<PAGE>
[logo] Investing
EATON VANCE for the [Photo of brick wall]
MUTUAL FUNDS 21st
Century [Graphics Omitted]
ANNUAL REPORT SEPTEMBER 30, 1997
EV
MARATHON
[Photo of highway] NATIONAL
MUNICIPALS
FUND
Eaton Vance
Global Management-Global Distibution
Marathon
[Photo of bridge]
<PAGE>
EV Marathon National Municipals Fund as of September 30, 1997
LETTER TO SHAREHOLDERS
[Photo of Thomas J. Fetter]
EV Marathon National Municipals Fund paid its shareholders monthly income
dividends totaling $0.552 per share during the year ended September 30, 1997.1
Based on the most recent dividend and the Fund's net asset value per share of
$10.53 on September 30, 1997, the Fund's annualized distribution rate at net
asset value was 5.27%. The SEC 30-day yield on that date was 4.63%.2 To equal
the Fund's distribution rate in a taxable investment, a couple in the 36%
federal tax bracket would have to receive a yield of 8.23%.
In a year of very favorable economic conditions, municipal bonds have performed
well
The municipal bond market continued to respond favorably in 1997 to an economic
climate of solid growth and low inflation. Gross domestic product (GDP), a
widely-used measure of economic performance, grew 4.9% in the first quarter,
3.3% in the second, and 3.5% in the third. Meanwhile, inflation remained in the
2-to-3% range. While the Federal Reserve elected to raise the Fed Funds Rate -
the primary short-term interest rate benchmark - 0.25% to 5.5% in March, it has
since maintained a generally stable interest rate policy in response to a benign
inflation outlook. Not surprisingly, municipal bonds have turned in solid
returns, with the Lehman Brothers Municipal Bond Index3 - an unmanaged index of
municipal bonds - rising 9.0% during the year ended September 30, 1997.
Amid Washington's newly found fiscal responsibility, the outlook for municipal
bonds appears bright
We believe the long-term outlook for municipal bonds has improved in the past
year for several reasons. First, Congress and the Clinton Administration agreed
to balance the budget by 2002. This would sharply reduce the government's
borrowing needs, leading to lower interest rates and channeling investments into
more productive areas of the economy. Second, even after the recently enacted
capital gains tax cut, the marginal tax rates of many taxpayers remain high. For
them, municipal bonds may still be the best vehicle for tax relief. And finally,
a balanced investment portfolio features equities, bonds, and cash. The stock
market has shown higher-than-normal volatility this year, capped by steep price
declines in late October. Following three years of stock market outperformance,
we believe investors should consider reallocating a portion of their portfolios
to bonds to maintain a prudent asset allocation. For these reasons, we believe
that the municipal market will continue to attract tax-conscious investors.
Eaton Vance will continue its leadership role in seeking high, tax-free income.
Sincerely,
/s/ Thomas J. Fetter
-----------------------------------
Thomas J. Fetter,
President
November 10, 1997
Growth of a $10,000 Investment 4
- --------------------------------------------------------------------------------
Three years ending September 30, 1997
National Muni Mar. Mountain Graph -- 9/97 Annual Report
- --------------------------------------------------------------------------------
9/30/94 $10,000
9,812
9,545
9,788
10,145
10,489
10,548
10,560
10,972
10,859
10,881
11,011
11,065
11,266
11,558
11,726
11,771
11,661
11,400
11,314
11,366
11,495
11,591
11,633
11,821
11,968
12,181
12,153
12,136
12,259
12,077
12,180
12,360
12,681
13,234
13,056
9/30/97 13,279
Performance5
- --------------------------------------------------------------------------------
as of September 30, 1997
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
One Year 12.3%
Five Years 7.8
Ten Years 8.4
- --------------------------------------------------------------------------------
SEC Average Annual Total Returns (including applicable CDSC)
One Year 7.3%
Five Years 7.5
Ten Years 8.4
1 A portion of the Fund's income could be subject to federal income tax, and/or
federal alternative minimum tax.
2 The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
3 It is not possible to invest directly in an Index.
4 Source: Towers Data Systems, Bethesda, MD. For illustration purposes only.
Chart reflects a $10,000 hypothetical investment on 9/30/94 and includes
reinvestment of all distributions. Chart does not include applicable
contingent deferred sales charge (CDSC).
5 Returns are calculated by determining the percentage change in net asset value
(NAV) with all distributions reinvested. SEC returns reflect applicable CDSC
on the following schedule: 5% - 1st year; 5% - 2nd year; 4% - 3rd year; 3% -
4th year; 2% - 5th year; 1% - 6th year.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
- -------------------------------------------------------------------------------
Mutual fund shares are not insured by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are
subject to investment risks, including possible loss of principal
invested.
- -------------------------------------------------------------------------------
<PAGE>
EV Marathon National Municipals Fund as of September 30, 1997
INVESTMENT UPDATE
An interview with Thomas M. Metzold, Portfolio Manager of the National
Municipals Portfolio.
Q: Tom, how would you describe the overall bond market during the past year?
A: Over the past year, both the equity and fixed-income markets have benefited
from the so-called "Goldilocks economy," in which growth has been neither
too fast nor too slow, and inflation has remained subdued. Although volatile
at times, interest rates have declined over the past 12 months, with yield
on the 30-year Treasury Bond dropping to 6.40% on September 30, 1997 from
6.90% a year earlier. This has been very good for bond performance.
Q: What effect has the volatility in the equity markets had on municipal bonds
this year?
A: The volatility in the equity markets is a good reminder for people to
maintain a well-diversified investment portfolio, and this is certainly
favorable for the bond market. However, equity investors have shown little
indication of panic selling during the periods of volatility this year - as
they did when stock prices dropped in 1987. So while the volatility has
served as a good case for diversification, it has not resulted in a major
cash flow shift from equities into municipal bonds.
Q: Have there been any significant changes in the Portfolio?
A: The main sector changes in the Fund during the past year have been a
decrease in health care, industrial revenue and utility bonds, and an
increase in the escrowed sector. Many of the bonds in these sectors were
advance refunded, which was a positive development for two main reasons.
First, advance refunding results in a higher price for bonds, therefore
boosting the Fund's share price. Second, escrowed bonds are backed by U.S.
Treasuries, which eliminates their credit/default risk.
[Photo of]
THOMAS M. METZOLD,
Portfolio Manager
Q: To what do you attribute the Fund's outstanding performance over the
past one- and three-year periods?
A: A combination of things. First, as I mentioned, the advance refunding of
many of our bonds resulted in significant gains, which helped our total
return tremendously. Second, we pursued a barbell strategy of combining
high-quality discount bonds, which perform when rates decline - as they have
during both the one- and three-year periods - with higher yielding issues.
Moreover, three years ago there was a lot of talk about a flat tax which
drove municipal bond prices down. We dismissed the flat tax threat as
unrealistic and took advantage of the lower prices to pick up some excellent
holdings at bargain levels. Finally, our research staff has done an
outstanding job of finding a steady supply of undervalued bonds.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
RATING DISTRIBUTION* FIVE LARGEST SECTORS*
- ------------------------------------ ------------------------------------
<S> <C>
As a percentage of total investments As a percentage of total investments
AAA 35.6% Escrowed 18.2%
BBB 29.0% Industrial Development/Pollution Control 13.0%
Not Rated 28.8% Transportation 9.7%
A 2.7% Hospitals 7.7%
BB 2.0% Nursing homes 6.9%
AA 1.7%
B 0.2%
*Ratings Distribution and Five Largest Sectors are subject to change due to active management.
</TABLE>
Q: What role does the research staff in Eaton Vance's municipal bond department
play?
A: I cannot overstate the value of our research staff. We review 200-300 issues
each year and only 20-25 typically meet the Fund's selection process. That
should indicate the intense scrutiny that our analysts give each and every
issue. Our research team, in my opinion, gives us a real competitive
advantage. A good example was their success with many of the high-yield
bonds which were eventually advance refunded.
Q: Can you give an example of a recent addition to the Fund?
A: Sure. The Austin, Texas, Cargoport is in the fast-growing and
highly-profitable air cargo industry. The transformation of distribution
systems in this country from warehouses stocked with expensive inventory to
just-in-time delivery has given rise to the air cargo business. Companies
like Federal Express and UPS derive most of their revenues from air cargo,
and even the major passenger carriers use cargo space to increase revenues.
Through an affiliation with local airport authorities, developers can raise
money in the municipal bond market to lease land and build facilities at
airports, and bondholders end up with a dependable income stream from this
growing business.
Q: What is your outlook for the economy over the next 6-12 months?
A: There is good reason to be optimistic. Growth continues at a moderate pace;
inflation remains low with little to no sign of becoming a threat; and
unemployment is low. Nevertheless, the events of late October, 1997, confirm
my feeling that any major negative event could create a sell-off in the
equity markets. A similar case can be made with the economy as the current
expansion moves into record territory in terms of length. I am not
predicting a severe disruption, but I am pleased that Alan Greenspan has not
dropped his vigilant attitude about inflation.
Q: How will the 1997 tax law affect the municipal bond market?
A: The tax reform bill did make equities more attractive - with the lowering of
the capital gains tax rate and the introduction of the Roth IRA - but it in
no way reduced the attractiveness of municipal bonds. Municipals remain the
only way for investors to receive current tax-free income. And on a
tax-equivalent basis, if an investor is in a high tax bracket, munis provide
a higher level of income than taxable bonds with similar risk
characteristics. With the recent volatility in the equity markets, investors
would be well-served to maintain a diversified portfolio of asset classes,
including municipal bonds.
