<PAGE>
[PHOTO OF E-V REGISTERED Mutual Funds for [PHOTO OF BRICK WALL
DOOR APPEARS HERE] People who pay APPEARS HERE]
Taxes
EDUCATION
Annual Report July 31, 1998
[PHOTO OF HIGHWAY AT NIGHT EATON VANCE
APPEARS HERE] MUNICIPALS
TRUST
Arizona
Colorado
Connecticut
Michigan
Minnesota
New Jersey
Pennsylvania
Texas
[PHOTO OF SUSPENSION BRIDGE
APPEARS HERE]
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
LETTER TO SHAREHOLDERS
[PHOTO OF THOMAS FETTER APPEARS HERE]
Thomas J. Fetter,
President
The municipal bond market has posted solid returns in 1998 in an economy
characterized by slower growth and continued low inflation. First quarter GDP
rose at a robust 5.5% annualized rate, but was followed by a more moderate 1.6%
pace in the second quarter as U.S. companies felt the effects of Asian economic
weakness. Meanwhile, the annualized inflation rate has declined to around 1%.
While there has been some pressure on wages and benefit costs, commodity prices
have continued to decline dramatically due to a slowing world economy and
slackening demand. As a consequence, the Federal Reserve has maintained a stable
interest rate policy. Against that backdrop, municipal bonds have turned in
positive returns, with the Lehman Brothers Municipal Bond Index* - an unmanaged
index of municipal bonds - rising 6.0% during the year ended July 31, 1998.
After a generation of deficit spending, the federal budget will register a
surplus in fiscal year 1998
Bolstered by rising tax receipts, falling interest costs, and a renewed fiscal
discipline on the part of policy makers, the federal budget will register a
surplus this year for the first time in a generation. The surplus will likely
result in lower Treasury bond issuance in coming years, which should greatly
improve the outlook for interest rates.
With refundings producing heavy municipal supply, municipal bonds now offer
unusually good value
The past twelve months have been characterized by a continued wave of
refundings, as municipal issuers have redeemed high-coupon older bonds and
replaced them with lower-coupon bonds. The surge in supply has restrained the
performance of municipals relative to Treasury bonds. As a result, municipal
yields represented 90.5% of Treasury yields at July 31, according to Bloomberg,
L.P.
Municipal bonds yield 90% of Treasury yields
5.17% - 30 Year AAA+ rated General Obligation (GO) Bonds*
8.08% - Taxable equivalent yield in 36% tax bracket
5.71% - 30 Year Treasury bond
Principal and interest payments of Treasury securities are guaranteed by the
U.S. government.
*GO yields are a compilation of a representative variety of general obligations
and are not necessarily representative of the Fund's yield. Statistics as of
July 31, 1998.
Past performance is no guarantee of future results
Source: Bloomberg L.P.
That ratio is very high by historical standards and suggests that municipals may
represent uncommonly good value. That is an important consideration, especially
given the recently overvalued status of some other asset classes.
Following an extraordinary three-year run of 20%-plus annual returns, the stock
market has entered a period of severe volatility. Moreover, the slowdown in Asia
and the economic uncertainty in emerging markets like Russia have clouded the
outlook for corporate profits while prompting many investors to diversify their
portfolios further with bond investments. Given their attractive valuations
relative to other fixed-income vehicles, municipals are receiving increased
attention. And, of course, municipal bonds remain a good way to lower one's
income tax burden. For those reasons, we believe that municipals continue to
merit strong consideration from tax-conscious investors.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter,
President
September 9, 1998
*It is not possible to invest directly in the Index.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
2
<PAGE>
Eaton Vance Arizona Municipals Fund as of July 31, 1998
INVESTMENT UPDATE
[PHOTO OF CYNTHIA CLEMSON APPEARS HERE]
Cynthia J. Clemson,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Following a brief slowdown in 1997, Arizona's economy accelerated in the
first half of 1998. Job growth remained strong, average earnings rose 4.4%,
and state retail sales increased a robust 7.4%. The Arizona unemployment
rate fell to 3.7% in July from 4.5% a year earlier.
. The Asian economic crisis does not yet appear to have affected Arizona's
export industries. The state's manufacturing sector - dominated by
technology - has added nearly 12,000 new jobs in the past year, the
strongest performance by the manufacturing sector since 1994.
. The Arizona real estate market has been soaring. Residential building
reached levels not seen since the building boom of the 1980s. Nearly $10
billion in construction projects was awarded in 1997. Major projects have
included new plants for leading chip manufacturer Intel and the Arizona
Diamondbacks' new Bank One Ballpark in Phoenix.
Management Update
- --------------------------------------------------------------------------------
. In a quiet market that traded in a narrow range, management made minor
structural adjustments, continuing a barbell approach. The Portfolio added
zero coupon issues to add upside potential, while improving call protection
through the purchase of some non-callable bonds.
. Amid very light new issuance, the Portfolio found opportunities in the
utility sector, where deregulation is distinguishing industry winners from
the also-rans. The Portfolio also found value among multi-family housing
bonds issued to meet the demands of a large population inflow.
. The Portfolio was very selective in the competitive hospital sector,
especially in the increasingly overbedded Phoenix area.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1998, the Fund's Class A and Class B shares
had total returns of 6.3% and 5.5%, respectively./1/ For Class A, this
return resulted from an increase in net asset value (NAV) per share to
$10.20 on July 31, 1998 from $10.09 on July 31, 1997, and the reinvestment
of $0.515 per share in tax-free income./2/ For Class B, this return
resulted from an increase in NAV to $11.34 from $11.22, and the
reinvestment of $0.490 per share in tax-free income./2/
. Based on the Fund's most recent dividends and NAVs on July 31, 1998 of
$10.20 per share for Class A and $11.34 for Class B, the distribution rates
were 5.05% and 4.32%, respectively./3/
. The SEC 30-day yields for Class A and B shares at July 31 were 4.41% and
3.83%, respectively./4/
Your Investment at Work
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[LOGO APPEARS HERE]
Winslow Industrial Development Authority Winslow Memorial Hospital Project
. Winslow Memorial Hospital, Inc. is a non-profit corporation that operates a
hospital in Winslow.
. The bonds were issued in 1992 to finance the acquisition, construction,
installation and equipping of the hospital offices and facilities as part
of its reconfiguration to qualify as a "sole community provider."
. With an exceptionally attractive coupon of 9.5%, this non-rated bond is a
good example of the Portfolio's efforts to find research-driven
opportunities.
- --------------------------------------------------------------------------------
/1/ These returns do not include the 4.75% maximum sales charge for Class A
shares or the applicable contingent deferred sales charges (CDSC) for Class
B shares. /2/ A portion of the Fund's income could be subject to federal
income tax and/or alternative minimum tax. /3/ The Fund's distribution rate
represents actual distributions paid to shareholders and is calculated by
dividing the last distribution per share (annualized) by the net asset
value. /4/ The Fund's SEC yield is calculated by dividing the net investment
income per share for the 30-day period by the offering price at the end of
the period and annualizing the result. /5/ Returns are historical and are
calculated by determining the percentage change in net asset value with all
distributions reinvested. SEC returns for Class A reflect the maximum 4.75%
sales charge. SEC returns for Class B reflect applicable CDSC based on the
following schedule: 5% - 1st and 2nd years; 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.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1998
Performance/5/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 6.3% 5.5%
Five Years N.A. 5.5
Life of Fund+ 5.6 7.5
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 1.3% 0.5%
Five Years N.A. 5.2
Life of Fund+ 4.5 7.5
+Inception date: Class A: 12/13/93; Class B: 7/25/91
Comparison of Change in Value of a $10,000 Investment in Eaton Vance Arizona
Municipals Fund, Class B vs. the Lehman Brothers Municipal Bond Index*
July 31, 1991 -- July 31, 1998
[LINE GRAPH APPEARS HERE]
Eaton Vance Arizona Lehman Brothers
Municipals Fund Municipal Bond
Date Class B Index
07-31-91 $10,000 $10,000
08-31-91 $10,079 $10,132
09-30-91 $10,310 $10,264
10-31-91 $10,411 $10,356
11-30-91 $10,396 $10,385
12-31-91 $10,736 $10,608
01-31-92 $10,698 $10,632
02-28-92 $10,719 $10,636
03-31-92 $10,635 $10,639
04-30-92 $10,720 $10,734
05-31-92 $10,931 $10,861
06-30-92 $11,146 $11,043
07-31-92 $11,621 $11,374
08-31-92 $11,343 $11,263
09-30-92 $11,385 $11,337
10-31-92 $11,046 $11,225
11-30-92 $11,437 $11,426
12-31-92 $11,598 $11,543
01-31-92 $11,624 $11,677
02-28-93 $12,298 $12,100
03-31-93 $12,152 $11,972
04-30-93 $12,276 $12,092
05-31-93 $12,348 $12,160
06-30-93 $12,637 $12,364
07-31-93 $12,615 $12,379
08-31-93 $12,969 $12,637
09-30-93 $13,126 $12,781
10-31-93 $13,169 $12,806
11-30-93 $12,987 $12,693
12-31-93 $13,335 $12,961
01-31-94 $13,491 $13,109
02-28-94 $13,061 $12,770
03-31-94 $12,293 $12,249
04-30-94 $12,351 $12,353
05-31-94 $12,468 $12,460
06-30-94 $12,330 $12,388
07-31-94 $12,580 $12,611
08-31-94 $12,614 $12,655
09-30-94 $12,367 $12,469
10-31-94 $12,011 $12,248
11-30-94 $11,673 $12,026
12-31-94 $12,044 $12,291
01-31-95 $12,533 $12,642
02-28-95 $13,007 $13,010
03-31-95 $13,142 $13,160
04-30-95 $13,134 $13,175
05-31-95 $13,573 $13,596
06-30-95 $13,348 $13,477
07-31-95 $13,415 $13,604
08-31-95 $13,581 $13,777
09-30-95 $13,647 $13,864
10-31-95 $13,893 $14,065
11-30-95 $14,217 $14,299
12-31-95 $14,400 $14,436
01-31-96 $14,481 $14,545
02-28-96 $14,313 $14,447
03-31-96 $14,051 $14,263
04-30-96 $13,988 $14,222
05-31-96 $13,962 $14,217
06-30-96 $14,113 $14,372
07-31-96 $14,242 $14,502
08-31-96 $14,243 $14,499
09-30-96 $14,461 $14,701
10-31-96 $14,580 $14,867
11-30-96 $14,811 $15,140
12-31-96 $14,745 $15,076
01-31-97 $14,759 $15,104
02-28-97 $14,929 $15,243
03-31-97 $14,731 $15,040
04-30-97 $14,881 $15,166
05-31-97 $15,087 $15,394
06-30-97 $15,229 $15,558
07-31-97 $15,645 $15,989
08-31-97 $15,508 $15,839
09-30-97 $15,678 $16,027
10-31-97 $15,763 $16,130
11-30-97 $15,840 $16,225
12-31-97 $16,063 $16,462
01-31-98 $16,349 $16,631
02-28-98 $16,369 $16,636
03-31-98 $16,378 $16,651
04-30-98 $16,249 $16,576
05-31-98 $16,480 $16,838
06-30-98 $16,497 $16,905
07-31-98 $16,512 $16,947
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
7/25/91. Index information is available only at month-end; therefore, the line
comparison begins at the next month following the commencement of the Fund's
investment operations. The chart compares the total return of the Fund's Class
B with that of the Lehman Brothers Municipal Bond Index, a broad-based,
unmanaged market index. Returns are calculated by determining the percentage
change in net asset value (NAV) with all distributions reinvested. The lines
on the chart represent total returns of $10,000 hypothetical investments in
the Fund and the Lehman Brothers Municipal Bond Index. An investment in Class
A shares on 12/31/93 at net asset value would have grown to $12,852 on
July 31, 1998; $12,241, including the 4.75% sales charge. 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.
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For federal income tax
purposes, 99.39% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1998 was designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
3
<PAGE>
Eaton Vance Colorado Municipals Fund as of July 31, 1998
INVESTMENT UPDATE
[PHOTO OF WILLIAM AHERN APPEARS HERE]
William H. Ahern,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Colorado continues to rank among the leading states in job growth. The
state's unemployment rate remained well below the nation's, at 3.3% in
July. Against the backdrop of a strong economy, state tax revenues have
risen at a 14% rate in 1998, with corporate and personal income tax each
showing unusual strength.
. Colorado's exports were again dominated by technology-based products,
including computer equipment, electronics, and fine instruments. Total
exports expanded to $5.6 billion in 1997, despite a 6% decline in exports
to Japan, the state's largest foreign trading partner. Asia's continuing
weakness could result in further weakness in that export market.
. The service sector provided the lion's share of new jobs in the past year.
Finance and real estate, benefiting from a surge in the state's real estate
markets, added 5,000 alone. Durable goods manufacturing created 2,700 new
positions, supported by strong demand for technology products.
Management Update
- --------------------------------------------------------------------------------
. Management maintained a generally positive market outlook and reduced its
exposure to par bonds in favor of discount bonds and zero coupon bonds.
These bonds are more sensitive to changes in interest rates.
. Non-rated bonds represented 10.2% of the Portfolio. We have taken advantage
of Eaton Vance's extensive resources in the non-rated segment of the market
to add these higher-yielding bonds to the Portfolio.
. Hospital bonds were the Portfolio's largest sector weighting. In a
fast-changing health care environment, the Portfolio focused on competitive
institutions with favorable demographics and the ability to contain costs.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1998, the Fund's Class A and Class B shares
had total returns of 5.6% and 4.7%, respectively./1/ For Class A, this
return resulted from an increase in net asset value (NAV) per share to
$9.95 on July 31, 1998 from $9.92 on July 31, 1997, and the reinvestment of
$0.515 per share in tax-free income./2/ For Class B, this return resulted
from an increase in NAV to $10.82 from $10.80, and the reinvestment of
$0.483 per share in tax-free income./2/
. Based on the Fund's most recent dividends and NAVs on July 31, 1998 of
$9.95 per share for Class A and $10.82 for Class B, the distribution rates
were 5.18% and 4.46%, respectively./3/
. The SEC 30-day yields for Class A and B shares at July 31 were 4.46% and
3.87%, respectively./4/
Your Investment at Work
- --------------------------------------------------------------------------------
[LOGO APPEARS HERE]
Colorado Health Facilities Authority Cleo Wallace Center
. The Cleo Wallace Center is a nationally-recognized facility specializing in
the treatment of emotionally-disturbed youth and adolescents.
. In addition to financing a much-needed social service for the community,
this non-rated bond has an attractive 7% coupon.
. This issue is an example of the Portfolio's efforts to find research-driven
opportunities in the non-rated segment of the Colorado market.
- --------------------------------------------------------------------------------
/1/ These returns do not include the 4.75% maximum sales charge for Class A
shares or the applicable contingent deferred sales charges (CDSC) for Class
B shares. /2/ A portion of the Fund's income could be subject to federal
income tax and/or alternative minimum tax. /3/ The Fund's distribution rate
represents actual distributions paid to shareholders and is calculated by
dividing the last distribution per share (annualized) by the net asset
value. /4/ The Fund's SEC yield is calculated by dividing the net
investment income per share for the 30-day period by the offering price at
the end of the period and annualizing the result. /5/ Returns are
historical and are calculated by determining the percentage change in net
asset value with all distributions reinvested. SEC returns for Class A
reflect the maximum 4.75% sales charge. SEC returns for Class B reflect
applicable CDSC based on the following schedule: 5% - 1st and 2nd years;
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.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1998
Performance/5/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 5.6% 4.7%
Five Years N.A. 5.3
Life of Fund+ 5.2 6.5
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 0.6% -0.3.%
Five Years N.A. 5.0
Life of Fund+ 4.1 6.4
+Inception date: Class A: 12/10/93; Class B: 8/25/92
Comparison of Change in Value of a $10,000 Investment in Eaton Vance
Colorado Municipals Fund, Class B vs. the Lehman Brothers Municipal Bond Index*
August 31, 1992 - July 31, 1998
[LINE GRAPH APPEARS HERE]
EATON VANCE
COLORADO LEHMAN BROTHERS
MUNICIPALS FUND MUNICIPAL BOND
DATE CLASS B INDEX
---- ------- -----
8/31/92 $10,000 $10,000
9/30/92 $10,020 $10,065
10/31/92 $9,762 $9,966
11/30/92 $10,205 $10,145
12/31/92 $10,353 $10,249
1/31/92 $10,465 $10,368
2/28/93 $10,896 $10,743
3/31/93 $10,746 $10,629
4/30/93 $10,900 $10,736
5/31/93 $10,964 $10,797
6/30/93 $11,147 $10,977
7/31/93 $11,166 $10,991
8/31/93 $11,430 $11,220
9/30/93 $11,575 $11,348
10/31/93 $11,604 $11,370
11/30/93 $11,475 $11,270
12/31/93 $11,707 $11,508
1/31/94 $11,847 $11,639
2/28/94 $11,443 $11,338
3/31/94 $10,776 $10,876
4/30/94 $10,838 $10,968
5/31/94 $10,957 $11,063
6/30/94 $10,809 $10,999
7/31/94 $11,058 $11,197
8/31/94 $11,068 $11,236
9/30/94 $10,854 $11,071
10/31/94 $10,573 $10,874
11/30/94 $10,309 $10,678
12/31/94 $10,592 $10,913
1/31/95 $11,005 $11,225
2/28/95 $11,427 $11,551
3/31/95 $11,505 $11,684
4/30/95 $11,475 $11,698
5/31/95 $11,819 $12,071
6/30/95 $11,613 $11,965
7/31/95 $11,675 $12,079
8/31/95 $11,827 $12,232
9/30/95 $11,875 $12,309
10/31/95 $12,148 $12,488
11/30/95 $12,420 $12,696
12/31/95 $12,563 $12,817
1/31/96 $12,614 $12,914
2/28/96 $12,471 $12,827
3/31/96 $12,255 $12,663
4/30/96 $12,233 $12,627
5/31/96 $12,234 $12,622
6/30/96 $12,348 $12,760
7/31/96 $12,430 $12,876
8/31/96 $12,405 $12,873
9/30/96 $12,592 $13,053
10/31/96 $12,701 $13,200
11/30/96 $12,913 $13,442
12/31/96 $12,877 $13,385
1/31/97 $12,914 $13,410
2/28/97 $13,045 $13,534
3/31/97 $12,901 $13,353
4/30/97 $13,001 $13,465
5/31/97 $13,178 $13,668
6/30/97 $13,422 $13,813
7/31/97 $13,829 $14,196
8/31/97 $13,728 $14,063
9/30/97 $13,832 $14,229
10/31/97 $13,974 $14,321
11/30/97 $14,044 $14,405
12/31/97 $14,235 $14,616
1/31/98 $14,354 $14,766
2/28/98 $14,371 $14,771
3/31/98 $14,379 $14,784
4/30/98 $14,286 $14,717
5/31/98 $14,431 $14,950
6/30/98 $14,472 $15,009
7/31/98 $14,485 $15,046
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
8/25/92. Index information is available only at month-end; therefore, the line
comparison begins at the next month following the commencement of the Fund's
investment operations. The chart compares the total return of the Fund's Class
B with that of the Lehman Brothers Municipal Bond Index, a broad-based,
unmanaged market index. Returns are calculated by determining the percentage
change in net asset value (NAV) with all distributions reinvested. The lines
on the chart represent total returns of $10,000 hypothetical investments in
the Fund and the Lehman Brothers Municipal Bond Index. An investment in Class
A shares on 12/31/93 at net asset value would have grown to $12,611 on July
31, 1998; $12,012, including the 4.75% sales charge. 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.
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For federal income tax
purposes, 99.69% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1998 was designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
4
<PAGE>
Eaton Vance Connecticut Municipals Fund as of July 31, 1998
INVESTMENT UPDATE
[PHOTO OF WILLIAM H. AHERN APPEARS HERE]
William H. Ahern,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Connecticut registered strong job growth over the past year. The state's
jobless rate, at 3.4% in July 1998, marked a major improvement from the
5.1% rate a year earlier. The housing sector was especially strong, with
new building permits in the first half of 1998 rising 15% above the same
period in 1997.
. Drugs and biotechnology remain prime generators of growth and jobs in
Connecticut. Home to four major pharmaceutical companies, the state has
encouraged public-private sector partnerships, including a $216 million
investment by Pfizer, Inc. for new lab and office space that should create
2,000 new jobs.
. Connecticut businesses may be following the Asian economic problems
closely. Connecticut's export trade with Asian nations amounted to $1.76
billion in 1997, representing 23% of the state's total export volume.
Management Update
- --------------------------------------------------------------------------------
. With the market trading in a narrow range throughout the year, the
Portfolio was characterized by relatively few changes. Management
concentrated on relative value and structural adjustments, extending call
protection to improve the Portfolio's upside potential.
. Resource recovery bonds represented a major commitment for the Portfolio.
The bonds have benefited from the continuing strength of the industrial
economy. They are popular with investors because they finance projects that
will benefit the environment.
. In a generic market where new issuance was again dominated by insured
bonds, the Portfolio increased its efforts to find non-rated bonds with the
ability to improve the Fund's yield.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1998, the Fund's Class A and Class B shares
had total returns of 6.0% and 5.0%, respectively./1/ For Class A, this
return resulted from an increase in net asset value (NAV) per share to
$10.71 on July 31, 1998 from $10.64 on July 31, 1997, and the reinvestment
of $0.550 per share in tax-free income./2/ For Class B, this return
resulted from an increase in NAV to $10.64 from $10.57, and the
reinvestment of $0.448 per share in tax-free income./2/
. Based on the Fund's most recent dividends and NAVs on July 31, 1998 of
$10.71 per share for Class A and $10.64 for Class B, the distribution rates
were 5.14% and 4.21%, respectively./3/
. The SEC30-day yields for Class A and B shares at July 31 were 4.19% and
3.57%, respectively./4/
Your Investment at Work
- --------------------------------------------------------------------------------
[PHOTO OF MORTAR BOARD
APPEARS HERE]
Connecticut Health & Education Finance Authority - Quinnipiac College
. This bond was issued in 1993 to finance the construction of a new classroom
and residence buildings for the Law School, and to refund earlier issues.
. Quinnipiac has continued its transformation from a commuter college to a
residential college with the percentage of students on campus reaching 70%.
. Rated BBB- by Standard & Poor's, the bonds carry a 6.0% coupon and are an
example of our efforts to find value in lower-rated investment-grade bonds.
/1/ These returns do not include the 4.75% maximum sales charge for Class A
shares or the applicable contingent deferred sales charges (CDSC) for Class
B shares. /2/ A portion of the Fund's income could be subject to federal
income tax and/or alternative minimum tax. /3/ The Fund's distribution rate
represents actual distributions paid to shareholders and is calculated by
dividing the last distribution per share (annualized) by the net asset
value. /4/ The Fund's SEC yield is calculated by dividing the net
investment income per share for the 30-day period by the offering price at
the end of the period and annualizing the result. /5/ Returns are
historical and are calculated by determining the percentage change in net
asset value with all distributions reinvested. SEC returns for Class A
reflect the maximum 4.75% sales charge. SEC returns for Class B reflect
applicable CDSC based on the following schedule: 5% - 1st and 2nd years;
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.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1998
Performance/5/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 6.0% 5.0%
Five Years N.A. 4.7
Life of Fund+ 7.4 6.1
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 0.9% 0.0%
Five Years N.A. 4.4
Life of Fund+ 6.1 6.1
+Inception date: Class A: 4/19/94; Class B: 5/1/92
Comparison of Change in Value of a $10,000 Investment in Eaton Vance Connecticut
Municipals Fund, Class B vs. the Lehman Brothers Municipal Bond Index*
May 31, 1992 - July 31, 1998
[LINE GRAPH APPEARS HERE]
Eaton Vance
Connecticut Lehman Brothers
Municipals Fund, Municipal
Date Class B Bond Index
---- ------- ----------
5/31/92 $10,000 $10,000
6/30/92 $10,215 $10,168
7/31/92 $10,616 $10,473
8/31/92 $10,409 $10,370
9/30/92 $10,416 $10,438
10/31/92 $10,131 $10,336
11/30/92 $10,491 $10,521
12/31/92 $10,617 $10,628
1/31/92 $10,741 $10,752
2/28/93 $11,179 $11,141
3/31/93 $11,048 $11,023
4/30/93 $11,173 $11,134
5/31/93 $11,237 $11,197
6/30/93 $11,455 $11,384
7/31/93 $11,442 $11,398
8/31/93 $11,710 $11,636
9/30/93 $11,835 $11,769
10/31/93 $11,821 $11,791
11/30/93 $11,679 $11,687
12/31/93 $11,933 $11,934
1/31/94 $12,043 $12,070
2/28/94 $11,686 $11,758
3/31/94 $11,084 $11,279
4/30/94 $11,102 $11,374
5/31/94 $11,200 $11,473
6/30/94 $11,071 $11,406
7/31/94 $11,290 $11,612
8/31/94 $11,298 $11,652
9/30/94 $11,057 $11,481
10/31/94 $10,736 $11,277
11/30/94 $10,353 $11,073
12/31/94 $10,697 $11,317
1/31/95 $11,104 $11,641
2/28/95 $11,486 $11,979
3/31/95 $11,576 $12,117
4/30/95 $11,568 $12,131
5/31/95 $11,881 $12,518
6/30/95 $11,706 $12,409
7/31/95 $11,803 $12,526
8/31/95 $11,980 $12,685
9/30/95 $12,075 $12,765
10/31/95 $12,254 $12,951
11/30/95 $12,481 $13,166
12/31/95 $12,601 $13,292
1/31/96 $12,662 $13,393
2/28/96 $12,527 $13,302
3/31/96 $12,318 $13,132
4/30/96 $12,318 $13,095
5/31/96 $12,329 $13,090
6/30/96 $12,442 $13,233
7/31/96 $12,547 $18,353
8/31/96 $12,533 $13,350
9/30/96 $12,707 $13,536
10/31/96 $12,815 $13,689
11/30/96 $13,002 $13,940
12/31/96 $12,950 $13,881
1/31/97 $12,947 $13,907
2/28/97 $13,077 $14,035
3/31/97 $12,941 $13,848
4/30/97 $13,038 $13,964
5/31/97 $13,187 $14,174
6/30/97 $13,328 $14,325
7/31/97 $13,697 $14,722
8/31/97 $13,591 $14,584
9/30/97 $13,732 $14,757
10/31/97 $13,806 $14,852
11/30/97 $13,872 $14,939
12/31/97 $14,049 $15,157
1/31/98 $14,178 $15,313
2/28/98 $14,205 $15,318
3/31/98 $14,223 $15,332
4/30/98 $14,152 $15,262
5/31/98 $14,321 $15,504
6/30/98 $14,359 $15,565
7/31/98 $14,381 $15,604
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
5/1/92. Index information is available only at month-end; therefore, the line
comparison begins at the next month following the commencement of the Fund's
investment operations.The chart compares the total return of the Fund's Class
B with that of the Lehman Brothers Municipal Bond Index, a broad-based,
unmanaged market index. Returns are calculated by determining the percentage
change in net asset value (NAV) with all distributions reinvested. The lines
on the chart represent total returns of $10,000 hypothetical investments in
the Fund and the Lehman Brothers Municipal Bond Index. An investment in Class
A shares on 4/30/94 at net asset value would have grown to $13,536 on July 31,
1998; $12,892, including the 4.75% sales charge. 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.
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For federal income tax
purposes, 99.78% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1998 was designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
5
<PAGE>
Eaton Vance Michigan Municipals Fund as of July 31, 1998
INVESTMENT UPDATE
[PHOTO OF TIMOTHY T. BROWSE APPEARS HERE]
Timothy T. Browse,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Michigan's economy struggled with some hurdles in the first half of 1998.
The General Motors' strike resulted in temporary layoffs at auto-related
industries, while the weakness in Asian economies threatened the state's
buoyant export market. The GM strike pushed Michigan's unemployment rate in
July to 4.2%, up from 3.6% in June, a 30-year low.
. The auto sector remains a key engine for Michigan's economy, with 3.1
million vehicles produced in the state in 1997. However, new industries are
experiencing strong growth. A recent survey of the state's 100
fastest-growing, privately-held businesses showed technology, service, and
temporary employment companies on the rise.
. Michigan's housing market has been especially robust, with both primary
residence and vacation home construction showing unusual strength. New
permits totaled 51,375 in 1997. Average home prices rose 7.9%, leading the
nation in that category.
Management Update
- --------------------------------------------------------------------------------
. Management continued its barbell approach, maintaining positions in
cushion, or premium, bonds with good call characteristics and attractive
book yields that contributed to the Fund's income. The Portfolio reduced
its exposure to bonds with 1-to-3 year calls.
. The municipal market traded within a relatively narrow range during the
period. Accordingly, the Portfolio took advantage of trading opportunities
to sell par bonds.
. The Portfolio added to its positions in discount bonds, which have upside
potential in the event of an interest rate decline. Among the discount
bonds added were Wayne Charter County Michigan Airport bonds.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1998, the Fund's Class A and Class B shares
had total returns of 6.0% and 5.1%, respectively./1/ For Class A, this
return resulted from an increase in net asset value (NAV) per share to
$9.82 on July 31, 1998 from $9.75 on July 31, 1997, and the reinvestment of
$0.496 per share in tax-free income./2/ For Class B, this return resulted
from an increase in NAV to $10.95 from $10.87, and the reinvestment of
$0.465 per share in tax-free income./2/
. Based on the Fund's most recent dividends and NAVs on July 31, 1998 of
$9.82 per share for Class A and $10.95 for Class B, the distribution rates
were 5.05% and 4.25%, respectively./3/
. The SEC 30-day yields for Class A and B shares at July 31 were 4.09% and
3.54%, respectively./4/
Your Investment at Work
- --------------------------------------------------------------------------------
Wayne Charter County - Detroit [PHOTO OF AIRPLANE
Metropolitan Wayne County Airport APPEARS HERE]
. Wayne County Airport serves the metropolitan Detroit area and is a major
hub for Northwest Airlines, one of the nation's largest air passenger
carriers.
. The bonds were issued to finance the renovation and construction costs of
additional terminal and administrative facilities.
. This insured bond offered the opportunity to upgrade the Portfolio amid
very narrow quality spreads while improving call protection with a
well-regarded issuer.
- --------------------------------------------------------------------------------
/1/ These returns do not include the 4.75% maximum sales charge for Class A
shares or the applicable contingent deferred sales charges (CDSC) for Class
B shares. /2/ A portion of the Fund's income could be subject to federal
income tax and/or alternative minimum tax. /3/ The Fund's distribution rate
represents actual distributions paid to shareholders and is calculated by
dividing the last distribution per share (annualized) by the net asset
value. /4/ The Fund's SEC yield is calculated by dividing the net
investment income per share for the 30-day period by the offering price at
the end of the period and annualizing the result. /5/ Returns are
historical and are calculated by determining the percentage change in net
asset value with all distributions reinvested. SEC returns for Class A
reflect the maximum 4.75% sales charge. SEC returns for Class B reflect
applicable CDSC based on the following schedule: 5% - 1st and 2nd years;
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.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1998
Performance/5/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 6.0% 5.1%
Five Years N.A. 5.1
Life of Fund+ 4.7 6.7
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 0.9% 0.1%
Five Years N.A. 4.7
Life of Fund+ 3.6 6.7
+Inception date: Class A: 12/7/93; Class B: 4/19/91
Comparison of Change in Value of a $10,000 Investment in Eaton Vance
Michigan Municipals Fund, Class B vs. the Lehman Brothers Municipal Bond Index*
April 30, 1991 - July 31, 1998
[LINE GRAPH APPEARS HERE]
Eaton Vance
Michigan Municipals Fund, Lehman Brothers
Date Class B Municipal Bond Index
---- ------- --------------------
4/30/91 $10,000 $10,000
5/31/91 $10,030 $10,089
6/30/91 $9,968 $10,079
7/31/91 $10,180 $10,202
8/31/91 $10,338 $10,336
9/30/91 $10,488 $10,471
10/31/91 $10,592 $10,565
11/30/91 $10,576 $10,594
12/31/91 $10,887 $10,822
1/31/92 $10,911 $10,846
2/28/92 $10,901 $10,850
3/31/92 $10,846 $10,854
4/30/92 $10,955 $10,951
5/31/92 $11,118 $11,080
6/30/92 $11,327 $11,265
7/31/92 $11,761 $11,603
8/31/92 $11,518 $11,490
9/30/92 $11,550 $11,565
10/31/92 $11,189 $11,451
11/30/92 $11,579 $11,657
12/31/92 $11,713 $11,776
1/31/92 $11,851 $11,913
2/28/93 $12,329 $12,343
3/31/93 $12,166 $12,213
4/30/93 $12,292 $12,336
5/31/93 $12,375 $12,405
6/30/93 $12,589 $12,613
7/31/93 $12,551 $12,629
8/31/93 $12,818 $12,892
9/30/93 $12,943 $13,039
10/31/93 $12,962 $13,064
11/30/93 $12,831 $12,949
12/31/93 $13,126 $13,222
1/31/94 $13,281 $13,373
2/28/94 $12,868 $13,027
3/31/94 $12,164 $12,496
4/30/94 $12,243 $12,602
5/31/94 $12,348 $12,711
6/30/94 $12,219 $12,637
7/31/94 $12,468 $12,866
8/31/94 $12,501 $12,910
9/30/94 $12,287 $12,721
10/31/94 $11,975 $12,495
11/30/94 $11,669 $12,269
12/31/94 $12,005 $12,539
1/31/95 $12,434 $12,897
2/28/95 $12,836 $13,272
3/31/95 $12,958 $13,425
4/30/95 $12,937 $13,441
5/31/95 $13,302 $13,870
6/30/95 $13,087 $13,748
7/31/95 $13,168 $13,878
8/31/95 $13,322 $14,055
9/30/95 $13,415 $14,143
10/31/95 $13,676 $14,349
11/30/95 $13,977 $14,587
12/31/95 $14,161 $14,727
1/31/96 $14,243 $14,839
2/28/96 $14,073 $14,738
3/31/96 $13,835 $14,550
4/30/96 $13,772 $14,509
5/31/96 $13,759 $14,503
6/30/96 $13,909 $14,661
7/31/96 $14,024 $14,794
8/31/96 $13,996 $14,791
9/30/96 $14,199 $14,997
10/31/96 $14,317 $15,167
11/30/96 $14,562 $15,445
12/31/96 $14,493 $15,380
1/31/97 $14,436 $15,409
2/28/97 $14,591 $15,550
3/31/97 $14,390 $15,343
4/30/97 $14,524 $15,471
5/31/97 $14,745 $15,704
6/30/97 $14,885 $16,871
7/31/97 $15,288 $16,311
8/31/97 $15,132 $16,158
9/30/97 $15,259 $16,350
10/31/97 $15,356 $16,455
11/30/97 $15,473 $16,552
12/31/97 $15,709 $16,793
1/31/98 $15,851 $16,966
2/28/98 $15,868 $16,972
3/31/98 $15,889 $16,987
4/30/98 $15,756 $16,910
5/31/98 $16,029 $17,178
6/30/98 $16,043 $17,245
7/31/98 $16,070 $17,289
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
4/19/91. Index information is available only at month-end; therefore, the line
comparison begins at the next month following the commencement of the Fund's
investment operations.The chart compares the total return of the Fund's Class
B with that of the Lehman Brothers Municipal Bond Index, a broad-based,
unmanaged market index. Returns are calculated by determining the percentage
change in net asset value (NAV) with all distributions reinvested. The lines
on the chart represent total returns of $10,000 hypothetical investments in
the Fund and the Lehman Brothers Municipal Bond Index. An investment in Class
A shares on 12/31/93 at net asset value would have grown to $12,354 on July
31, 1998, $11,767, including the 4.75% sales charge. 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.
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For federal income tax
purposes, 99.16% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1998 was designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
6
<PAGE>
Eaton Vance Minnesota Municipals Fund as of July 31, 1998
INVESTMENT UPDATE
[PHOTO OF ROBERT B. MACINTOSH APPEARS HERE]
Robert B. MacIntosh,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. The Minnesota economy, benefiting from its increasing exposure to
fast-growing technology sectors, registered above-average growth in the
past year. The state enjoyed a faster pace of job creation than that of the
nation as a whole. Reflecting that growth, Minnesota's unemployment rate
fell to 2.3% in July, 1998 from 3.2% a year earlier.
. Minnesota continued to see a surge in start-up businesses in the past year.
Activity was especially robust among services, finance, transportation and
real estate. These start-ups were a major source of new jobs.
. Iron ore production remains a staple of the Minnesota economy. The state
accounts for roughly three-quarters of total U.S. production and over 6% of
the world's supply.
Management Update
- --------------------------------------------------------------------------------
. In a very quiet trading environment, the Portfolio pursued a barbell
strategy. The barbell balanced the use of zero coupon bonds for capital
appreciation potential with high-coupon bonds that provided an attractive
income stream and more price stability.
. Minnesota municipal supply remained very light, with the new issue market
dominated mainly by local housing and school bonds. The Portfolio was
selective in these areas while seeking value among higher education and
hospital issues.
. The Portfolio found some attractive opportunities among multi-family
housing bonds. We also found value among non-rated, continuing life-care
facilities and nursing homes. With some of these bonds non-rated, we were
able to draw on the Portfolio's strong research capabilities in the
non-rated segment of the market.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1998, the Fund's Class A and Class B shares
had total returns of 5.9% and 5.0%, respectively./1/ For Class A, this
return resulted from an increase in net asset value (NAV) per share to
$9.82 on July 31, 1998 from $9.77 on July 31, 1997, and the reinvestment of
$0.515 per share in tax-free income./2/ For Class B, this return resulted
from an increase in NAV to $10.54 from $10.49, and the reinvestment of
$0.462 per share in tax-free income./2/
. Based on the Fund's most recent dividends and NAVs on July 31, 1998 of
$9.82 per share for Class A and $10.54 for Class B, the distribution rates
were 5.24% and 4.38%, respectively./3/
. The SEC 30-yields for Class A and B shares at July 31 were 4.53% and 3.93%,
respectively./4/
Your Investment at Work
- --------------------------------------------------------------------------------
City of Hopkins [PHOTO OF MORTAR BOARD
The Blake School Project APPEARS HERE]
. Blake School is an independent college preparatory school with campuses in
Wayzata, Hopkins, and Minneapolis. The school has received plaudits
nationally for its curriculum and the quality of its faculty.
. The bonds were issued in 1997 to advance-refund a 1994 bond of Blake
School.
. In the thinly-traded Minnesota market, the bond - rated A by Moody's and
non-rated by Standard & Poor's - offered good value in a well-regarded
issuer.
- --------------------------------------------------------------------------------
/1/ These returns do not include the 4.75% maximum sales charge for Class A
shares or the applicable contingent deferred sales charges (CDSC) for Class
B shares. /2/ A portion of the Fund's income could be subject to federal
income tax and/or alternative minimum tax. /3/ The Fund's distribution rate
represents actual distributions paid to shareholders and is calculated by
dividing the last distribution per share (annualized) by the net asset
value. /4/ The Fund's SEC yield is calculated by dividing the net
investment income per share for the 30-day period by the offering price at
the end of the period and annualizing the result. /5/ Returns are
historical and are calculated by determining the percentage change in net
asset value with all distributions reinvested. SEC returns for Class A
reflect the maximum 4.75% sales charge. SEC returns for Class B reflect
applicable CDSC based on the following schedule: 5% - 1st and 2nd years;
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.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1998
Performance/5/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 5.9% 5.0%
Five Years N.A. 4.7
Life of Fund+ 4.9 6.1
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 0.9% 0.0%
Five Years N.A. 4.4
Life of Fund+ 3.8 6.1
+Inception date: Class A: 12/9/93; Class B: 7/29/91
Comparison of Change in Value of a $10,000 Investment in Eaton Vance
Minnesota Municipals Fund, Class B vs. the Lehman Brothers Municipal Bond Index*
July 31, 1991 - July 31, 1998
[LINE GRAPH APPEARS HERE]
EATON VANCE
MINNESOTA LEHMAN BROTHERS
MUNICIPALS FUND MUNICIPAL BOND
DATE CLASS B INDEX
---- ------- -----
7/31/91 $10,000 $10,000
8/31/91 $10,050 $10,132
9/30/91 $10,196 $10,264
10/31/91 $10,299 $10,356
11/30/91 $10,303 $10,385
12/31/91 $10,502 $10,608
1/31/92 $10,556 $10,632
2/28/92 $10,555 $10,636
3/31/92 $10,521 $10,639
4/30/92 $10,617 $10,734
5/31/92 $10,746 $10,861
6/30/92 $10,919 $11,043
7/31/92 $11,273 $11,374
8/31/92 $11,087 $11,263
9/30/92 $11,096 $11,337
10/31/92 $10,805 $11,225
11/30/92 $11,156 $11,426
12/31/92 $11,288 $11,543
1/31/92 $11,411 $11,677
2/28/93 $11,812 $12,100
3/31/93 $11,696 $11,972
4/30/93 $11,819 $12,092
5/31/93 $11,889 $12,160
6/30/93 $12,076 $12,364
7/31/93 $12,063 $12,379
8/31/93 $12,303 $12,637
9/30/93 $12,459 $12,781
10/31/93 $12,466 $12,806
11/30/93 $12,349 $12,693
12/31/93 $12,598 $12,961
1/31/94 $12,703 $13,109
2/28/94 $12,370 S12,770
3/31/94 $11,718 $12,249
4/30/94 $11,749 $12,353
5/31/94 $11,876 $12,460
6/30/94 $11,775 $12,388
7/31/94 $11,984 $12,611
8/31/94 $12,017 $12,655
9/30/94 $11,797 $12,469
10/31/94 $11,468 $12,248
11/30/94 $11,110 $12,026
12/31/94 $11,463 $12,291
1/31/95 $11,834 $12,642
2/28/98 $12,227 $13,010
3/31/95 $12,372 $13,160
4/30/95 $12,339 $13,175
5/31/95 $12,671 $13,596
6/30/95 $12,448 $13,477
7/31/95 $12,513 $13,604
8/31/95 $12,676 $13,777
9/30/95 $12,739 $13,864
10/31/95 $12,967 $14,065
11/30/95 $13,221 $14,299
12/31/95 $13,398 $14,436
1/31/96 $13,437 $14,545
2/28/96 $13,308 $14,447
3/31/98 $13,021 $14,263
4/30/96 $13,047 $14,222
5/31/96 $13,058 $14,217
6/30/96 $13,165 $14,372
7/31/96 $13,264 $14,502
8/31/96 $13,196 $14,499
9/30/96 $13,382 $14,701
10/31/96 $13,484 $14,867
11/30/96 $13,697 $15,140
12/31/96 $13,615 $15,076
1/31/97 $13,640 $15,104
2/28/97 $13,778 $15,243
3/31/97 $13,580 $15,040
4/30/97 $13,712 $15,166
5/31/97 $13,887 $15,394
6/30/97 $14,024 $18,558
7/31/97 $14,459 $15,989
8/31/97 $14,265 $15,839
9/30/97 $14,389 $16,027
10/31/97 $14,498 $16,130
11/30/97 $14,612 $16,225
12/31/97 $14,816 $16,462
1/31/98 $14,969 $16,631
2/28/98 $14,985 $16,636
3/31/98 $14,991 $16,651
4/30/98 $14,874 $16,576
5/31/98 $15,113 $18,838
6/30/98 $15,169 $16,905
7/31/98 $15,181 $16,947
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
7/29/91. Index information is available only at month-end; therefore, the line
comparison begins at the next month following the commencement of the Fund's
investment operations. The chart compares the total return of the Fund's Class
B with that of the Lehman Brothers Municipal Bond Index, a broad-based,
unmanaged market index. Returns are calculated by determining the percentage
change in net asset value (NAV) with all distributions reinvested. The lines
on the chart represent total returns of $10,000 hypothetical investments in
the Fund and the Lehman Brothers Municipal Bond Index. An investment in Class
A shares on 12/31/93 at net asset value would have grown to $12,419 on July
31, 1998; $11,831, including the 4.75% sales charge. 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.
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For federal income tax
purposes, 99.37% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1998 was designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
7
<PAGE>
Eaton Vance New Jersey Municipals Fund as of July 31, 1998
INVESTMENT UPDATE
[PHOTO OF ROBERT B. MACINTOSH APPEARS HERE]
Robert B. MacIntosh,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. New Jersey's unemployment rate saw modest improvement in the year ended
July 31. The jobless rate declined to 4.8% from 5.1% a year earlier. The
service sector provided the largest gain, with hiring in health care,
social services, and management and engineering especially strong.
. The New Jersey construction industry posted strong gains during the past
year. Sales of new and existing homes reached record levels as a sound
economic outlook and low interest rates brought a rush of buyers to the
housing market.
. Consumer confidence in New Jersey - as indicated by the Middle Atlantic
Region Consumer Confidence Survey - has risen sharply in the past year,
mirroring trends at the national level. Positive consumer sentiment was
manifest in strong retail sales activity.
Management Update
- --------------------------------------------------------------------------------
. In a continued low-inflation environment, the Portfolio maintained its
upside potential by avoiding par bonds while focusing on discount issues
and selectively adding zero coupon bonds. In addition, call protection was
upgraded, reducing the threat of an untimely call of the Bonds at the
discretion of the issuer.
. Several of the Portfolio's holdings were pre-refunded during the period.
Lower interest rates have encouraged issuers to refund older, high-coupon
debt. The Portfolio's pre-refunded holdings have improved credit quality
and tempered volatility.
. Bonds of the Port Authority of New York/New Jersey remain the Portfolio's
largest holding. The Port Authority has enjoyed increased activity due to
the economic revival in New York City and northern New Jersey.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1998, the Fund's Class A and Class B shares
had total returns of 6.2% and 5.4%, respectively./1/ For Class A, this
return resulted from an increase in net asset value (NAV) per share to
$10.59 on July 31, 1998 from $10.53 on July 31, 1997, and the reinvestment
of $0.580 per share in tax-free income./2/ For Class B, this return
resulted from an increase in NAV to $11.02 from $10.94, and the
reinvestment of $0.50 per share in tax-free income./2/
. Based on the Fund's most recent dividends and NAVs on July 31, 1998 of
$10.59 per share for Class A and $11.02 for Class B, the distribution rates
were 5.48% and 4.54%, respectively./3/
. The SEC 30-day yields for Class A and B shares at July 31 were 4.22% and
3.59%, respectively./4/
Your Investment at Work
- --------------------------------------------------------------------------------
New Jersey Economic Development Authority [CLIP ART OF BUILDING
Holt Hauling APPEARS HERE]
. Holt Hauling is a major cargo container operator, loading and unloading
containers from ships, railroad cars and trucks in ports and cities along
the East Coast.
. This bond was issued by the state's Economic Development Authority to
finance facilities at Holt's Camden-based operation.
. The bonds have an attractive coupon of 8.95%. They are a good example of
the Portfolio's efforts to find value in the non-rated sector of the
market.
- --------------------------------------------------------------------------------
/1/ These returns do not include the 4.75% maximum sales charge for Class A
shares or the applicable contingent deferred sales charges (CDSC) for Class
B shares. /2/ A portion of the Fund's income could be subject to federal
income tax and/or alternative minimum tax. /3/ The Fund's distribution rate
represents actual distributions paid to shareholders and is calculated by
dividing the last distribution per share (annualized) by the net asset
value. /4/ The Fund's SEC yield is calculated by dividing the net
investment income per share for the 30-day period by the offering price at
the end of the period and annualizing the result. /5/ Returns are
historical and are calculated by determining the percentage change in net
asset value with all distributions reinvested. SEC returns for Class A
reflect the maximum 4.75% sales charge. SEC returns for Class B reflect
applicable CDSC based on the following schedule: 5% - 1st and 2nd years;
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.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1998
Performance/5/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 6.2% 5.4%
Five Years N.A. 5.0
Life of Fund+ 7.4 7.0
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 1.1% 0.4%
Five Years N.A. 4.6
Life of Fund+ 6.1 7.0
+Inception date: Class A: 4/13/94; Class B: 1/8/91
Comparison of Change in Value of a $10,000 Investment in Eaton Vance
New Jersey Municipals Fund, Class B vs. the Lehman Brothers Municipal Bond
Index*
January 31, 1991 - July 31, 1998
[LINE GRAPH APPEARS HERE]
EATON VANCE
NEW JERSEY LEHMAN BROTHERS
MUNICIPALS FUND MUNICIPAL BOND
DATE CLASS B INDEX
---- ------- -----
1/31/91 $10,000 $10,000
2/28/91 $10,097 $10,087
3/31/91 $10,089 $10,090
4/30/91 $10,236 $10,225
5/31/91 $10,353 $10,316
6/30/91 $10,243 $10,306
7/31/91 $10,448 $10,431
8/31/91 $10,618 $10,569
9/30/91 $10,739 $10,706
10/31/91 $10,834 $10,803
11/30/91 $10,818 $10,833
12/31/91 $11,095 $11,065
1/31/92 $11,077 $11,091
2/28/92 $11,078 $11,094
3/31/92 $11,054 $11,098
4/30/92 $11,122 $11,197
5/31/92 $11,317 $11,329
6/30/92 $11,494 $11,519
7/31/92 $11,932 $11,865
8/31/92 $11,731 $11,749
9/30/92 $11,775 $11,826
10/31/92 $11,477 $11,709
11/30/92 $11,805 $11,919
12/31/92 $11,959 $12,041
1/31/93 $12,121 $12,181
2/28/93 $12,660 $12,622
3/31/93 $12,486 $12,488
4/30/93 $12,649 $12,614
5/31/93 $12,734 $12,685
6/30/93 $12,954 $12,897
7/31/93 $12,943 $12,913
8/31/93 $13,181 $13,183
9/30/93 $13,323 $13,333
10/31/93 $13,323 $13,358
11/30/93 $13,196 $13,241
12/31/93 $13,467 $13,520
1/31/94 $13,615 $13,675
2/28/94 $13,275 $13,320
3/31/94 $12,617 $12,778
4/30/94 $12,666 $12,886
5/31/94 $12,752 $12,998
6/30/94 $12,626 $12,922
7/31/94 $12,821 $13,155
8/31/94 $12,870 $13,201
9/30/94 $12,659 $13,007
10/31/94 $12,349 $12,776
11/30/94 $12,008 $12,545
12/31/94 $12,363 $12,821
1/31/95 $12,762 $13,188
2/28/95 $13,108 $13,571
3/31/95 $13,217 $13,727
4/30/95 $13,237 $13,744
5/31/95 $13,597 $14,182
6/30/95 $13,409 $14,058
7/31/95 $13,467 $14,191
8/31/95 $13,613 $14,371
9/30/95 $13,708 $14,462
10/31/95 $13,935 $14,672
11/30/95 $14,188 $14,916
12/31/95 $14,323 $15,059
1/31/96 $14,408 $15,173
2/28/96 $14,225 $15,070
3/31/96 $14,066 $14,878
4/30/96 $14,043 $14,836
5/31/96 $14,032 $14,830
6/30/96 $14,161 $14,992
7/31/96 $14,241 $15,127
8/31/96 $14,257 $15,124
9/30/96 $14,454 $15,335
10/31/96 $14,563 $15,509
11/30/96 $14,788 $15,793
12/31/96 $14,722 $15,726
1/31/97 $14,724 $15,756
2/28/97 $14,844 $15,900
3/31/97 $14,713 $15,688
4/30/97 $14,854 $15,820
5/31/97 $15,040 $16,058
6/30/97 $15,158 $16,229
7/31/97 $15,643 $16,678
8/31/97 $15,475 $16,522
9/30/97 $15,651 $16,718
10/31/97 $15,754 $16,826
11/30/97 $15,848 $16,925
12/31/97 $16,107 $17,172
1/31/98 $16,242 $17,349
2/28/98 $16,264 $17,354
3/31/98 $16,303 $17,369
4/30/98 $16,186 $17,291
5/31/98 $16,425 $17,565
6/30/98 $16,473 $17,634
7/31/98 $16,490 $17,678
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
1/8/91. Index information is available only at month-end; therefore, the line
comparison begins at the next month following the commencement of the Fund's
investment operations. The chart compares the total return of the Fund's Class
B with that of the Lehman Brothers Municipal Bond Index, a broad-based,
unmanaged market index. Returns are calculated by determining the percentage
change in net asset value (NAV) with all distributions reinvested. The lines
on the chart represent total returns of $10,000 hypothetical investments in
the Fund and the Lehman Brothers Municipal Bond Index. An investment in Class
A shares on 4/30/94 at net asset value would have grown to $13,648 on July 31,
1998, $12,994, including the 4.75% sales charge. 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.
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For federal income tax
purposes, 99.69% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1998 was designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
8
<PAGE>
Eaton Vance Pennsylvania Municipals Fund as of July 31, 1998
INVESTMENT UPDATE
[PHOTO OF TIMOTHY T. BROWSE APPEARS HERE]
Timothy T. Browse,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. The Pennsylvania economy remained in high gear, as the construction,
financial services, and wholesale and retail trade sectors maintained their
strong momentum. The commonwealth's unemployment rate reached a nine-year
low in July of 4.5%, a significant improvement from the 5.3% rate posted a
year earlier.
. Pennsylvania companies are closely monitoring the Asian economies for
continuing signs of weakness. The downturn, combined with cheap Asian
imports, has had a negative impact on the commonwealth's manufacturing
sector, resulting in weaker demand and selective layoffs following 18
consecutive months of job gains.
. Pennsylvania continues to aggressively court new businesses. Drug giant
Smithkline Beechham transferred its U.S. headquarters in September 1997,
bringing 1,250 jobs, while Kvaerner, Europe's largest shipbuilder,
announced it will open its first American shipyard in Philadelphia.
Management Update
- --------------------------------------------------------------------------------
. Reflecting a positive view of the bond market, the Portfolio focused on
longer-call discount bonds. These bonds have more capital appreciation
potential in the event of a market rally.
. The Portfolio used periods of market strength to reduce its exposure to par
bonds. The Portfolio also sold premium bonds with shorter calls, whose
performance is likely to be restrained by imminent calls by the issuers.
. The troubled Allegheny Health System had a negative effect on the entire
Pennsylvania hospital sector. While the Portfolio has lightened its
hospital holdings, it retained some exposure to the Allegheny bonds. We
continue to monitor the hospital sector closely for opportunities in the
wake of the recent pullback.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1998, the Fund's Class A and Class B shares
had total returns of 4.2% and 3.2%, respectively./1/ For Class A, this
return resulted from a decline in net asset value (NAV) per share to $10.40
on July 31, 1998 from $10.55 on July 31, 1997, and the reinvestment of
$0.585 per share in tax-free income./2/ For Class B, this return resulted
from a decline in NAV to $10.73 from $10.90, and the reinvestment of $0.520
per share in tax-free income./2/
. Based on the Fund's most recent dividends and NAVs on July 31, 1998 of
$10.40 per share for Class A and $10.73 for Class B, the distribution rates
were 5.63% and 4.85%, respectively./3/
. The SEC 30-day yields for Class A and B shares at July 31 were 4.62% and
3.99%, respectively./4/
Your Investment at Work
- --------------------------------------------------------------------------------
Delaware County Authority [PHOTO OF MORTAR BOARD
Villanova University APPEARS HERE]
. Villanova University is an independent, coeducational institution near
Philadelphia. The University provides undergraduate and graduate
instruction to approximately 10,000 students.
. The bonds are being used to finance the cost of constructing student
apartments, renovating the science building, and adding a wing to the main
building of the College of Commerce and Finance.
. With its 5.75% coupon and A rating, the bond was an attractive purchase for
the Portfolio.
- --------------------------------------------------------------------------------
/1/ These returns do not include the 4.75% maximum sales charge for Class A
shares or the applicable contingent deferred sales charges (CDSC) for Class
B shares. /2/ A portion of the Fund's income could be subject to federal
income tax and/or alternative minimum tax. /3/ The Fund's distribution rate
represents actual distributions paid to shareholders and is calculated by
dividing the last distribution per share (annualized) by the net asset
value. /4/ The Fund's SEC yield is calculated by dividing the net
investment income per share for the 30-day period by the offering price at
the end of the period and annualizing the result. /5/ Returns are
historical and are calculated by determining the percentage change in net
asset value with all distributions reinvested. SEC returns for Class A
reflect the maximum 4.75% sales charge. SEC returns for Class B reflect
applicable CDSC based on the following schedule: 5% - 1st and 2nd years;
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.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1998
Performance/5/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 4.2% 3.2%
Five Years N.A. 4.7
Life of Fund+ 6.9 6.7
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year -0.8% -1.7%
Five Years N.A. 4.4
Life of Fund+ 5.7 6.7
+Inception date: Class A: 6/1/94; Class B: 1/8/91
Comparison of Change in Value of a $10,000 Investment in Eaton Vance
Pennsylvania Municipals Fund, Class B vs. the Lehman Brothers Municipal Bond
Index*
January 31, 1991 - July 31, 1998
[LINE GRAPH APPEARS HERE]
EATON VANCE
PENNSYLVANIA LEHMAN BROTHERS
MUNICIPALS FUND MUNICIPAL BOND
DATE CLASS B INDEX
---- ------- -----
1/31/91 $10,000 $10,000
2/28/91 $10,096 $10,087
3/31/91 $10,109 $10,090
4/30/91 $10,268 $10,225
5/31/91 $10,366 $10,316
6/30/91 $10,298 $10,306
7/31/91 $10,465 $10,431
8/31/91 $10,617 $10,569
9/30/91 $10,772 $10,706
10/31/91 $10,901 $10,803
11/30/91 $10,887 $10,833
12/31/91 $11,169 $11,065
1/31/92 $11,131 $11,091
2/28/92 $11,134 $11,094
3/31/92 $11,101 $11,098
4/30/92 $11,214 $11,197
5/31/92 $11,380 $11,329
6/30/92 $11,594 $11,519
7/31/92 $12,014 $11,865
8/31/92 $11,780 $11,749
9/30/92 $11,803 $11,826
10/31/92 $11,471 $11,709
11/30/92 $11,890 $11,919
12/31/92 $12,024 $12,041
1/31/92 $12,165 $12,181
2/28/93 $12,649 $12,622
3/31/93 $12,486 $12,488
4/30/93 $12,628 $12,614
5/31/93 $12,680 $12,685
6/30/93 $12,866 $12,897
7/31/93 $12,856 $12,913
8/31/93 $13,143 $13,183
9/30/93 $13,308 $13,333
10/31/93 $13,319 $13,358
11/30/93 $13,202 $13,241
12/31/93 $13,523 $13,520
1/31/94 $13,672 $13,675
2/28/94 $13,270 $13,320
3/31/94 $12,548 $12,778
4/30/94 $12,595 $12,886
5/31/94 $12,693 $12,998
6/30/94 $12,590 $12,922
7/31/94 $12,797 $13,155
8/31/94 $12,821 $13,201
9/30/94 $12,621 $13,007
10/31/94 $12,320 $12,776
11/30/94 $11,901 $12,545
12/31/94 $12,219 $12,821
1/31/95 $12,618 $13,188
2/28/95 $13,016 $13,571
3/31/95 $13,168 $13,727
4/30/95 $13,150 $13,744
5/31/95 $13,562 $14,182
6/30/95 $13,384 $14,058
7/31/95 $13,468 $14,191
8/31/96 $13,587 $14,371
9/30/05 $13,696 $14,462
10/31/95 $13,923 $14,672
11/30/95 $14,178 $14,916
12/31/95 $14,326 $15,059
1/31/96 $14,425 $15,173
2/28/96 $14,308 $15,070
3/31/96 $14,094 $14,878
4/30/96 $14,071 $14,836
5/31/96 $14,060 $14,830
6/30/96 $14,150 $14,992
7/31/96 $14,286 $15,127
8/31/96 $14,303 $15,124
9/30/96 $14,502 $15,335
10/31/96 $14,599 $15,509
11/30/96 $14,812 $15,793
12/31/96 $14,803 $15,726
1/31/97 $14,820 $15,756
2/28/97 $14,956 $15,900
3/31/97 $14,784 $15,688
4/30/97 $14,912 $15,820
5/31/97 $15,128 $16,058
6/30/97 $15,291 $16,229
7/31/97 $15,665 $16,678
8/31/97 $15,556 $16,522
9/30/97 $15,721 $16,718
10/31/97 $15,798 $16,826
11/30/97 $15,881 $16,925
12/31/97 $16,115 $17,172
1/31/98 $16,238 $17,349
2/28/98 $16,277 $17,354
3/31/98 $16,319 $17,369
4/30/98 $16,219 $17,291
5/31/98 $16,432 $17,565
6/30/98 $16,453 $17,634
7/31/98 $16,171 $17,678
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
1/8/91. Index information is available only at month-end; therefore, the line
comparison begins at the next month following the commencement of the Fund's
investment operations. The chart compares the total return of the Fund's Class
B with that of the Lehman Brothers Municipal Bond Index, a broad-based,
unmanaged market index. Returns are calculated by determining the percentage
change in net asset value (NAV) with all distributions reinvested. The lines
on the chart represent total returns of $10,000 hypothetical investments in
the Fund and the Lehman Brothers Municipal Bond Index. An investment in Class
A shares on 6/30/94 at net asset value would have grown to $13,262 on July 31,
1998; $12,637, including the 4.75% sales charge. 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.
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For federal income tax
purposes, 99.74% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1998 was designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
9
<PAGE>
Eaton Vance Texas Municipals Fund as of July 31, 1998
INVESTMENT UPDATE
[PHOTO OF THOMAS M. METZOLD APPEARS HERE]
Thomas M. Metzold,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. The Texas economy made further strides in the past year, as strength in the
manufacturing sector outweighed a still-weak energy sector. Boosted by
strong job growth in technology sectors, Texas now ranks second only to
California in manufacturing employment, contributing to the state's low
4.9% jobless rate in July.
. The Texas construction industry continues to experience a strong rebound,
with construction employment rising 5% in the past year. The recovery has
come mainly in the multi-family housing market in response to strong demand
in metropolitan areas.
. With Middle Eastern oil producers having raised production allowances, the
world is again in the midst of an oil glut. The oversupply will likely
exert downward pressure on oil and gas prices over the near-term,
restraining job growth in the state's energy sector.
Management Update
- --------------------------------------------------------------------------------
. In a subdued Texas municipal market, management continued its efforts to
eliminate bonds with inferior structure and call characteristics. That
strategy featured a balance between discount bonds with appreciation
potential and premium bonds for income, while avoided current coupons.
. Industrial development bonds were among the Portfolio's largest sector
weightings. These bonds finance projects such as power generation, airport
terminals and pollution control facilities for industries as diverse as
electric utilities, chemical companies and airlines.
. To counter increasingly narrow quality spreads, the Portfolio sought
opportunities in non-rated and lower-rated investment grade issues. The
Portfolio's analysts found especially good value among long-term care
facilities and housing bonds.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1998, the Fund's Class A and Class B shares
had total returns of 6.6% and 5.7%, respectively./1/ For Class A, this
return resulted from an increase in net asset value (NAV) per share to
$9.89 on July 31, 1998 from $9.77 on July 31, 1997, and the reinvestment of
$0.505 per share in tax-free income./2/ For Class B, this return resulted
from an increase in NAV to $11.08 from $10.96, and the reinvestment of
$0.496 per share in tax-free income./2/
. Based on the Fund's most recent dividends and NAVs on July 31, 1998 of
$9.89 per share for Class A and $11.08 for Class B, the distribution rates
were 5.11% and 4.48%, respectively./3/
. The SEC 30-day yields for Class A and B shares at July 31 were 3.86% and
3.30%, respectively./4/
Your Investment at Work
- --------------------------------------------------------------------------------
Bell County Health Facilities Authority [LOGO APPEARS HERE]
Care Institute, Inc., Texas
. Care Institute, Inc. operates a series of facilities within the state of
Texas specializing in nursing care, assisted living, and independent
living.