<PAGE>
EV Marathon National Municipals Fund as of September 30, 1997
INVESTMENT UPDATE
Date Fund/NAV LMBI
---- -------- ----
9/30/87 $10,000 $10,000
10/31/87 $ 9,877 $10,036
11/30/87 $10,233 $10,297
12/31/87 $10,311 $10,477
1/31/88 $10,711 $10,819
2/28/88 $10,844 $10,933
3/31/88 $10,684 $10,806
4/30/88 $10,710 $10,888
5/31/88 $10,747 $10,857
6/30/88 $10,896 $11,015
7/31/88 $10,978 $11,087
8/31/88 $11,028 $11,097
9/30/88 $11,194 $11,298
10/31/88 $11,364 $11,497
11/30,88 $11,280 $11,392
12/31/88 $11,400 $11,508
1/31/89 $11,560 $11,747
2/28/89 $11,537 $11,612
3/31/89 $11,532 $11,585
4/30/89 $11,747 $11,860
5/31/89 $11,915 $12,106
6/30/89 $12,080 $12,270
7/31/89 $12,198 $12,438
8/31/89 $12,071 $12,316
9/30/89 $12,085 $12,279
10/31/89 $12,175 $12,429
11/30/89 $12,289 $12,647
12/31/89 $12,339 $12,750
1/31/90 $12,238 $12,690
2/28/90 $12,330 $12,803
3/31/90 $12,297 $12,807
4/30/90 $12,129 $12,714
5/31/90 $12,388 $12,992
6/30/90 $12,469 $13,106
7/31/90 $12,643 $13,299
8/31/90 $12,424 $13,106
9/30/90 $12,427 $13,113
10/31/90 $12,582 $13,352
11/30/90 $12,759 $13,620
12/31/90 $12,760 $13,679
1/31/91 $12,865 $13,863
2/28/91 $12,932 $13,984
3/31/91 $12,937 $13,988
4/30/91 $13,133 $14,175
5/31/91 $13,255 $14,301
6/30/91 $13,257 $14,287
7/31/91 $13,491 $14,461
8/31/91 $13,676 $14,652
9/30/91 $13,835 $14,842
10/31/91 $13,913 $14,976
11/30/91 $13,894 $15,018
12/31/91 $14,263 $15,340
1/31/92 $14,195 $15,375
2/28/92 $14,245 $15,380
3/31/92 $14,305 $15,385
4/30/92 $14,511 $15,523
5/31/92 $14,748 $15,706
6/30/92 $15,114 $15,969
7/31/92 $15,742 $16,448
8/31/92 $15,398 $16,287
9/30/92 $15,449 $16,394
10/31/92 $15,045 $16,233
11/30/92 $15,549 $16,524
12/31/92 $15,696 $16,692
1/31/92 $15,851 $16,887
2/28/93 $16,607 $17,497
3/31/93 $16,347 $17,312
4/30/93 $16,584 $17,487
5/31/93 $16,743 $17,585
6/30/93 $17,076 $17,879
7/31/93 $17,115 $17,902
8/31/93 $17,510 $18,275
9/30/93 $17,751 $18,483
10/31/93 $17,840 $18,519
11/30/93 $17,645 $18,355
12/31/93 $17,990 $18,743
1/31/94 $18,245 $18,957
2/28/94 $17,798 $18,466
3/31/94 $16,789 $17,714
4/30/94 $16,881 $17,864
5/31/94 $17,027 $18,019
6/30/94 $16,887 $17,914
7/31/94 $17,243 $18,237
8/31/94 $17,267 $18,300
9/30/94 $16,896 $18,032
10/31/94 $16,579 $17,712
11/30/94 $16,127 $17,391
12/31/94 $16,538 $17,774
1/31/95 $17,140 $18,282
2/28/95 $17,723 $18,814
3/31/95 $17,822 $19,030
4/30/95 $17,842 $19,053
5/31/95 $18,539 $19,661
6/30/95 $18,348 $19,489
7/31/95 $18,384 $19,673
8/31/95 $18,604 $19,923
9/30/95 $18,694 $20,049
10/31/95 $19,034 $20,340
11/30/95 $19,528 $20,678
12/31/95 $19,812 $20,876
1/31/96 $19,887 $21,034
2/28/96 $19,703 $20,892
3/31/96 $19,261 $20,625
4/30/96 $19,116 $20,567
5/31/96 $19,203 $20,559
6/30/96 $19,421 $20,783
7/31/96 $19,584 $20,971
8/31/96 $19,655 $20,966
9/30/96 $19,972 $21,259
10/31/96 $20,221 $21,500
11/30/96 $20,581 $21,893
12/31/96 $20,534 $21,801
1/31/97 $20,505 $21,842
2/28/97 $20,713 $22,043
3/31/97 $20,404 $21,749
4/30/97 $20,579 $21,931
5/31/97 $20,883 $22,261
6/30/97 $21,425 $22,498
7/31/97 $22,360 $23,121
8/31/97 $22,059 $22,905
9/30/97 $22,435 $23,176
Performance+
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as of September 30, 1997
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 12.3%
Five Years 7.8
Ten Years 8.4
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
One Year 7.3%
Five Years 7.5
Ten Years 8.4
* Source: Towers Data Systems, Bethesda, MD.
The chart compares the Fund's total return with that of a broad-based,
unmanaged market index of municipal bonds. Returns are calculated by
determining the percentage change in net asset value (NAV) with all
distributions reinvested. The lines on the chart represent the total returns
of $10,000 hypothetical investments in the Fund and the Lehman Brothers
Municipal Bond Index. The Index's total return does not reflect commissions or
expenses that would have been incurred if an investor individually purchased
or sold the securities represented in the Index. It is not possible to invest
directly in an Index.
+ SEC returns reflect applicable contingent deferred sales charge (CDSC), based
on the following schedule: 5% - 1st year; 5% - 2nd year; 4% - 3rd year; 3% -
4th year; 2% - 5th year; 1% - 6th year. Past performance is no guarantee of
future results. Investment return and principal value will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
- -------------------------------------------------------------------------------
Federal income tax information: For federal income tax purposes, 97.43%
of the total dividends paid by the Fund from net investment income
during the fiscal year ended September 30, 1997
is designated as an exempt-interest dividend.
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<PAGE>
EV Marathon National Municipals Fund as of September 30, 1997
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of September 30, 1997
Assets
- -------------------------------------------------------------------------------
Investment in National Municipals Portfolio, at value
(Note 1A) (identified cost, $1,769,647,018) $2,049,339,066
Receivable for Fund shares sold 1,771,830
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Total assets $2,051,110,896
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Liabilities
- -------------------------------------------------------------------------------
Dividends payable $ 4,433,525
Payable for Fund shares redeemed 4,590,247
Payable to affiliate for Trustees' fees (Note 4) 831
Accrued expenses 1,460,305
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Total liabilities $ 10,484,908
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Net Assets for 193,835,215 shares of
beneficial interest outstanding $2,040,625,988
- -------------------------------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------------------------------
Paid in capital $1,851,427,961
Accumulated net realized loss on investments from Portfolio
(computed on the basis of identified cost) (92,140,325)
Accumulated undistributed net investment income 1,646,304
Net unrealized appreciation of investments from Portfolio
(computed on the basis of identified cost) 279,692,048
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Total $2,040,625,988
- -------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption
Price Per Share (Note 6)
- -------------------------------------------------------------------------------
($2,040,625,988 / 193,835,215 shares
of beneficial interest outstanding) $ 10.53
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See notes to financial statements
<PAGE>
EV Marathon National Municipals Fund as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statement of Operations
For the Year Ended
September 30, 1997
Investment Income (Note 1B)
- -------------------------------------------------------------------------------
Interest income allocated from Portfolio $ 144,447,500
Expenses allocated from Portfolio (10,689,144)
- -------------------------------------------------------------------------------
Net investment income from Portfolio $ 133,758,356
- -------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 3,292
Distribution fees (Note 5) 20,087,981
Transfer and dividend disbursing agent fees 1,340,243
Printing and postage 422,685
Registration fees 47,789
Legal and accounting services 33,062
Custodian fee 28,600
Miscellaneous 150,831
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Total expenses $ 22,114,483
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Net investment income $ 111,643,873
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Realized and Unrealized
Gain (Loss) from Portfolio
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 28,336,035
Financial futures contracts (27,029,648)
- --------------------------------------------------------------------------------
Net realized gain on investments $ 1,306,387
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $ 127,640,542
Financial futures contracts (2,140,694)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 125,499,848
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 126,806,235
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 238,450,108
- --------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
EV Marathon National Municipals Fund as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended Year Ended
in Net Assets September 30, 1997 September 30, 1996
- --------------------------------------------------------------------------------------------------
From operations --
<S> <C> <C>
Net investment income $ 111,643,873 $ 121,825,796
Net realized gain on investments 1,306,387 1,458,622
Net change in unrealized appreciation
(depreciation) of investments 125,499,848 20,708,208
- --------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 238,450,108 $ 143,992,626
- --------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (112,620,886) $ (121,100,027)
- --------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (112,620,886) $ (121,100,027)
- --------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest
(Note 3) --
Proceeds from sale of shares $ 228,261,692 $ 395,101,590
Net asset value of shares issued to
shareholders in payment of distributions
declared 42,171,754 46,400,860
Cost of shares redeemed (457,268,290) (554,003,400)
- --------------------------------------------------------------------------------------------------
Net decrease in net assets from
Fund share transactions $ (186,834,844) $ (112,500,950)
- --------------------------------------------------------------------------------------------------
Net decrease in net assets $ (61,005,622) $ (89,608,351)
- --------------------------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------------------------
At beginning of year $2,101,631,610 $2,191,239,961
- --------------------------------------------------------------------------------------------------
At end of year $2,040,625,988 $2,101,631,610
- --------------------------------------------------------------------------------------------------
Accumulated
undistributed net
investment income
included in net assets
- --------------------------------------------------------------------------------------------------
At end of year $ 1,646,304 $ 2,623,317
- --------------------------------------------------------------------------------------------------
See notes to financial statements
</TABLE>
<PAGE>
EV Marathon National Municipals Fund as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value --
Beginning of year $ 9.900 $ 9.800 $ 9.410 $ 10.570 $ 9.820
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.550 $ 0.557 $ 0.570 $ 0.556 $ 0.553
Net realized and
unrealized gain (loss) on
investments 0.634 0.096 0.395 (1.043) 0.856
- --------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
operations $ 1.184 $ 0.653 $ 0.965 $ (0.487) $ 1.409
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions
- --------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.554) $ (0.553) $ (0.570) $ (0.556) $ (0.553)
In excess of net
investment income -- -- (0.005) (0.077) (0.106)
In excess of net realized
gain on investment
transactions -- -- -- (0.040) --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.554) $ (0.553) $ (0.575) $ (0.673) $ (0.659)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of
year $ 10.530 $ 9.900 $ 9.800 $ 9.410 $ 10.570
- --------------------------------------------------------------------------------------------------------------------------------
Total Return(1) 12.33% 6.84% 10.60% (4.82)% 14.90%
- --------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(000 omitted) $2,040,626 $2,101,632 $2,191,240 $2,171,901 $2,090,482
Ratio of net expenses to
average daily net assets
(2)(3) 1.60% 1.55% 1.53% 1.51% 1.67%
Ratio of net expenses to
average daily net assets
after custodian fee
reduction(2) 1.60% 1.54% 1.52% -- --
Ratio of net investment
income to average daily
net assets 5.45% 5.62% 6.00% 5.54% 5.43%
Portfolio Turnover(4) -- -- -- -- 10%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Income dividends, if any, are assumed to be reinvested at
the net asset value on the payable date. Total return is not computed on
an annualized basis.