. These bonds were issued to help finance an assisted living facility in Bell
County. These facilities have become increasingly popular as a health care
alternative for an aging population.
. The bonds, with a 9.0% coupon, provide an excellent income stream to the
Portfolio and are an example of our efforts to find value in non-rated
issuers.
- --------------------------------------------------------------------------------
/1/ These returns do not include the 4.75% maximum sales charge for Class A
shares or the applicable contingent deferred sales charges (CDSC) for Class
B shares. /2/ A portion of the Fund's income could be subject to federal
income tax and/or alternative minimum tax. /3/ The Fund's distribution rate
represents actual distributions paid to shareholders and is calculated by
dividing the last distribution per share (annualized) by the net asset
value. /4/ The Fund's SEC yield is calculated by dividing the net
investment income per share for the 30-day period by the offering price at
the end of the period and annualizing the result. /5/ Returns are
historical and are calculated by determining the percentage change in net
asset value with all distributions reinvested. SEC returns for Class A
reflect the maximum 4.75% sales charge. SEC returns for Class B reflect
applicable CDSC based on the following schedule: 5% - 1st and 2nd years;
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.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1998
Performance/5/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 6.6% 5.7%
Five Years N.A. 5.7
Life of Fund+ 5.2 7.1
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 1.5% 0.7%
Five Years N.A. 5.4
Life of Fund+ 4.1 7.1
+Inception date: Class A: 12/8/93; Class B: 3/24/92
Comparison of Change in Value of a $10,000 Investment in Eaton Vance Texas
Municipals Fund, Class B vs. the Lehman Brothers Municipal Bond Index*
March 31, 1992 - July 31, 1998
[LINE GRAPH APPEARS HERE]
Eaton Vance
Texas Municipals Fund, Lehman Brothers
Date Class B Municipal Bond Index
---- ------- --------------------
3/31/92 $10,000 $10,000
4/30/92 $10,080 $10,089
5/31/92 $10,286 $10,208
6/30/92 $10,501 $10,379
7/31/92 $10,970 $10,690
8/31/92 $10,710 $10,586
9/30/92 $10,751 $10,656
10/31/92 $10,421 $10,551
11/30/92 $10,788 $10,740
12/31/92 $10,914 $10,849
1/31/92 $10,979 $10,976
2/28/93 $11,532 $11,373
3/31/93 $11,336 $11,252
4/30/93 $11,445 $11,366
5/31/93 $11,523 $11,430
6/30/93 $11,694 $11,621
7/31/93 $11,685 $11,636
8/31/93 $11,972 $11,878
9/30/93 $12,137 $12,013
10/31/93 $12,116 $12,037
11/30/93 $11,987 $11,930
12/31/93 $12,287 $12,182
1/31/94 $12,459 $12,321
2/28/94 $12,055 $12,002
3/31/94 $11,344 $11,513
4/30/94 $11,412 $11,611
5/31/94 $11,637 $11,712
6/30/94 $11,432 $11,643
7/31/94 $11,694 $11,854
8/31/94 $11,729 $11,895
9/30/94 $11,499 $11,720
10/31/94 $11,187 $11,512
11/30/94 $10,929 $11,304
12/31/94 $11,295 $11,552
1/31/95 $11,726 $11,883
2/28/95 $12,155 $12,228
3/31/95 $12,262 $12,369
4/30/95 $12,222 $12,383
5/31/95 $12,593 $12,779
6/30/95 $12,382 $12,667
7/31/95 $12,437 $12,787
8/31/95 $12,586 $12,949
9/30/95 $12,650 $13,031
10/31/95 $12,886 $13,220
11/30/95 $13,171 $13,440
12/31/95 $13,309 $13,569
1/31/96 $13,363 $13,671
2/28/96 $13,217 $13,579
3/31/96 $13,019 $13,406
4/30/96 $12,999 $13,368
5/31/96 $13,038 $13,363
6/30/96 $13,146 $13,508
7/31/96 $13,257 $13,630
8/31/96 $13,272 $13,627
9/30/96 $13,442 $13,818
10/31/96 $13,531 $13,974
11/30/96 $13,714 $14,230
12/31/96 $13,704 $14,170
1/31/97 $13,744 $14,197
2/28/97 $13,894 $14,327
3/31/97 $13,746 $14,136
4/30/97 $13,864 $14,254
5/31/97 $14,049 $14,469
6/30/97 $14,212 $14,623
7/31/97 $14,583 $15,028
8/31/97 $14,479 $14,887
9/30/97 $14,629 $15,064
10/31/91 $14,751 $15,161
11/30/97 $14,812 $15,250
12/31/97 $14,985 $15,472
1/31/98 $15,137 $15,632
2/28/98 $15,156 $15,637
3/31/98 $15,179 $15,651
4/30/98 $15,125 $15,580
5/31/98 $15,333 $15,826
6/30/98 $15,391 $15,889
7/31/98 $15,420 $15,929
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
3/24/92. Index information is available only at month-end; therefore, the line
comparison begins at the next month following the commencement of the Fund's
investment operations.The chart compares the total return of the Fund's Class
B with that of the Lehman Brothers Municipal Bond Index, a broad-based,
unmanaged market index. Returns are calculated by determining the percentage
change in net asset value (NAV) with all distributions reinvested. The lines
on the chart represent total returns of $10,000 hypothetical investments in
the Fund and the Lehman Brothers Municipal Bond Index. An investment in Class
A shares on 12/31/93 at net asset value would have grown to $12,639 on July
31, 1998; $12,037, including the 4.75% sales charge. 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.
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For federal income tax
purposes, 99.91% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1998 was designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
10
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
As of July 31, 1998
<TABLE>
<CAPTION>
Arizona Fund Colorado Fund Connecticut Fund Michigan Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment in Municipals Portfolio, (Portfolio) --
Identified cost $ 93,964,160 $ 36,504,539 $ 154,168,207 $ 119,353,053
Unrealized appreciation 9,127,922 3,296,641 10,786,657 10,883,393
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment, at value $ 103,092,082 $ 39,801,180 $ 164,954,864 $ 130,236,446
- ------------------------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold $ 83,718 $ 11,080 $ 134,789 $ 112,803
Deferred organization expenses -- -- -- 775
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 103,175,800 $ 39,812,260 $ 165,089,653 $ 130,350,024
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions payable $ 202,849 $ 83,171 $ 315,853 $ 245,379
Payable for Fund shares redeemed 144,609 -- 396,186 305,293
Payable to affiliate for Trustees' fees 353 3 28 353
Other accrued expenses 37,446 22,564 59,501 56,555
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 385,257 $ 105,738 $ 771,568 $ 607,580
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 102,790,543 $ 39,706,522 $ 164,318,085 $ 129,742,444
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ 95,922,263 $ 37,943,905 $ 159,130,238 $ 120,855,136
Accumulated net realized loss from Portfolio
(computed on the basis of identified cost) (2,079,116) (1,587,493) (5,282,957) (1,750,705)
Accumulated undistributed (distributions in excess of)
net investment income (180,526) 53,469 (315,853) (245,380)
Net unrealized appreciation from Portfolio
(computed on the basis of identified cost) 9,127,922 3,296,641 10,786,657 10,883,393
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 102,790,543 $ 39,706,522 $ 164,318,085 $ 129,742,444
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 3,497,712 $ 2,171,632 $ 5,192,834 $ 1,525,947
Shares Outstanding 342,936 218,343 485,014 155,446
Net Asset Value and Redemption Price Per Share
(net assets / shares of beneficial interest $ 10.20 $ 9.95 $ 10.71 $ 9.82
outstanding)
Maximum Offering Price Per Share
(100 / 95.25 of net asset value per share) $ 10.71 $ 10.45 $ 11.24 $ 10.31
- ------------------------------------------------------------------------------------------------------------------------------------
Class B Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 99,292,831 $ 37,534,890 $ 159,125,251 $ 128,216,497
Shares Outstanding 8,752,300 3,468,356 14,956,906 11,705,448
Net Asset Value, Offering Price and Redemption Price
Per Share (net assets / shares of beneficial
interest outstanding) $ 11.34 $ 10.82 $ 10.64 $ 10.95
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
On sales of $25,000 or more, the offering price of Class A shares is reduced.
See notes to financial statements
11
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of July 31, 1998
<TABLE>
<CAPTION>
Minnesota Fund New Jersey Fund Pennsylvania Fund Texas Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment in Municipals Portfolio, (Portfolio)--
Identified cost $ 61,152,342 $ 295,827,056 $ 334,253,543 $ 16,365,367
Unrealized appreciation 5,831,313 32,802,058 25,278,310 1,472,099
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment, at value $ 66,983,655 $ 328,629,114 $ 359,531,853 $ 17,837,466
- ------------------------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold $ 126,629 $ 224,130 $ 326,147 $ 706
Deferred organization expenses 923 1,202 -- 252
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 67,111,207 $ 328,854,446 $ 359,858,000 $ 17,838,424
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions payable $ 138,236 $ 683,054 $ 784,329 $ 35,853
Payable for Fund shares redeemed 41,634 323,086 805,366 435,840
Payable to affiliate for Trustees' fees 7 27 353 17
Other accrued expenses 37,590 122,866 123,601 6,191
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 217,467 $ 1,129,033 $ 1,713,649 $ 477,901
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 66,893,740 $ 327,725,413 $ 358,144,351 $ 17,360,523
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ 65,185,812 $ 308,676,344 $ 348,182,698 $ 16,334,170
Accumulated net realized loss from Portfolio
(computed on the basis of identified cost) (3,985,149) (13,268,929) (15,528,648) (460,399)
Accumulated undistributed (distributions in excess
of) net investment income (138,236) (484,060) 211,991 14,653
Net unrealized appreciation from Portfolio
(computed on the basis of identified cost) 5,831,313 32,802,058 25,278,310 1,472,099
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 66,893,740 $ 327,725,413 $ 358,144,351 $ 17,360,523
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 3,994,637 $ 11,570,249 $ 8,551,745 $ 372,627
Shares Outstanding 406,841 1,092,505 822,585 37,682
Net Asset Value and Redemption Price Per Share
(net assets/shares of beneficial interest
outstanding) $ 9.82 $ 10.59 $ 10.40 $ 9.89
Maximum Offering Price Per Share
(100/95.25 of net asset value per share) $ 10.31 $ 11.12 $ 10.92 $ 10.38
- ------------------------------------------------------------------------------------------------------------------------------------
Class B Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 62,899,103 $ 316,155,164 $ 349,592,606 $ 16,987,896
Shares Outstanding 5,966,893 28,693,504 32,591,980 1,533,552
Net Asset Value, Offering Price and Redemption
Price Per Share (net assets/shares of
beneficial interest outstanding) $ 10.54 $ 11.02 $ 10.73 $ 11.08
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
On sales of $25,000 or more, the offering price of Class A shares is reduced.
See notes to financial statements
12
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1998
<TABLE>
<CAPTION>
Arizona Fund Colorado Fund Connecticut Fund Michigan Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------------
Interest allocated from Portfolio $ 6,121,200 $ 2,377,732 $ 9,650,562 $ 7,913,736
Expenses allocated from Portfolio (510,288) (151,579) (840,459) (676,439)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income from Portfolio $ 5,610,912 $ 2,226,153 $ 8,810,103 $ 7,237,297
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Trustees fees and expenses $ 3,096 $ 172 $ 3,004 $ 3,744
Distribution and service fees
Class A 4,294 3,180 4,490 2,027
Class B 976,191 360,952 1,567,573 1,315,872
Transfer and dividend disbursing agent fees 62,887 36,502 150,937 130,275
Custodian fee 16,954 5,720 18,603 15,277
Legal and accounting services 19,259 10,047 16,092 11,988
Printing and postage 11,544 5,631 12,265 9,751
Registration fees 4,448 1,338 3,754 2,900
Amortization of organization expenses 2,829 2,366 3,551 2,190
Miscellaneous 12,691 5,272 15,887 9,201
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 1,114,193 $ 431,180 $ 1,796,156 $ 1,503,225
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 4,496,719 $ 1,794,973 $ 7,013,947 $ 5,734,072
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 3,159,655 $ 886,357 $ 583,817 $ 3,849,645
Financial futures contracts (949,855) (418,124) (1,055,823) (1,463,448)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) $ 2,209,800 $ 468,233 $ (472,006) $ 2,386,197
- ------------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $(1,542,650) $ (611,689) $ 1,340,798 $(2,128,854)
Financial futures contracts 597,430 221,001 550,956 968,229
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ (945,220) $ (390,688) $ 1,891,754 $(1,160,625)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain $ 1,264,580 $ 77,545 $ 1,419,748 $ 1,225,572
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 5,761,299 $ 1,872,518 $ 8,433,695 $ 6,959,644
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
13
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1998
<TABLE>
<CAPTION>
Minnesota Fund New Jersey Fund Pennsylvania Fund Texas Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------------
Interest allocated from Portfolio $ 3,919,663 $ 20,492,162 $ 23,535,425 $ 1,168,398
Expenses allocated from Portfolio (307,385) (1,759,965) (1,902,885) (68,957)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income from Portfolio $ 3,612,278 $ 18,732,197 $ 21,632,540 $ 1,099,441
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Trustees fees and expenses $ 1,705 $ 3,419 $ 4,588 $ 187
Distribution and service fees
Class A 3,076 9,742 6,450 655
Class B 611,238 3,102,542 3,541,229 180,473
Transfer and dividend disbursing agent fees 61,159 301,089 345,685 16,837
Custodian fee 9,431 28,049 296 4,833
Printing and postage 8,067 28,706 25,057 4,245
Legal and accounting services 16,300 16,747 10,075 141
Registration fees 2,211 4,193 4,663 20
Amortization of organization expenses 2,719 1,709 -- 2,844
Miscellaneous 12,108 31,843 23,667 3,613
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 728,014 $ 3,528,039 $ 3,961,710 $ 213,848
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 2,884,264 $ 15,204,158 $ 17,670,830 $ 885,593
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,573,786 $ 4,091,888 $ 5,872,852 $ 568,115
Financial futures contracts (872,751) (2,384,863) (3,792,095) (91,792)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain $ 701,035 $ 1,707,025 $ 2,080,757 $ 476,323
- ------------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $ (694,190) $ 79,249 $ (9,697,063) $ (357,280)
Financial futures contracts 457,776 988,190 2,480,978 81,066
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ (236,414) $ 1,067,439 $ (7,216,085) $ (276,214)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) $ 464,621 $ 2,774,464 $ (5,135,328) $ 200,109
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 3,348,885 $ 17,978,622 $ 12,535,502 $ 1,085,702
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
14
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1998
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Arizona Fund Colorado Fund Connecticut Fund Michigan Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 4,496,719 $ 1,794,973 $ 7,013,947 $ 5,734,072
Net realized gain (loss) 2,209,800 468,233 (472,006) 2,386,197
Net change in unrealized appreciation
(depreciation) (945,220) (390,688) 1,891,754 (1,160,625)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 5,761,299 $ 1,872,518 $ 8,433,695 $ 6,959,644
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (131,150) $ (95,887) $ (172,439) $ (54,041)
Class B (4,365,569) (1,722,316) (6,841,508) (5,682,246)
In excess of net investment income
Class A (4,180) -- (6,696) --
Class B (126,748) -- (150,607) (212,249)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (4,627,647) $ (1,818,203) $ (7,171,250) $ (5,948,536)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest --
Proceeds from sale of shares
Class A $ 1,739,465 $ 834,848 $ 2,967,667 $ 725,660
Class B 6,442,510 3,825,870 6,225,238 3,792,047
Issued in reorganization of EV Traditional
Municipals Funds
Class A 1,873,786 1,672,995 2,746,315 1,141,339
Net asset value of shares issued to
shareholders in payment of
distributions declared
Class A 69,652 44,261 53,614 36,731
Class B 1,670,753 875,227 3,767,532 3,061,914
Cost of shares redeemed
Class A (209,594) (382,226) (592,798) (381,773)
Class B (19,308,751) (8,004,934) (23,745,878) (28,186,086)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share transactions $ (7,722,179) $ (1,133,959) $ (8,578,310) $ (19,810,168)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (6,588,527) $ (1,079,644) $ (7,315,865) $ (18,799,060)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 109,379,070 $ 40,786,166 $ 171,633,950 $ 148,541,504
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 102,790,543 $ 39,706,522 $ 164,318,085 $ 129,742,444
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of)
net investment income
included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ (180,526) $ 53,469 $ (315,853) $ (245,380)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
15
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1998
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Minnesota Fund New Jersey Fund Pennsylvania Fund Texas Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 2,884,264 $ 15,204,158 $ 17,670,830 $ 885,593
Net realized gain 701,035 1,707,025 2,080,757 476,323
Net change in unrealized appreciation
(depreciation) (236,414) 1,067,439 (7,216,085) (276,214)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 3,348,885 $ 17,978,622 $ 12,535,502 $ 1,085,702
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (163,184) $ (457,368) $ (348,278) $ (18,647)
Class B (2,727,564) (14,746,790) (17,849,608) (870,033)
In excess of net investment income
Class A -- (17,868) (3,747) --
Class B (143,063) (270,007) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (3,033,811) $ (15,492,033) $ (18,201,633) $ (888,680)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest --
Proceeds from sale of shares
Class A $ 1,538,325 $ 7,108,162 $ 4,213,104 $ 41,067
Class B 3,343,605 20,260,815 17,769,330 582,852
Issued in reorganization of EV Traditional
Municipals Funds
Class A 2,536,172 5,945,100 5,104,277 352,637
Net asset value of shares issued to shareholders
in payment of distributions declared
Class A 85,836 211,396 197,696 11,174
Class B 1,484,893 7,689,826 8,191,410 355,409
Cost of shares redeemed
Class A (180,691) (1,750,303) (808,053) (36,588)
Class B (10,010,256) (59,305,679) (66,831,364) (5,425,673)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from
Fund share transactions $ (1,202,116) $ (19,840,683) $ (37,267,877) $ (4,119,122)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (887,042) $ (17,354,094) $ (37,829,731) $ (3,922,100)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 67,780,782 $ 345,079,507 $ 395,974,082 $ 21,282,623
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 66,893,740 $ 327,725,413 $ 358,144,351 $ 17,360,523
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed (distributions in
excess of) net investment income
included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ (138,236) $ (484,060) $ 211,991 $ 14,653
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
16
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Arizona Fund Colorado Fund Connecticut Fund Michigan Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 5,308,412 $ 1,949,565 $ 7,854,551 $ 7,008,394
Net realized gain 777,524 436,388 470,342 22,544
Net change in unrealized appreciation (depreciation) 4,874,791 1,988,534 6,896,585 6,437,778
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 10,960,727 $ 4,374,487 $ 15,221,478 $ 13,468,716
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Class B) --
From net investment income $ (5,284,385) $ (1,920,578) $ (7,825,912) $ (7,008,394)
In excess of net investment income -- -- -- (34,246)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (5,284,385) $ (1,920,578) $ (7,825,912) $ (7,042,640)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Class B) --
Proceeds from sale of shares $ 6,378,622 $ 3,160,432 $ 8,059,926 $ 2,876,721
Net asset value of shares issued to shareholders in
payment of distributions declared 2,001,467 959,878 4,201,749 3,546,390
Cost of shares redeemed (32,357,879) (8,760,256) (29,631,741) (35,374,258)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share transactions $ (23,977,790) $ (4,639,946) $ (17,370,066) $ (28,951,147)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (18,301,448) $ (2,186,037) $ (9,974,500) $ (22,525,071)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 127,680,518 $ 42,972,203 $ 181,608,450 $ 171,066,575
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 109,379,070 $ 40,786,166 $ 171,633,950 $ 148,541,504
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of)
net investment income
included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ (49,528) $ 72,147 $ (319,776) $ (175,786)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
17
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Minnesota Fund New Jersey Fund Pennsylvania Fund Texas Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 3,228,568 $ 17,363,224 $ 20,464,913 $ 1,029,099
Net realized gain (loss) 19,343 1,985,293 (1,051,109) (6,238)
Net change in unrealized appreciation (depreciation) 2,703,193 13,897,749 18,464,028 1,092,949
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 5,951,104 $ 33,246,266 $ 37,877,832 $ 2,115,810
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Class B) --
From net investment income $ (3,186,013) $ (17,073,929) $ (20,078,825) $ (1,046,385)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (3,186,013) $ (17,073,929) $ (20,078,825) $ (1,046,385)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Class B) --
Proceeds from sale of shares $ 3,588,530 $ 16,690,868 $ 15,557,539 $ 1,640,887
Net asset value of shares issued to shareholders in
payment of distributions declared 1,654,522 8,710,206 9,150,623 396,839
Cost of shares redeemed (14,601,452) (75,142,843) (87,637,467) (5,820,480)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share transactions $ (9,358,400) $ (49,741,769) $ (62,929,305) $ (3,782,754)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (6,593,309) $ (33,569,432) $ (45,130,298) $ (2,713,329)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 74,374,091 $ 378,648,939 $ 441,104,380 $ 23,995,952
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 67,780,782 $ 345,079,507 $ 395,974,082 $ 21,282,623
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of)
net investment income
included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ (82,513) $ (190,532) $ 741,627 $ 18,886
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
18
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Arizona Fund
---------------------------------------------------------------------------
Year Ended
---------------------------------------------------------------------------
July 31, Sept. 30,
------------------------------------------------------------ ----------
1998++ 1997 1996 1995 1994* 1993
----------------- ---------------------------------------- ----------
Class A Class B Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $10.090 $11.220 $ 10.680 $ 10.530 $ 10.390 $ 11.570 $ 10.700
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.499 $ 0.476 $ 0.486 $ 0.482 $ 0.492 $ 0.404 $ 0.496
Net realized and unrealized gain (loss) 0.126 0.134 0.539 0.161 0.164 (0.862) 1.076
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.625 $ 0.610 $ 1.025 $ 0.643 $ 0.656 $ (0.458) $ 1.572
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.499) $(0.476) $ (0.485) $ (0.488) $ (0.492) $ (0.404) $ (0.496)
In excess of net investment income (0.016) (0.014) -- (0.005) (0.024) (0.074) (0.127)
From net realized gain -- -- -- -- -- (0.233) (0.079)
In excess of net realized gain -- -- -- -- -- (0.011) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.515) $(0.490) $ (0.485) $ (0.493) $ (0.516) $ (0.722) $ (0.702)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $10.200 $11.340 $ 11.220 $ 10.680 $ 10.530 $ 10.390 $ 11.570
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 6.34% 5.54% 9.85% 6.17% 6.64% (4.16)% 15.29%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $3,498 $99,293 $109,379 $127,681 $141,859 $150,879 $135,524
Ratios (As a percentage of average daily net assets):
Expenses/(2)(3)/ 0.78% 1.57% 1.58% 1.56% 1.53% 1.46%+ 1.53%
Expenses after custodian fee reduction/(2)/ 0.76% 1.55% 1.57% 1.55% -- -- --
Net investment income 4.88% 4.22% 4.50% 4.49% 4.81% 4.47%+ 4.42%
Portfolio Turnover/(4)/ -- -- -- -- -- -- 39%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Net investment income per share was computed using average shares
outstanding.
* For the ten-month period ended July 31, 1994.
/(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. Dividends and distributions, if any, are assumed
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/The expense ratios for the year ended July 31, 1996 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 each
of 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 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
19
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Colorado Fund
--------------------------------------------------------------------------
Year Ended
--------------------------------------------------------------------------
July 31, Sept. 30,
-------------------------------------------------------------- ---------
1998 1997 1996 1995 1994* 1993
------------------ ---------------------------------------- ---------
Class A Class B Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value--Beginning of year $ 9.920 $10.800 $10.170 $10.020 $10.010 $10.960 $10.060
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.507 $ 0.478 $ 0.491 $ 0.480 $ 0.494 $ 0.403 $ 0.484
Net realized and unrealized gain (loss) 0.038 0.025 0.621 0.162 0.033 (0.880) 0.996
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.545 $ 0.503 $ 1.112 $ 0.642 $ 0.527 $(0.477) $ 1.480
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.515) $(0.483) $(0.482) $(0.492) $(0.494) $(0.403) $(0.484)
In excess of net investment income -- -- -- -- (0.023) (0.070) (0.096)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.515) $(0.483) $(0.482) $(0.492) $(0.517) $(0.473) $(0.580)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 9.950 $10.820 $10.800 $10.170 $10.020 $10.010 $10.960
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 5.62% 4.74% 11.26% 6.46% 5.58% (4.46)% 15.52%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $ 2,172 $37,535 $40,786 $42,972 $43,900 $42,085 $24,847
Ratios (As a percentage of average daily net assets):
Net expenses/(2)(3)/ 0.74% 1.51% 1.53% 1.49% 1.28% 1.09%+ 1.00%
Net expenses after custodian fee reduction/(2)/ 0.71% 1.48% 1.49% 1.45% -- -- --
Net investment income 5.14% 4.40% 4.75% 4.69% 5.03% 4.59%+ 4.49%
Portfolio Turnover/(4)/ -- -- -- -- -- -- 3%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The operating expenses of the Fund and the Portfolio may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been
taken, the ratios and net investment income per share would have been as
follows:
<TABLE>
<S> <C> <C> <C> <C>
Ratios (As a percentage of average daily net assets):
Expenses/(2)(3)/ 1.51% 1.43% 1.42%+ 1.90%
Expenses after custodian fee reduction/(2)/ 1.46% -- -- --
Net investment income 4.67% 4.88% 4.26%+ 3.60%
Net investment income per share $ 0.478 $ 0.479 $ 0.373 $ 0.387
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten-month period ended July 31, 1994.
/(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. Dividends and distributions, if any, are assumed
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/The expense ratios for the year ended July 31, 1996 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 each
of 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 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
20
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Connecticut Fund
--------------------------------------------------------------------------
Year Ended
--------------------------------------------------------------------------
July 31, Sept. 30,
-------------------------------------------------------------- ---------
1998++ 1997 1996 1995 1994* 1993
------------------ ----------------------------------------- ---------
Class A Class B Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value--Beginning of year $10.640 $ 10.570 $ 10.120 $ 9.970 $ 10.050 $ 11.030 $ 10.270
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.529 $ 0.438 $ 0.453 $ 0.452 $ 0.465 $ 0.388 $ 0.471
Net realized and unrealized gain (loss) 0.091 0.080 0.450 0.169 (0.037) (0.883) 0.885
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.620 $ 0.518 $ 0.903 $ 0.621 $ 0.428 $ (0.495) $ 1.356
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.529) $ (0.438) $ (0.453) $ (0.452) $ (0.465) $ (0.388) $ (0.471)
In excess of net investment income (0.021) (0.010) -- (0.019) (0.043) (0.079) (0.120)
From net realized gain -- -- -- -- -- (0.018) (0.005)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.550) $ (0.448) $ (0.453) $ (0.471) $ (0.508) $ (0.485) $ (0.596)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $10.710 $ 10.640 $ 10.570 $ 10.120 $ 9.970 $ 10.050 $ 11.030
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 5.97% 4.99% 9.17% 6.30% 4.55% (4.61)% 13.62%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $ 5,193 $159,125 $171,634 $181,608 $188,900 $188,453 $160,790
Ratios (As a percentage of average daily net assets):
Expenses/(2)(3)/ 0.76% 1.59% 1.60% 1.58% 1.55% 1.43%+ 1.56%
Expenses after custodian fee reduction/(2)/ 0.75% 1.58% 1.60% 1.57% -- -- --
Net investment income 4.93% 4.14% 4.45% 4.45% 4.77% 4.42%+ 4.33%
Portfolio Turnover/(4)/ -- -- -- -- -- -- 14%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Net investment income per share was computed using average shares
outstanding.
* For the ten-month period ended July 31, 1994.
/(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. Dividends and distributions, if any, are assumed
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/The expense ratios for the year ended July 31, 1996 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 each
of 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 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
21
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Michigan Fund
---------------------------------------------------------------------------
Year Ended
---------------------------------------------------------------------------
July 31, Sept. 30,
--------------------------------------------------------------- ---------
1998++ 1997 1996 1995 1994* 1993
------------------ ----------------------------------------- ---------
Class A Class B Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value--Beginning of year $ 9.750 $ 10.870 $ 10.420 $ 10.250 $ 10.210 $ 11.110 $ 10.570
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.474 $ 0.448 $ 0.460 $ 0.464 $ 0.486 $ 0.398 $ 0.480
Net realized and unrealized gain (loss) 0.092 0.097 0.454 0.195 0.059 (0.794) 0.745
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.566 $ 0.545 $ 0.914 $ 0.659 $ 0.545 $ (0.396) $ 1.225
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.496) $ (0.448) $ (0.462) $ (0.481) $ (0.486) $ (0.398) $ (0.480)
In excess of net investment income -- (0.017) (0.002) (0.008) (0.019) (0.062) (0.114)
From net realized gain -- -- -- -- -- (0.028) (0.058)
In excess of net realized gain -- -- -- -- -- (0.016) (0.033)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.496) $ (0.465) $ (0.464) $ (0.489) $ (0.505) $ (0.504) $ (0.685)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value--End of year $ 9.820 $ 10.950 $ 10.870 $ 10.420 $ 10.250 $ 10.210 $ 11.110
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 5.95% 5.11% 9.01% 6.50% 5.61% (3.66)% 12.06%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $ 1,526 $128,216 $148,542 $171,067 $186,363 $197,082 $188,290
Ratios (As a percentage of average daily net assets):
Expenses/(2)(3)/ 0.83% 1.59% 1.60% 1.61% 1.51% 1.49%+ 1.54%
Expenses after custodian fee reduction/(2)/ 0.81% 1.57% 1.58% 1.60% -- -- --
Net investment income 4.85% 4.12% 4.40% 4.44% 4.84% 4.49%+ 4.40%
Portfolio Turnover/(4)/ -- -- -- -- -- -- 28%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Net investment income per share was computed using average shares
outstanding.
* For the ten-month period ended July 31, 1994.
/(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. Dividends and distributions, if any, are assumed
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/The expense ratios for the year ended July 31, 1996 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 each
of 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 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
22
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Minnesota Fund
-------------------------------------------------------------------------
Year Ended
-------------------------------------------------------------------------
July 31, Sept. 30,
-------------------------------------------------------------- ---------
1998++ 1997 1996 1995 1994* 1993
------------------ ---------------------------------------- ---------
Class A Class B Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value--Beginning of year $ 9.770 $10.490 $10.070 $ 9.950 $10.040 $10.910 $10.310
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.492 $ 0.439 $ 0.466 $ 0.468 $ 0.470 $ 0.383 $ 0.473
Net realized and unrealized gain (loss) 0.073 0.073 0.415 0.123 (0.053) (0.788) 0.749
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.565 $ 0.512 $ 0.881 $ 0.591 $ 0.417 $(0.405) $ 1.222
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.515) $(0.439) $(0.461) $(0.468) $(0.470) $(0.383) $(0.473)
In excess of net investment income -- (0.023) -- (0.003) (0.037) (0.073) (0.125)
From net realized gain -- -- -- -- -- (0.009) --
In excess of net realized gain -- -- -- -- -- -- (0.024)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.515) $(0.462) $(0.461) $(0.471) $(0.507) $(0.465) $(0.622)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value--End of year $ 9.820 $10.540 $10.490 $10.070 $ 9.950 $10.040 $10.910
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 5.94% 4.99% 9.01% 6.00% 4.41% (3.81)% 12.28%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $ 3,995 $62,899 $67,781 $74,374 $78,970 $79,223 $68,004
Ratios (As a percentage of average daily net assets):
Net expenses/(2)(3)/ 0.73% 1.58% 1.58% 1.56% 1.52% 1.54%+ 1.59%
Net expenses after custodian fee reduction/(2)/ 0.71% 1.56% 1.55% 1.54% -- -- --
Net investment income 5.03% 4.19% 4.62% 4.63% 4.80% 4.38%+ 4.38%
Portfolio Turnover/(4)/ -- -- -- -- -- -- 16%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The operating expenses of the Fund and the Portfolio may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been
taken, the ratios and net investment income per share would have been as
follows:
<TABLE>
<S> <C>
Ratios (As a percentage of average daily net assets):
Expenses/(2)(3)/ 1.61%
Net investment income 4.37%
Net investment income per share $ 0.472
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Net investment income per share was computed using average shares
outstanding.