(2) Includes the Fund's share of its corresponding Portfolio's allocated
expenses subsequent to February 1, 1993.
(3) The expense ratios for the year ended September 30, 1995 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for the prior periods have not been adjusted to reflect this
change.
(4) Portfolio Turnover represents the rate of portfolio activity for the
period while the Fund was making investments directly in securities. The
portfolio turnover rate for the period since the Fund transferred
substantially all of its investable assets to the Portfolio is shown in
the Portfolio's financial statements which are included elsewhere in this
report.
See notes to financial statements
<PAGE>
EV Marathon National Municipals Fund as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- --------------------------------------------------------------------------------
EV Marathon National Municipals Fund (the Fund) is a diversified series of
Eaton Vance Municipals Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund invests all of its investable assets in
interests in National Municipals Portfolio (the Portfolio), a New York
Trust, having the same investment objective as the Fund. The value of the
Fund's investment in the Portfolio reflects the Fund's proportionate
interest in the net assets of the Portfolio (93.9% at September 30, 1997).
The performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio, including the
portfolio of investments, are included elsewhere in this report and should
be read in conjunction with the Fund's financial statements.
On June 23, 1997, the Board of Trustees of the Trust adopted a multiple
class plan for the Fund which permits the Fund to issue more than one class
of shares. Initially, the Fund will offer three classes of shares and,
effective October 1, 1997, the existing shares of the Fund will be
designated as Class B shares.
On June 23, 1997, the Board of Trustees also approved a Plan of
Reorganization (the "Plan") for the Trust. Under the terms of the Plan, the
Fund will acquire substantially all of the assets and liabilities of the EV
Traditional National Municipals Fund (the Traditional Fund) and the EV
Classic National Municipals Fund (the Classic Fund). The transactions will
be structured for tax purposes to qualify as a tax-free reorganization under
the Internal Revenue Code. As a result of the reorganization, shareholders
of the Traditional Fund and the Classic Fund will receive Class A Shares and
Class C Shares of the Fund, respectively. The reorganization will occur
after the close of business, September 30, 1997.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuation -- Valuation of securities by the Portfolio is
discussed in Note 1A of the Portfolio's Notes to Financial Statements which
are included elsewhere in this report.
B Income -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally
accepted accounting principles.
C Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is necessary. At September 30, 1997, the Fund,
for federal income tax purposes had a capital loss carryover of $100,327,504
which will reduce the taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code, and
thus will reduce the amount of distributions to shareholders which would
otherwise be necessary to relieve the Fund of any liability for federal income
or excise tax. Such capital loss carryover will expire on September 30, 2003
($8,244,733), September 30, 2004 ($85,290,150) and September 30, 2005
($6,792,621). Dividends paid by the Fund from net tax- exempt interest on
municipal bonds allocated from the Portfolio are not includable by
shareholders as gross income for federal income tax purposes because the Fund
and Portfolio intend to meet certain requirements of the Internal Revenue Code
applicable to regulated investment companies which will enable the Fund to pay
exempt-interest dividends. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986, may be considered a tax
preference item to shareholders.
D Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
E Other -- Investment transactions are accounted for on a trade-date basis.
F Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Fund and the Portfolio. Pursuant to the respective
custodian agreements, IBT receives a fee reduced by credits which are
determined based on the average daily cash balances the Fund or the
Portfolio maintain with IBT. All significant credit balances used to reduce
the Fund's custodian fees are reported as a reduction of expenses on the
Statement of Operations.
2 Distributions to Shareholders
- --------------------------------------------------------------------------------
The net investment income of the Fund is determined daily and substantially
all of the net investment income so determined is declared as a dividend to
shareholders of record at the time of declaration. Distributions are paid
monthly. Distributions of allocated realized capital gains, if any, are made
at least annually. Shareholders may reinvest capital gain distributions in
additional shares of the Fund at the net asset value as of the ex-dividend
date. Distributions are paid in the form of additional shares or, at the
election of the shareholder, in cash. The Fund distinguishes between
distributions on a tax basis and a financial reporting basis. Generally
accepted accounting principles require that only distributions in excess of
tax basis earnings and profits be reported in the financial statements as a
return of capital. Differences in the recognition or classification of
income between the financial statements and tax earnings and profits which
result in over-distributions for financial statement purposes only are
classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital.
The tax treatment of distributions for the calendar year will be reported to
shareholders prior to February 1, 1998 and will be based n tax accounting
methods which may differ from amounts determined for financial statement
purposes.
3 Shares of Beneficial Interest
- --------------------------------------------------------------------------------
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
Year Ended September 30,
-----------------------------
1997 1996
-----------------------------------------------------------------------------
Sales 22,677,891 39,934,229
Issued to shareholders electing to receive
payments of distributions in Fund shares 4,179,698 4,686,466
Redemptions (45,329,984) (55,965,893)
-----------------------------------------------------------------------------
Net decrease (18,472,395) (11,345,198)
-----------------------------------------------------------------------------
4 Investment Adviser Fee and Other Transactions with Affiliates
- --------------------------------------------------------------------------------
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report. Except as to Trustees of the Fund and the
Portfolio who are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their services to the Fund out of the
investment adviser fee earned by BMR. Certain officers and Trustees of the
Fund and of the Portfolio are officers and/or directors/trustees of the
above organizations (Note 5).
5 Distribution Plan
- --------------------------------------------------------------------------------
The Fund has adopted a distribution plan (the Plan) pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to pay
the Principal Underwriter, Eaton Vance Distributors, Inc. (EVD) amounts
equal to 1/365 of 0.75% of the Fund's daily net assets, for providing
ongoing distribution services and facilities to the Fund. The Fund will
automatically discontinue payments to EVD during any period in which there
are no outstanding Uncovered Distribution Charges, which are equivalent to
the sum of (i) 5% of the aggregate amount received by the Fund for shares
sold plus, (ii) distribution fees calculated by applying the rate of 1% over
the prevailing prime rate to the outstanding balance of Uncovered
Distribution Charges of EVD, reduced by the aggregate amount of contingent
deferred sales charges (Note 6) and daily amounts theretofore paid to EVD.
The amount payable to EVD with respect to each day is accrued on such day as
a liability of the Fund and, accordingly, reduces the Fund's net assets. The
Fund paid $15,359,689 to EVD representing 0.75% of average daily net assets.
At September 30, 1997 the amount of Uncovered Distribution Charges of EVD
calculated under the Plan for the Fund was approximately $23,100,000.
In addition, the Plan authorizes the Fund to make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in amounts
not exceeding 0.25% of the Fund's average daily net assets for each fiscal
year. The Trustees have initially implemented the Plan by authorizing the
Fund to make quarterly payments of service fees to the Principal Underwriter
and Authorized Firms in amounts not expected to exceed 0.25% per annum of
the Fund's average daily net assets based on the value of Fund shares sold
by such persons and remaining outstanding for at least one year. The Fund
paid or accrued service fees to or payable to EVD for the year ended
September 30, 1997 in the amount of $4,728,292. Service fee payments are
made for personal services and/or the maintenance of shareholder accounts.
Service fees paid to EVD and Authorized Firms are separate and distinct from
the sales commissions and distribution fees payable by the Fund to EVD, and,
as such, are not subject to automatic discontinuance when there are no
outstanding Uncovered Distribution Charges of EVD.
Certain officers and Trustees of the Fund are officers or directors of EVD.
6 Contingent Deferred Sales Charge
- --------------------------------------------------------------------------------
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon
the lower of the net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital
gains distributions. The CDSC is imposed at declining rates that begin at 5%
in the case of redemptions in the first and second year after purchase,
declining one percentage point each subsequent year. No CDSC is levied on
shares which have been sold to EVD or its affiliates or to their respective
employees or clients. CDSC charges are paid to EVD to reduce the amount of
Uncovered Distribution Charges calculated under the Fund's Distribution Plan
(Note 5). CDSC charges received when no Uncovered Distribution Charges exist
will be credited to the Fund. EVD received approximately $4,211,000 of CDSC
paid by shareholders for the year ended September 30, 1997.
7 Investment Transactions
- --------------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the National Municipals
Portfolio aggregated $237,003,069 and $558,210,113, respectively, for the
year ended September 30, 1997.
8 Subsequent Event
- --------------------------------------------------------------------------------
Effective October 1, 1997, the EV Marathon National Municipals Fund will
change its name to the Eaton Vance National Municipals Fund and shares of
the Fund will be designated as Class B shares. Two additional classes of
shares will also be offered.