* For the ten-month period ended July 31, 1994.
/(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. Dividends and distributions, if any, are assumed
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/The expense ratios for the year ended July 31, 1996 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 each
of 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 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
23
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
New Jersey Fund
--------------------------------------------------------------------------
Year Ended
--------------------------------------------------------------------------
July 31, Sept. 30,
-------------------------------------------------------------- ---------
1998++ 1997 1996 1995 1994* 1993
------------------ ----------------------------------------- ---------
Class A Class B Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value--Beginning of year $10.530 $ 10.940 $ 10.440 $ 10.360 $ 10.410 $ 11.350 $ 10.680
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.558 $ 0.491 $ 0.506 $ 0.505 $ 0.505 $ 0.421 $ 0.514
Net realized and unrealized gain (loss) 0.082 0.089 0.493 0.084 (0.009) (0.836) 0.841
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.640 $ 0.580 $ 0.999 $ 0.589 $ 0.496 $ (0.415) $ 1.355
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.558) $ (0.491) $ (0.499) $ (0.505) $ (0.505) $ (0.421) $ (0.514)
In excess of net investment income (0.022) (0.009) -- (0.004) (0.035) (0.075) (0.112)
From net realized gain -- -- -- -- -- (0.029) (0.059)
In excess of net realized gain -- -- -- -- (0.006) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.580) $ (0.500) $ (0.499) $ (0.509) $ (0.546) $ (0.525) $ (0.685)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value--End of year $10.590 $ 11.020 $ 10.940 $ 10.440 $ 10.360 $ 10.410 $ 11.350
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 6.24% 5.41% 9.85% 5.74% 5.04% (3.77)% 13.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $11,570 $316,155 $345,080 $378,649 $404,861 $420,117 $395,421
Ratios (As a percentage of average daily net assets):
Expenses/(2)(3)/ 0.77% 1.61% 1.59% 1.57% 1.53% 1.48%+ 1.56%
Expenses after custodian fee reduction/(2)/ 0.75% 1.59% 1.57% 1.56% -- -- --
Net investment income 5.25% 4.48% 4.82% 4.80% 4.97% 4.64%+ 4.66%
Portfolio Turnover/(4)/ -- -- -- -- -- -- 20%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ Net investment income per share was computed using average shares
outstanding.
* For the ten-month period ended July 31, 1994.
/(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. Dividends and distributions, if any, are assumed
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/The expense ratios for the year ended July 31, 1996 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 each
of 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 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
24
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Pennsylvania Fund
--------------------------------------------------------------------------
Year Ended
--------------------------------------------------------------------------
July 31, Sept. 30,
------------------------------------------------------------- ---------
1998 1997 1996 1995 1994* 1993
------------------ ---------------------------------------- ---------
Class A Class B Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value--Beginning of year $10.550 $ 10.900 $ 10.430 $ 10.320 $ 10.340 $ 11.310 $ 10.650
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.578 $ 0.506 $ 0.522 $ 0.512 $ 0.507 $ 0.422 $ 0.520
Net realized and unrealized gain (loss) (0.143) (0.156) 0.458 0.108 0.004++ (0.841) 0.794
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.435 $ 0.350 $ 0.980 $ 0.620 $ 0.511 $ (0.419) $ 1.314
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.578) $ (0.520) $ (0.510) $ (0.510) $ (0.507) $ (0.422) $ (0.520)
In excess of net investment income (0.007) -- -- -- (0.024) (0.069) (0.115)
From net realized gain -- -- -- -- -- (0.042) (0.019)
In excess of net realized gain -- -- -- -- -- (0.018) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.585) $ (0.520) $ (0.510) $ (0.510) $ (0.531) $ (0.551) $ (0.654)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value--End of year $10.400 $ 10.730 $ 10.900 $ 10.430 $ 10.320 $ 10.340 $ 11.310
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 4.17% 3.23% 9.66% 6.08% 5.24% (3.84)% 12.76%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $ 8,552 $349,593 $395,974 $441,104 $495,856 $530,115 $499,601
Ratios (As a percentage of average daily net assets):
Expenses/(2)(3)/ 0.74% 1.59% 1.61% 1.58% 1.51% 1.46%+ 1.56%
Expenses after custodian fee reduction/(2)/ 0.70% 1.55% 1.56% 1.54% -- -- --
Net investment income 5.40% 4.63% 4.93% 4.89% 5.04% 4.68%+ 4.70%
Portfolio Turnover/(4)/ -- -- -- -- -- -- 6%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gain (loss) on investments for the period because of the timing of sales of
Fund shares and the amount of the per share realized and unrealized gains
and losses at such time.
* For the ten-month period ended July 31, 1994.
/(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. Dividends and distributions, if any, are assumed
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/The expense ratios for the year ended July 31, 1996 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 each
of 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 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
25
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Texas Fund
-------------------------------------------------------------------------
Year Ended
-------------------------------------------------------------------------
July 31, Sept. 30,
------------------------------------------------------------ ---------
1998 1997 1996 1995 1994* 1993
----------------- ------------------ ------------------ ---------
Class A Class B Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value--Beginning of year $ 9.770 $10.960 $10.440 $10.280 $10.210 $11.110 $10.450
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.515 $ 0.496 $ 0.489 $ 0.492 $ 0.532 $ 0.436 $ 0.515
Net realized and unrealized gain (loss) 0.110 0.120 0.526 0.177 0.084 (0.824) 0.787
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.625 $ 0.616 $ 1.015 $ 0.669 $ 0.616 $(0.388) $ 1.302
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.505) $(0.496) $(0.495) $(0.509) $(0.532) $(0.436) $(0.515)
In excess of net investment income -- -- -- -- (0.014) (0.076) (0.106)
In excess of net realized gain -- -- -- -- -- -- (0.021)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.505) $(0.496) $(0.495) $(0.509) $(0.546) $(0.512) $(0.642)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value--End of year $ 9.890 $11.080 $10.960 $10.440 $10.280 $10.210 $11.110
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 6.55% 5.74% 10.00% 6.60% 6.36% (3.65)% 12.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $ 373 $16,988 $21,283 $23,996 $27,762 $26,677 $16,338
Ratios (As a percentage of average daily net assets):
Net expenses/(2)(3)/ 0.72% 1.49% 1.57% 1.43% 0.99% 0.82%+ 1.06%
Net expenses after custodian fee reduction/(2)/ 0.69% 1.46% 1.55% 1.39% -- -- --
Net investment income 5.22% 4.50% 4.61% 4.70% 5.29% 4.81%+ 4.67%
Portfolio Turnover/(4)/ -- -- -- -- -- -- 7%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The operating expenses of the Fund and the Portfolio may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been
taken, the ratios and net investment income per share would have been as
follows:
<TABLE>
Ratios (As a percentage of average daily net assets):
<S> <C> <C> <C> <C>
Expenses/(2)(3)/ 1.53% 1.44% 1.67%+ 2.55%
Expenses after custodian fee reduction/(2)/ 1.49% -- -- --
Net investment income 4.60% 4.84% 3.96%+ 3.18%
Net investment income per share $0.482 $0.487 $0.359 $0.350
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten-month period ended July 31, 1994.
/(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. Dividends and distributions, if any, are assumed
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/The expense ratios for the year ended July 31, 1996 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 each
of 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 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
26
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
---------------------------------------------------------------------------
Eaton Vance Municipals 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 Trust presently consists of twenty-nine Funds,
eight of which, each non-diversified, are included in these financial
statements. They include Eaton Vance Arizona Municipals Fund ("Arizona
Fund"), Eaton Vance Colorado Municipals Fund ("Colorado Fund"), Eaton Vance
Connecticut Municipals Fund ("Connecticut Fund"), Eaton Vance Michigan
Municipals Fund ("Michigan Fund"), Eaton Vance Minnesota Municipals Fund
("Minnesota Fund"), Eaton Vance New Jersey Municipals Fund ("New Jersey
Fund"), Eaton Vance Pennsylvania Municipals Fund ("Pennsylvania Fund") and
Eaton Vance Texas Municipals Fund ("Texas Fund"). The Funds offer two
classes of shares. Class A shares are sold subject to a sales charge
imposed at the time of purchase. Class B shares are sold at net asset value
and are subject to a declining contingent deferred sales charge (See Note
6). All classes of shares have equal rights to assets and voting
privileges. Realized and unrealized gains and losses and net investment
income, other than class specific expenses, are allocated daily to each
class of shares based on the relative net assets of each class to the total
net assets of the Fund. Each class of shares differs in its distribution
plan and certain other class specific expenses. Each Fund invests all of
its investable assets in interests in a separate corresponding open-end
management investment company (a "Portfolio"), a New York Trust, having the
same investment objective as its corresponding Fund. The Arizona Fund
invests its assets in the Arizona Municipals Portfolio, the Colorado Fund
invests its assets in the Colorado Municipals Portfolio, the Connecticut
Fund invests its assets in the Connecticut Municipals Portfolio, the
Michigan Fund invests its assets in the Michigan Municipals Portfolio, the
Minnesota Fund invests its assets in the Minnesota Municipals Portfolio,
the New Jersey Fund invests its assets in the New Jersey Municipals
Portfolio, the Pennsylvania Fund invests its assets in the Pennsylvania
Municipals Portfolio and the Texas Fund invests its assets in the Texas
Municipals Portfolio. The value of each Fund's investment in its
corresponding Portfolio reflects the Fund's proportionate interest in the
net assets of that Portfolio (approximately 100% at July 31, 1998 for each
Fund). The performance of each Fund is directly affected by the performance
of its corresponding Portfolio. The financial statements of each Portfolio,
including the portfolio of investments, are included elsewhere in this
report and should be read in conjunction with each Fund's financial
statements.
The following is a summary of significant accounting policies consistently
followed by the Trust 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 Portfolios is
discussed in Note 1A of the Portfolios' Notes to Financial Statements which
are included elsewhere in this report.
B Income -- Each Fund's net investment income consists of the Fund's pro
rata share of the net investment income of its corresponding Portfolio,
less all actual and accrued expenses of each Fund determined in accordance
with generally accepted accounting principles.
C Federal Taxes -- Each 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 July 31, 1998,
the Funds, for federal income tax purposes, had capital loss carryovers
which will reduce taxable income arising from future net realized gain on
investments, if any, to the extent permitted by the Internal Revenue Code,
and thus will reduce the amount of the distributions to shareholders which
would otherwise be necessary to relieve the Funds of any liability for
federal income or excise tax. A portion of such capital loss carryovers
were acquired through the Fund Reorganization (see Note 8) and may be
subject to certain limitations. The amounts and expiration dates of the
capital loss carryovers are as follows:
Fund Amount Expires
---------------------------------------------------------------------------
Arizona Fund $ 2,085,083 July 31, 2004
Colorado Fund 1,589,426 July 31, 2004
Connecticut Fund 91,011 July 31, 2005
5,029,576 July 31, 2004
169,562 July 31, 2003
Michigan Fund 315,466 July 31, 2005
1,357,114 July 31, 2004
35,940 July 31, 2003
Minnesota Fund 329,867 July 31, 2005
3,644,076 July 31, 2004
27
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
Fund Amount Expires
-------------------------------------------------------------------------
New Jersey Fund $ 23,676 July 31, 2005
13,303,402 July 31, 2004
92 July 31, 2002
Pennsylvania Fund 1,933,493 July 31, 2005
12,988,102 July 31, 2004
346,419 July 31, 2003
Texas Fund 87,793 July 31, 2005
375,605 July 31, 2004
Dividends paid by each Fund from net interest on tax-exempt municipal bonds
allocated from its corresponding Portfolio are not includable by
shareholders as gross income for federal income tax purposes because each
Fund and Portfolio intend to meet certain requirements of the Internal
Revenue Code applicable to regulated investment companies which will enable
the Funds to pay tax-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 Deferred Organization Expenses -- Costs incurred by each Fund in
connection with its organization, including registration costs, are being
amortized on the straight-line basis over five years.
E Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Funds and the Portfolios. Pursuant to the respective
custodian agreements, IBT receives a fee reduced by credits which
are determined based on the average daily cash balances the Funds or the
Portfolios maintain with IBT. All significant credit balances used to
reduce each Fund's custodian fees are reported as a reduction of expenses
on the Statement Of Operations.
F 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.
G Other -- Investment transactions are accounted for on a trade date basis.
2 Distributions to Shareholders
---------------------------------------------------------------------------
The net income of each Fund is determined daily and substantially all of
the net income so determined is declared as a dividend to shareholders of
record at the time of declaration. Distributions are paid monthly.
Distributions are paid in the form of additional shares or, at the election
of the shareholder, in cash. 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.
The Funds distinguish 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 temporary over distributions
for financial statement purposes 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. During the year ended July 31, 1998, the
following reclassifications were made due to permanent differences between
book and tax accounting for reallocation of gain/loss:
<TABLE>
<CAPTION>
Connecticut Fund Increase/(Decrease)
----------------------------------------------------------------------------------------
<S> <C>
Accumulated undistributed (distributions in excess of)
net investment income $ (166,050)
Accumulated net realized gain (loss) on investments
from Portfolio 134,417
Paid-in capital 31,633
Michigan Fund
----------------------------------------------------------------------------------------
Accumulated undistributed (distributions in excess of)
net investment income $ (139,344)
Paid-in capital 139,344
Minnesota Fund
----------------------------------------------------------------------------------------
Accumulated undistributed (distributions in excess of)
net investment income $ (83,398)
Paid-in capital 83,398
</TABLE>
28
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
New Jersey Fund
- --------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments
from Portfolio $ 62,436
Paid-in capital (62,436)
Pennsylvania Fund
- --------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments
from Portfolio $ 55,313
Paid-in capital (55,313)
Net investment income, net realized gains, and net assets were not affected
by these reclassifications.
The tax treatment of distributions for the calendar year will be reported
to shareholders prior to February 1, 1999, and will be based on tax
accounting methods which may differ from amounts determined for financial
statement purposes.
3 Shares of Beneficial Interest
---------------------------------------------------------------------------
The Funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Such shares may be issued in a number of different classes.
Transactions in Fund shares were as follows:
Arizona Fund
-------------------------------------------
Year Ended Year Ended
July 31, 1998 July 31, 1997
-------------------------------------------
Class A Class B Class B
- --------------------------------------------------------------------------------
Sales 170,891 569,460 587,035
Issued to shareholders electing
to receive payments of
distributions in Fund shares 6,850 147,910 184,561
Redemptions (20,568) (1,710,682) (2,984,656)
Issued to EV Traditional
Municipals Fund shareholders
185,763 -- --
- --------------------------------------------------------------------------------
Net increase (decrease) 342,936 (993,312) (2,213,060)
- --------------------------------------------------------------------------------
Colorado Fund
-------------------------------------------
Year Ended Year Ended
July 31, 1998 July 31, 1997
-------------------------------------------
Class A Class B Class B
- --------------------------------------------------------------------------------
Sales 83,490 352,856 305,999
Issued to shareholders electing
to receive payments of
distributions in Fund shares 4,447 80,757 92,921
Redemptions (38,178) (740,698) (847,903)
Issued to EV Traditional
Municipals Fund shareholders 168,584 -- --
- --------------------------------------------------------------------------------
Net increase (decrease) 218,343 (307,085) (448,983)
- --------------------------------------------------------------------------------
Connecticut Fund
-------------------------------------------
Year Ended Year Ended
July 31, 1998 July 31, 1997
-------------------------------------------
Class A Class B Class B
- --------------------------------------------------------------------------------
Sales 277,244 585,923 785,303
Issued to shareholders electing
to receive payments of
distributions in Fund shares 5,014 355,118 410,380
Redemptions (55,247) (2,227,088) (2,893,701)
Issued to EV Traditional
Municipals Fund shareholders 258,003 -- --
- --------------------------------------------------------------------------------
Net increase (decrease) 485,014 (1,286,047) (1,698,018)
- --------------------------------------------------------------------------------
Michigan Fund
-------------------------------------------
Year Ended Year Ended
July 31, 1998 July 31, 1997
-------------------------------------------
Class A Class B Class B
- --------------------------------------------------------------------------------
Sales 73,709 348,116 273,591
Issued to shareholders electing
to receive payments of
distributions in Fund shares 3,759 280,699 336,586
Redemptions (39,094) (2,585,944) (3,360,285)
Issued to EV Traditional
Municipals Fund shareholders 117,072 -- --
- --------------------------------------------------------------------------------
Net increase (decrease) 155,446 (1,957,129) (2,750,108)
- --------------------------------------------------------------------------------
29
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
Minnesota Fund
-------------------------------------------
Year Ended Year Ended
July 31, 1998 July 31, 1997
-------------------------------------------
Class A Class B Class B
- --------------------------------------------------------------------------------
Sales 157,027 318,574 354,478
Issued to shareholders electing
to receive payments of
distributions in Fund shares 8,777 141,435 163,187
Redemptions (18,523) (954,723) (1,442,543)
Issued to EV Traditional
Municipal Fund shareholders 259,560 -- --
- --------------------------------------------------------------------------------
Net increase (decrease) 406,841 (494,714) (924,878)
- --------------------------------------------------------------------------------
New Jersey Fund
--------------------------------------------
Year Ended Year Ended
July 31, 1998 July 31, 1997
--------------------------------------------
Class A Class B Class B
- --------------------------------------------------------------------------------
Sales 672,700 1,840,820 1,576,459
Issued to shareholders electing
to receive payments of
distributions in Fund shares 19,995 700,002 824,152
Redemptions (165,010) (5,394,350) (7,114,631)
Issued to EV Traditional
Municipal Fund shareholders 564,820 -- --
- --------------------------------------------------------------------------------
Net increase (decrease) 1,092,505 (2,853,528) (4,714,020)
- --------------------------------------------------------------------------------
Pennsylvania Fund
--------------------------------------------
Year Ended Year Ended
July 31, 1998 July 31, 1997
--------------------------------------------
Class A Class B Class B
- --------------------------------------------------------------------------------
Sales 396,676 1,626,734 1,471,266
Issued to shareholders electing
to receive payments of
distributions in Fund shares 18,652 749,510 853,998
Redemptions (76,420) (6,125,607) (8,289,968)
Issued to EV Traditional
Municipal Fund shareholders 483,677 -- --
- --------------------------------------------------------------------------------
Net increase (decrease) 822,585 (3,749,363) (5,964,704)
- --------------------------------------------------------------------------------
Texas Fund
--------------------------------------------
Year Ended Year Ended
July 31, 1998 July 31, 1997
--------------------------------------------
Class A Class B Class B
- --------------------------------------------------------------------------------
Sales 4,222 52,970 156,332
Issued to shareholders electing
to receive payments of
distributions in Fund shares 1,137 32,250 37,478
Redemptions (3,768) (493,571) (549,906)
Issued to EV Traditional
Municipal Fund shareholders 36,091 -- --
- --------------------------------------------------------------------------------
Net increase (decrease) 37,682 (408,351) (356,096)
- --------------------------------------------------------------------------------
4 Transactions with Affiliates
---------------------------------------------------------------------------
Eaton Vance Management (EVM) serves as the Administrator of each Fund, but
receives no compensation. Each of the Portfolios have engaged Boston
Management and Research (BMR), a subsidiary of EVM, to render investment
advisory services. See Note 2 of the Portfolios' Notes to Financial
Statements which are included elsewhere in this report. Certain of the
officers and Trustees of the Funds and the Portfolios are officers and
directors/trustees of the above organizations. Except as to Trustees of the
Funds and Portfolios who are not members of EVM's or BMR's organization,
officers and Trustees receive remuneration for their services to each fund
out of the investment adviser fee earned by BMR. Eaton Vance Distributors,
Inc. (EVD), a subsidiary of EVM and the Funds' principal underwriter,
received $3,065, $2,093, $4,474, $1,223, $3,362, $14,721, $3,848 and $97
from the Arizona Fund, Colorado Fund, Connecticut Fund, Michigan Fund,
Minnesota Fund, New Jersey Fund, Pennsylvania Fund and Texas Fund,
respectively, as its portion of the sales charge on sales of Class A shares
for the year ended July 31, 1998.
5 Distribution and Service Plans
---------------------------------------------------------------------------
Each Fund has adopted a distribution plan (Class B Plans) pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (Class A
Plans) (collectively, the Plans). The Plans require the Class B shares to
pay the principal underwriter, EVD, amounts equal to 1/365 of 0.75% of each
Fund's Class B daily net assets, for providing ongoing distribution
services and facilities to the respective Fund. A Fund's Class B shares
will automatically discontinue payments to EVD during any period in which
there are no outstanding Uncovered Distribution Charges,
30
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
which are equivalent to the sum of (i) 5% of the aggregate amount received
by the Fund for Class B 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 amounts
theretofore paid to EVD. The amount payable to EVD with respect to each day
is accrued on such day as a liability of each Class B and, accordingly,
reduces the Class B's net assets. For the year ended July 31, 1998, the
Class B shares of the Arizona Fund, Colorado Fund, Connecticut Fund,
Michigan Fund, Minnesota Fund, New Jersey Fund, Pennsylvania Fund and Texas
Fund paid $775,844, $289,494, $1,240,622, $1,035,452, $488,671, $2,470,627,
$2,809,571 and $144,546, respectively, to EVD, representing 0.75% of each
Fund's Class B average daily net assets. At July 31, 1998, the amount of
Uncovered Distribution Charges of EVD calculated under the Class B Plans
for Arizona Fund, Colorado Fund, Connecticut Fund, Michigan Fund, Minnesota
Fund, New Jersey Fund, Pennsylvania Fund and Texas Fund were approximately
$2,696,000, $1,365,000, $4,469,000, $2,875,000, $1,711,000, $7,150,000,
$8,506,000 and $413,000, respectively.
In addition, the Plans also authorize each class to make payments of
service fees to EVD, Authorized Firms and other persons in amounts not
exceeding 0.25% of each Fund's average daily net assets attributable to
Class A and Class B shares for any fiscal year. The Trustees have initially
implemented the Plans by authorizing each class to make quarterly payments
of service fees to EVD and Authorized Firms in amounts not expected to
exceed 0.20% per annum of each Fund's average daily net assets attributable
to both Class A and Class B shares based on the value of Fund shares sold
by such persons and remaining outstanding for at least one year. For the
year ended July 31, 1998, Arizona Fund, Colorado Fund, Connecticut Fund,
Michigan Fund, Minnesota Fund, New Jersey Fund, Pennsylvania Fund and Texas
Fund paid or accrued service fees to or payable to EVD in the amount of
$4,294, $3,180, $4,490, $2,027, $3,076, $9,742, $6,450 and $655,
respectively, for Class A shares, and $200,347, $71,458, $326,951,
$280,420, $122,567, $631,915, $731,658 and $35,927, respectively, for Class
B shares. Service fee payments will be made for personal services and/or
the maintenance of shareholder accounts. Service fees are separate and
distinct from the sales commissions and distribution fees payable by each
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 Funds are officers or directors of
EVD.
6 Contingent Deferred Sales Charge
---------------------------------------------------------------------------
A contingent deferred sales charge (CDSC) is imposed on any redemption of
Class B 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 Class B 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 Class B 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 each Fund's Class B Distribution Plan (see Note
5). CDSC charges received when no Uncovered Distribution Charges exist will
be credited to the Fund. EVD received approximately $302,000, $159,000,
$317,000, $258,000, $142,000, $632,000, $669,000 and $66,000 of CDSC paid
by Class B shareholders of Arizona Fund, Colorado Fund, Connecticut Fund,
Michigan Fund, Minnesota Fund, New Jersey Fund, Pennsylvania Fund and Texas
Fund, respectively, for the year ended July 31, 1998.
7 Investment Transactions
---------------------------------------------------------------------------
Increases and decreases in each Fund's investment in its corresponding
Portfolio for the year ended July 31, 1998 were as follows:
Arizona Fund
---------------------------------------------------------------------------
Increases $ 8,495,182
Decreases (24,750,363)
Colorado Fund
---------------------------------------------------------------------------
Increases $ 4,707,201
Decreases (9,834,162)
Connecticut Fund
---------------------------------------------------------------------------
Increases $ 9,761,887
Decreases (29,880,364)
Michigan Fund
---------------------------------------------------------------------------
Increases $ 5,251,473
Decreases (33,701,520)
Minnesota Fund
---------------------------------------------------------------------------
Increases $ 4,912,748
Decreases (12,679,645)
31
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
New Jersey Fund
---------------------------------------------------------------------------
Increases $ 28,452,460
Decreases (74,018,070)
Pennsylvania Fund
---------------------------------------------------------------------------
Increases $ 23,151,071
Decreases (82,338,942)
Texas Fund
---------------------------------------------------------------------------
Increases $ 710,511
Decreases (5,848,716)
8 Transfer of Assets
---------------------------------------------------------------------------
On August 1, 1997, EV Marathon Arizona Municipals Fund, EV Marathon
Colorado Municipals Fund, EV Marathon Connecticut Municipals Fund, EV
Marathon Michigan Municipals Fund, EV Marathon Minnesota Municipals Fund,
EV Marathon New Jersey Municipals Fund, EV Marathon Pennsylvania Municipals
Fund and EV Marathon Texas Municipals Fund acquired the net assets of EV
Traditional Arizona Municipals Fund, EV Traditional Colorado Municipals
Fund, EV Traditional Connecticut Municipals Fund, EV Traditional Michigan
Municipals Fund, EV Traditional Minnesota Municipals Fund, EV Traditional
New Jersey Municipals Fund, EV Traditional Pennsylvania Municipals Fund and
EV Traditional Texas Municipals Fund, respectively, pursuant to an
Agreement and Plan of Reorganization dated June 23, 1997. In accordance
with the agreement, the Funds, at the closing, issued Class A shares as
follows:
Class A shares Aggregate value Net asset value
Fund issued of shares issued per share
--------------------------------------------------------------------------
Arizona Fund 185,763 $1,873,786 $10.09
Colorado Fund 168,584 1,672,995 9.92
Connecticut Fund 258,003 2,746,315 10.64
Michigan Fund 117,072 1,141,339 9.75
Minnesota Fund 259,560 2,536,172 9.77
New Jersey Fund 564,820 5,945,100 10.53
Pennsylvania Fund 483,677 5,104,277 10.55
Texas Fund 36,091 352,637 9.77
The transaction was structured for tax purposes to qualify as a tax free
reorganization under the Internal Revenue Code. The net assets acquired,
including unrealized appreciation at the date of the transaction were as
follows:
Fund Acquired net assets Unrealized appreciation
---------------------------------------------------------------------------
Arizona Fund $1,873,786 $105,967
Colorado Fund 1,672,995 154,386
Connecticut Fund 2,746,315 148,370
Michigan Fund 1,141,339 105,076
Minnesota Fund 2,536,172 208,144
New Jersey Fund 5,945,100 282,362
Pennsylvania Fund 5,104,277 214,513
Texas Fund 352,637 12,509
Directly after the merger, the combined net assets of the Funds and the net
asset value of Class A shares and Class B shares were as follows:
Class A Class B
net asset value net asset value
Fund Combined net assets per share per share
---------------------------------------------------------------------------
Arizona Fund $ 111,252,856 $ 10.09 $ 11.22
Colorado Fund 42,459,161 9.92 10.80
Connecticut Fund 174,380,265 10.64 10.57
Michigan Fund 149,682,843 9.75 10.87
Minnesota Fund 70,316,954 9.77 10.49
New Jersey Fund 351,024,607 10.53 10.94
Pennsylvania Fund 401,078,359 10.55 10.90
Texas Fund 21,635,260 9.77 10.96
9 Name Change
---------------------------------------------------------------------------
Effective August 1, 1997, the EV Marathon Arizona Municipals Fund, EV
Marathon Colorado Municipals Fund, EV Marathon Connecticut Municipals Fund,
EV Marathon Michigan Municipals Fund, EV Marathon Minnesota Municipals
Fund, EV Marathon New Jersey Municipals Fund, EV Marathon Pennsylvania
Municipals Fund and EV Marathon Texas Municipals Fund changed their
respective names to Eaton Vance Arizona Municipals Fund, Eaton Vance
Colorado Municipals Fund, Eaton Vance Connecticut Municipals Fund, Eaton
Vance Michigan Municipals Fund, Eaton Vance Minnesota Municipals Fund,
Eaton Vance New Jersey Municipals Fund, Eaton Vance Pennsylvania Municipals
Fund and Eaton Vance Texas Municipals Fund.