<PAGE>
EV Marathon National Municipals Fund as of September 30, 1997
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders
of Eaton Vance Municipals Trust
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of EV
Marathon National Municipals Fund (one of the series constituting Eaton Vance
Municipals Trust) as of September 30, 1997, the related statement of
operations for year then ended, the statements of changes in net assets for
the years ended September 30, 1997 and 1996 and the financial highlights for
each of the years in the five year period ended September 30, 1997. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of EV Marathon
National Municipals Fund at September 30, 1997, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 7, 1997
<PAGE>
<TABLE>
National Municipals Portfolio as of September 30, 1997
- --------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------------------------------------
Tax-Exempt Investments -- 100.0%
<CAPTION>
Ratings (Unaudited)
- -------------------------- Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
- --------------------------------------------------------------------------------------------------------------
Assisted Living -- 5.0%
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NR NR $ 6,035 Arizona Health Facilities Authority,
(Mesa Project), 7.625%, 1/1/26 $ 6,037,535
NR NR 17,070 Bell County, TX, Health Facilities, (Care
Institute, Inc.), 9.00%, 11/1/24 19,382,985
NR NR 5,000 Chester, PA, IDA, (Senior Life Choice of
Paoli, L.P.), 8.05%, 1/1/24 5,382,800
NR NR 3,060 Chester, PA, IDA, (Senior Life-Choice of
Kimberton) (AMT), 8.50%, 9/1/25 3,356,698
NR NR 5,000 Delaware, PA, IDA, Glen Riddle Project,
(AMT), 8.625%, 9/1/25 5,535,250
NR NR 10,000 Glen Cove, IDA, 9.50%, 7/1/12 10,000,000
NR NR 15,000 Illinois Development Finance Authority
(Care Institute, Inc.), 7.80%, 6/1/25 16,007,100
NR NR 4,605 New Jersey EDA, (Chelsea at East
Brunswick Project) (AMT), 8.25%, 10/1/20 4,770,964
NR NR 10,000 New Jersey EDA, (Forsgate Project) (AMT),
8.625%, 6/1/25 11,136,700
NR NR 7,915 Roseville, MN, Elder Care Facility (Care
Institute, Inc.), 7.75%, 11/1/23 8,173,187
NR NR 12,430 St. Paul, MN, Housing and Redevelopment,
(Elder Care Institute, Inc.), 8.75%,
11/1/24 14,134,277
NR NR 5,000 Village of North Syracuse, NY, Housing
Authority (AJM Senior Housing, Inc.,
Janus Park), 8.00%, 6/1/24 5,321,000
- --------------------------------------------------------------------------------------------------------------
$109,238,496
- --------------------------------------------------------------------------------------------------------------
Cogeneration -- 4.5%
- --------------------------------------------------------------------------------------------------------------
NR NR $ 20,250 Maryland Energy, AES Warrior Run Project,
(AMT), 7.40%, 9/1/19 $ 22,174,358
NR BB+ 30,775 New Jersey EDA, (Vineland Cogeneration)
(AMT), 7.875%, 6/1/19 33,735,863
NR NR 9,950 Palm Beach County, FL, Osceola Power
(AMT), 6.95%, 1/1/22 4,875,500
NR NR 6,100 Pennsylvania Economic Development
Authority, EDA, (Northampton Generation
Project) (AMT), 6.50%, 1/1/13 6,307,522
NR NR 5,000 Pennsylvania Economic Development
Authority, Northampton Generating
Project, Junior Liens (AMT), 6.95%,
1/1/21 5,176,750
NR NR 18,450 Pennsylvania Economic Development
Financing Authority, Northampton
Generating Project (AMT), 6.60%, 1/1/19 19,075,271
NR NR 7,000 Pennsylvania Economic Development
Financing Authority, Northampton
Generating Project, Junior Liens, (AMT),
6.875%, 1/1/11 7,236,880
- --------------------------------------------------------------------------------------------------------------
$ 98,582,144
- --------------------------------------------------------------------------------------------------------------
Colleges and Universities -- 0.3%
- --------------------------------------------------------------------------------------------------------------
NR BBB- $ 1,250 Massachusetts Health and Educational
Facilities (Nichols College), 7.00%, 10/1/20 $ 1,339,000
NR NR 4,300 New Hampshire Higher Educational and
Health (Franklin Pierce Law Center),
7.50%, 7/1/22 4,589,003
- --------------------------------------------------------------------------------------------------------------
$ 5,928,003
- --------------------------------------------------------------------------------------------------------------
Electric Utilities -- 0.3%
- --------------------------------------------------------------------------------------------------------------
NR NR $ 5,000 West Feliciana, LA, Gulf States Utilities
Company Project, (AMT), 9.00%, 5/1/15 $ 5,615,100
- --------------------------------------------------------------------------------------------------------------
$ 5,615,100
- --------------------------------------------------------------------------------------------------------------
Escrowed / Prerefunded -- 18.2%
- --------------------------------------------------------------------------------------------------------------
NR AAA $ 65,000 Bakersfield, CA, Bakersfield Assisted
Living Center, 0.00%, 4/15/21 $ 17,710,550
NR NR 2,200 Bexar County, TX, Health Facilities (St.
Luke's Lutheran), 7.00%, 5/1/21 2,622,158
Aaa NR 39,600 Colorado Health Facilities Authority,
Retirement Housing, Liberty Heights
Project, 0.00%, 7/15/22 9,949,500
NR AAA 177,055 Colorado Health Facilities Authority,
Retirement Housing, Liberty Heights
Project, 0.00%, 7/15/24 39,794,881
Aa2 NR 5,000 Colorado Housing and Finance Authority,
Retirement Housing, (Liberty Heights
Project), (AMT), 7.55%, 11/1/27 5,632,700
Aaa NR 225,500 Dawson Ridge County, Metropolitan
District, 0.00%, 10/1/22 55,993,904
Baa2 AAA 10,000 Detroit, MI, Unlimited Tax, 8.70%, 4/1/10 11,270,500
NR NR 7,000 Florida Mid-Bay Bridge Authority, 6.875%,
10/1/22 8,287,510
NR NR 4,470 Hazelton Luzerne, PA (Saint Joseph
Medical Center), 8.375%, 7/1/12 5,350,501
NR AAA 60,360 Illinois Development Finance Authority,
(Regency Park at Lincolnwood), 0.00%, 7/15/25 12,489,088
NR AAA 156,555 Illinois Development Finance Authority,
Regency Park at Lincolnwood, 0.00%, 7/15/23 36,281,621
NR NR 4,500 Illinois, Chicago Osteopathic Health
Systems, 7.25%, 5/15/22 5,510,250
NR NR 4,650 Illinois, Chicago Osteopathic Heath
Systems, 7.125%, 5/15/11 5,447,847
Aaa AAA 10,000 Louisville, KY (Alliant Health System,
Inc.) (MBIA), Variable, 10/1/14(2) 12,062,500
NR AAA 12,340 Louisiana Public Facilities Authority
(Southern Baptist Hospitals, Inc.), 8.00%,
5/15/12 15,008,772
NR NR 6,040 Massachusetts Health and Educational
Facilities Authority, (1st Mortgage-
Fairview Extended Care), 10.125%, 1/1/11 7,261,590
Baa1 BBB- 10,000 Maricopa County, AZ (Sun Health
Corporation), 8.125%, 4/1/12 11,702,900
Aaa NR 138,000 Mississippi Housing Finance Corp., Single
Family (AMT), 0.00%, 6/1/15 53,135,519
NR NR 4,585 Mille Lacs Capital Improvements (Mille
Lacs Band of Chippewa Indians), 9.25%,
11/1/12 5,763,391
NR AAA $ 10,000 New Hampshire Higher Educational and
Health Facilities (Riverwoods at Exeter),
9.00%, 3/1/23 $ 12,435,700
A2 A- 5,035 New York, NY, Municipal Water Finance
Authority, Prerefunded to 6/15/01, 6.25%,
6/15/21 5,393,693
Aaa NR 6,130 North Salt Lake Municipal Building
Authority, Davis County, UT., 8.625%, 12/1/17 7,364,643
Baa1 AAA 4,000 Philadelphia, PA Municipal Water Finance
Authority, 7.00%, 8/1/18 4,394,920
NR NR 3,500 Philadelphia, PA, (The Philadelphia
Protestant Home Project), 8.625%, 7/1/21 4,072,915
NR NR 5,000 Rhode Island Health and Education
Building (Steere House), 8.25%, 7/1/15 5,609,500
NR AAA 8,000 Scranton-Lackawanna Health and Welfare
Authority, PA (Moses Taylor Hospital),
8.25%, 7/1/09 9,222,400
NR AAA 4,500 Scranton-Lackawanna, PA, Health and
Welfare Authority, Moses Taylor Hospital,
8.50%, 7/1/20 5,238,495
Aaa AAA 19,165 Texas Turnpike Authority (Houston Ship
Channel Bridge), 12.625%, 1/1/20 26,142,977
- --------------------------------------------------------------------------------------------------------------
$401,150,925
- --------------------------------------------------------------------------------------------------------------
Hospitals -- 7.7%
- --------------------------------------------------------------------------------------------------------------
NR BBB $ 6,500 Arizona Health Facilities, (Phoenix
Memorial Hospital), 8.20%, 6/1/21 $ 7,133,750
NR NR 2,395 Berlin, MD (Atlantic General),
8.375%, 6/1/22 2,573,763
Baa NR 10,180 Chaves County, NM (Eastern New Mexico
Medical Center), 7.25%, 12/1/22 11,019,545
NR BBB- 5,015 Colorado Health Facilities (National
Jewish Center For Immunology and
Respiratory Medicine), 7.10%, 2/15/22 5,190,876
Baa BBB 32,000 Colorado Health Facilities (Rocky
Mountain Adventist Healthcare), 6.625%,
2/1/22 33,908,480
NR BBB- 3,000 Colorado Health Facilities Authority,
(National Jewish Center For Immunology
and Respiratory Medicine), 6.875%, 2/15/12 3,109,950
Baa1 NR 4,000 Crossville, TN, Health and Educational
Financing Authority (Cumberland Medical
Center), 6.75%, 11/1/12 4,229,880
Baa1 BBB+ 6,000 District of Columbia (Washington Hospital
Center Issue-Medlantic Healthcare Group,
Inc.), 7.125%, 8/15/19 6,797,100
NR A- 5,000 Dubuque, IA, Finley Hospital Project,
6.875%, 1/1/12 5,399,700
NR BBB- 5,350 Grove City Area Hospital Authority, PA
(United Community Hospital), 8.125%, 7/1/12 5,441,539
Baa1 NR 1,000 Illinois Health Facilities Authority
(Holy Cross Hospital), 6.70%, 3/1/14 1,061,340
Baa1 NR 2,650 Illinois Health Facilities Authority
(Holy Cross Hospital), 6.75%, 3/1/24 2,812,233
Baa2 NR 4,500 Indiana Health Facility Financing
Authority (Memorial Hospital and Health
Care Center), 7.40%, 3/1/22 4,888,980
NR BBB 8,250 Louisiana PFA, General Health Systems
Project, 6.80%, 11/1/16 8,931,203
A3 NR 3,750 Louisiana Public Facilities Authority
(Woman's Hospital Foundation), 7.25%,
10/1/22 4,291,950
Baa NR 2,000 Marshall County, AL (Guntersville-Arab
Medical Center), 7.00%, 10/1/09 2,142,920
Baa NR 2,000 Marshall County, AL (Guntersville-Arab
Medical Center), 7.00%, 10/1/13 2,142,920
Baa3 BB+ 2,500 Massachusetts HEFA (Milford-Whitinsville
Hospital), 7.75%, 7/15/17 2,733,925
Ba2 NR 5,000 Mississippi Hospital Equipment and
Facilities Authority (Magnolia Hospital),
7.375%, 10/1/21 5,289,250
A BBB+ 10,000 Philadelphia, PA (Albert Eistein Medical
Center), 7.00%, 10/1/21 10,783,200
Ba BBB+ 9,000 Philadelphia, PA, (Graduate Health
System), 6.625%, 7/1/21 9,341,370
Baa3 NR 2,000 Prince George's County, MD (Greater
SouthEast Healthcare System), 6.375%,
1/1/23 2,052,800
Baa1 BBB+ 10,000 Randolph County Building Commission, WV
(Davis Memorial Hospital), 7.65%, 11/1/21 11,009,000
Baa3 BBB 8,000 South Dakota Health and Educational
Finance Authority, Prarie Lakes Health
Care System Issue, 7.25%, 4/1/22 8,696,160
NR BBB- 4,000 State of Hawaii Department of Budget and
Finance, Special Purpose Mortgage
Revenue, (Wahiawa General Hospital),
7.50%, 7/1/12 4,400,400
NR NR 4,855 Winslow, AZ, Industrial Development
Authority (Winslow Memorial Hospital),
9.50%, 6/1/22 5,481,926
- --------------------------------------------------------------------------------------------------------------
$170,864,160
- --------------------------------------------------------------------------------------------------------------
Hotels -- 0.2%
- --------------------------------------------------------------------------------------------------------------
NR NR $ 1,018 Illinois Development Finance Authority
(Comfort Inn - O'Hare), 2.50%, 5/1/16 $ 591,557
NR NR 1,929 Illinois Development Finance Authority
(Comfort Inn - O'Hare), 10.00%, 5/1/16 2,082,860
NR NR 4,205 Niagara County, NY, Industrial
Development Authority (Wintergarden Inn
Associates), 9.75%, 6/1/11(1) 1,682,000
- --------------------------------------------------------------------------------------------------------------
$ 4,356,417
- --------------------------------------------------------------------------------------------------------------
Housing -- 2.6%
- --------------------------------------------------------------------------------------------------------------
Aa AA- $ 9,450 California Housing Finance Agency (AMT),
Residual Interest Bonds, Variable, 8/1/23(2) $ 10,489,500
NR NR 9,405 Lake Creek Affordable Housing Corp.,
Multi-family, 8.00%, 12/1/23 9,863,588
NR NR 8,000 Los Angeles County Housing Authority, CA,
Multifamily Housing, Corporate Fund for
Housing Projects, 10.50%, 12/1/29 7,242,560
NR A 5,675 Maricopa County, AZ, IDA, Multi-family,
6.625%, 1/1/27 6,120,658
NR A 1,000 Maricopa County, AZ, Industrial
Development Authority, Multifamily,
6.45%, 1/1/17 1,072,740
NR NR 2,185 Minneapolis Community Development,
Multifamily (Lindsay Brothers), 1.50%,
12/1/07 1,170,832
NR NR 3,240 Minneapolis Community Development,
Multifamily (Lindsay Brothers), 9.50%,
12/1/07 3,499,556
NR NR 4,710 North Little Rock, AR, Residential
Housing Facilities (Parkstone Place),
9.75%, 8/1/21 4,939,377
NR NR 8,745 North Miami, FL, Health Care Facilities
(The Imperial Club), 9.25%, 1/1/13 9,932,396
NR NR 4,000 North Miami, FL, Health Care Facilities
(The Imperial Club), 10.00%, 1/1/13 3,911,920
- --------------------------------------------------------------------------------------------------------------
$ 58,243,127
- --------------------------------------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 13.0%
- --------------------------------------------------------------------------------------------------------------
NR NR $ 7,500 Austin, TX (Cargoport Development LLC)
(AMT), 8.30%, 10/1/21 $ 8,011,275
NR NR 2,000 California Pollution Control, (Laidlaw
Environmental), (AMT), 6.70%, 7/1/07 2,051,960
NR NR 2,000 Camden County, NJ, Holt Hauling and
Warehousing System, Inc. Project (AMT),
9.875%, 1/1/21 2,407,780
Baa2 BBB+ 6,050 Carbon County, UT (Laidlaw) (AMT), 7.50%,
2/1/10 6,923,378
Baa2 BBB- 28,000 Chicago, IL, O'Hare International
(American Airlines), 7.875%, 11/1/25 30,754,920
Baa2 BBB- 20,275 Chicago, IL, O'Hare International,
(American Airlines), 8.20%, 12/1/24 24,426,306
NR NR 4,005 College Park, GA (Airport Parking
Venture), 10.00%, 5/15/16 3,759,494
Baa1 BBB 24,000 Courtland, AL (Champion International
Corporation), (AMT), 7.00%, 6/1/22 26,067,840
Baa2 BBB- 41,000 Dallas-Fort Worth, TX, International
Airport Facility (American Airlines),
7.25%, 11/1/30 45,537,879
Baa1 BBB 11,480 Gulf Coast Waste Disposal, TX (Champion
International Corp.) (AMT), 6.875%, 12/1/28 12,532,142
NR NR 5,928 Gwinnett County, GA (Plastics/Packaging,
Inc.) (AMT), 9.00%, 5/1/13(1) 3,260,163
NR NR 6,500 Kimball, NE, Economic Development
Authority, (Clean Harbors Inc.) (AMT),
10.75%, 9/1/26 7,052,370
NR NR 1,900 Los Angeles International Airport
(Continental Airlines) (AMT), 9.00%, 8/1/08 1,990,801
Baa1 BBB 10,000 Maine Finance Authority, (Great Northern
Paper, Inc., Project - Bowater Inc.)
(AMT), 7.75%, 10/1/22 11,193,900
NR BBB- 5,000 Maine Solid Waste Disposal (Boise Cascade
Corp.) (AMT), 7.90%, 6/1/15 5,413,600
Baa1 BBB 5,000 McMinn County,TN (Calhoun Newsprint Co.
Project - Bowater Inc.), (AMT), 7.40%,
12/1/22 5,572,850
NR NR 10,000 Michigan Strategic (S.D. Warren Co.),
7.375%, 1/15/22 10,946,700
NR NR 15,000 Michigan Strategic (S.D. Warren Co.),
7.375%, 1/15/22 16,420,050
NR NR 4,100 Middleboro, MA (Read Corp.), 9.50%, 10/1/10 4,391,428
NR NR 17,000 New Jersey Economic Development Authority
(Holt Hauling and Warehouse), 7.75%, 3/1/27 18,668,380
NR NR 1,500 New Jersey EDA, Holt Hauling and
Warehousing System, Inc., 7.90%, 3/1/27 1,657,230
Baa2 BBB- 7,500 Pennsylvania, IDA, (MacMillan Bloedel
Project) (AMT), 7.60%, 12/1/20 8,690,850
Baa3 BBB 10,000 Pennsylvania, IDA, (Sun Company Project),
(AMT), 7.60%, 12/1/24 11,544,100
B1 B 2,000 Riverdale Village, IL, ACME Metals, Inc.
Project (AMT), 7.95%, 4/1/25 2,162,720
B1 B 2,585 Riverdale Village, IL, ACME Metals, Inc.
Project, (AMT), 7.90%, 4/1/24 2,786,914
NR NR 2,505 Savannah, GA (Intercat-Savannah, Inc.)