32
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
Eaton Vance Municipals Trust:
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities of Eaton
Vance Arizona Municipals Fund, Eaton Vance Colorado Municipals Fund, Eaton Vance
Connecticut Municipals Fund, Eaton Vance Michigan Municipals Fund, Eaton Vance
Minnesota Municipals Fund, Eaton Vance New Jersey Municipals Fund, Eaton Vance
Pennsylvania Municipals Fund and Eaton Vance Texas Municipals Fund (the Funds)
(certain of the series of Eaton Vance Municipals Trust) as of July 31, 1998, the
related statements of operations for the year then ended, the statements of
changes in net assets for the years ended July 31, 1998 and 1997 and financial
highlights for each of the years in the four year period ended July 31, 1998,
the ten months ended July 31, 1994 and the year ended September 30, 1993. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on the 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 referred to
above present fairly, in all material respects, the financial position of the
aforementioned Funds of Eaton Vance Municipals Trust at July 31, 1998, the
results of their operations, the changes in their net assets and their financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 4, 1998
33
<PAGE>
Arizona Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ----------------------------------------------------------------------------------------------
Assisted Living -- 1.8%
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR NR $1,800 Arizona HFA, (Care Institute, Inc.-
Mesa), 7.625%, 1/1/26 $ 1,877,868
- ----------------------------------------------------------------------------------------------
$ 1,877,868
- ----------------------------------------------------------------------------------------------
Education -- 3.4%
- ----------------------------------------------------------------------------------------------
NR NR $2,000 Arizona Educational Loan Marketing
Corp., (AMT), 6.30%, 12/1/08 $ 2,141,740
A1 AA 1,250 University of Arizona,
6.25%, 6/1/11 1,354,138
- ----------------------------------------------------------------------------------------------
$ 3,495,878
- ----------------------------------------------------------------------------------------------
Electric Utilities -- 13.2%
- ----------------------------------------------------------------------------------------------
Ba2 BB+ $3,500 Maricopa County, Pollution Control,
6.375%, 8/15/23 $ 3,697,539
Baa1 A- 4,300 Navajo County, Pollution Control,
5.875%, 8/15/28 4,413,132
B2 B 1,000 Pima County, IDA, (Tucson Electric
Power Co.), 6.00%, 9/1/29 1,011,090
Baa1 BBB+ 370 Puerto Rico Electric Power Authority,
7.125%, 7/1/14 385,880
A A+ 1,000 Puerto Rico Telephone Authority,
Variable Rate, 1/1/20/(1)/ 1,105,850
Aa2 AA 2,000 Salt River Project Agricultural
Improvement and Power District,
5.00%, 1/1/20 1,970,200
Aa2 AA 820 Salt River Project Agricultural
Improvement and Power District,
6.25%, 1/1/27 879,434
- -----------------------------------------------------------------------------------------------
$13,463,125
- -----------------------------------------------------------------------------------------------
Escrowed/Prerefunded -- 19.4%
- -----------------------------------------------------------------------------------------------
NR AAA $1,000 Glendale, IDA, Prerefunded to
7/1/05, 7.125%, 7/1/20 $ 1,175,530
Baa1 BBB- 1,000 Maricopa County, (Sun Health
Corp.), Prerefunded to 4/1/02,
8.125%, 4/1/12 1,150,850
NR NR 2,250 Maricopa County, IDA, (Greenery
Apartments), Escrowed to Maturity,
6.625%, 7/1/26 2,607,143
NR NR 3,000 Maricopa County, IDA, (Place Five
and The Greenery), Escrowed to
Maturity, 6.625%, 1/1/27 3,485,910
NR NR 1,250 Maricopa County, IDA, (Place Five
and The Greenery), Escrowed to
Maturity, 8.625%, 1/1/11 1,642,850
Aaa AAA 7,500 Maricopa County, Single Family
Mortgage, Escrowed to Maturity,
0.00%, 2/1/16 3,096,225
Aaa AAA 1,750 Phoenix, Civic Improvement Excise
Tax, (MBIA), Prerefunded to
7/1/04, 6.60%, 7/1/08 1,983,468
Aaa AAA 6,500 Phoenix, IDA, Single Family,
Escrowed to Maturity,
0.00%, 12/1/14 2,892,110
NR AAA 1,500 Puerto Rico, "RIBS", (AMBAC),
Variable Rate, Prerefunded to
7/1/02, 7/1/15/(1)//(2)/ 1,731,615
- -----------------------------------------------------------------------------------------------
$19,765,701
- -----------------------------------------------------------------------------------------------
General Obligations -- 3.6%
- -----------------------------------------------------------------------------------------------
Baa1 A $1,125 Puerto Rico, 0.00%, 7/1/17 $ 428,366
NR A 2,000 Tatum Ranch, 6.875%, 7/1/16 2,234,120
Aa3 AA 1,000 Tucson, 5.375%, 7/1/21 1,048,670
- -----------------------------------------------------------------------------------------------
$ 3,711,156
- -----------------------------------------------------------------------------------------------
Hospitals -- 3.5%
- -----------------------------------------------------------------------------------------------
NR BBB $1,130 Arizona HFA, (Phoenix Memorial
Hospital), 8.125%, 6/1/12 $ 1,218,558
NR BBB 1,250 Arizona HFA, (Phoenix Memorial
Hospital), 8.20%, 6/1/21/(3)/ 1,350,400
NR NR 895 Winslow, IDA, (Winslow Memorial
Hospital), 9.50%, 6/1/22 1,026,628
- -----------------------------------------------------------------------------------------------
$ 3,595,586
- -----------------------------------------------------------------------------------------------
Housing -- 5.2%
- -----------------------------------------------------------------------------------------------
NR A $2,000 Maricopa County, IDA, (Laguna Point
Apartments), 6.75%, 7/1/19 $ 2,168,920
NR NR 1,000 Maricopa County, IDA, (National
Health Facilities II),
6.375%, 1/1/19 1,000,330
NR AA 1,000 Phoenix, (Woodstone and Silver
Springs Apartments), (Asset
Guaranty), 6.25%, 4/1/23 1,042,430
NR AAA 1,000 Tempe, IDA, (Quadrangle Village
Apartments), 6.25%, 6/1/26 1,043,880
- -----------------------------------------------------------------------------------------------
$ 5,255,560
- -----------------------------------------------------------------------------------------------
Industrial Development Revenue/Pollution
Control Revenue -- 11.7%
- -----------------------------------------------------------------------------------------------
A1 NR $1,000 Casa Grande, Pollution Control, (Frito
Lay, Inc.), 6.60%, 12/1/10 $ 1,093,810
- -----------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
34
<PAGE>
Arizona Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ----------------------------------------------------------------------------------------------
Industrial Development Revenue/
Pollution Control Revenue (continued)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR BBB- $2,000 Coconino County, Pollution Control,
(Nevada Power Co.), (AMT),
5.80%, 11/1/32 $ 2,039,540
Baa2 BBB 2,000 Gila County, IDA, (Asarco, Inc.),
5.55%, 1/1/27 2,020,120
A2 A 1,000 Greenlee County, Pollution Control,
(Phelps Dodge Corp.),
5.45%, 6/1/09 1,031,740
Ba1 BB+ 500 Maricopa County, Pollution Control,
(Public Service Co.),
5.75%, 11/1/22 509,290
Baa3 BBB- 2,950 Puerto Rico Port Authority, (American
Airlines), (AMT), 6.25%, 6/1/26 3,189,393
NR AA- 2,000 Yavapai County, IDA, (Citizens
Utilities Co.), (AMT), 5.45%, 6/1/33 1,998,280
- -----------------------------------------------------------------------------------------------
$11,882,173
- -----------------------------------------------------------------------------------------------
Insured-Electric Utilities -- 3.0%
- -----------------------------------------------------------------------------------------------
Aaa AAA $2,715 Pima County, (Irvington Power),
(FGIC), 7.25%, 7/15/10 $ 3,020,030
- -----------------------------------------------------------------------------------------------
$ 3,020,030
- -----------------------------------------------------------------------------------------------
Insured-General Obligations -- 2.2%
- -----------------------------------------------------------------------------------------------
Aaa AAA $1,000 Puerto Rico, (FSA), Variable
Rate, 7/1/22/(1)//(2)/ $ 1,136,250
Aaa AAA 1,000 Puerto Rico, Variable Rate,
(FSA), 7/1/20/(1)/ 1,121,250
- -----------------------------------------------------------------------------------------------
$ 2,257,500
- -----------------------------------------------------------------------------------------------
Insured-Hospitals -- 11.9%
- -----------------------------------------------------------------------------------------------
Aaa AAA $2,000 Maricopa County, (Samaritan
Health), (MBIA), 7.00%, 12/1/16 $ 2,487,360
Aaa AAA 2,000 Maricopa County, Hospital District
No. 1, (FGIC), 6.125%, 6/1/15 2,144,760
Aaa AAA 2,000 Mohave County, (Kingman Regional
Medical Center), (FGIC),
6.50%, 6/1/15 2,159,780
Aaa AAA 1,000 Pima County, (Carondelet Health
Care Corp.), (MBIA),
5.25%, 7/1/12 1,049,410
Aaa AAA 1,000 Pima County, (Carondolet Health
Care Corp.), (MBIA),
5.25%, 7/1/11 1,054,250
Aaa AAA 1,500 Pima County, (Tucson Medical
Center), (MBIA), 6.375%, 4/1/12 1,618,140
Aaa AAA 1,500 Scottsdale, IDA, (Scottsdale
Memorial Hospital), (AMBAC),
6.125%, 9/1/17 1,634,730
- -----------------------------------------------------------------------------------------------
$12,148,430
- -----------------------------------------------------------------------------------------------
Insured-Housing -- 2.6%
- -----------------------------------------------------------------------------------------------
Aaa AAA $2,500 Maricopa County, IDA, Multifamily,
(National Health Facilities II), (FSA),
5.50%, 1/1/24 $ 2,638,075
- -----------------------------------------------------------------------------------------------
$ 2,638,075
- -----------------------------------------------------------------------------------------------
Insured-Water and Sewer -- 1.1%
- -----------------------------------------------------------------------------------------------
Aaa AAA $1,000 Chandler, Water and Sewer, (FGIC),
6.25%, 7/1/13 $ 1,084,600
- -----------------------------------------------------------------------------------------------
$ 1,084,600
- -----------------------------------------------------------------------------------------------
Miscellaneous Health Care -- 1.0%
- -----------------------------------------------------------------------------------------------
NR NR $1,000 Coconino County, IDA, Health Care
Insurance, (Guidance Center, Inc.),
5.80%, 6/1/11 $ 1,001,840
- -----------------------------------------------------------------------------------------------
$ 1,001,840
- -----------------------------------------------------------------------------------------------
Pooled Loans -- 3.8%
- -----------------------------------------------------------------------------------------------
Aa2 NR $2,000 Arizona Educational Loan Marketing
Corp., (AMT), 6.25%, 6/1/06 $ 2,191,440
A NR 1,500 Arizona Student Loan Acquisition
Authority, (AMT),
7.625%, 5/1/10 1,659,075
- -----------------------------------------------------------------------------------------------
$ 3,850,515
- -----------------------------------------------------------------------------------------------
Special Tax Revenue -- 0.8%
- -----------------------------------------------------------------------------------------------
NR NR $ 750 Virgin Islands Public Finance
Authority, 7.25%, 10/1/18 $ 853,028
- -----------------------------------------------------------------------------------------------
$ 853,028
- -----------------------------------------------------------------------------------------------
Transportation -- 6.1%
- -----------------------------------------------------------------------------------------------
NR BBB $3,000 Guam Airport Authority, (AMT),
6.70%, 10/1/23 $ 3,280,950
Baa1 A 3,000 Puerto Rico Highway and
Transportation Authority,
5.00%, 7/1/38 2,877,480
- -----------------------------------------------------------------------------------------------
$ 6,158,430
- -----------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
35
<PAGE>
Arizona Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer -- 5.7%
- -----------------------------------------------------------------------------------------------
Aa1 AA+ $2,000 Arizona Wastewater Management
Authority, 6.80%, 7/1/11 $ 2,208,420
A1 AA- 1,000 Central Arizona Water Conservation
District, 5.50%, 11/1/09 1,083,310
Aa3 A 1,500 Phoenix, (Civic Improvement Corp.),
4.75%, 7/1/23 1,411,245
A1 A+ 1,000 Tuscon, Water Systems,
6.50%, 7/1/16 1,074,890
- -----------------------------------------------------------------------------------------------
$ 5,777,865
- -----------------------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $92,678,595) $101,837,360
- -----------------------------------------------------------------------------------------------
</TABLE>
AMT-Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio primarily invests in debt securities issued by Arizona
municipalities. 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 July 31, 1998, 24.4% 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 institution ranged from 3.3% to 8.3% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At July 31,
1998, the value of these securities amounted to $2,867,865 or 2.8% of
the Portfolio's net assets.
/(3)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
36
<PAGE>
Colorado Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Electric Utilities -- 1.4%
- --------------------------------------------------------------------------------
NR BBB $ 500 Guam Power Authority,
6.625%, 10/1/14 $ 553,510
- --------------------------------------------------------------------------------
$ 553,510
- --------------------------------------------------------------------------------
Escrowed/Prerefunded -- 6.9%
- --------------------------------------------------------------------------------
Aaa NR $4,500 Dawson Ridge, Metropolitan
District #1, Escrowed to
Maturity, 0.00%, 10/1/22 $ 1,165,185
Aaa BBB 160 Denver, City and County
Airport Revenue, Pre-
refunded to 11/15/01,
(AMT), 7.00%, 11/15/25 174,462
Aaa BBB 1,185 Denver, City and County
Airport Revenue, Pre-
refunded to 11/15/02,
(AMT), 6.75%, 11/15/22 1,290,181
Aaa BBB 85 Denver, City and County
Airport Revenue, Pre-
refunded to 11/15/04,
(AMT), 7.50%, 11/15/23 101,116
- --------------------------------------------------------------------------------
$ 2,730,944
- --------------------------------------------------------------------------------
Hospitals -- 23.4%
- --------------------------------------------------------------------------------
NR NR $ 900 Colorado HFA, (Cleo Wallace
Center), 7.00%, 8/1/15 $ 942,867
NR BBB- 650 Colorado HFA, (National
Jewish Center For Immunology),
6.875%, 2/15/12 717,717
Baa1 NR 2,000 Colorado HFA, (Parkview
Memorial Hospital),
6.125%, 9/1/25 2,117,640
Baa BBB 2,050 Colorado HFA, (Rocky
Mountain Adventist
Healthcare), 6.625%, 2/1/13 2,202,704
NR NR 600 Colorado HFA, (Steamboat
Springs Health), 5.00%,
9/15/03 606,036
NR NR 500 Colorado HFA, (Steamboat
Springs Health), 5.30%,
9/15/09 504,195
NR BBB 2,000 Colorado HFA, (Vail Valley
Medical Center), 6.60%,
1/15/20 2,153,660
- --------------------------------------------------------------------------------
$ 9,244,819
- --------------------------------------------------------------------------------
Housing -- 19.3%
- --------------------------------------------------------------------------------
A3 A $1,000 Colorado HFA, 5.35%, 11/1/16 $ 1,003,890
Aa AA 500 Colorado HFA, MFMR,
(AMT), 6.40%, 10/1/27 534,120
Aa2 NR 1,130 Colorado HFA, Single
Family Access Program,
7.90%, 12/1/24 1,264,979
Aa2 NR 570 Colorado HFA, Single
Family Access Program,
8.00%, 12/1/24 643,262
Aa2 NR 1,000 Colorado HFA, Single
Family Housing, (AMT),
7.55%, 11/1/27 1,134,670
Aa2 NR 490 Colorado HFA, Single
Family Housing, (AMT),
7.65%, 12/1/25 550,902
NR AAA 1,000 Denver, Multifamily Housing,
(Lofts), (AMT), 6.15%, 12/1/16 1,052,830
NR NR 340 Lake Creek, Affordable
Housing Corp., 8.00%,
12/1/23 358,948
NR AAA 1,000 Lakewood, Multifamily
Housing, FHA Insured
Mortgage Loan, (AMT),
6.65%, 10/1/25 1,075,870
- --------------------------------------------------------------------------------
$ 7,619,471
- --------------------------------------------------------------------------------
Industrial Development Revenue/Pollution
Control Revenue -- 6.6%
- --------------------------------------------------------------------------------
A2 NR $1,250 Puerto Rico Industrial,
Medical and Environmental
Pollution Control Facility
Finance Authority, (American
Home Products), 5.10%,
12/1/18 $ 1,225,875
Baa3 BBB- 1,250 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.25%, 6/1/26 1,351,438
- --------------------------------------------------------------------------------
$ 2,577,313
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 2.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 300 Puerto Rico Electric Power
Authority, "STRIPES", (FSA),
Variable Rate, 7/1/03/(1)/ $ 339,375
Aaa AAA 500 Puerto Rico Telephone
Authority, (MBIA), Variable
Rate, 1/16/15/(1)/ 531,875
- --------------------------------------------------------------------------------
$ 871,250
- --------------------------------------------------------------------------------
Insured-General Obligations -- 8.4%
- --------------------------------------------------------------------------------
Aaa AAA $1,750 Eagle, Garfield and Routt
Counties, School District
No. RE 50J, (FGIC), 6.30%,
12/1/12 $ 1,948,188
Aaa AAA 1,160 Highlands Ranch Metropolitan
District No. 2, (FSA), 6.50%,
6/15/10/(2)/ 1,358,082
- --------------------------------------------------------------------------------
$ 3,306,270
- --------------------------------------------------------------------------------
Insured-Housing -- 2.8%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Thornton, SCA Realty MFMR,
(FSA), 7.10%, 1/1/30 $ 1,094,500
- --------------------------------------------------------------------------------
$ 1,094,500
- --------------------------------------------------------------------------------
See notes to financial statements
37
<PAGE>
Colorado Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 2.7%
Aaa AAA $1,000 Broomfield Sales and Use Tax,
(AMBAC), 6.30%, 12/1/14 $ 1,076,600
- --------------------------------------------------------------------------------
$ 1,076,600
- --------------------------------------------------------------------------------
Insured-Transportation -- 7.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 750 Denver, (Denver International
Airport), (AMT), (MBIA),
5.75%, 11/15/15 $ 790,125
Aaa AAA 3,095 Puerto Rico Highway and
Transportation Authority,
(AMBAC), 0.00%, 7/1/18 1,150,690
Aaa AAA 1,000 Puerto Rico Highway and
Transportation Authority,
(MBIA), (IBC), 5.00%, 7/1/38 970,540
- --------------------------------------------------------------------------------
$ 2,911,355
- --------------------------------------------------------------------------------
Transportation -- 16.2%
- --------------------------------------------------------------------------------
Baa3 BB+ $2,000 Denver, (United Airlines),
(AMT), 6.875%, 10/1/32 $ 2,166,339
Aaa BBB 315 Denver, City and County
Airport Revenue, (AMT),
6.75%, 11/15/22 352,198
Baa1 BBB 590 Denver, City and County
Airport Revenue, (AMT),
7.00%, 11/15/25 629,831
Baa1 BBB 415 Denver, City and County
Airport Revenue, (AMT),
7.50%, 11/15/23 479,972
NR NR 500 Eagle County, (Eagle County
Airport Terminal), (AMT),
7.50%, 5/1/21 546,115
NR BBB 750 Guam Airport Authority,
(AMT), 6.60%, 10/1/10 819,735
NR BBB 100 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 109,365
Baa1 A 250 Puerto Rico Highway and
Transportation Authority,
5.00%, 7/1/36 246,433
Baa1 A 1,000 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/36 1,053,200
- --------------------------------------------------------------------------------
$ 6,403,188
- --------------------------------------------------------------------------------
Water and Sewer -- 2.7%
- --------------------------------------------------------------------------------
NR NR $1,000 Cottonwood Water and
Sanitation District, 7.75%,
12/1/20 $ 1,075,940
- --------------------------------------------------------------------------------
$ 1,075,940
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $36,166,584) $39,465,160
- --------------------------------------------------------------------------------
AMT- Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by Colorado
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1998, 23.5% 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 4.9% to 7.1% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
38
<PAGE>
Connecticut Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- -------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cogeneration -- 4.9%
- -----------------------------------------------------------------------------------------
NR BBB $ 8,000 Eastern Connecticut Resource
Recovery Authority,
(Wheelabrator Lisbon), (AMT),
5.50%, 1/1/20 $ 7,920,160
- -----------------------------------------------------------------------------------------
$ 7,920,160
- -----------------------------------------------------------------------------------------
Education -- 9.6%
- -----------------------------------------------------------------------------------------
NR BBB- $ 4,775 Connecticut HEFA, (Quinnipiac
College), 6.00%, 7/1/23 $ 4,878,904
Baa3 BBB- 1,000 Connecticut HEFA, (Sacred Heart
University), 5.80%, 7/1/23 1,005,310
Ba2 BBB- 5,500 Connecticut HEFA, (University
of Hartford), 6.80%, 7/1/22 5,824,500
Aaa AAA 3,400 Connecticut HEFA, (Yale
University), Variable Rate,
6/10/30(1) 3,846,250
- -----------------------------------------------------------------------------------------
$ 15,554,964
- -----------------------------------------------------------------------------------------
Electric Utilities -- 5.3%
- -----------------------------------------------------------------------------------------
NR BBB $ 3,625 Guam Power Authority,
6.30%, 10/1/22 $ 3,849,823
NR BBB 1,100 Guam Power Authority,
6.625%, 10/1/14 1,217,722
NR NR 3,220 Virgin Islands Water and Power
Authority, 7.40%, 7/1/11 3,538,072
- -----------------------------------------------------------------------------------------
$ 8,605,617
- -----------------------------------------------------------------------------------------
Escrowed / Prerefunded -- 1.5%
- -----------------------------------------------------------------------------------------
NR A $ 1,000 Connecticut HEFA, (Sacred Heart
University), 6.80%, 7/1/12 $ 1,112,830
A1 AAA 645 Connecticut State, (STOB),
(Transportation Infrastructure
Purposes), 6.50%, 7/1/09 674,270
NR AA- 650 Connecticut State, General
Obligations Bonds,
6.875%, 7/15/10 698,900
- -----------------------------------------------------------------------------------------
$ 2,486,000
- -----------------------------------------------------------------------------------------
General Obligations -- 2.0%
- -----------------------------------------------------------------------------------------
Aa3 AA- $ 1,750 Connecticut State, Capital
Appreciation Bonds,
0.00%, 11/1/09 $ 1,049,143
Aa2 AA 1,270 Danbury, 4.50%, 2/1/14 1,230,033
NR BBB 500 Guam, 5.40%, 11/15/18 501,600
Baa1 A $ 1,065 Puerto Rico, Public
Improvement, 0.00%, 7/1/15 $ 451,326
- -----------------------------------------------------------------------------------------
$ 3,232,102
- -----------------------------------------------------------------------------------------
Hospitals -- 9.5%
- -----------------------------------------------------------------------------------------
Baa2 NR $ 5,400 Connecticut HEFA, (Griffin
Hospital), 5.75%, 7/1/23 $ 5,424,894
Baa2 BBB 500 Connecticut HEFA, (Hospital for
Special Care), 5.375%, 7/1/17 498,095
NR NR 2,000 Connecticut HEFA, (New Britain
Memorial Hospital),
7.75%, 7/1/22 2,286,680
NR A+ 1,100 Connecticut HEFA, (William W.
Backus Hospital), 6.00%, 7/1/12 1,164,229
NR A+ 5,780 Connecticut HEFA, (William W.
Backus Hospital),
6.375%, 7/1/22 6,125,817
- -----------------------------------------------------------------------------------------
$ 15,499,715
- -----------------------------------------------------------------------------------------
Housing -- 11.0%
- -----------------------------------------------------------------------------------------
Aa AA $ 3,000 Connecticut HFA, MRB,
6.20%, 5/15/14 $ 3,176,520
Aa2 AA 1,620 Connecticut HFA, MRB,
6.35%, 5/15/17 1,730,128
Aa2 AA 210 Connecticut HFA, MRB,
6.55%, 11/15/13 224,459
Aa2 AA 2,515 Connecticut HFA, MRB,
6.60%, 11/15/23 2,697,966
Aa2 AA 2,925 Connecticut HFA, MRB,
6.70%, 11/15/12 3,161,867
Aa2 AA 1,705 Connecticut HFA, MRB,
6.75%, 11/15/23 1,847,009
Aa2 AA 200 Connecticut HFA, MRB,
7.00%, 11/15/09 213,422
Aa AA 15 Connecticut HFA, MRB,
7.625%, 11/15/17 15,271
Aa2 AA 4,545 Connecticut HFA, MRB, (AMT),
6.20%, 11/15/22 4,825,290
- -----------------------------------------------------------------------------------------
$ 17,891,932
- -----------------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 3.4%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 1,000 Connecticut Development
Authority PCR, (Pfizer, Inc.),
6.55%, 2/15/13 $ 1,094,060
</TABLE>
See notes to financial statements
39
<PAGE>
Connecticut Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- -------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------------------
Industrial Development Revenue /
Pollution Control Revenue (continued)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR NR $ 3,065 Connecticut Development
Authority, Airport Facility,
(Signature Flight), (AMT),
6.625%, 12/1/14 $ 3,284,209
A3 BBB+ 1,100 Sprague, Environmental
Improvement, (International
Paper Co.), (AMT), 5.70%,
10/1/21 1,134,298
- -----------------------------------------------------------------------------------------
$ 5,512,567
- -----------------------------------------------------------------------------------------
Insured-Education -- 4.3%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 3,250 Connecticut HEFA, (Choate
Rosemary College), (MBIA),
5.00%, 7/1/27 $ 3,174,568
Aaa AAA 1,555 Connecticut HEFA, (Choate
Rosemary College), (MBIA),
6.80%, 7/1/15(2) 1,773,882
Aaa AAA 2,000 Connecticut HEFA, (Trinity
College), (MBIA), 5.50%, 7/1/21 2,126,920
- -----------------------------------------------------------------------------------------
$ 7,075,370
- -----------------------------------------------------------------------------------------
Insured-General Obligations -- 1.3%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 1,000 New Britain, (MBIA),
6.00%, 3/1/12 $ 1,125,090
Aaa AAA 1,000 Puerto Rico, (MBIA),
5.375%, 7/1/25 1,023,420
- -----------------------------------------------------------------------------------------
$ 2,148,510
- -----------------------------------------------------------------------------------------
Insured-Hospitals -- 7.0%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 1,000 Connecticut HEFA, (Bridgeport
Hospital), (MBIA),
6.625%, 7/1/18 $ 1,090,400
Aaa AAA 1,000 Connecticut HEFA, (Danbury
Hospital), (AMBAC),
5.375%, 7/1/17 1,018,440
Aaa AAA 1,000 Connecticut HEFA, (Hospital of
St. Raphael), (AMBAC),
6.50%, 7/1/11 1,176,480
Aaa AAA 1,500 Connecticut HEFA, (Hospital of
St. Raphael), (AMBAC),
6.625%, 7/1/14 1,612,920
Aaa AAA 2,350 Connecticut HEFA, (Lawrence and
Memorial Hospital), (MBIA),
5.00%, 7/1/22 2,271,933
Aaa AAA 2,000 Connecticut HEFA, (Veterans
Memorial Medical Center),
(MBIA), 5.375%, 7/1/15 2,061,940
Aaa AAA $ 2,000 Connecticut HEFA, (Yale-New
Haven Hospital), (MBIA), 6.50%, $ 2,168,160
7/1/12
- -----------------------------------------------------------------------------------------
$ 11,400,273
- -----------------------------------------------------------------------------------------
Insured-Housing -- 0.2%
- -----------------------------------------------------------------------------------------
NR AA $ 305 Puerto Rico Housing Finance
Corp., (AMBAC), 7.50%, 10/1/11 $ 315,144
- -----------------------------------------------------------------------------------------
$ 315,144
- -----------------------------------------------------------------------------------------
Insured-Transportation -- 5.9%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 8,200 Connecticut State, Airport
Revenue, (Bradley
International), (FGIC), 7.65%,
10/1/12 $ 9,576,779
- -----------------------------------------------------------------------------------------
$ 9,576,779
- -----------------------------------------------------------------------------------------
Nursing Homes -- 15.1%
- -----------------------------------------------------------------------------------------
NR NR $ 1,240 Connecticut Development
Authority, (Baptist Homes),
9.00%, 9/1/22 $ 1,397,046
A2 NR 9,000 Connecticut Development
Authority, Health Care Bonds,
(Duncaster), 6.75%, 9/1/15 9,737,549
A1 AA- 720 Connecticut HEFA, (NHP),
(Highland View), (AMT), 7.00%,
11/1/07 832,442
A1 AA- 1,305 Connecticut HEFA, (NHP),
(Sharon Healthcare), 6.25%,
11/1/14 1,445,235
A1 AA- 655 Connecticut HEFA, (NHP), (St.
Camillus), 6.25%, 11/1/18 716,747
A1 AA- 3,250 Connecticut HEFA, (NHP), (St.
Joseph's Manor),
6.25%, 11/1/16 3,599,245
A1 AA- 335 Connecticut HEFA, (NHP),
(Wadsworth Glen), (AMT),
7.00%, 11/1/07 387,317
A1 AA- 2,000 Connecticut HEFA, (NHP),
(Wadsworth Glen), (AMT),
7.50%, 11/1/16 2,355,620
A1 AA- 3,000 Connecticut HEFA, (NHP),
(Windsor), 7.125%, 11/1/14 3,444,330
A1 AA- 500 Connecticut HEFA, (NHP),
(Windsor), 7.125%, 11/1/24 573,760
- -----------------------------------------------------------------------------------------
$ 24,489,291
- -----------------------------------------------------------------------------------------
Solid Waste -- 5.4%
- -----------------------------------------------------------------------------------------
A NR $ 2,500 Bristol Resource Recovery
Facility, (Ogden Martin
Systems), $ 2,762,950
6.50%, 7/1/14
</TABLE>
See notes to financial statements
40
<PAGE>
Connecticut Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- -------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Solid Waste (continued)
- -----------------------------------------------------------------------------------------
Baa1 A- $ 4,250 Connecticut Resources Recovery
Authority, (American REF-FUEL
Co.), (AMT), 6.45%, 11/15/22 $ 4,560,973
A2 NR 450 Connecticut Resources Recovery
Authority, (American REF-FUEL
Co.), (AMT), 8.00%, 11/15/15 467,181
A2 A- 1,000 Connecticut Resources Recovery
Authority, (American REF-FUEL
Co.), (AMT), 8.10%, 11/15/15 1,040,600
- -----------------------------------------------------------------------------------------
$ 8,831,704
- -----------------------------------------------------------------------------------------
Special Tax Revenue -- 4.4%
- -----------------------------------------------------------------------------------------
A1 AA- $ 3,180 Connecticut State, (STOB),
6.125%, 9/1/12 $ 3,614,579
A1 AA- 2,000 Connecticut State, (STOB),
6.50%, 10/1/12 2,345,280
NR NR 1,000 Virgin Islands Public Finance
Authority, 7.25%, 10/1/18 1,137,370
- -----------------------------------------------------------------------------------------
$ 7,097,229
- -----------------------------------------------------------------------------------------
Student Loans -- 2.5%
- -----------------------------------------------------------------------------------------
A1 NR $ 1,180 Connecticut Higher Education
Supplemental Loan Authority
Revenue Bonds, (AMT),
6.20%, 11/15/09 $ 1,250,788
A1 NR 390 Connecticut Higher Education
Supplemental Loan Authority
Revenue Bonds, (AMT),
7.375%, 11/15/05 400,187
A1 NR 2,435 Connecticut Higher Education
Supplemental Loan Authority
Revenue Bonds, (AMT),
7.50%, 11/15/10 2,500,185
- -----------------------------------------------------------------------------------------
$ 4,151,160
- -----------------------------------------------------------------------------------------
Transportation -- 5.8%
- -----------------------------------------------------------------------------------------
NR BBB $ 2,000 Guam Airport Authority, (AMT),
6.70%, 10/1/23 $ 2,187,300
Baa1 A 1,020 Puerto Rico Highway and
Transportation Authority,
4.75%, 7/1/38 956,862
Baa1 A 1,000 Puerto Rico Highway and
Transportation Authority,
5.00%, 7/1/38 959,160
Baa1 A 4,965 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/15 5,251,778
- -----------------------------------------------------------------------------------------
$ 9,355,100
- -----------------------------------------------------------------------------------------
Water and Sewer -- 0.9%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 1,250 Connecticut State, Clean Water
Fund, 6.00%, 10/1/12 $ 1,415,225
- -----------------------------------------------------------------------------------------
$ 1,415,225
- -----------------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $151,783,349) $ 162,558,842
- -----------------------------------------------------------------------------------------
</TABLE>
AMT -- Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by Connecticut
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1998, 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 by financial
institution ranged from 2.5% to 10.3% of total investments.
(1) Security has been issued as an inverse floater bond.