(AMT), 9.75%, 7/1/10 2,709,208
NR NR 4,000 Savannah, GA, Economic Development
Authority (Intercat Incorporated), (AMT),
9.00%, 1/1/15 4,385,160
NR NR 2,000 Skowhegan, ME, S. D. Warren Co., 6.65%,
10/15/15 2,086,720
NR NR 1,000 State of Ohio, Solid Waste, (Republic
Engineered Steels Inc.), (AMT), 9.00%, 6/1/21 1,039,750
NR NR 3,500 Toole County, UT, Pollution Control
Revenue, (AMT), 7.55%, 7/1/27 3,703,735
- --------------------------------------------------------------------------------------------------------------
$288,149,603
- --------------------------------------------------------------------------------------------------------------
Insured - Electric Utilities -- 4.3%
- --------------------------------------------------------------------------------------------------------------
Aaa AAA $ 22,000 Intermountain Power Agency, UT (MBIA),
5.75%, 7/1/19 $ 22,758,340
Aaa AAA 10,000 Intermountain Power Agency, UT (MBIA),
6.00%, 7/1/16 10,634,700
Aaa AAA 10,000 Los Angeles, CA, Department of Water and
Power (MBIA), 5.00%, 10/15/33 9,337,600
Aaa AAA 21,000 Sacramento, CA, Municipal Utility
District, (MBIA), 4.75%, 9/1/21 19,047,210
Aaa AAA 16,500 Sacramento, CA, Municipal Utility
District, (MBIA), Variable,
11/15/15(2) 16,871,250
Aaa AAA 15,350 South Carolina Public Services, Residual
Interest Bonds, (FGIC), Variable, 1/1/25(2) 13,431,250
Aaa AAA 2,145 Washington Public Power Supply System,
Nuclear Project Number 2, (MBIA),
14.375%, 7/1/01 2,637,428
- --------------------------------------------------------------------------------------------------------------
$ 94,717,778
- --------------------------------------------------------------------------------------------------------------
Insured - General Obligations -- 1.2%
- --------------------------------------------------------------------------------------------------------------
Aaa AAA $ 19,500 State of California (FGIC), 4.75%, 9/1/23 $ 17,616,105
Aaa AAA 10,000 State of California (FSA), 4.75%, 9/1/18 9,202,500
- --------------------------------------------------------------------------------------------------------------
$ 26,818,605
- --------------------------------------------------------------------------------------------------------------
Insured - Hospitals -- 0.4%
- --------------------------------------------------------------------------------------------------------------
Aaa AAA $ 7,000 Montgomery, PA, (Abington Memorial
Hospital) (AMBAC), Variable, 7/5/11(2) $ 8,085,000
- --------------------------------------------------------------------------------------------------------------
$ 8,085,000
- --------------------------------------------------------------------------------------------------------------
Insured - Housing -- 0.4%
- --------------------------------------------------------------------------------------------------------------
Aaa AAA $ 7,525 SCA Multifamily Mortgage, Industrial
Development Board, Hamilton County, TN,
(AMT) (FSA), 7.35%, 1/1/30 $ 8,276,522
- --------------------------------------------------------------------------------------------------------------
$ 8,276,522
- --------------------------------------------------------------------------------------------------------------
Insured - Industrial Development Revenue/
Pollution Control Revenue -- 0.5%
- --------------------------------------------------------------------------------------------------------------
Aaa AAA $ 11,950 Chicago, IL (The Peoples Gas Light and
Coke Company) (AMT), (AMBAC), Residual
Interest Bonds, Variable, 12/1/23(2) 12,129,250
- --------------------------------------------------------------------------------------------------------------
$ 12,129,250
- --------------------------------------------------------------------------------------------------------------
Insured - Special Tax Revenue -- 5.4%
- --------------------------------------------------------------------------------------------------------------
Aaa AAA $ 20,000 Los Angeles County, CA, Metropolitan
Transportation (AMBAC), 4.75%, 7/1/18 $ 18,201,800
Aaa AAA 92,995 Metropolitan Pier and Exposition
Authority, IL, McCormick Place Expansion
Project (FGIC), 0.00%, 6/15/29 16,040,708
Aaa AAA 92,995 Metropolitan Pier and Exposition
Authority, IL, McCormick Place Expansion
Project, (MBIA), 0.00%, 6/15/28 16,954,848
Aaa AAA 9,800 Metropolitan Pier and Exposition
Authority, IL, McCormick Place Expansion
Project, Residual Interest Bonds, (MBIA),
Variable, 6/15/27(2) 10,694,250
Aaa AAA 10,655 Rancho Mirage, CA, Water District
Financing, (AMBAC), 4.75%, 8/15/21 9,664,937
Aaa AAA 13,350 Rancho Mirage, CA, Whitewater
Redevelopment Project, (MBIA), 5.00%,
4/1/24 12,692,112
Aaa AAA 3,415 Regional Transportation Authority, LA
(FGIC), 0.00%, 12/1/12 1,544,434
Aaa AAA 10,935 Regional Transportation Authority, LA
(FGIC), 0.00%, 12/1/15 4,138,351
Aaa AAA 10,000 Regional Transportation Authority, LA
(FGIC), 0.00%, 12/1/21 2,650,500
Aaa AAA 20,000 South Orange County, CA, Public Financing
Authority, (FGIC), Variable, 8/15/15(2) 20,050,000
Aaa AAA 7,000 Utah Municipal Finance Corp., Local
Government Revenue, (FSA), 0.00%, 3/1/10 3,709,020
Aaa AAA 6,000 Utah Municipal Finance Corp., Local
Government Revenue, (FSA), 0.00%, 3/1/11 2,993,160
- --------------------------------------------------------------------------------------------------------------
$119,334,120
- --------------------------------------------------------------------------------------------------------------
Insured - Transportation -- 6.5%
- --------------------------------------------------------------------------------------------------------------
Aaa AAA $ 19,000 Massachusetts State Turnpike Authority
(MBIA), 5.00%, 1/1/20 $ 18,598,910
Aaa AAA 1,000 Massachusetts State Turnpike Authority
(MBIA), 5.00%, 1/1/20 978,890
Aaa NR 41,015 Massachusetts State Turnpike Authority,
(FGIC), 5.125%, 1/1/23 40,907,950
Aaa NR 40,000 Massachusetts State Turnpike Authority,
Metropolitan District Highway System,
(MBIA), 5.00%, 1/1/27 37,657,199
Aaa AAA 14,400 Metropolitan Washington DC Airport
Authority (MBIA), Variable, 4/1/21(2) 14,940,000
Aaa AAA 18,200 Mobile, AL, Airport Authority (MBIA),
6.375%, 10/1/14 20,114,276
NR AAA 10,000 Triborough Bridge and Tunnel Authority,
(MBIA), Variable, 1/1/19(2) 10,600,000
- --------------------------------------------------------------------------------------------------------------
$143,797,225
- --------------------------------------------------------------------------------------------------------------
Insured - Water and Sewer -- 1.3%
- --------------------------------------------------------------------------------------------------------------
Aaa AAA $ 10,000 Detroit, MI, Sewer Revenue (FGIC),
Variable Rate, 7/1/23(2) $ 10,275,000
Aaa AAA 7,150 Harrisburg, PA, Water Revenue Bonds,
Residual Interest Bonds (FGIC), Variable,
8/11/16(2) 6,926,563
Aaa AAA 10,000 New York, NY, Municipal Water Finance
Authority, (FSA), Variable, 6/15/21(2) 11,425,000
- --------------------------------------------------------------------------------------------------------------
$ 28,626,563
- --------------------------------------------------------------------------------------------------------------
Lease Revenue /
Certificates of Participation -- 0.2%
- --------------------------------------------------------------------------------------------------------------
NR A- $ 3,500 Plymouth County, MA (Plymouth County
Correctional Facility), 7.00%, 4/1/22 $ 3,918,985
- --------------------------------------------------------------------------------------------------------------
$ 3,918,985
- --------------------------------------------------------------------------------------------------------------
Life Care -- 6.6%
- --------------------------------------------------------------------------------------------------------------
NR NR $ 8,616 Albuquerque, NM, First Mortgage
Industrial Development Revenue, (La Vida
Llena Retirement Center), 8.625%, 2/1/20 $ 9,067,909
NR NR 7,000 Albuquerque, NM, First Mortgage
Industrial Development Revenue, (La Vida
Llena Retirement Center), 8.85%, 2/1/23 7,464,450
NR NR 5,744 Albuquerque, NM, First Mortgage
Industrial Development Revenue, (La Vida
Lllena Retirement Center), 2.25%, 2/1/23 1,746,980
NR NR 10,000 Atlantic Beach, Fixed Rate Improvement,
(Fleet Landing Project), 8.00%, 6/1/24 10,861,700
NR NR 12,555 De Kalb County, Private Hospital
Authority (Atlanta Incorporated), 8.50%,
3/1/25 11,356,751
NR NR 5,200 Kansas City, MO Industrial Development
Authority (Kingswood United Methodist
Manor), 9.00%, 11/15/13 5,747,352
NR NR 20,400 Loudoun County, VA, Industrial
Development Authority (Falcons Landing),
8.75%, 11/1/24 23,048,532
NR NR 2,100 Loudoun County, VA, Industrial
Development Authority, Residential Care
(Falcons Landing), 9.25%, 7/1/04 2,312,121
NR NR 15,000 Louisiana Housing Finance Agency (HCC
Assisted Living Group 1) (AMT), 9.00%,
3/1/25 16,401,000
NR NR 1,950 New Hampshire Higher Educational and
Health Facilities (Riverwoods at Exeter),
8.00%, 3/1/01 1,990,404
NR NR 3,500 New Jersey EDA, (Cadbury Corp.), 7.50%,
7/1/21 3,636,115
NR NR 20,000 New Jersey EDA, (Keswick Pines Project),
8.75%, 1/1/24 22,048,200
NR NR 5,800 Ridgeland, MS, Urban Renewal, The Orchard
Project Series 1993A, 7.75%, 12/1/15 6,206,928
NR NR 10,000 Saint Tammany, LA, Public Finance,
Christwood Project, 9.00%, 11/15/25 10,977,100
NR NR 4,500 Vermont Industrial Development Authority
(Wake Robin Corp.), 8.75%, 3/1/23 4,979,295
NR NR 7,500 Vermont Industrial Development Authority
(Wake Robin Corp.), 8.75%, 4/1/23(3) 8,298,825
- --------------------------------------------------------------------------------------------------------------
$146,143,662
- --------------------------------------------------------------------------------------------------------------
Miscellaneous -- 2.5%
- --------------------------------------------------------------------------------------------------------------
NR NR $ 6,225 American Samoa Economic Development,
Executive Office Building, 10.125%, 9/1/08 $ 6,650,728
NR NR 6,645 Hardeman County, TN (Correctional
Facilities Corp.), 7.75%, 8/1/17 7,378,542
NR A- 6,500 Los Angeles Regional Airports Improvement
Corporation (LAXFuel) (AMT), 6.50%, 1/1/32 6,703,840
NR NR 22,500 New Jersey Sports and Exposition
Authority, (Monmouth Park Project),
8.00%, 1/1/25 25,276,050
NR NR 10,200 Orange County Community Activity Center
Revenue Bonds, 8.00%, 3/1/24 8,160,000
NR NR 1,600 Pittsfield Township, MI, EDC, (Arbor
Hospice Project), 7.875%, 8/15/27 1,572,896
- --------------------------------------------------------------------------------------------------------------
$ 55,742,056
- --------------------------------------------------------------------------------------------------------------
Nursing Homes -- 6.9%
- --------------------------------------------------------------------------------------------------------------
NR NR $ 13,415 Bell County, TX, (Riverside Healthcare,
Inc. - Normandy Terrace), 9.00%, 4/1/23 $ 15,470,446
NR NR 4,600 Collier County, FL, IDA, Retirement
Rental, (Beverly Enterprises - Florida,
Inc.), 10.75%, 3/1/03 5,297,590
NR NR 5,000 Delaware County, PA (Mainline - Haverford
Nursing and Rehabilitation Centers),
9.00%, 8/1/22 5,765,550
NR NR 5,460 Hillsborough County, FL, Industrial
Development Authority, Center for
Independent Living, Tampa Projects, 11%,
3/1/19(4) 4,914,000
NR NR 4,650 Hillsborough County, FL, Industrial
Development Authority, Center for
Independent Living, Tampa Projects,
10.25%, 3/1/09(4) 4,185,000
Baa1 NR 10,000 Indianapolis, IN (National Benevolent
Association - Robin Run Village), 7.625%,
10/1/22 11,001,700
NR NR 3,575 Lackawanna County, PA, Industrial
Development Authority, (Edella Street
Associates), 8.875%, 9/1/14 3,923,884
NR N/A 3,085 Luzerne County, PA, Industrial
Development Authority (River Street
Associates), 8.75%, 6/15/07 3,363,082
NR NR 13,250 Massachusetts IFA, AGE, Institute of
Massachusetts, 8.05%, 11/1/25 13,991,338
NR NR 11,780 Mississippi Business Finance Corp.
(Magnolia Healthcare), 7.99%, 7/1/25 12,335,427
NR NR 6,750 Missouri Health and Education Authority
(Bethesda Health Group of Saint Louis
Inc.), 6.625%, 8/15/05 7,128,000
NR NR 14,000 Missouri Health and Education Authority
(Bethesda Health Group of Saint Louis,
Inc.), 7.50%, 8/15/12 15,661,100
NR NR 12,500 Montgomery, PA, IDA (Advancement of
Geriatric Health Care Institute), 8.375%,
7/1/23 13,577,000
NR NR 5,915 New Jersey Economic Development Authority
(Victoria Health Corporation), 7.75%,
1/1/24 6,265,760
NR NR 5,000 New Jersey EDA, (Claremont Health System,
Inc.), 9.10%, 9/1/22 5,563,700
NR NR 2,895 Okaloosa County, FL, (Beverly
Enterprises), 10.75%, 10/1/03 2,991,288
Baa1 BBB 3,870 Racine County, WI, Health Center, 8.125%,
8/1/21 3,989,390
NR NR 5,000 Sussex County, DE (Delaware Health
Corporation), 7.50%, 1/1/14 5,188,800
NR NR 5,000 Sussex County, DE (Deleware Health
Corporarion), 7.60%, 1/1/24 5,203,900
NR NR 4,500 Tarrant County Health Facilities, TX,
10.25%, 9/1/19 4,763,025
NR NR 2,500 Westmoreland, PA, (Highland Health
Systems, Inc.), 9.25%, 6/1/22 2,799,550
- --------------------------------------------------------------------------------------------------------------
$153,379,530
- --------------------------------------------------------------------------------------------------------------
Pooled Loans -- 0.2%
- --------------------------------------------------------------------------------------------------------------
Aa3 AA- $ 5,000 Port Seattle, WA, 6.00%, 12/1/14 $ 5,110,700
- --------------------------------------------------------------------------------------------------------------
$ 5,110,700
- --------------------------------------------------------------------------------------------------------------
Solid Waste -- 1.7%
- --------------------------------------------------------------------------------------------------------------
NR NR $ 35,000 Robbins, Cook County, IL (Robbins
Resource Recovery Partners, L.P.),
8.375%, 10/15/16 $ 36,874,950
- --------------------------------------------------------------------------------------------------------------
$ 36,874,950
- --------------------------------------------------------------------------------------------------------------
Special Tax Revenue -- 0.2%
- --------------------------------------------------------------------------------------------------------------
Baa BBB $ 3,755 Inglewood, CA Public Financing Authority,
In-Town, Manchester-Prairie and North
Inglewood Industrial Park Redevelopment
Projects-Redevelopment Loans, 7.00%, 5/1/22 $ 4,057,953
- --------------------------------------------------------------------------------------------------------------
$ 4,057,953
- --------------------------------------------------------------------------------------------------------------
Transportation -- 9.7%
- --------------------------------------------------------------------------------------------------------------
Baa3 BB+ $ 52,500 Denver, CO, (United Airlines) (AMT),
6.875%, 10/1/32(3) $ 56,288,924
Baa1 BBB 8,000 Denver, CO, Airport System Revenue (AMT),
7.00%, 11/15/25 8,479,120
Baa1 BBB 5,725 Denver, CO, Airport System Revenue (AMT),
7.50%, 11/15/23 6,594,456
A A+ 5,000 Hawaii Airport System (AMT), 7.00%, 7/1/18 5,399,450
A1 NR 5,500 Massachusetts State Turnpike Authority,
5.00%, 1/1/20 5,383,895
A1 AA- 15,000 Port Authority of New York and New Jersey
(AMT), Variable, 1/15/27(2) 16,443,750
Baa3 NR 15,000 San Joaquin Hills, CA, Toll Road Revenue
Bonds, 0.00%, 1/1/25 3,486,000
Baa3 NR 35,100 San Joaquin Hills, CA, Toll Roads, 0.00%,
1/1/17 12,689,352
Baa3 NR 54,400 San Joaquin Hills, CA, Toll Roads, 0.00%,
1/1/18 18,654,848
Baa3 NR 46,210 San Joaquin Hills, CA, Toll Roads, 0.00%,
1/1/20 14,133,791
Baa3 NR 72,685 San Joaquin Hills, CA, Toll Roads, 0.00%,
1/1/21 21,078,650
Baa3 NR 29,225 San Joaquin Hills, CA, Toll Roads, 0.00%,
1/1/22 8,020,801
Baa3 NR 45,045 San Joaquin Hills, CA, Toll Roads, 0.00%,
1/1/23 11,697,736
Baa3 NR 107,260 San Joaquin Hills, CA, Toll Roads, 0.00%,
1/1/24 26,351,637
- --------------------------------------------------------------------------------------------------------------
$214,702,410
- --------------------------------------------------------------------------------------------------------------
Water and Sewer -- 0.2%
- --------------------------------------------------------------------------------------------------------------
A2 A- $ 4,965 New York, NY, Municipal Water Finance
Authority, 6.25%, 6/15/21 $ 5,185,893
- --------------------------------------------------------------------------------------------------------------
$ 5,185,893
- --------------------------------------------------------------------------------------------------------------
Total Tax-Exempt Investments
(identified cost $1,910,653,348) $2,209,029,177
- --------------------------------------------------------------------------------------------------------------
<PAGE>
Taxable Investment -- 0.0%
Ratings (Unaudited)
- -------------------------------- Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
- --------------------------------------------------------------------------------------------------------------
Life Care -- 0.0%
- --------------------------------------------------------------------------------------------------------------
NR NR $ 650 Ridgeland, MS, Urban Renewal, The Orchard
Limited Project, Series 1993B, 9.00%,
12/1/00 $ 658,684
- --------------------------------------------------------------------------------------------------------------
$ 658,684
- --------------------------------------------------------------------------------------------------------------
Total Taxable Investment
(identified cost $650,000) $ 658,684
- --------------------------------------------------------------------------------------------------------------
Total Investments -- 100.0%
(identified cost $1,911,303,348) $2,209,687,861
- --------------------------------------------------------------------------------------------------------------
</TABLE>
At September 30, 1997 the concentration of the Portfolio's investments in the
various states, determined as a percentage of total investments, is as follows:
California 12.6%
Others, representing less than 10% individually 87.4%
The Portfolio invests primarily in debt securities issued by municipalties. The
ability of the issuers of the debt securities to meet their obligations may be
affected by economic developments in a specific industry or municipality. In
order to reduce the risk associated with such economic developments, at
September 30, 1997, 18.8% of the securities in the portfolio of investments are
backed by bond insurance of various financial institutions and financial
guaranty assurance agencies The aggregate percentage insured by financial
institutions ranged from 1.6% to 9.0% of total investments.
(1) Non-income producing security.
(2) Security has been issued as an inverse floater bond.
(3) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
(4) The Portfolio is accruing only partial interest on this security.
See notes to financial statements
<PAGE>
National Municipals Portfolio as of September 30, 1997
- ------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities
As of September 30, 1997
Assets
- ------------------------------------------------------------------------------
Investments, at value (Note 1A)
(identified cost, $1,911,303,348) $2,209,687,861
Cash 941
Receivable for investments sold 12,547,990
Interest receivable 37,541,131
Receivable for variation margin on open financial futures
contracts (Note 1E) 1,031,250
Deferred organization expenses (Note 1D) 7,562
- ------------------------------------------------------------------------------
Total assets $2,260,816,735
- ------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------
Demand note payable (Note 5) $ 11,767,000
Payable for investments purchased 67,331,430
Payable to affiliate for Trustees' fees (Note 2) 7,524
Accrued expenses 95,377
- ------------------------------------------------------------------------------
Total liabilities $ 79,201,331
- ------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $2,181,615,404
- ------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $1,891,311,891
Net unrealized appreciation of investments
(computed on the basis of identified cost) 290,303,513
- ------------------------------------------------------------------------------
Total $2,181,615,404
- ------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
National Municipals Portfolio as of September 30, 1997
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS CONT'D
- -------------------------------------------------------------------------------
Statement of Operations
For the Year Ended
September 30, 1997
Investment Income (Note 1B)
- ------------------------------------------------------------------------------
Interest income $152,452,869
- ------------------------------------------------------------------------------
Total investment income $152,452,869
- ------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 9,517,084
Compensation of Trustees not members of the Investment Adviser's
organization (Note 2) 29,929
Interest expense (Note 5) 1,260,554
Custodian fee 333,623
Legal and accounting services 77,129
Amortization of organization expenses (Note 1D) 19,513
Miscellaneous 41,257
- ------------------------------------------------------------------------------
Total expenses $ 11,279,089
- ------------------------------------------------------------------------------
Net investment income $141,173,780
- ------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- ------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 29,105,894
Financial futures contracts (28,422,175)
- ------------------------------------------------------------------------------
Net realized gain on investment transactions $ 683,719
- ------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $135,921,719
Financial futures contracts (2,357,687)
- ------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $133,564,032
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments $134,247,751
- ------------------------------------------------------------------------------
Net increase in net assets from operations $275,421,531
- ------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
National Municipals Portfolio as of September 30, 1997
- ------------------------------------------------------------------------------
FINANCIAL STATEMENTS CONT'D
- ------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended Year Ended
in Net Assets September 30, 1997 September 30, 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment income $ 141,173,780 $ 150,829,621
Net realized gain on investments 683,719 1,307,718
Net change in unrealized appreciation
(depreciation) of investments 133,564,032 21,364,900
- -------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 275,421,531 $ 173,502,239
- -------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 304,512,126 $ 517,368,709
Withdrawals (610,796,255) (739,039,309)
- -------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $ (306,284,129) $ (221,670,600)
- -------------------------------------------------------------------------------------------------
Net decrease in net assets $ (30,862,598) $ (48,168,361)
- -------------------------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------------------
At beginning of year $2,212,478,002 $2,260,646,363
- -------------------------------------------------------------------------------------------------
At end of year $2,181,615,404 $2,212,478,002
- -------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
<PAGE>
National Municipals Portfolio as of September 30, 1997
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS CONT'D
- -------------------------------------------------------------------------------
Supplementary Data
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios (as a percentage of average daily net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses(1) 0.52% 0.49% 0.50% 0.50% 0.47%+
Net expenses after
custodian fee reduction 0.52% 0.48% 0.49% -- --
Net investment income 6.51% 6.65% 7.00% 6.55% 6.58%+
Portfolio turnover 17% 19% 54% 40% 13%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $2,181,615 $2,212,478 $2,260,646 $2,210,936 $2,083,322
- ------------------------------------------------------------------------------------------------------------------------------------
+ Annualized.