(2) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
41
<PAGE>
Michigan Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- -------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electric Utilities -- 1.6%
- ---------------------------------------------------------------------------------------
NR BBB $ 1,000 Guam Power Authority,
6.625%, 10/1/14 $ 1,107,020
Baa1 BBB+ 500 Michigan South Central Power
Agency Supply System,
6.75%, 11/1/10 536,835
Baa1 BBB+ 365 Puerto Rico Electric Power
Authority, 7.125%, 7/1/14 380,666
- ---------------------------------------------------------------------------------------
$ 2,024,521
- ---------------------------------------------------------------------------------------
Escrowed / Prerefunded -- 2.4%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 1,000 Lake Orion School District,
Prerefunded to 5/1/05,
(AMBAC), 7.00%, 5/1/20 $ 1,165,750
NR NR 1,770 Michigan Strategic
Environmental Research
Institute, Prerefunded to
8/15/02, 6.375%, 8/15/12 1,922,114
- ---------------------------------------------------------------------------------------
$ 3,087,864
- ---------------------------------------------------------------------------------------
General Obligations -- 6.3%
- ---------------------------------------------------------------------------------------
Aa2 AA+ $ 500 Avondale School District,
School Building and Site,
6.75%, 5/1/14 $ 536,195
Baa2 BBB+ 5,115 Detroit, 6.35%, 4/1/14 5,550,286
Aaa BBB+ 500 Detroit, 6.70%, 4/1/10 571,235
Aa2 AA+ 1,000 Mattawan Consolidated Schools,
6.40%, 5/1/09 1,093,550
Baa1 A 500 Puerto Rico, 0.00%, 7/1/16 200,355
Baa1 A 700 Puerto Rico, 0.00%, 7/1/18 252,784
- ---------------------------------------------------------------------------------------
$ 8,204,405
- ---------------------------------------------------------------------------------------
Hospitals -- 13.6%
- ---------------------------------------------------------------------------------------
NR BBB $ 2,000 Michigan HFA, (Central
Michigan Community Hospital),
6.25%, 10/1/27 $ 2,111,460
A2 A 2,975 Michigan HFA, (Detroit Medical
Center Obligated Group),
5.50%, 8/15/23 3,006,684
A2 A 4,000 Michigan HFA, (Detroit Medical
Center Obligated Group),
6.25%, 8/15/13 4,330,080
Aa AA 250 Michigan HFA, (Henry Ford
Continuing Care Corp.),
6.75%, 7/1/11 270,703
A1 NR $ 9,000 Michigan HFA, (McLaren
Obligated Group), 4.50%,
10/15/21 8,094,329
- ---------------------------------------------------------------------------------------
$ 17,813,256
- ---------------------------------------------------------------------------------------
Housing -- 1.4%
- ---------------------------------------------------------------------------------------
NR AA- $ 740 Michigan HDA, Rental Housing,
(AMT), 7.15%, 4/1/10 $ 796,773
NR AA+ 1,000 Michigan HDA, SFMR, (AMT),
6.20%, 12/1/27 1,063,290
- ---------------------------------------------------------------------------------------
$ 1,860,063
- ---------------------------------------------------------------------------------------
Industrial Development Revenue / Pollution Control
Revenue -- 13.1%
- ---------------------------------------------------------------------------------------
Baa1 BBB $ 2,000 Dickinson, PCR, (Champion
International), 5.85%, 10/1/18 $ 2,085,980
NR BB- 1,000 Michigan Strategic Fund,
(Crown Paper), (AMT), 6.50%,
8/1/21 1,024,070
A3 A 5,970 Michigan Strategic Fund,
(General Motors Corp.),
6.20%, 9/1/20 6,458,166
NR BB- 110 Michigan Strategic Fund,
(KMart Corp.), 6.80%, 12/15/07 117,033
NR NR 3,000 Michigan Strategic Fund, (S.D.
Warren Co.), (AMT),
7.375%, 1/15/22 3,332,940
Baa3 BBB- 2,750 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.25%, 6/1/26 2,973,163
Baa3 BBB- 490 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.30%, 6/1/23 520,057
NR BB- 530 Richmond EDC, (KMart Corp.),
6.625%, 1/1/07 570,911
- ---------------------------------------------------------------------------------------
$ 17,082,320
- ---------------------------------------------------------------------------------------
Insured-Colleges and Universities -- 5.6%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 2,870 Eastern Michigan University,
(FGIC), 5.50%, 6/1/27 $ 2,971,598
Aaa AAA 2,750 Ferris State University,
(MBIA), 5.25%, 10/1/20 2,754,318
Aaa AAA 1,000 Michigan State
University-Grand Valley,
(MBIA), 5.25%, 10/1/17 1,008,950
Aaa AAA 500 Western Michigan University,
(AMBAC), 6.50%, 7/15/21 539,900
- ---------------------------------------------------------------------------------------
$ 7,274,766
- ---------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
42
<PAGE>
Michigan Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- -------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------------------
Insured-Electric Utilities -- 4.1%
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa AAA $ 300 Michigan Strategic Fund,
(Detroit Edison Co.), (FGIC),
6.95%, 5/1/11 $ 363,741
Aaa AAA 4,000 Michigan Strategic Fund,
(Detroit Edison Co.), (FGIC),
6.95%, 9/1/21 4,349,960
Aaa AAA 550 Monroe County, PCR, (Detroit
Edison Co.), (FGIC), (AMT),
7.65%, 9/1/20 595,287
- ---------------------------------------------------------------------------------------
$ 5,308,988
- ---------------------------------------------------------------------------------------
Insured-General Obligations -- 14.6%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 500 Detroit, (FGIC), 5.50%, 4/1/16 $ 514,885
Aaa AAA 1,000 Grand Ledge School District,
(MBIA), 5.375%, 5/1/24 1,018,070
Aaa AAA 1,900 Holland School District,
(AMBAC), 0.00%, 5/1/17 729,638
Aaa AAA 2,000 Kalamazoo, (MBIA),
5.40%, 5/1/14 2,117,740
Aaa AAA 1,000 Lake Shore Public Schools,
Macomb County, (FSA),
5.50%, 5/1/17 1,033,210
Aaa AAA 2,000 Lincoln Park School District,
(FGIC), 5.00%, 5/1/20 1,954,460
Aaa AAA 1,500 Lincoln Park School District,
(FGIC), 5.90%, 5/1/26 1,664,820
Aaa AAA 2,410 Okemos Public Schools, (MBIA),
0.00%, 5/1/16 973,953
Aaa AAA 13,700 Parchment School District,
(MBIA), 5.00%, 5/1/25(2) 1,347,395
Aaa AAA 4,740 South Redford School District,
(FGIC), 5.50%, 5/1/22 4,887,271
Aaa AAA 2,750 Ypsilanti School District,
(FGIC), 5.375%, 5/1/26 2,799,693
- ---------------------------------------------------------------------------------------
$ 19,041,135
- ---------------------------------------------------------------------------------------
Insured-Hospitals -- 6.1%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 1,300 Jackson HFA, (W.A. Foote
Memorial), (FGIC),
4.75%, 6/1/15 $ 1,241,136
Aaa NR 900 Kalamazoo HFA, (Bronson
Methodist Hospital), (MBIA),
5.50%, 5/15/28 924,696
Aaa AAA 3,500 Kent HFA, (Butterworth Health
System), (MBIA),
6.125%, 1/15/16 3,941,490
Aaa NR $ 1,000 Michigan State HFA, (Botsford
Hospital Obligation), (MBIA),
5.00%, 2/15/22 963,150
Aaa AAA 1,000 Petoskey, HFA, (Northern
Michigan Hospital Obligation),
(MBIA), 5.00%, 11/15/27 959,130
- ---------------------------------------------------------------------------------------
$ 8,029,602
- ---------------------------------------------------------------------------------------
Insured-Housing -- 2.1%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 500 Michigan HDA, (Parkway
Meadows), (FSA),
6.85%, 10/15/18 $ 536,140
Aaa AAA 2,075 Michigan HDA, SFMR, (AMBAC),
(AMT), 6.05%, 12/1/27 2,182,610
- ---------------------------------------------------------------------------------------
$ 2,718,750
- ---------------------------------------------------------------------------------------
Insured-Life Care -- 4.7%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 2,200 Hancock HFA, (Portage Health),
(MBIA), 5.45%, 8/1/47 $ 2,222,814
Aaa AAA 1,000 Michigan State HFA,
(Midmichigan Obligation
Group), (FSA), 5.375%, 6/1/27 1,013,490
Aaa AAA 3,000 Michigan State HFA, (Oakwood
Obligation Group), (FSA),
5.00%, 8/15/26 2,880,000
- ---------------------------------------------------------------------------------------
$ 6,116,304
- ---------------------------------------------------------------------------------------
Insured-Transportation -- 2.9%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 4,000 Wayne Charter County, Airport
Revenue, Detroit Metropolitan
Wayne County Airport, (MBIA),
(AMT), 5.00%, 12/1/28 $ 3,816,720
- ---------------------------------------------------------------------------------------
$ 3,816,720
- ---------------------------------------------------------------------------------------
Insured-Water and Sewer -- 5.6%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 7,680 Detroit, City Water Supply
System, (FGIC), 4.75%,
7/1/19(3) $ 7,284,402
- ---------------------------------------------------------------------------------------
$ 7,284,402
- ---------------------------------------------------------------------------------------
Life Care -- 2.0%
- ---------------------------------------------------------------------------------------
NR BBB $ 1,500 Kalamazoo EDC, (Friendship
Village), 6.25%, 5/15/27 $ 1,587,345
NR NR 1,000 Michigan HFA, (Presbyterian
Village), 6.50%, 1/1/25 1,072,680
- ---------------------------------------------------------------------------------------
$ 2,660,025
- ---------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
43
<PAGE>
Michigan Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- -------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Miscellaneous -- 1.2%
- ---------------------------------------------------------------------------------------
NR NR $ 1,500 Pittsfield Township EDC,
(Arbor Hospice), 7.875%,
8/15/27 $ 1,585,605
- ---------------------------------------------------------------------------------------
$ 1,585,605
- ---------------------------------------------------------------------------------------
Pooled Loans -- 4.8%
- ---------------------------------------------------------------------------------------
NR A $ 1,825 Michigan Municipal Bond
Authority Local Government
Loan, $ 2,016,406
6.75%, 5/1/12
NR A 590 Michigan Municipal Bond
Authority Local Government
Loan, 645,442
6.90%, 5/1/21
Aa2 AA+ 2,550 Michigan Municipal Bond
Authority Local Government
Loan-Qualified School, 6.50%, 2,826,548
5/1/07
Aa2 AA+ 760 Michigan Municipal Parking
Bond Authority, 6.50%, 11/1/08 840,849
- ---------------------------------------------------------------------------------------
$ 6,329,245
- ---------------------------------------------------------------------------------------
Special Tax Revenue -- 7.2%
- ---------------------------------------------------------------------------------------
NR BBB+ $ 250 Battle Creek, Downtown
Development Authority Tax
Increment, 7.60%, 5/1/16 $ 294,893
NR BBB+ 1,315 Battle Creek, Downtown
Development Authority Tax
Increment, 7.65%, 5/1/22 1,554,448
NR A 4,300 Detroit, (Convention Facility
Cobo Hall Expansion),
5.25%, 9/30/12/(1)//(3)/ 4,336,722
NR A- 3,050 Detroit, Downtown Tax
Increment, 0.00%, 7/1/16 1,157,811
NR A- 2,000 Detroit, Downtown Tax
Increment, 0.00%, 7/1/20 598,660
A3 A 1,500 Detroit, Local Development
Finance Authority, 5.375%,
5/1/21 1,515,735
- ---------------------------------------------------------------------------------------
$ 9,458,269
- ---------------------------------------------------------------------------------------
Water and Sewer -- 0.7%
- ---------------------------------------------------------------------------------------
Aa1 AA+ $ 1,000 Michigan Municipal Bond
Authority, (Clean Water
Revolving Fund), 4.75%,
10/1/18/(2)/ $ 948,320
- ---------------------------------------------------------------------------------------
$ 948,320
- ---------------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $119,726,431) $ 130,644,560
- ---------------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by Michigan
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1998, 46.5% 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 institution ranged from 3.5% to 21.9%.
(1) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
(2) When-issued security.
(3) Security (or a portion thereof) has been segregated to cover when-issued
securities.
See notes to financial statements
44
<PAGE>
Minnesota Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------ Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ----------------------------------------------------------------------------------------
Assisted Living -- 1.7%
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR NR $ 1,000 St. Paul, Housing and
Redevelopment, (Care Institute,
Inc. -Highland), 8.75%, 11/1/24 $ 1,157,940
- ----------------------------------------------------------------------------------------
$ 1,157,940
- ----------------------------------------------------------------------------------------
Education -- 7.1%
- ----------------------------------------------------------------------------------------
A2 NR $ 1,000 Hopkins, (Blake School),
5.50%, 9/1/24 $ 1,018,910
A3 NR 500 Minnesota Higher Education
Facilities Authority, (St.
John's University), 5.40%,
10/1/22 509,555
Baa2 NR 500 Minnesota Higher Education
Facilities Authority, (St.
Mary's College), 6.15%, 10/1/23 521,035
A2 NR 1,100 Minnesota Higher Education
Facilities Authority,
(University of St. Thomas),
5.40%, 4/1/22 1,120,097
A2 NR 1,510 Minnesota Higher Education
Facilities Authority,
(University of St. Thomas),
5.40%, 4/1/23 1,532,318
- ----------------------------------------------------------------------------------------
$ 4,701,915
- ----------------------------------------------------------------------------------------
Escrowed / Prerefunded -- 3.0%
- ----------------------------------------------------------------------------------------
Aaa AAA $ 1,700 Minnesota State, Prerefunded
to 8/1/02, Variable
Rate, 8/1/11(1) $ 1,965,166
- ----------------------------------------------------------------------------------------
$ 1,965,166
- ----------------------------------------------------------------------------------------
General Obligations -- 2.8%
- ----------------------------------------------------------------------------------------
Aaa AAA $ 200 Minneapolis and St. Paul,
Airports Commission, (AMT),
6.60%, 1/1/09 $ 213,808
Aaa AAA 300 Minneapolis and St. Paul,
Airports Commission, (AMT),
6.60%, 1/1/10 320,220
Aaa AAA 1,000 Minnesota State, (Duluth
Airport), (AMT), 6.25%, 8/1/14 1,098,110
A1 AA- 200 St. Cloud, Variable
Rate, 8/1/13(1) 222,750
- ----------------------------------------------------------------------------------------
$ 1,854,888
- ----------------------------------------------------------------------------------------
Hospitals -- 17.1%
- ----------------------------------------------------------------------------------------
Baa1 A- $ 1,250 Minneapolis and St. Paul,
Housing and Redevelopment
Authority, (Group Health Plan,
Inc.), 6.75%, 12/1/13 $ 1,352,575
Baa1 A- 250 Minneapolis and St. Paul,
Housing and Redevelopment
Authority, (Group Health Plan,
Inc.), 6.90%, 10/15/22 272,570
NR BBB+ 2,120 Red Wing Health Care Facilities,
(River Region Obligation Group),
6.50%, 9/1/22 2,279,191
NR AA+ 1,000 Rochester Health Care
Facilities, (Mayo Clinic),
5.50%, 11/15/27 1,031,900
NR AA+ 2,200 Rochester Health Care
Facilities, (Mayo Clinic),
(AMT), Variable
Rate, 11/15/15(1) 2,535,500
Baa3 BBB 1,000 St. Paul, Housing and
Redevelopment Authority,
(Healtheast), 6.625%, 11/1/17 1,075,120
Baa3 BBB 2,500 St. Paul, Housing and
Redevelopment Authority,
(Healtheast), 6.625%, 11/1/17 2,687,799
- ----------------------------------------------------------------------------------------
$ 11,234,655
- ----------------------------------------------------------------------------------------
Housing -- 23.4%
- ----------------------------------------------------------------------------------------
NR AAA $ 300 Coon Rapids, Multifamily
Housing, (Browns Meadow), (FHA),
(AMT), 6.85%, 8/1/33 $ 316,716
NR AAA 1,395 Dakota County, Housing and
Redevelopment Authority, (GNMA),
7.375%, 12/1/29(2) 1,532,463
Aaa NR 500 Little Canada, Facilities
Revenue, (Cedars Lakeside)
(GNMA),
5.90%, 8/1/20 523,510
Aaa NR 500 Little Canada, Facilities
Revenue, (Cedars Lakeside)
(GNMA), 5.95%, 2/1/32 521,415
Aa NR 1,200 Maplewood, Multifamily Housing,
(Beaver Creek), (FHA),
6.50%, 9/1/24 1,276,584
NR AAA 80 Minneapolis and St. Paul,
Housing Finance Board, SFM,
(GNMA), (AMT), 7.30%, 8/1/31 84,360
Aa2 AA 400 Minnesota HFA, SFMR,
6.95%, 7/1/16 428,084
Aa2 AA+ 3,975 Minnesota HFA, SFMR, (AMT),
6.50%, 1/1/26(3) 4,193,823
Aa2 AA+ 1,000 Minnesota HFA, SFMR, (AMT),
6.75%, 7/1/12 1,057,080
</TABLE>
See notes to financial statements
45
<PAGE>
Minnesota Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ----------------------------------------------------------------------------------------
Housing (continued)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aa2 AA $ 650 Minnesota HFA, SFMR, (AMT),
6.75%, 1/1/26 $ 688,513
Aa2 AA+ 1,235 Minnesota HFA, SFMR, (AMT),
6.85%, 1/1/24 1,309,779
Aa2 AA 380 Minnesota HFA, SFMR, (AMT),
7.05%, 7/1/22 397,951
Aa NR 1,250 St. Louis Park, (Knollwood
Apartments), (FHA),
6.25%, 12/1/28 1,326,988
Aaa NR 1,685 St. Paul, Housing and
Redevelopment Authority, (Cliffe
Apartments), (GNMA),
6.00%, 1/1/31 1,749,957
- ----------------------------------------------------------------------------------------
$ 15,407,223
- ----------------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 8.1%
- ----------------------------------------------------------------------------------------
NR A- $ 1,000 Cloquet PCR, (Potlach Corp.),
5.90%, 10/1/26 $ 1,054,250
NR A- 750 Minneapolis, Community
Development Agency,
6.00%, 6/1/11 779,580
NR A- 100 Minneapolis, Community
Development Agency,
7.35%, 12/1/09 106,687
NR A- 1,250 Minneapolis, Community
Development Agency,
7.40%, 12/1/21 1,333,488
NR A- 1,605 Minneapolis, Community
Development Agency, (AMT),
6.80%, 12/1/24 1,739,932
NR A- 300 Minneapolis, Community
Development Agency, (Firemans
Ins.), 6.40%, 12/1/04 307,863
- ----------------------------------------------------------------------------------------
$ 5,321,800
- ----------------------------------------------------------------------------------------
Insured-Electric Utilities -- 14.8%
- ----------------------------------------------------------------------------------------
Aaa AAA $ 1,050 Northern Minnesota Municipal
Power Agency, (AMBAC),
5.30%, 1/1/21 $ 1,065,687
Aaa AAA 700 Northern Minnesota Municipal
Power Agency, (FSA), 5.40%,
1/1/16(4) 717,094
Aaa AAA 3,000 Southern Minnesota Municipal
Power Agency, (MBIA),
0.00%, 10/1/21 959,610
Aaa AAA 10,000 Southern Minnesota Municipal
Power Agency, (MBIA),
0.00%, 1/1/25 2,593,900
Aaa AAA $ 9,880 Southern Minnesota Municipal
Power Agency, (MBIA),
0.00%, 1/1/26 $ 2,431,270
Aaa AAA 4,800 Southern Minnesota Municipal
Power Agency, (MBIA),
0.00%, 1/1/27 1,122,288
Aaa AAA 300 Southern Minnesota Municipal
Power Agency, (MBIA), (AMT),
Variable Rate, 1/1/18(1)(5) 324,000
Aaa AAA 510 Western Minnesota Municipal
Power Agency, (MBIA), 5.50%,
1/1/15 510,184
- ----------------------------------------------------------------------------------------
$ 9,724,033
- ----------------------------------------------------------------------------------------
Insured-General Obligations -- 2.3%
- ----------------------------------------------------------------------------------------
Aaa AAA $ 1,330 St. Francis, Independent School
District No. 15, (FGIC),
6.35%, 2/1/12 $ 1,495,066
- ----------------------------------------------------------------------------------------
$ 1,495,066
- ----------------------------------------------------------------------------------------
Insured-Hospitals -- 3.6%
- ----------------------------------------------------------------------------------------
Aaa AAA $ 100 Minneapolis and St. Paul,
Housing and Redevelopment
Authority, (Health One), (MBIA),
7.40%, 8/15/11 $ 108,003
Aaa AAA 250 Minneapolis, Hospital Revenue,
(Fairview Hospital), (MBIA),
6.50%, 1/1/11 269,955
Aaa AAA 450 Minnesota Agricultural and
Economic Development, (Fairview
Hospital), (MBIA), 5.75%,
11/15/26 478,607
Aaa AAA 450 Plymouth, Health Facilities,
(Westhealth), (CGIC),
6.25%, 6/1/16 493,268
Aaa AAA 1,000 St. Louis Park, Health Care
Facilities, (AMBAC), Variable
Rate, 7/1/13(1) 1,013,750
- ----------------------------------------------------------------------------------------
$ 2,363,583
- ----------------------------------------------------------------------------------------
Insured-Housing -- 2.5%
- ----------------------------------------------------------------------------------------
Aaa AAA $ 1,500 SCA MFMR Receipts, Burnsville,
(FSA), 7.10%, 1/1/30 $ 1,641,750
- ----------------------------------------------------------------------------------------
$ 1,641,750
- ----------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
46
<PAGE>
Minnesota Municipals Portfolio as of July 31, 1998
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS CONT'D
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ----------------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 4.8%
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa AAA $ 3,000 St. Paul, Housing and
Redevelopment Authority, (Civic
Center), (MBIA), 5.45%, 11/1/13 $ 3,134,399
- ----------------------------------------------------------------------------------------
$ 3,134,399
- ----------------------------------------------------------------------------------------
Lease Revenue / Certificates of
Participation -- 3.5%
- ----------------------------------------------------------------------------------------
Baa1 NR $ 350 Cambridge EDA, 6.25%, 2/1/14 $ 362,471
NR AA 1,770 Hennepin County,
6.80%, 5/1/17(2) 1,920,893
- ----------------------------------------------------------------------------------------
$ 2,283,364
- ----------------------------------------------------------------------------------------
Miscellaneous -- 1.5%
- ----------------------------------------------------------------------------------------
NR NR $ 1,000 Red Lake Band of Chippewa
Indians, 6.25%, 8/1/13 $ 1,000,480
- ----------------------------------------------------------------------------------------
$ 1,000,480
- ----------------------------------------------------------------------------------------
Nursing Homes -- 1.5%
- ----------------------------------------------------------------------------------------
NR NR $ 1,000 Columbia Heights, Multifamily,
(Crest View), 6.00%, 3/1/33 $ 1,005,730
- ----------------------------------------------------------------------------------------
$ 1,005,730
- ----------------------------------------------------------------------------------------
Solid Waste -- 0.7%
- ----------------------------------------------------------------------------------------
Aa3 AA- $ 450 Anoka County, Solid Waste
Disposal, National Rural
Utility, (AMT), 6.95%, 12/1/08 $ 479,264
- ----------------------------------------------------------------------------------------
$ 479,264
- ----------------------------------------------------------------------------------------
Transportation -- 1.6%
- ----------------------------------------------------------------------------------------
Baa1 A $ 500 Puerto Rico Highway and
Transportation Authority,
4.75%, 7/1/38 $ 469,050
Baa1 A 600 Puerto Rico Highway and
Transportation Authority,
5.00%, 7/1/36 591,438
- ----------------------------------------------------------------------------------------
$ 1,060,488
- ----------------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $59,988,550) $ 65,831,744
- ----------------------------------------------------------------------------------------
</TABLE>
AMT -- Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by Minnesota
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1998, 27.9% 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 by financial
institution ranged from 0.7% to 18.1% of total investments.
(1) Security has been issued as an inverse floater bond.
(2) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
(3) Security (or a portion thereof) has been segregated to cover when-issued
securities.
(4) When-issued security.
(5) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. It is the
Portfolio's intention to hold the security until maturity.
See notes to financial statements
47
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- --------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------------------
Airlines -- 1.7%
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Baa3 BBB- $ 5,100 Port Authority of New York and
New Jersey, (Delta Airlines),
6.95%, 6/1/08 $ 5,557,776
- -----------------------------------------------------------------------------------------
$ 5,557,776
- -----------------------------------------------------------------------------------------
Assisted Living -- 2.6%
- -----------------------------------------------------------------------------------------
NR NR $ 3,750 New Jersey EDA, (Chelsea at
East Brunswick), (AMT),
8.25%, 10/1/20 $ 4,170,600
NR NR 3,630 New Jersey EDA, (Forsgate),
(AMT), 8.625%, 6/1/25 4,212,143
- -----------------------------------------------------------------------------------------
$ 8,382,743
- -----------------------------------------------------------------------------------------
Cogeneration -- 4.9%
- -----------------------------------------------------------------------------------------
NR BBB- $ 1,725 New Jersey EDA, (Trigen
Trenton), (AMT), 6.20%, 12/1/07 $ 1,831,398
NR BB+ 12,750 New Jersey EDA, (Vineland
Cogeneration), (AMT),
7.875%, 6/1/19 13,987,132
- -----------------------------------------------------------------------------------------
$ 15,818,530
- -----------------------------------------------------------------------------------------
Education -- 3.0%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 1,000 New Jersey Educational
Facilities Authority,
(Princeton Theological),
5.00%, 7/1/22 $ 986,910
Baa1 A- 2,480 New Jersey Educational
Facilities Authority, (Seton
Hall Univ.), 7.00%, 7/1/21 2,666,050
NR NR 8,800 New Jersey Higher Educational
Student Loan Bonds, (AMT),
0.00%, 7/1/10 3,521,584
A1 AAA 2,500 Rutgers, The State University
of New Jersey, 6.85%, 5/1/21 2,730,150
- -----------------------------------------------------------------------------------------
$ 9,904,694
- -----------------------------------------------------------------------------------------
Electric Utilities -- 3.6%
- -----------------------------------------------------------------------------------------
NR BBB $ 3,000 Guam Power Authority,
6.75%, 10/1/24 $ 3,340,800
Baa1 BBB+ 6,500 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 2,497,950
Baa1 BBB+ 2,000 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 768,600
NR NR $ 4,695 Virgin Islands Water and Power
Authority, 7.40%, 7/1/11 $ 5,158,772
- -----------------------------------------------------------------------------------------
$ 11,766,122
- -----------------------------------------------------------------------------------------
Escrowed / Prerefunded -- 3.2%
- -----------------------------------------------------------------------------------------
NR NR $ 615 New Jersey EDA, (Cadbury
Corp.), Prerefunded to 7/1/01,
7.50%, 7/1/21 $ 687,656
NR NR 2,000 New Jersey EDA, (Cadbury
Corp.), Prerefunded to 7/1/01,
8.00%, 7/1/15 2,263,480
NR NR 300 New Jersey EDA, (Cadbury
Corp.), Prerefunded to 7/1/01,
8.70%, 7/1/07 342,573
Aaa AAA 4,000 New Jersey EDA, (Keswick
Pines), Prerefunded to 1/1/04,
8.75%, 1/1/24 4,904,480
Aaa A+ 1,000 New Jersey EDA, (Performing
Arts Center), Prerefunded to
6/15/01, 6.75%, 6/15/12 1,092,420
NR NR 1,000 Passaic County, Prerefunded to
9/1/99, 6.70%, 9/1/13 1,050,760
- -----------------------------------------------------------------------------------------
$ 10,341,369
- -----------------------------------------------------------------------------------------
General Obligations -- 4.2%
- -----------------------------------------------------------------------------------------
NR BBB $ 9,745 Guam, 5.40%, 11/15/18 $ 9,776,183
NR A+ 1,500 Hudson County Improvement
Authority, 6.625%, 8/1/25 1,628,805
Aa2 NR 3,000 Mercer County Improvement
Authority, 0.00%, 4/1/10 1,717,170
Baa1 A 1,600 Puerto Rico, 0.00%, 7/1/18 577,792
- -----------------------------------------------------------------------------------------
$ 13,699,950
- -----------------------------------------------------------------------------------------
Hospitals -- 13.4%
- -----------------------------------------------------------------------------------------
Baa2 NR $ 5,250 Camden County, Improvement
Authority Revenue, (Cooper
Health System), 6.00%, 2/15/27 $ 5,472,653
A3 A- 2,300 New Jersey Health Care
Facilities Financing
Authority, (Atlantic City
Medical Center), 6.80%, 7/1/11 2,530,483
Baa2 NR 5,875 New Jersey Health Care
Facilities Financing
Authority, (Deborah Heart and
Lung Center),
6.30%, 7/1/23 6,221,625
Baa1 NR 4,000 New Jersey Health Care
Facilities Financing
Authority, (Southern Ocean
County Hospital),
6.25%, 7/1/23 4,241,160
</TABLE>
See notes to financial statements
48
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- --------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------------------
Hospitals (continued)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aa2 AAA $ 9,585 New Jersey Health Care
Facilities Financing
Authority, (St. Elizabeth's
Hospital),
6.80%, 8/1/19 $ 10,261,700
Baa1 A- 3,500 New Jersey Health Care
Facilities, (Capital Health
System),
5.25%, 7/1/17 3,489,430
Baa1 A- 1,250 New Jersey Health Care
Facilities, (Capital Health
Systems), 5.125%, 7/1/12 1,236,475
Baa2 BBB 5,400 New Jersey Health Care
Facilities, (Capital Health
Systems),
6.00%, 7/1/27 5,652,990
Baa1 A- 1,750 New Jersey Health Care
Facilities, (Capital Health
System),
5.25%, 7/1/27 1,723,803
NR BBB+ 2,720 New Jersey Health Care
Facilities, (Holy Name
Hospital),
6.00%, 7/1/25 2,847,432
- -----------------------------------------------------------------------------------------
$ 43,677,751
- -----------------------------------------------------------------------------------------
Housing -- 3.0%
- -----------------------------------------------------------------------------------------
NR AAA $ 1,000 Guam Housing Corp., Single
Family, 5.75%, 9/1/31 $ 1,063,300
NR A+ 1,250 New Jersey HFA,
7.25%, 11/1/22 1,315,688
NR AAA 2,000 New Jersey HFA, (Presidential
Plaza), (FHA), 6.95%, 5/1/13 2,163,960
NR AAA 3,700 New Jersey HFA, (Presidential
Plaza), (FHA), 7.00%, 5/1/30 4,002,993
NR A+ 1,000 New Jersey HFA, Rental
Housing, (AMT), 7.10%, 5/1/22 1,064,840
- -----------------------------------------------------------------------------------------
$ 9,610,781
- -----------------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 10.4%
- -----------------------------------------------------------------------------------------
NR NR $ 4,000 Middlesex County Pollution
Control Financing Authority,
(Amerada Hess Corp.), 6.875%,
12/1/22 $ 4,367,440
NR NR 2,000 Middlesex County Pollution
Control Financing Authority,
(Amerada Hess Corp.), 7.875%,
6/1/22 2,306,620
Aa1 NR 3,000 New Jersey EDA, (Garden State
Paper Co.), 7.125%, 4/1/22 3,287,430
Baa1 BBB+ 2,135 New Jersey EDA, (GATX
Terminals Corp.), 7.30%, 9/1/19 2,432,341
NR NR 1,500 New Jersey EDA, (Holt
Hauling), 7.90%, 3/1/27 1,711,080
NR NR 5,640 New Jersey EDA, (Holt
Hauling), 8.95%, 12/15/18 6,306,874
NR NR 1,160 New Jersey EDA, (National
Association of Accountants),
7.65%, 7/1/09 1,240,284
NR NR 2,000 New Jersey EDA, (The Seeing
Eye, Inc.), 7.30%, 4/1/11 2,125,080
Baa3 BBB- 2,250 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.25%, 6/1/26 2,432,588
Baa3 BBB- 5,550 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.30%, 6/1/23 5,890,437
NR BBB 1,520 South Jersey Transportation
Authority, (Raytheon
Aircraft), 6.15%, 1/1/22 1,623,208
- -----------------------------------------------------------------------------------------
$ 33,723,382
- -----------------------------------------------------------------------------------------
Insured-Education -- 0.3%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 845 New Jersey Educational
Facilities Authority, (Seton
Hall University), (BIGI),
6.85%, 7/1/19 $ 883,270
- -----------------------------------------------------------------------------------------
$ 883,270
- -----------------------------------------------------------------------------------------
Insured-Electric Utilities -- 0.4%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 1,150 New Jersey EDA, (New Jersey
American Water Co.), (AMT)
(FGIC), 6.875%, 11/1/34 $ 1,294,521
- -----------------------------------------------------------------------------------------
$ 1,294,521
- -----------------------------------------------------------------------------------------
Insured-General Obligations -- 1.2%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 3,815 Middletown Township, Board of
Education, (MBIA),
5.80%, 8/1/23 $ 4,019,064
- -----------------------------------------------------------------------------------------
$ 4,019,064
- -----------------------------------------------------------------------------------------
Insured-Hospitals -- 4.2%
- -----------------------------------------------------------------------------------------
Aaa NR $ 4,250 New Jersey EDA, (Hillcrest
Health Services), (AMBAC),
0.00%, 1/1/19 $ 1,526,090
Aaa NR 3,000 New Jersey EDA, (Hillcrest
Health Services), (AMBAC),
0.00%, 1/1/21 970,140
Aaa NR 10,620 New Jersey EDA, (St.
Barnabas), (MBIA), 0.00%,
7/1/26 2,582,253
</TABLE>
See notes to financial statements
49
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- --------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------------------
Insured-Hospitals (continued)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa AAA $ 1,570 New Jersey Health Care
Facilities Financing
Authority, (Cathedral Health
Services) (MBIA),
7.25%, 2/15/21 $ 1,720,987
Aaa AAA 2,415 New Jersey Health Care
Facilities Financing
Authority, (Cathedral Health
Services), (MBIA),
5.20%, 8/1/15 2,434,779
Aaa AAA 2,000 New Jersey Health Care
Facilities Financing
Authority, (Hackensack Medical
Center) (FGIC),
6.25%, 7/1/21 2,122,360
Aaa AAA 2,000 New Jersey Health Care
Facilities Financing
Authority, (Hackensack Medical
Center), (MBIA),
5.00%, 1/1/28 1,941,440
Aaa AAA 500 New Jersey Health Care
Facilities Financing
Authority, (Medical Center at
Princeton), (AMBAC), 5.00%,
7/1/28 486,735
- -----------------------------------------------------------------------------------------
$ 13,784,784
- -----------------------------------------------------------------------------------------
Insured-Housing -- 0.8%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 1,040 New Jersey HFA, (AMT), (MBIA),
7.70%, 10/1/29 $ 1,082,515
Aaa AAA 1,550 Pennsauken Township, Housing
Finance Corp., (MBIA),
8.00%, 4/1/11 1,609,133
- -----------------------------------------------------------------------------------------
$ 2,691,648
- -----------------------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of
Participation -- 4.1%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 3,900 Atlantic County, Public
Facilities Lease Agreement,
(FGIC),
6.00%, 3/1/13 $ 4,382,235
Aaa AAA 2,500 Hudson County Improvement
Authority, Secondary Yield
Curve Notes, (FGIC) Variable
Rate, 12/1/25(1)(2) 2,901,150
Aaa AAA 1,750 Hudson County, Correctional
Facility, (MBIA),
6.50%, 12/1/11 1,894,620
Aaa AAA 1,800 Middlesex County, Certificates
of Participation, (MBIA),
6.125%, 2/15/19 1,950,966
Aaa AAA 2,020 University of Medicine and
Dentistry, Certificates of
Participation, (MBIA),
6.75%, 12/1/09 2,130,494
- -----------------------------------------------------------------------------------------
$ 13,259,465
- -----------------------------------------------------------------------------------------
Insured-Transportation -- 5.1%
- -----------------------------------------------------------------------------------------
NR AAA $ 5,000 New Jersey Turnpike Authority,
"RITES" (MBIA), Variable
Rate, 1/1/16(1) $ 6,729,350
Aaa AAA 7,450 New Jersey Turnpike Authority,
(MBIA), 6.50%, 1/1/16 8,782,134
Aaa AAA 1,000 New Jersey Turnpike Authority,
(MBIA), 6.50%, 1/1/16 1,178,810
- -----------------------------------------------------------------------------------------
$ 16,690,294
- -----------------------------------------------------------------------------------------
Insured-Water and Sewer -- 0.9%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 2,500 Middlesex County, Utilities
Authority, (MBIA), Variable
Rate, 8/15/10 $ 2,884,275
- -----------------------------------------------------------------------------------------
$ 2,884,275
- -----------------------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 4.1%
- -----------------------------------------------------------------------------------------
Baa1 A- $ 720 Atlantic County, Public
Facilities Lease Agreement,
8.875%, 1/15/14 $ 991,685
Baa1 A- 785 Atlantic County, Public
Facilities Lease Agreement,
8.875%, 1/15/15 1,091,221
A1 NR 1,000 Bedminster Township, Board of
Education, 7.125%, 9/1/10 1,092,690
Aa AA- 2,000 Mercer County Improvement
Authority, (Richard J. Hughes
Justice), 6.05%, 1/1/15 2,002,880
Aa AA- 1,500 Mercer County Improvement
Authority, (Richard J. Hughes
Justice), 6.05%, 1/1/16 1,502,160
Aa AA- 1,500 Mercer County Improvement
Authority, (Richard J. Hughes
Justice), 6.05%, 1/1/17 1,502,115
Aa2 AA- 2,591 New Jersey Building Authority,
(Garden State Savings Bonds),
0.00%, 6/15/10 1,468,553
A1 A+ 5,500 New Jersey EDA, Economic
Recovery Fund, 0.00%, 3/15/13 2,622,400
A1 A+ 1,650 New Jersey EDA, State
Contract, 0.00%, 9/15/09 970,398
- -----------------------------------------------------------------------------------------
$ 13,244,102
- -----------------------------------------------------------------------------------------
Life Care -- 0.5%
- -----------------------------------------------------------------------------------------
NR NR $ 1,480 New Jersey EDA, (Hudson County
Occupational Center),
6.50%, 7/1/18 $ 1,497,642
- -----------------------------------------------------------------------------------------
$ 1,497,642
- -----------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
50
<PAGE>
<TABLE>
<CAPTION>
New Jersey Municipals Portfolio as of July 31, 1998
- -----------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS CONT'D
Ratings (Unaudited)
- --------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------------------
Nursing Homes -- 1.3%
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR NR $ 1,400 New Jersey EDA, (Claremont
Health System, Inc.),
9.10%, 9/1/22 $ 1,588,818
NR NR 2,500 New Jersey EDA, (Victoria
Health Corp.), 7.65%, 1/1/14 2,751,200
- -----------------------------------------------------------------------------------------
$ 4,340,018
- -----------------------------------------------------------------------------------------
Solid Waste -- 0.7%
- -----------------------------------------------------------------------------------------
NR NR $ 2,350 Union County, Utilities
Authority, (AMT), 7.20%,
6/15/14 $ 2,355,852
- -----------------------------------------------------------------------------------------
$ 2,355,852
- -----------------------------------------------------------------------------------------
Special Tax Revenue -- 5.8%
- -----------------------------------------------------------------------------------------
NR NR $ 7,600 New Jersey Sports and
Exposition Authority,
(Monmouth Park), 8.00%,
1/1/25(3) $ 8,660,352
NR NR 8,850 Virgin Islands Public Finance
Authority, 7.25%, 10/1/18 10,065,724
- -----------------------------------------------------------------------------------------
$ 18,726,076
- -----------------------------------------------------------------------------------------
Transportation -- 19.1%
- -----------------------------------------------------------------------------------------
NR BBB $ 1,400 Guam Airport Authority,
6.50%, 10/1/23 $ 1,523,844
NR BBB 2,000 Guam Airport Authority, (AMT),
6.70%, 10/1/23 2,187,300
Aa3 A+ 3,500 New Jersey Turnpike Authority,
5.00%, 6/15/17 3,455,620
A1 AA- 5,000 Port Authority of New York and
New Jersey, 5.375%, 3/1/28 5,271,800
A1 AA- 19,000 Port Authority of New York and
New Jersey, 6.125%, 6/1/24 21,942,909
A1 AA- 4,750 Port Authority of New York and
New Jersey, (AMT),
6.25%, 1/15/27 5,045,260
NR NR 5,000 Port Authority of New York and
New Jersey, (KIAC),
6.75%, 10/1/19 5,507,000
Baa1 A 2,500 Puerto Rico Highway and
Transportation Authority,
4.75%, 7/1/38 2,345,250
Baa1 A 6,625 Puerto Rico Highway and
Transportation Authority,
5.00%, 7/1/36 6,530,461
Baa1 A 7,825 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/36 8,241,290
- -----------------------------------------------------------------------------------------
$ 62,050,734
- -----------------------------------------------------------------------------------------
Water and Sewer -- 1.5%
- -----------------------------------------------------------------------------------------
A3 A $ 4,500 New Jersey EDA, Elizabethtown
Water Revenue, (AMT),
6.70%, 8/1/21 $ 4,826,745
Aa2 AA 80 New Jersey Wastewater
Treatment Trust, 6.875%,
6/15/09 85,673
Aa2 AA 20 New Jersey Wastewater
Treatment Trust, 7.00%, 6/15/10 21,444
- -----------------------------------------------------------------------------------------
$ 4,933,862
- -----------------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $292,277,246) $ 325,138,705
- -----------------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by New Jersey
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1998, 17.1% 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 institution ranged from 0.3% to 12.6% of total investments.
(1) Security has been issued as an inverse floater bond.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. It is the
Portfolio's intention to hold the security until maturity.
(3) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
51
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
Ratings
(Unaudited) Principal
- ------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Assisted Living -- 4.1%
- --------------------------------------------------------------------------------
NR NR $ 5,000 Chester IDA, (Senior Life
Choice of Kimberton),
(AMT),
8.50%, 9/1/25 $ 5,729,450
NR NR 2,680 Chester IDA, (Senior Life
Choice of Paoli, L.P.),
8.05%, 1/1/24 2,998,277
NR NR 5,000 Delaware IDA, (Glen
Riddle), (AMT), 8.625%,
9/1/25 5,764,750
- --------------------------------------------------------------------------------
$ 14,492,477
- --------------------------------------------------------------------------------
Cogeneration -- 2.7%
- --------------------------------------------------------------------------------
NR BBB- $ 9,000 Pennsylvania EDA,
(Northampton Generating),
(AMT),
6.50%, 1/1/13 $ 9,572,489
- --------------------------------------------------------------------------------
$ 9,572,489
- --------------------------------------------------------------------------------
Colleges and Universities -- 3.7%
- --------------------------------------------------------------------------------
NR AAA $ 2,000 Lehigh County General
Purpose Authority,
(Allentown College of St.
Francis), 6.75%,
12/15/12/(1)/ $ 2,155,200
NR BBB- 1,100 Lehigh County General
Purpose Authority, (Cedar
Crest College), 6.70%,
4/1/26 1,194,996
NR BBB- 3,000 Pennsylvania Higher
Educational Facilities
Authority, (Gwynedd-Mercy
College), 5.60%, 11/1/22 3,014,820
NR BBB+ 2,000 Pennsylvania Higher
Educational Facilities
Authority, (Ursinns
College), 5.90%, 1/1/27 2,086,060
NR A- 4,225 Scranton-Lackawanna,
(University of Scranton),
6.40%, 3/1/07 4,532,834
- --------------------------------------------------------------------------------
$ 12,983,910
- --------------------------------------------------------------------------------
Electric Utilities -- 2.8%
- --------------------------------------------------------------------------------
Baa3 BB- $ 500 Beaver IDA, (Ohio Edison
Co.), 7.75%, 9/1/24 $ 525,105
Baa1 BBB+ 3,250 Delaware IDA,
(Philadelphia Electric
Co.), 7.375%, 4/1/21 3,513,250
Baa2 BBB+ 4,070 Montgomery IDA,
(Philadelphia Electric
Co.), (AMT),
7.60%, 4/1/21 4,405,816
NR NR 1,385 Virgin Islands Water and
Power Authority, 7.40%,
7/1/11 1,521,810
- --------------------------------------------------------------------------------
$ 9,965,981
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 6.6%
- --------------------------------------------------------------------------------
NR NR $ 4,315 Hazelton Luzerne, (Saint
Joseph Medical Center),
Prerefunded to 7/1/03,
8.375%, 7/1/12 $ 5,085,788
Aaa AAA 5,000 Philadelphia Hospital and
Higher Education
Authority, (FGIC),
Prerefunded to 2/15/04,
Variable Rate, 3/6/12/(2)/ 5,225,000
Baa2 NR 4,115 Somerset, (Community
Hospital), Prerefunded to
3/1/02,
6.75%, 3/1/11 4,466,956
Aaa AAA 4,845 Westmoreland Municipal
Authority, (FGIC),
Escrowed to Maturity,
0.00%, 8/15/19 1,611,883
Aaa AAA 5,400 Westmoreland Municipal
Authority, (FGIC),
Escrowed to Maturity,
0.00%, 8/15/20 1,753,218
Aaa AAA 5,780 Westmoreland Municipal
Authority, (FGIC),
Escrowed to Maturity,
0.00%, 8/15/20 1,817,116
NR NR 2,750 Wilkins Area IDA,
(Fairview Extended Care),
Prerefunded to 1/1/01,
10.25%, 1/1/21 3,212,083
- --------------------------------------------------------------------------------
$ 23,172,044
- --------------------------------------------------------------------------------
General Obligations -- 3.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 5,600 Berks, (FGIC), Variable
Rate, 11/10/20/(7)/ $ 6,741,000
NR A 3,000 Dauphin, 6.90%, 6/1/26 3,207,390
A1 A+ 2,050 Lower Providence Township
Sewer Authority, 6.75%,
5/1/22 2,232,573
Baa1 A 1,000 Puerto Rico, 4.50%, 7/1/23 904,750
- --------------------------------------------------------------------------------
$ 13,085,713
- --------------------------------------------------------------------------------
Hospitals -- 14.6%
- --------------------------------------------------------------------------------
A3 NR $ 5,330 Allegheny County HDA,(St.
Francis Medical Center),
5.75%, 5/15/27 $ 5,495,923
NR AAA 2,300 Allegheny IDA,
(Presbyterian Medical
Center), 6.75%, 2/1/26 2,525,147
Baa BBB 2,000 Dauphin County Hospital
Authority, (Community
General Osteopathic
Hospital), 7.375%, 6/1/16 2,183,540
NR BBB 1,150 Horizon Hospital Systems
Authority, (Horizon
Hospital Systems, Inc.),
6.35%, 5/15/26 1,229,856
A NR 2,670 Indiana County Hospital
Authority, (Indiana
Hospital), 7.125%, 7/1/23 2,933,956
See notes to financial statements
52
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Ratings
(Unaudited) Principal
- ------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Hospitals (continued)
- --------------------------------------------------------------------------------
A3 A $ 3,250 Lehigh County Hospital
Authority, (Muhlenberg
Hospital),
6.60%, 7/15/22 $ 3,591,023
NR BBB- 3,500 McKean County Hospital
Authority, (Bradford
Hospital),
6.00%, 10/1/13 3,592,750
A3 A- 2,550 Monroeville Hospital
Authority, (Forbes Health
System),
6.25%, 10/1/15 2,378,640
Baa2 NR 1,375 Montgomery Hospital
Authority, (Montgomery
Hospital Medical Center),
6.60%, 7/1/10 1,482,264
NR BBB+ 2,615 Montgomery Hospital
Authority, (Pottstown
Medical Center), 6.875%,
11/15/20 2,888,974
A BBB+ 8,500 Pennsylvania HEFA,
(Albert
Einstein Medical Center),
7.625%, 4/1/11 8,887,855
A3 A 500 Pennsylvania HEFA,
(Allegheny General
Hospital),
7.25%, 9/1/17 446,295
B2 BB 5,625 Philadelphia HEFA,
6.625%, 7/1/21 2,818,913
B2 BB 7,115 Philadelphia HEFA,
7.25%, 7/1/18 3,564,900
A3 NR 7,000 Washington County
Hospital Authority,
(Monongahela Valley
Hospital), 6.75%, 12/1/08 7,623,000
- --------------------------------------------------------------------------------
$ 51,643,036
- --------------------------------------------------------------------------------
Housing -- 6.1%
- --------------------------------------------------------------------------------
NR AAA $ 2,870 Allegheny, SFMR, (Ladies
Grand Army), (FHA),
6.35%, 10/1/36 $ 3,098,050
Aa2 AA 1,000 Pennsylvania HFA, (AMT),
Variable Rate, 10/3/23/(2)/ 1,135,000
Aa2 AA+ 2,000 Pennsylvania HFA, SFMR,
(AMT), 6.15%, 10/1/27 2,105,320
Aa AA+ 8,350 Pennsylvania HFA, SFMR,
(AMT), 7.50%, 10/1/25 9,102,669
A1 AAA 1,000 Pittsburgh Urban
Redevelopment Authority,
7.125%, 4/1/15 1,049,360
Aa2 AAA 265 Pittsburgh Urban
Redevelopment Authority,
7.45%, 4/1/10 279,776
Aa2 AAA 3,385 Pittsburgh Urban
Redevelopment Authority,
(AMT),
7.10%, 4/1/24 3,684,674
A1 AAA 1,055 Pittsburgh Urban
Redevelopment Authority,
(AMT),
7.40%, 4/1/24 1,111,200
- --------------------------------------------------------------------------------
$ 21,566,049
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 19.5%
- --------------------------------------------------------------------------------
A3 BBB+ $ 6,450 Butler County IDA, (Witco
Corp.), 5.85%, 12/1/23 $ 6,732,317
NR BB- 1,005 Clearfield County IDA,
(Kmart Corp.), 6.80%,
5/15/07 1,078,053
NR A 4,000 Franklin County IDA,
(Corning, Inc.), 6.25%,
8/1/05 4,450,600
A2 A 12,000 New Morgan IDA, (New
Morgan Landfill), (AMT),
6.50%, 4/1/19 13,062,239
NR BBB- 9,000 Pennsylvania EDA,
(Colver), (AMT), 7.125%,
12/1/15 10,033,199
NR BBB- 5,000 Pennsylvania EDA,
(Colver), (AMT), 7.15%,
12/1/18 5,589,300
Baa2 BBB- 5,000 Pennsylvania IDA,
(MacMillan Bloedel),
(AMT),
7.60%, 12/1/20 5,562,900
Baa3 BBB 4,450 Pennsylvania IDA, (Sun
Company), (AMT), 7.60%,
12/1/24 5,198,357
NR NR 6,500 Philadelphia IDA,
(Refrigerated
Enterprises), (AMT),
9.05%, 12/1/19 7,371,260
Baa3 BBB- 5,000 Puerto Rico Port
Authority, (American
Airlines), (AMT), 6.25%,
6/1/26 5,405,750
Baa3 BBB- 2,800 Puerto Rico Port
Authority, (American
Airlines), (AMT), 6.30%,
6/1/23 2,971,752
NR BB- 1,105 Shamokin IDA, (Kmart
Corp.), 6.70%, 7/1/07 1,189,201
- --------------------------------------------------------------------------------
$ 68,644,928
- --------------------------------------------------------------------------------
Insured-Education -- 2.8%
- --------------------------------------------------------------------------------
Aaa NR $ 3,000 Delaware County,
(Villanova University),
(MBIA),
5.00%, 12/1/28 $ 2,910,930
Aaa AAA 2,500 Pennsylvania Higher
Education Student Loan,
(AMBAC), (AMT), 7.15%,
9/1/21 2,700,975
Aaa AAA 1,500 Pennsylvania Higher
Education Student Loan,
(AMBAC), (AMT), Variable
Rate, 3/1/22/(2)/ 1,685,625
Aaa AAA 700 Pennsylvania Higher
Education Student Loan,
(AMBAC), (AMT), Variable
Rate, 9/1/26/(2)/ 809,375
Aaa AAA 1,750 University of Pittsburgh,
(FGIC), 5.125%, 6/1/22 1,728,528
- -------------------------------------------------------------------------------
$ 9,835,433
- -------------------------------------------------------------------------------
See notes to financial statements
53
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 5.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 4,000 Beaver IDA, (Ohio Edison
Co.), (FGIC), 7.00%,
6/1/21 $ 4,334,560
Aaa AAA 10,000 Beaver IDA, (Ohio Edison
Co.), (FGIC), 7.05%,
10/1/20 11,485,699
Aaa AAA 3,800 Puerto Rico Electric
Power Authority,
"STRIPES", (FSA),
Variable Rate, 7/1/02(2) 4,189,500
- --------------------------------------------------------------------------------
$ 20,009,759
- --------------------------------------------------------------------------------
Insured-General Obligations -- 6.9%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,170 Elizabeth Forward School
District, (MBIA), 0.00%,
9/1/20 $ 680,621
Aaa AAA 2,170 Elizabeth Forward School
District, (MBIA), 0.00%,
9/1/21 645,228
Aaa AAA 2,170 Elizabeth Forward School
District, (MBIA), 0.00%,
9/1/22 611,332
Aaa AAA 2,170 Elizabeth Forward School
District, (MBIA), 0.00%,
9/1/23 579,151
Aaa AAA 2,500 Erie School District,
(MBIA), 0.00%, 5/1/19 866,875
Aaa AAA 2,625 Erie School District,
(MBIA), 0.00%, 5/1/20 864,938
Aaa AAA 2,625 Erie School District,
(MBIA), 0.00%, 5/1/21 821,704
Aaa AAA 3,625 Erie School District,
(MBIA), 0.00%, 5/1/22 1,077,278
Aaa AAA 5,000 Hampton Township School
District, (FGIC), 5.00%,
9/1/27 4,854,350
Aaa NR 2,365 Harrisburg, (AMBAC),
0.00%, 3/15/17 894,467
Aaa AAA 5,175 Hazelton School District,
(FGIC), 0.00%, 3/1/21 1,580,756
Aaa NR 1,000 Hopewell School District,
(FSA), 0.00%, 9/1/22 284,380
Aaa AAA 7,500 Keystone Oaks School
District, (AMBAC),
Variable Rate, 9/1/16(2) 8,681,250
Aaa AAA 1,430 Mars Area School
District, (MBIA), 0.00%,
3/1/14 641,584
Aaa AAA 655 Rochester Area School
District, (AMBAC), 0.00%,
5/1/10 368,320
Aaa AAA 1,000 Venango County, (AMBAC),
6.30%, 12/1/19 1,076,600
- --------------------------------------------------------------------------------
$ 24,528,834
- --------------------------------------------------------------------------------
Insured-Hospitals -- 5.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 4,550 Allegheny County HDA,
(MBIA), 5.625%, 4/1/27 $ 4,738,598
Aaa AAA 3,750 Allegheny County Hospital
Authority, (Magee-Womens
Hospital), (FGIC),
0.00%, 10/1/15 1,537,950
Aaa AAA 1,170 Allegheny County,
(Children's Hospital of
Pittsburgh), (MBIA),
6.75%, 7/1/08 1,228,968
Aaa AAA 2,500 Armstrong County Hospital
Authority, (Saint Francis
Health Care), (AMBAC),
6.00%, 8/15/08 2,676,350
Aaa AAA 1,400 Armstrong County Hospital
Authority, (Saint Francis
Health Care), (AMBAC),
6.25%, 6/1/13 1,508,892
Aaa AAA 775 Carbon County Hospital
Authority, (Gnaden
Memorial Hospital),
(AMBAC), 7.00%, 11/15/14 834,605
Aaa AAA 750 Erie County Hospital
Authority, (Hamot Health
System), (AMBAC), 7.10%,
2/15/10 818,790
Aaa NR 4,000 Lehigh County Hospital
Authority, (Lehigh Valley
Health Network), (MBIA),
5.00%, 7/1/28 3,841,040
Aaa AAA 1,000 Montgomery County HEFA,
(Abington Memorial
Hospital) (AMBAC),
Variable Rate, 7/5/11(2) 1,172,500
- --------------------------------------------------------------------------------
$ 18,357,693
- --------------------------------------------------------------------------------
Insured-Industrial Development Revenue -- 0.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,000 Delaware County,
(Philadelphia Water),
(AMT), (FGIC),
6.35%, 8/15/25 $ 1,095,570
- --------------------------------------------------------------------------------
$ 1,095,570
- --------------------------------------------------------------------------------
Insured-Transportation -- 1.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,000 Allegheny County Port
Authority, (Pittsburgh
International Airport),
(MBIA), 5.00%, 1/1/19 $ 1,956,100
Aaa AAA 2,000 Allegheny County Port
Authority, (Pittsburgh
International Airport),
(MBIA), (AMT), 5.25%,
1/1/16 2,007,080
See notes to financial statements
54
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Insured-Transportation (continued)
- --------------------------------------------------------------------------------
Aaa AAA $ 2,000 Philadelphia Authority
For Industrial
Development,
(Philadelphia Airport
System), (FGIC), (AMT),
5.00%, 7/1/16 $ 1,954,800
- --------------------------------------------------------------------------------
$ 5,917,980
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 2.6%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,500 Philadelphia Water and
Wastewater, (CGIC),
Variable Rate, 6/15/12(2) $ 2,712,500
Aaa AAA 3,490 Pittsburgh Water and
Sewer Authority, (FGIC),
4.75%, 9/1/16 3,336,754
Aaa AAA 3,000 Pittsburgh Water and
Sewer Authority, (FSA),
5.00%, 9/1/19 2,951,880
- --------------------------------------------------------------------------------
$ 9,001,134
- --------------------------------------------------------------------------------
Life Care -- 3.2%
- --------------------------------------------------------------------------------
NR NR $ 4,050 Delaware County, (White
Horse Village), 7.50%,
7/1/18 $ 4,438,476
NR BBB+ 3,620 Delaware HFA,
5.75%, 12/15/22 3,970,126
Baa2 BBB+ 3,060 Hazleton HFA, (Hazelton
General Hospital), 5.50%,
7/1/27 3,042,283
- --------------------------------------------------------------------------------
$ 11,450,885
- --------------------------------------------------------------------------------
Nursing Homes -- 2.2%
- --------------------------------------------------------------------------------
NR NR $ 1,230 Chartiers Valley IDA,
(Beverly Enterprises,
Inc.),
5.375%, 6/1/07 $ 1,236,937
NR NR 3,500 Montgomery IDA,
(Advancement of Geriatric
Health Care Institute),
8.375%, 7/1/23 3,786,300
NR NR 1,100 Philadelphia HEFA, (The
Philadelphia Protestant
Home), 6.50%, 7/1/27 1,146,728
NR NR 1,445 Westmoreland County IDA,
(Highland Health Systems,
Inc.), 9.25%, 6/1/22 1,645,277
- --------------------------------------------------------------------------------
$ 7,815,242
- --------------------------------------------------------------------------------
Pooled Loans -- 5.6%
- --------------------------------------------------------------------------------
NR AA- $16,950 Pennsylvania Finance
Authority, Beaver County,
6.60%, 11/1/09 $ 18,763,988
NR AA+ 870 Pennsylvania
Infrastructure Investment
Authority, (Pennvest),
6.80%, 9/1/10 957,661
- --------------------------------------------------------------------------------
$ 19,721,649
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $327,484,420) $352,860,806
- --------------------------------------------------------------------------------
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by Pennsylvania
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1998, 30% 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 institution ranged from 0.8% to 13.9%.
(1) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
(2) Security has been issued as an inverse floater bond.
See notes to financial statements
55
<PAGE>
Texas Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Assisted Living -- 3.3%
- --------------------------------------------------------------------------------
NR NR $500 Bell County, Health
Facilities, (Care Institute,
Inc., Texas), 9.00%, 11/1/24 $ 573,925
- --------------------------------------------------------------------------------
$ 573,925
- --------------------------------------------------------------------------------
Education -- 1.4%
- --------------------------------------------------------------------------------
A NR $240 Brazos, Higher Education
Authority, (AMT), 6.50%, 6/1/04 $ 254,206
- --------------------------------------------------------------------------------
$ 254,206
- --------------------------------------------------------------------------------
Escrowed/Prerefunded -- 4.3%
- --------------------------------------------------------------------------------
NR NR $200 Bexar County, Health Facilities,
(St. Luke's Lutheran), Escrowed
to Maturity, 7.00%, 5/1/21 $ 251,234
Aaa NR 100 Ector County, Hospital
District, Prerefunded to
6/1/02, 7.30%, 4/15/12 112,503
Baa1 BBB 185 Gulf Coast Waste Disposal
Authority, (Champion
International), (AMT),
Prerefunded to 04/01/02,
7.25%, 4/1/17 206,917
Aaa AAA 150 Texas National Research
Lab Super Collider, Escrowed
to Maturity, 6.95%, 12/1/12 177,335
- --------------------------------------------------------------------------------
$ 747,989
- --------------------------------------------------------------------------------
General Obligations -- 15.2%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Bastrop, Independent School
District, (PSF), 0.00%, 2/15/13 $ 480,170
NR NR 500 Leander, 6.75%, 8/15/16 578,240
Aaa NR 1,000 New Braunfel Independent School
District, (PSF), 0.00%, 2/1/13 481,120
Aa2 AA 690 Texas Veterans' Housing
Assistance U.T., (AMT),
6.70%, 12/1/24 738,328
Aa2 AA 345 Texas Veterans' Housing
Assistance U.T., (AMT),
6.80%, 12/1/23 371,286
- --------------------------------------------------------------------------------
$2,649,144
- --------------------------------------------------------------------------------
Hospitals -- 6.9%
- --------------------------------------------------------------------------------
NR BBB+ $500 Denison Hospital Authority,
(Texoma Medical Center),
7.10%, 8/15/24 $ 558,780
A3 NR 100 Harris County, Hospital
District, (Memorial),
7.125%, 6/1/15 112,157
A2 NR $500 Tarrant County,
(Methodist Health System),
6.00%, 9/1/24 $ 542,485
- --------------------------------------------------------------------------------
$1,213,422
- --------------------------------------------------------------------------------
Housing -- 24.8%
- --------------------------------------------------------------------------------
NR AAA $ 80 Bexar County, HFC,
8.10%, 3/1/24 $ 84,744
NR AAA 500 Dallas, HFC, (GNMA),
7.95%, 12/1/23 528,740
NR AAA 150 North Central County,
HFC, (GNMA), 7.875%,
10/1/22 158,099
NR AAA 1,000 Texas Department of
Housing and Community Affairs,
(Meadow Ridge Apartments),
(AMT), 5.55%, 8/1/30 1,016,659
NR A 500 Texas Department of
Housing and Community Affairs,
(NHP Foundation-Asmara),
6.40%, 1/1/27 536,895
NR AAA 500 Texas Department of Housing and
Community Affairs, (Pebble Brook
Apartments), (AMT), 5.50%, 12/1/18 503,075
NR A 750 Travis County HFC, (Travis
Station Apartments),
6.75%, 4/1/19 795,420
NR AAA 665 Travis County, HFC, (GNMA)
(FNMA), 7.05%, 12/1/25 710,267
- --------------------------------------------------------------------------------
$4,333,899
- --------------------------------------------------------------------------------
Industrial Development Revenue/Pollution
Control Revenue -- 15.5%
- --------------------------------------------------------------------------------
Baa2 BBB $505 Alliance Airport Authority,
(American Airlines), (AMT),
7.50%, 12/1/29 $ 544,451
Baa2 BBB- 225 Dallas-Fort Worth Airport,
(American Airlines), (AMT),
7.50%, 11/1/25 242,233
Baa1 BBB 265 Gulf Coast Waste Disposal
Authority, (Champion
International), (AMT),
7.25%, 4/1/17 290,551
A2 A+ 1,000 Port Corpus Christi,
(Hoechst Celanese Corp.),
(AMT), 6.875%, 4/1/17 1,089,259
NR A 500 Trinity River Authority, (PCR),
(AMT), 6.20%, 3/1/20 535,580
- --------------------------------------------------------------------------------
$2,702,074
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 8.3%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Austin, Combined Utility,
(AMBAC), 6.75%, 11/15/12 $1,201,029
Aaa AAA 500 Lower Colorado River
Authority Junior Lien, (FGIC),
0.00%, 1/1/12 255,740
- --------------------------------------------------------------------------------
$1,456,769
- --------------------------------------------------------------------------------
See notes to financial statements
56
<PAGE>
Texas Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Insured-Hospitals -- 6.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Harris County, HFC, (Hermann
Hospital), (MBIA), 6.375%,
10/1/24 $ 560,495
Aaa AAA 500 Tyler County, HFC, (Mother
Frances Hospital), (FGIC),
6.50%, 7/1/22 543,920
- --------------------------------------------------------------------------------
$ 1,104,415
- --------------------------------------------------------------------------------
Lease Revenue/Certificates of
Participation -- 1.6%
- --------------------------------------------------------------------------------
NR BBB- $ 250 Rio Grande, Independent School
District Lease, 6.75%, 7/15/10 $ 273,945
- --------------------------------------------------------------------------------
$ 273,945
- --------------------------------------------------------------------------------
Nursing Homes -- 6.0%
- --------------------------------------------------------------------------------
Aa NR $ 975 Port Arthur, Health Facilities,
(FHA), 6.50%, 8/1/24 $ 1,048,534
- --------------------------------------------------------------------------------
$ 1,048,534
- --------------------------------------------------------------------------------
Transportation -- 6.4%
- --------------------------------------------------------------------------------
NR NR $ 250 Abia Dev. Corp., (Austin
Cargoport), 9.25%, 10/1/21 $ 286,710
NR BBB 755 Guam Airport Authority, (AMT),
6.70%, 10/1/23 825,706
- --------------------------------------------------------------------------------
$ 1,112,416
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $15,998,639) $17,470,738
- --------------------------------------------------------------------------------
AMT- Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
HFC - Housing Finance Corporation
The Portfolio invests primarily in debt securities issued by Texas
municipalities. 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 July 31, 1998, 14.7% 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 institution ranged from 3.2% to 6.9% of total investments.