* For the period from the start of business, February 1, 1993, to September 30, 1993.
(1) The expense ratios for the year ended September 30, 1995 and periods thereafter have been adjusted to reflect a change in
reporting requirements. The new reporting guidelines require the Portfolio to increase its expense ratio by the effect of any
expense offset arrangements with its service providers. The expense ratios for the prior periods have not been adjusted to
reflect this change.
See notes to financial statements
</TABLE>
<PAGE>
National Municipals Portfolio as of September 30, 1997
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1 Significant Accounting Policies
-----------------------------------------------------------------------------
National Municipals Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified open-end management investment
company which was organized as a trust under the laws of the State of New York
on May 1, 1992. The Declaration of Trust permits the Trustees to issue
interests in the Portfolio. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A Investment Valuation -- Municipal bonds are normally valued on the basis of
valuations furnished by a pricing service. Taxable obligations, if any, for
which price quotations are readily available are normally valued at the mean
between the latest bid and asked prices. Futures contracts listed on the
commodity exchanges are valued at closing settlement prices. Short-term
obligations, maturing in sixty days or less, are valued at amortized cost,
which approximates value. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes.
C Federal Taxes -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally
must satisfy the applicable source of income and diversification requirements
(under the Internal Revenue Code) in order for its investors to satisfy them.
The Portfolio will allocate at least annually among its investors each
investor's distributive share of the Portfolio's net taxable (if any) and
tax-exempt investment income, net realized capital gains, and any other items
of income, gain, loss, deduction or credit. Interest income received by the
Portfolio on investments in municipal bonds, which is excludable from gross
income under the Internal Revenue Code, will retain its status as income
exempt from federal income tax when allocated to the Portfolio's investors.
The portion of such interest, if any, earned on private activity bonds issued
after August 7, 1986 may be considered a tax preference item for investors.
D Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
E Financial Futures Contracts -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit ("initial margin") either in
cash or securities an amount equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio ("margin maintenance") each day, dependent
on the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio. The
Portfolio's investment in financial futures contracts is designed only to
hedge against anticipated future changes in interest rates. Should interest
rates move unexpectedly, the Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
F Legal Fees -- Legal fees and other related expenses incurred as part of
negotiations of the terms and requirements of capital infusions, or that are
expected to result in the restructuring of or a plan of reorganization for an
investment are recorded as realized losses. Ongoing expenditures to protect or
enhance an investment are treated as operating expenses.
G When-issued and Delayed Delivery Transactions -- The Portfolio may engage in
when-issued or delayed delivery transactions. The Portfolio records when-
issued securities on trade date and maintains security positions such that
sufficient liquid assets will be available to make payments for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked-to-market daily and begin accruing interest on settlement date.
H Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
I Other -- Investment transactions are accounted for on a trade date basis.
J Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives
a fee reduced by credits which are determined based on the average daily cash
balance the Portfolio maintains with IBT. All significant credit balances used
to reduce the Portfolio's custodian fees are reflected as a reduction of
operating expense on the Statement of Operations.
2 Investment Adviser Fee and Other Transactions with Affiliates
------------------------------------------------------------------------------
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation for
management and investment advisory services rendered to the Portfolio. The fee
is based upon a percentage of average daily net assets plus a percentage of
gross income (i.e., income other than gains from the sale of securities). For
the year ended September 30, 1997, the fee was equivalent to 0.44% of the
Portfolio's average net assets for such period and amounted to $9,517,084.
Except as to Trustees of the Portfolio who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services to
the Portfolio out of such investment adviser fee. Trustees of the Portfolio
that are not affiliated with the Investment Adviser may elect to defer receipt
of all or a percentage of their annual fees in accordance with the terms of
the Trustees Deferred Compensation Plan. For the year ended September 30,
1997, no significant amounts have been deferred.
Certain of the officers and Trustees of the Portfolio are officers and
directors/trustees of the above organizations.
3 Investments
------------------------------------------------------------------------------
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $366,727,114 and $558,324,520,
respectively, for the year ended September 30, 1997.
4 Federal Income Tax Basis of Investments
------------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the investments
owned at September 30, 1997, as computed on a federal income tax basis, were
as follows:
Aggregate cost $1,911,303,348
--------------------------------------------------------------------------
Gross unrealized appreciation $ 314,031,037
Gross unrealized depreciation (15,646,524)
--------------------------------------------------------------------------
Net unrealized appreciation $ 298,384,513
--------------------------------------------------------------------------
5 Line of Credit
------------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $120 million unsecured line of credit agreement
with a group of banks. The Portfolio may temporarily borrow from the line of
credit to satisfy redemption requests or settle investment transactions.
Interest is charged to each portfolio or fund based on its borrowings at an
amount above either the bank's adjusted certificate of deposit rate,
Eurodollar rate or federal funds rate. In addition, a fee computed at an
annual rate of 0.15% on the daily unused portion of the line of credit is
allocated among the participating portfolios and funds at the end of each
quarter. For the year ended September 30, 1997, the average daily loan balance
was $23,709,934 and the average interest rate was 6.136%. The maximum
borrowings at any month end during the year ended September 30, 1997 was
$65,000,000. At September 30, 1997, the Portfolio had a balance outstanding
pursuant to this line of credit of $11,767,000.
6 Financial Instruments
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The Portfolio regularly trades in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered.
A summary of obligations under these financial instruments at September 30,
1997 is as follows:
Futures
Contracts Net
Expiration Unrealized
Date Contracts Position Depreciation
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12/97 3,000 U.S. Treasury Bonds Short $8,081,000
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At September 30, 1997, the Portfolio had sufficient cash and/or securities to
cover margin requirements on open futures contracts.
<PAGE>
National Municipals Portfolio as of September 30, 1997
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INDEPENDENT AUDITORS' REPORT
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To the Trustees and Investors
of National Municipals Portfolio
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We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of National Municipals Portfolio as of September
30, 1997, the related statement of operations for year then ended, the
statements of changes in net assets for the years ended September 30, 1997 and
1996 and the supplementary data for the years ended September 30, 1997, 1996,
1995, and 1994 and for the period from the start of business, February 1, 1993,
to September 30, 1993. These financial statements and supplementary data are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and supplementary data based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities held as of
September 30, 1997 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and supplementary data present fairly,
in all material respects, the financial position of National Municipals
Portfolio at September 30, 1997, the results of its operations, the changes in
its net assets, and its supplementary data for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 7, 1997
<PAGE>
EV Marathon National Municipals Fund as of September 30, 1997
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INVESTMENT MANAGEMENT
- -------------------------------------------------------------------------------
EV Marathon National Municipals Fund
<TABLE>
<CAPTION>
Officers Independent Trustees
<S> <C>
THOMAS J. FETTER DONALD R. DWIGHT
President President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
JAMES B. HAWKES
Vice President and Trustee SAMUEL L. HAYES, III
Jacob H. Schiff Professor of Investment Banking,
Harvard University Graduate School of Business
ROBERT B. MACINTOSH Administration
Vice President
NORTON H. REAMER
JAMES L. O'CONNOR President and Director, United Asset
Treasurer Management Corporation
ALAN R. DYNNER JOHN L. THORNDIKE
Secretary Formerly Director, Fiduciary Company Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
National Municipals Portfolio
Officers Independent Trustees
THOMAS J. FETTER DONALD R. DWIGHT
President President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
JAMES B. HAWKES
Vice President and Trustee SAMUEL L. HAYES, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
ROBERT B. MACINTOSH Business Administration
Vice President
NORTON H. REAMER
THOMAS M. METZOLD President and Director, United Asset
Vice President and Portfolio Management Corporation
Manager
JOHN L. THORNDIKE
JAMES L. O'CONNOR Formerly Director, Fiduciary Company Incorporated
Treasurer
JACK L. TREYNOR
ALAN R. DYNNER Investment Adviser and Consultant
Secretary
</TABLE>
<PAGE>
INVESTMENT ADVISOR OF
NATIONAL MUNICIPALS PORTFOLIO
BOSTON MANAGEMENT AND RESEARCH
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV MARATHON NATIONAL MUNICIPALS FUND
EATON VANCE MANAGEMENT
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
EATON VANCE DISTRIBUTORS, INC.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
INVESTORS BANK & TRUST COMPANY
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AGENT
FIRST DATA INVESTOR SERVICES GROUP, INC.
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
EV MARATHON NATIONAL MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
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This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution
plan, sales charges and expenses. Please read the prospectus carefully
before you invest or send money.
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M-HMSRC-11/97