See notes to financial statements
57
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
As of July 31, 1998
Arizona Colorado Connecticut Michigan
Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments --
Identified cost $ 92,678,595 $ 36,166,584 $151,783,349 $119,726,431
Unrealized appreciation 9,158,765 3,298,576 10,775,493 10,918,129
- ------------------------------------------------------------------------------------------------------------------------------------
Investments, at value $101,837,360 $ 39,465,160 $162,558,842 $130,644,560
- ------------------------------------------------------------------------------------------------------------------------------------
Cash $ 720,410 $ 3,074 $ 234,826 $ 499
Receivable for investments sold 495,917 86,125 253,673 --
Interest receivable 1,007,738 524,704 1,927,464 1,919,186
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $104,061,425 $ 40,079,063 $164,974,805 $132,564,245
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased $ 959,723 $ -- $ -- $ --
Payable for when-issued securities -- -- -- 2,294,354
Demand note payable -- 273,000 -- 21,000
Payable for daily variation margin on open
financial futures contracts 812 312 1,313 1,062
Payable to affiliate for Trustees' fees 949 14 96 949
Other accrued expenses 7,835 4,537 18,508 10,412
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 969,319 $ 277,863 $ 19,917 $ 2,327,777
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $103,092,106 $ 39,801,200 $164,954,888 $130,236,468
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $ 93,964,184 $ 36,504,559 $154,187,522 $119,353,075
Net unrealized appreciation (computed on the
basis of identified cost) 9,127,922 3,296,641 10,767,366 10,883,393
- ------------------------------------------------------------------------------------------------------------------------------------
Total $103,092,106 $ 39,801,200 $164,954,888 $130,236,468
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
58
<PAGE>
<TABLE>
<CAPTION>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of July 31, 1998
Minnesota New Jersey Pennsylvania Texas
Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments --
Identified cost $59,988,550 $292,277,246 $327,484,420 $15,998,639
Unrealized appreciation 5,843,194 32,861,459 25,376,386 1,472,099
- ------------------------------------------------------------------------------------------------------------------------------------
Investments, at value $65,831,744 $325,138,705 $352,860,806 $17,470,738
- ------------------------------------------------------------------------------------------------------------------------------------
Cash $ 727 $ 281 $ 1,961,280 $ 21,554
Receivable for investments sold 1,351,090 1,078,009 30,000 1,102,056
Interest receivable 821,427 3,949,296 4,685,769 291,451
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $68,004,988 $330,166,291 $359,537,855 $18,885,799
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased $ -- $ -- $ -- $ 1,046,570
Payable for when-issued securities 688,793 -- -- --
Demand note payable 325,000 1,510,000 -- --
Payable for daily variation margin on open
financial futures contracts 375 1,875 3,000 --
Payable to affiliate for Trustees' fees 57 146 1,742 --
Other accrued expenses 7,086 25,132 1,238 1,742
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 1,021,311 $ 1,537,153 $ 5,980 $ 1,048,312
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $66,983,677 $328,629,138 $359,531,875 $17,837,487
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $61,152,363 $295,827,079 $334,253,565 $16,365,388
Net unrealized appreciation (computed on the basis
of identified cost) 5,831,314 32,802,059 25,278,310 1,472,099
- ------------------------------------------------------------------------------------------------------------------------------------
Total $66,983,677 $328,629,138 $359,531,875 $17,837,487
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
59
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1998
<TABLE>
<CAPTION>
Arizona Colorado Connecticut Michigan
Portfolio Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
- ---------------------------------------------------------------------------------------------------------------------------------
Interest $ 6,121,201 $ 2,377,732 $ 9,650,563 $ 7,913,736
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 6,121,201 $ 2,377,732 $ 9,650,563 $ 7,913,736
Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
Investment adviser fee $ 413,386 $ 97,947 $ 703,463 $ 562,200
Trustees fees and expenses 13,877 2,173 15,168 11,996
Custodian fee 71,087 36,312 102,421 78,882
Legal and accounting services 22,495 17,118 22,318 22,162
Amortization of organization expenses 887 229 1,574 1,508
Miscellaneous 6,831 8,452 19,101 21,863
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 528,563 $ 162,231 $ 864,045 $ 698,611
- ---------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee $ 18,275 $ 10,652 $ 23,586 $ 22,172
- ---------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 18,275 $ 10,652 $ 23,586 $ 22,172
- ---------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 510,288 $ 151,579 $ 840,459 $ 676,439
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 5,610,913 $ 2,226,153 $ 8,810,104 $ 7,237,297
- ---------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 3,159,656 $ 886,357 $ 583,817 $ 3,849,645
Financial futures contracts (949,855) (418,124) (1,055,823) (1,463,448)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) $ 2,209,801 $ 468,233 $ (472,006) $ 2,386,197
- ---------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $(1,542,650) $ (611,689) $ 1,205,087 $(2,128,854)
Financial futures contracts 597,430 221,001 552,590 968,229
- ---------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ (945,220) $ (390,688) $ 1,757,677 $(1,160,625)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain $ 1,264,581 $ 77,545 $ 1,285,671 $ 1,225,572
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 6,875,494 $ 2,303,698 $10,095,775 $ 8,462,869
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
60
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1998
<TABLE>
<CAPTION>
Minnesota New Jersey Pennsylvania Texas
Portfolio Portfolio Portfolio Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
- --------------------------------------------------------------------------------------------------------------------------------
Interest $ 3,919,663 $ 20,492,162 $ 23,535,425 $ 1,168,398
- --------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 3,919,663 $ 20,492,162 $ 23,535,425 $ 1,168,398
- --------------------------------------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------------------------------------
Investment adviser fee $ 228,670 $ 1,535,921 $ 1,758,264 $ 31,780
Trustees fees and expenses 8,363 22,424 23,320 679
Custodian fee 45,883 184,415 149,630 19,962
Legal and accounting services 20,218 34,518 34,362 15,161
Amortization of organization expenses 309 2,330 2,988 209
Miscellaneous 15,759 36,037 83,951 7,446
- --------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 319,202 $ 1,815,645 $ 2,052,515 $ 75,237
- --------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee $ 11,817 $ 55,680 $ 149,630 $ 6,280
- --------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 11,817 $ 55,680 $ 149,630 $ 6,280
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 307,385 $ 1,759,965 $ 1,902,885 $ 68,957
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 3,612,278 $ 18,732,197 $ 21,632,540 $ 1,099,441
- --------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,573,786 $ 4,091,888 $ 5,872,852 $ 568,115
Financial futures contracts (872,751) (2,384,863) (3,792,095) (91,792)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized gain $ 701,035 $ 1,707,025 $ 2,080,757 $ 476,323
- --------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ (694,189) $ (4,734) $ (9,695,269) $ (357,281)
Financial futures contracts 457,776 988,190 2,480,978 81,068
- --------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ (236,413) $ 983,456 $ (7,214,291) $ (276,213)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) $ 464,622 $ 2,690,481 $ (5,133,534) $ 200,110
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 4,076,900 $ 21,422,678 $ 16,499,006 $ 1,299,551
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
61
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1998
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Arizona Portfolio Colorado Portfolio Connecticut Portfolio Michigan Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 5,610,913 $ 2,226,153 $ 8,810,104 $ 7,237,297
Net realized gain (loss) 2,209,801 468,233 (472,006) 2,386,197
Net change in unrealized appreciation
(depreciation) (945,220) (390,688) 1,757,677 (1,160,625)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 6,875,494 $ 2,303,698 $ 10,095,775 $ 8,462,869
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 8,495,182 $ 4,707,220 $ 9,761,887 $ 5,251,473
Withdrawals (24,750,363) (9,834,162) (29,880,364) (33,701,520)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $ (16,255,181) $ (5,126,942) $(20,118,477) $ (28,450,047)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (9,379,687) $ (2,823,244) $(10,022,702) $ (19,987,178)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 112,471,793 $ 42,624,444 $174,977,590 $ 150,223,646
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 103,092,106 $ 39,801,200 $164,954,888 $ 130,236,468
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
62
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1998
<TABLE>
<CAPTION>
Minnesota New Jersey Pennsylvania Texas
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 3,612,278 $ 18,732,197 $ 21,632,540 $ 1,099,441
Net realized gain 701,035 1,707,025 2,080,757 476,323
Net change in unrealized appreciation (depreciation) (236,413) 983,456 (7,214,291) (276,213)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 4,076,900 $ 21,422,678 $ 16,499,006 $ 1,299,551
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 4,912,748 $ 28,452,460 $ 23,151,071 $ 710,511
Withdrawals (12,679,645) (74,018,070) (82,338,942) (5,848,716)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital transactions $ (7,766,897) $(45,565,610) $(59,187,871) $ (5,138,205)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (3,689,997) $(24,142,932) $(42,688,865) $ (3,838,654)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 70,673,674 $352,772,070 $402,220,740 $ 21,676,141
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 66,983,677 $328,629,138 $359,531,875 $ 17,837,487
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
63
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Arizona Colorado Connecticut Michigan
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 6,682,773 $ 2,539,687 $ 9,925,507 $ 8,798,336
Net realized gain 799,157 446,628 472,294 36,033
Net change in unrealized appreciation (depreciation) 4,938,530 2,095,673 7,068,431 6,476,859
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 12,420,460 $ 5,081,988 $ 17,466,232 $ 15,311,228
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 7,001,783 $ 4,009,912 $ 9,762,822 $ 3,699,109
Withdrawals (36,811,997) (11,883,030) (39,868,349) (42,251,299)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital transactions $(29,810,214) $ (7,873,118) $(30,105,527) $(38,552,190)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $(17,389,754) $ (2,791,130) $(12,639,295) $(23,240,962)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $129,861,547 $ 45,415,574 $187,616,885 $173,464,608
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $112,471,793 $ 42,624,444 $174,977,590 $150,223,646
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
64
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Minnesota New Jersey Pennsylvania Texas
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 4,112,897 $ 21,484,047 $ 25,120,444 $ 1,316,730
Net realized gain (loss) 28,621 1,984,468 (1,113,620) (11,999)
Net change in unrealized appreciation (depreciation) 2,786,157 14,203,930 18,755,709 1,114,403
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 6,927,675 $ 37,672,445 $ 42,762,533 $ 2,419,134
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 4,877,845 $ 20,443,481 $ 19,109,521 $ 1,759,693
Withdrawals (17,221,919) (91,588,197) (107,833,175) (6,869,522)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital transactions $ (12,344,074) $ (71,144,716) $ (88,723,654) $ (5,109,829)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (5,416,399) $ (33,472,271) $ (45,961,121) $ (2,690,695)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 76,090,073 $ 386,244,341 $ 448,181,861 $ 24,366,836
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 70,673,674 $ 352,772,070 $ 402,220,740 $ 21,676,141
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
65
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Arizona Portfolio
-----------------------------------------------------------------------
Year Ended
-----------------------------------------------------------------------
July 31, Sept. 30,
---------------------------------------------------------- -----------
1998 1997 1996 1995 1994* 1993**
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- -----------------------------------------------------------------------------------------------------------------------
Expenses/(1)/ 0.50% 0.50% 0.51% 0.52% 0.46%+ 0.42%+
Expenses after custodian fee reduction 0.48% 0.49% 0.50% -- -- --
Net investment income 5.27% 5.56% 5.53% 5.81% 5.43%+ 5.46%+
Portfolio Turnover 23% 10% 18% 22% 23% 107%
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $103,092 $112,472 $129,862 $144,521 $154,068 $133,539
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten-month period ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
/(1)/The expense ratios for the year ended July 31, 1996 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 each of the prior periods have not been adjusted to
reflect this change.
See notes to financial statements
66
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Colorado Portfolio
-----------------------------------------------------------------
Year Ended
------------------------------------------------------------------
July 31, Sept. 30,
------------------------------------------------------ ---------
1998 1997 1996 1995 1994* 1993**
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets+
- -----------------------------------------------------------------------------------------------------------------------
Net expenses/(1)/ 0.40% 0.40% 0.40% 0.25% 0.02%+ 0.06%+
Net expenses after custodian fee reduction 0.37% 0.36% 0.36% -- -- --
Net investment income 5.49% 5.86% 5.75% 6.05% 5.73%+ 5.60%+
Portfolio Turnover 18% 14% 53% 52% 23% 10%
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $39,801 $42,624 $45,416 $46,077 $44,399 $24,346
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The operating expenses of the Colorado Portfolio may reflect a reduction of
the Investment Adviser fee, an allocation of expenses to the Investment
Adviser, or both. Had such action not been taken, the ratios would have been
as follows:
<TABLE>
<S> <C> <C> <C> <C>
Expenses/(1)/ 0.42% 0.40% 0.35%+ 0.35%+
Expenses after custodian fee reduction 0.38% -- -- --
Net investment income 5.73% 5.90% 5.40%+ 5.31%+
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten-month period ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
/(1)/The expense ratios for the year ended July 31, 1996 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 each of the prior periods have not been adjusted to
reflect this change.
See notes to financial statements
67
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Connecticut Portfolio
-----------------------------------------------------------------------
Year Ended
-----------------------------------------------------------------------
July 31, Sept. 30,
---------------------------------------------------------- ----------
1998 1997 1996 1995 1994* 1993**
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- -----------------------------------------------------------------------------------------------------------------------
Expenses/(1)/ 0.51% 0.53% 0.52% 0.53% 0.47%+ 0.46%+
Expenses after custodian fee reduction 0.50% 0.53% 0.50% -- -- --
Net investment income 5.20% 5.50% 5.49% 5.77% 5.40%+ 5.45%+
Portfolio Turnover 7% 11% 23% 29% 10% 10%
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $164,955 $174,978 $187,617 $195,276 $192,038 $159,848
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten-month period ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
/(1)/The expense ratios for the year ended July 31, 1996 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 each of the prior periods have not been adjusted to
reflect this change.
See notes to financial statements
68
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Michigan Portfolio
-----------------------------------------------------------------------
Year Ended
-----------------------------------------------------------------------
July 31, Sept. 30,
----------------------------------------------------------- ----------
1998 1997 1996 1995 1994* 1993**
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- -----------------------------------------------------------------------------------------------------------------------
Expenses/(1)/ 0.50% 0.52% 0.54% 0.48% 0.47%+ 0.44%+
Expenses after custodian fee reduction 0.48% 0.50% 0.52% -- -- --
Net investment income 5.19% 5.45% 5.50% 5.85% 5.48%+ 5.46%+
Portfolio Turnover 26% 16% 49% 54% 45% 20%
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $130,236 $150,224 $173,465 $191,263 $204,032 $187,665
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten-month period ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
/(1)/The expense ratios for the year ended July 31, 1996 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 each of the prior periods have not been adjusted to
reflect this change.
See notes to financial statements
69
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Minnesota Portfolio
------------------------------------------------------------------
Year Ended
------------------------------------------------------------------
July 31, Sept. 30,
----------------------------------------------------- ------------
1998 1997 1996 1995 1994* 1993**
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- -----------------------------------------------------------------------------------------------------------------------
Expenses/(1)/ 0.47% 0.47% 0.48% 0.47% 0.45%+ 0.40%+
Expenses after custodian fee reduction 0.45% 0.44% 0.46% -- -- --
Net investment income 5.28% 5.71% 5.69% 5.83% 5.50%+ 5.58%+
Portfolio Turnover 23% 22% 45% 76% 20% 10%
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $66,984 $70,674 $76,090 $82,968 $84,005 $67,019
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten-month period ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to
September 30, 1993.
/(1)/ The expense ratios for the year ended July 31, 1996 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 each of the prior periods have not been
adjusted to reflect this change.
See notes to financial statements
70
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
New Jersey Portfolio
----------------------------------------------------------------------
Year Ended
----------------------------------------------------------------------
July 31, Sept. 30,
--------------------------------------------------------- -----------
1998 1997 1996 1995 1994* 1993**
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- ----------------------------------------------------------------------------------------------------------------------
Expenses (1) 0.54% 0.54% 0.53% 0.52% 0.50%+ 0.50%+
Expenses after custodian fee reduction 0.52% 0.52% 0.52% -- -- --
Net investment income 5.52% 5.84% 5.82% 5.96% 5.62%+ 5.67%+
Portfolio Turnover 14% 24% 39% 54% 25% 12%
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $328,629 $352,772 $386,244 $411,038 $423,854 $393,677
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten-month period ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to
September 30, 1993.
/(1)/ The expense ratios for the year ended July 31, 1996 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 each of the prior periods have not been
adjusted to reflect this change.
See notes to financial statements
71
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Pennsylvania Portfolio
------------------------------------------------------------------------
Year Ended
------------------------------------------------------------------------
July 31, Sept. 30,
-------------------------------------------------------- --------------
1998 1997 1996 1995 1994* 1993**
- -------------------------------------------------------------------------------------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- ------------------------------------------------------------------------------------------------------------------------
Expenses/(1)/ 0.54% 0.55% 0.54% 0.49% 0.48%+ 0.50%+
Expenses after custodian fee reduction 0.50% 0.51% 0.50% -- -- --
Net investment income 5.66% 5.96% 5.90% 6.02% 5.66%+ 5.71%+
Portfolio Turnover 13% 17% 30% 44% 21% 17%
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $359,532 $402,221 $448,182 $502,250 $536,786 $497,001
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten-month period ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
/(1)/ The expense ratios for the year ended July 31, 1996 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 each of the prior periods have not been
adjusted to reflect this change .
See notes to financial statements
72
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Texas Portfolio
--------------------------------------------------------------------
Year Ended
--------------------------------------------------------------------
July 31, Sept. 30,
------------------------------------------------------ ------------
1998 1997 1996 1995 1994* 1993**
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets+
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net expenses/(1)/ 0.38% 0.37% 0.32% 0.08% 0%+ 0.03%+
Net expenses after custodian fee reduction 0.35% 0.35% 0.27% -- -- --
Net investment income 5.58% 5.79% 5.81% 6.20% 5.69%+ 5.82%+
Portfolio Turnover 17% 17% 39% 49% 27% 8%
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $17,837 $21,676 $24,367 $28,227 $27,589 $16,029
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The operating expenses of the Portfolio may reflect a reduction of the
Investment Adviser fee, an allocation of expenses to the Investment Adviser,
or both. Had such action not been taken, the ratios would have been as
follows:
<TABLE>
<S> <C> <C> <C> <C>
Expenses/(1)/ 0.42% 0.35% 0.37%+ 0.42%
Expenses after custodian fee reduction 0.37% -- -- --
Net investment income 5.71% 5.93% 5.32%+ 5.43%+
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten-month period ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
/(1)/ The expense ratios for the year ended July 31, 1996 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 each of the prior periods have not been
adjusted to reflect this change.
See notes to financial statements
73
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
1 Significant Accounting Policies
------------------------------------------------------------------------------
Arizona Municipals Portfolio (Arizona Portfolio), Colorado Municipals
Portfolio (Colorado Portfolio), Connecticut Municipals Portfolio (Connecticut
Portfolio), Michigan Municipals Portfolio (Michigan Portfolio), Minnesota
Municipals Portfolio (Minnesota Portfolio), New Jersey Municipals Portfolio
(New Jersey Portfolio), Pennsylvania Municipals Portfolio (Pennsylvania
Portfolio) and Texas Municipals Portfolio (Texas Portfolio), collectively the
Portfolios, are registered under the Investment Company Act of 1940 as
non-diversified open-end management investment companies which were organized
as trusts under the laws of the State of New York on May 1, 1992. The
Declarations of Trust permit the Trustees to issue interests in the
Portfolios. The following is a summary of significant accounting policies of
the Portfolios. The policies are in conformity with generally accepted
accounting principles.
A Investment Valuations -- 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 and options
on futures contracts listed on commodity exchanges are valued at closing
settlement prices. Over-the-counter options on financial futures contracts
are normally valued at the mean between the latest bid and asked 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 Income Taxes -- The Portfolios are treated as partnerships for federal tax
purposes. No provision is made by the Portfolios for federal or state taxes
on any taxable income of the Portfolios because each investor in the
Portfolios is ultimately responsible for the payment of any taxes. Since some
of the Portfolios' investors are regulated investment companies that invest
all or substantially all of their assets in the Portfolios, the Portfolios
normally must satisfy the applicable source of income and diversification
requirements (under the Internal Revenue Code) in order for their respective
investors to satisfy them. The Portfolios will allocate at least annually
among their respective investors each investor's distributive share of the
Portfolios' 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 Portfolios 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 each 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 a 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, a 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 a 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 a Portfolio. A
Portfolio's investment in financial futures contracts is designed only to
hedge against anticipated future changes in interest rates. Should interest
rates move unexpectedly, a Portfolio may not achieve the anticipated benefits
of the financial futures contracts and may realize a loss.
F Options on Financial Futures Contracts -- Upon the purchase of a put option
on a financial futures contract by a Portfolio, the premium paid is recorded
as an investment, the value of which is marked-to-market daily. When a
purchased option expires, a Portfolio will realize a loss in the amount of
the cost of the option. When a Portfolio enters into a closing sale
transaction, the Portfolio will realize a gain or loss depending on whether
the sales proceeds from the closing sale transaction are greater or less than
the cost of the option. When a Portfolio exercises a put option, settlement
is made in cash. The risk associated with purchasing options is limited to
the premium originally paid.
G When-issued and Delayed Delivery Transactions -- The Portfolios may engage
in when-issued or delayed delivery transactions. The Portfolios record
when-issued securities on trade date and maintain 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
74
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
basis are marked-to-market daily and begin earning interest on settlement
date.
H Other -- Investment transactions are accounted for on a trade date basis.
I Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolios. Pursuant to the custodian agreements, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances each Portfolio maintains with IBT. All significant credit
balances used to reduce each Portfolio's custodian fees are reported as a
reduction of expenses in the Statement of Operations.
J 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.
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 each 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 July 31, 1998, each Portfolio paid advisory
fees as follows:
Portfolio Amount Effective Rate*
------------------------------------------------------------------------------
Arizona $ 413,386 0.39%
Colorado 97,947 0.24%
Connecticut 703,463 0.42%
Michigan 562,200 0.40%
Minnesota 228,670 0.33%
New Jersey 1,535,921 0.45%
Pennsylvania 1,758,264 0.46%
Texas 31,780 0.16%
* Advisory fees paid as a percentage of average daily net assets.
Except as to Trustees of the Portfolios who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services
to the Portfolios out of such investment adviser fee.
Trustees of the Portfolios 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 July 31, 1998, no significant amounts have been deferred.
Certain of the officers and Trustees of the Portfolios are officers and
directors/trustees of the above organizations.
3 Investments
------------------------------------------------------------------------------
Purchases and sales of investments, other than U.S. Government securities,
purchased options and short-term obligations, for the year ended July 31,
1998 were as follows:
Arizona Portfolio
------------------------------------------------------------------------------
Purchases $24,145,210
Sales 35,138,378
Colorado Portfolio
------------------------------------------------------------------------------
Purchases $ 7,134,562
Sales 10,160,716
Connecticut Portfolio
------------------------------------------------------------------------------
Purchases $11,752,567
Sales 22,274,789
Michigan Portfolio
------------------------------------------------------------------------------
Purchases $35,222,997
Sales 52,977,352
Minnesota Portfolio
------------------------------------------------------------------------------
Purchases $15,681,830
Sales 20,575,048
New Jersey Portfolio
------------------------------------------------------------------------------
Purchases $46,163,464
Sales 75,032,585
Pennsylvania Portfolio
------------------------------------------------------------------------------
Purchases $48,254,274
Sales 87,111,676
Texas Portfolio
------------------------------------------------------------------------------
Purchases $ 3,480,795
Sales 8,284,640
75
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
4 Federal Income Tax Basis of Investments
------------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned by each Portfolio at July 31, 1998, as computed on a
federal income tax basis, are as follows:
Arizona Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 92,678,595
------------------------------------------------------------------------------
Gross unrealized appreciation $ 9,196,716
Gross unrealized depreciation (37,951)
------------------------------------------------------------------------------
Net unrealized appreciation $ 9,158,765
------------------------------------------------------------------------------
Colorado Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 36,166,584
------------------------------------------------------------------------------
Gross unrealized appreciation $ 3,298,576
Gross unrealized depreciation --
------------------------------------------------------------------------------
Net unrealized appreciation $ 3,298,576
------------------------------------------------------------------------------
Connecticut Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 151,783,349
------------------------------------------------------------------------------
Gross unrealized appreciation $ 10,802,275
Gross unrealized depreciation (26,782)
------------------------------------------------------------------------------
Net unrealized appreciation $ 10,775,493
------------------------------------------------------------------------------
Michigan Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 119,726,431
------------------------------------------------------------------------------
Gross unrealized appreciation $ 10,959,239
Gross unrealized depreciation (41,110)
------------------------------------------------------------------------------
Net unrealized appreciation $ 10,918,129
------------------------------------------------------------------------------
Minnesota Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 59,988,550
------------------------------------------------------------------------------
Gross unrealized appreciation $ 5,843,194
Gross unrealized depreciation --
------------------------------------------------------------------------------
Net unrealized appreciation $ 5,843,194
------------------------------------------------------------------------------
New Jersey Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 292,277,246
------------------------------------------------------------------------------
Gross unrealized appreciation $ 32,961,776
Gross unrealized depreciation (100,317)
------------------------------------------------------------------------------
Net unrealized appreciation $ 32,861,459
------------------------------------------------------------------------------
Pennsylvania Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 327,484,420
------------------------------------------------------------------------------
Gross unrealized appreciation $ 31,636,291
Gross unrealized depreciation (6,259,905)
------------------------------------------------------------------------------
Net unrealized appreciation $ 25,376,386
------------------------------------------------------------------------------
Texas Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 15,998,639
------------------------------------------------------------------------------
Gross unrealized appreciation $ 1,472,099
Gross unrealized depreciation --
------------------------------------------------------------------------------
Net unrealized appreciation $ 1,472,099
------------------------------------------------------------------------------
5 Line of Credit
------------------------------------------------------------------------------
The Portfolios participate with other portfolios and funds managed by BMR and
EVM and their affiliates in a committed $100 million unsecured line of credit
agreement with a group of banks. Borrowings will be made by the portfolios or
funds solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each portfolio or fund
based on its borrowings at an amount above either the Eurodollar rate or
Federal Funds rate. In addition, a fee computed at an annual rate of 0.10% on
the daily unused portion of the facility is allocated among the participating
portfolios and funds at the end of each quarter. At July 31, 1998, the
Colorado Portfolio, Michigan Portfolio, Minnesota Portfolio and New Jersey
Portfolio had balances outstanding pursuant to this line of credit of
$273,000, $21,000, $325,000 and $1,510,000 respectively. The Portfolios did
not have any significant borrowings or allocated fees during the year ended
July 31, 1998.
6 Financial Instruments
------------------------------------------------------------------------------
The Portfolios regularly trade in financial instruments with off-balance
sheet risk in the normal course of their investing activities to assist in
managing exposure to
76
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
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 a 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 July 31, 1998,
is as follows:
Futures
Contracts
Expiration Net Unrealized
Portfolio Date Contracts Position Depreciation
------------------------------------------------------------------------------
Arizona 9/98 26 U.S. Treasury Bonds Short $30,843
------------------------------------------------------------------------------
Colorado 9/98 10 U.S. Treasury Bonds Short 1,935
------------------------------------------------------------------------------
Connecticut 9/98 42 U.S. Treasury Bonds Short 8,127
------------------------------------------------------------------------------
Michigan 9/98 34 U.S. Treasury Bonds Short 34,736
------------------------------------------------------------------------------
Minnesota 9/98 12 U.S. Treasury Bonds Short 11,880
------------------------------------------------------------------------------
New Jersey 9/98 60 U.S. Treasury Bonds Short 59,400
------------------------------------------------------------------------------
Pennsylvania 9/98 96 U.S. Treasury Bonds Short 98,076
------------------------------------------------------------------------------
At July 31, 1998, the Portfolios had sufficient cash and/or securities to
cover margin requirements on open futures contracts.
77
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
INDEPENDENT AUDITORS' REPORT
To the Trustees and Investors of Arizona Municipals Portfolio, Colorado
Municipals Portfolio, Connecticut Municipals Portfolio, Michigan Municipals
Portfolio, Minnesota Municipals Portfolio, New Jersey Municipals Portfolio,
Pennsylvania Municipals Portfolio and Texas Municipals Portfolio:
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Arizona Municipals Portfolio, Colorado
Municipals Portfolio, Connecticut Municipals Portfolio, Michigan Municipals
Portfolio, Minnesota Municipals Portfolio, New Jersey Municipals Portfolio,
Pennsylvania Municipals Portfolio and Texas Municipals Portfolio as of July 31,
1998, the related statements of operations for the year then ended, the
statements of changes in net assets for the years ended July 31, 1998 and 1997
and supplementary data for each of the years in the four year period ended July
31, 1998, the ten months ended July 31, 1994, and 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 Trusts' management. Our
responsibility is to express an opinion on the 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 owned at July 31,
1998, by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other audit 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 Arizona Municipals
Portfolio, Colorado Municipals Portfolio, Connecticut Municipals Portfolio,
Michigan Municipals Portfolio, Minnesota Municipals Portfolio, New Jersey
Municipals Portfolio, Pennsylvania Municipals Portfolio and Texas Municipals
Portfolio at July 31, 1998, the results of their operations, the changes in
their net assets and their supplementary data for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 4, 1998
78
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
INVESTMENT MANAGEMENT
Eaton Vance Municipals Funds
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President and Trustee
Robert B. MacIntosh
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Municipals Portfolios
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President and Trustee
Robert B. MacIntosh
Vice President and Portfolio
Manager of Minnesota and
New Jersey Municipals Portfolios
Cynthia J. Clemson
Vice President and Portfolio
Manager of Arizona
Municipals Portfolio
William H. Ahern, Jr.
Vice President and Portfolio
Manager of Colorado and
Connecticut Municipals Portfolios
Thomas M. Metzold
Vice President and Portfolio
Manager of Texas
Municipals Portfolio
Timothy T. Browse
Vice President and Portfolio
Manager of Michigan
and Pennsylvania
Municipals Portfolios
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
79
<PAGE>
Investment Adviser of the Portfolios
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of the Funds
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
200 Clarendon Street, 16th Floor
Boston, MA 02116
Transfer Agent
First Data Investor Services Group, Inc.
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
Eaton Vance Municipals Trust
24 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
