<PAGE>
[EATON VANCE LOGO] [PICTURE OF EDUCATION]
ANNUAL REPORT SEPTEMBER 30, 1999
EATON VANCE
NATIONAL
[PICTURE OF FREEWAY] MUNICIPALS
FUND
GLOBAL MANAGEMENT-GLOBAL DISTRIBUTION
[PICTURE OF BRIDGE]
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND as of September 30, 1999
Letter to Shareholders
[PHOTO]
Thomas J. Fetter
President
Eaton Vance National Municipals Fund paid its shareholders monthly income
dividends totalling $0.637 per share for Class A shares, $0.513 for Class B
shares, $0.479 for Class C shares, and $0.149 for Class I shares (inception
date July 1, 1999) during the year ended September 30, 1999.(1) Based on the
Fund's most recent distribution and its net asset value per share on
September 30, 1999, the Fund's annualized distribution rates were 6.03% for
Class A, 5.18% for Class B, 5.09% for Class C, and 6.14% for Class I.(2) The
SEC 30-day yields on that date were 5.79% for Class A, 5.25% for Class B,
5.24% for Class C, and 6.25% for Class I.(3)
The past year has been challenging for the municipal market. At the outset,
continued low inflation provided a fairly positive environment for the
tax-exempt sector. The U.S. economy grew 4.6% in the first quarter, before
posting a more moderate 2.3% growth rate in the second quarter. While
inflation appeared to remain fairly well in check, rising energy prices and
labor cost pressures caught the eye of the Federal Reserve. In late June, the
Fed raised its Federal funds rate - a key short-term interest rate barometer
- - by 25 basis points (.25%), and repeated the move in August.
While municipal bonds gained ground on Treasuries in the first quarter, by
fall the municipal market had been affected by the uncertainty about possible
Federal Reserve actions as well as confusion over tax proposals pending in
Congress. For the year ended September 30, 1999, the Lehman Brothers 7-Year
Municipal Bond Index - a widely recognized, unmanaged index of
intermediate-term municipal bonds - posted a return of 0.57%.(4)
Municipal bonds yield 96% of Treasury yields
5.83% 9.11%
30-Year AAA rated Taxable equivalent yield
General Obligation (GO) Bonds* in 36% tax bracket
6.05%
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
September 30, 1999.
Municipal bonds remain an undervalued asset class...
Municipal bonds can be a compelling alternative for investors, especially at
their recent levels. With their competitive yields, lower volatility and
tax-exempt status, municipal bonds merit consideration from risk-conscious,
income-oriented investors. At Eaton Vance, we believe that, amid rising
surpluses and modest inflation pressures, the outlook for bonds is quite
favorable. In this climate, municipals represent a prudent way to diversify
one's investment portfolio while lowering one's tax burden.
Sincerely,
/s/ THOMAS J. FETTER
Thomas J. Fetter
President
November 11, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Performance(5) Class A Class B Class C Class I
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Returns (at net asset value)
- ------------------------------------------------- ----------------------------------
One Year -5.14% -5.90% -5.92% N.A.
Five Years 7.17 6.29 6.11 N.A.
Ten Years N.A. 6.61 N.A. N.A.
Life of Fund+ 7.15 6.70 4.18 -2.44
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- -------------------------------------------------------------------------------------
One Year -9.64% -10.38% -6.81% N.A.
Five Years 6.13 5.98 6.11 N.A.
Ten Years N.A. 6.61 N.A. N.A.
Life of Fund+ 6.21 6.70 4.18 -2.44
</TABLE>
+Inception Dates - Class A: 4/5/94; Class B: 12/19/85; Class C: 12/3/93;
Class I: 7/1/99
(1)A portion of the Fund's income could be subject to federal income tax
and/or federal alternative minimum tax. Income may be subject to state tax.
(2)The Fund's distribution rate represents actual distributions paid to
shareholders and is calculated by dividing the last distribution rate per
share (annualized) by the net asset value.
(3)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.
(4)It is not possible to invest directly in an Index.
(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. SEC 1-Year
return for Class C reflects a 1% CDSC. Past performance is no guarantee of
future results. Investment return and principal value will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
- -------------------------------------------------------------------------------
Mutual fund shares are not insured by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are
subject to investment risks, including possible loss of principal invested.
- -------------------------------------------------------------------------------
2
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND as of September 30, 1999
MANAGEMENT DISCUSSION
AN INTERVIEW WITH THOMAS M. METZOLD, VICE PRESIDENT AND PORTFOLIO MANAGER OF
NATIONAL MUNICIPALS PORTFOLIO
[PHOTO]
Thomas M. Metzold
Portfolio Manager
Q: Tom, can you give us some background on what happened in
the municipal market this year?
A: As we mentioned in the opening letter of this report, the municipal bond
market was adversely affected by rising interest rates and uncertainty
regarding future moves by the Federal Reserve Board. In addition, the demand
side of the market had a very poor year. Municipals were the forgotten asset
class, and sources of municipal demand, which typically include the
institutional, retail, and arbitrage sectors, did not demonstrate the levels
of demand they have in the past. The significant decline in demand created a
supply/demand imbalance, which resulted in declining prices and increasing
yields.
Q: Can you explain more about supply and demand in the muni market?
A: Yes. The muni market is unique in that municipals are purchased only by
people living in the United States, whereas Treasuries can be purchased by
investors all around the world. This contributes to limited demand, and
makes municipals more susceptible to supply/demand imbalances.
In addition, with the stock market doing as well as it has over the past
few years, munis were less attractive to some investors, who viewed them as
too staid or conservative. This resulted in decreased demand and was another
reason the market underperformed this year. As a result of the municipal
market's underperformance, municipals continue to be undervalued, and
therefore are an attractive asset class which can add value for investors
looking to rebalance their portfolios.
As far as the supply aspect, muni supply comes from two places: new issues
and the restructuring of existing issues. With interest rates rising as much
as they have, it has been increasingly difficult for refundings to take
place. With that aspect of supply easing, and with demand increasing, the
supply/demand equilibrium should come back into balance.
Five Largest Sector Positions+
- ------------------------------------
By total net assets
Escrowed/Prerefunded 17.7%
Industrial Development Revenue 11.8%
Insured - Electric Utilities 6.5%
Nursing Home 6.5%
Hospital 5.8%
+ Private insurance does not remove the risk associated with these investments.
Rating Distribution+
- ------------------------------------
By total net assets
[PIE CHART]
+ Portfolio Sector Positions and Rating Distribution are subject to change.
3
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND as of September 30, 1999
MANAGEMENT DISCUSSION
Q: How did the Portfolio perform in this
context?
A: While the Fund has underperformed its peer group this year, we believe
that over the longer term, it can outperform its peer group if interest
rates decline. Also, not only has the Fund offered superior income
distribution, its total return over time is still excellent. Despite
underperforming in 1999, it was still the Lipper number-two ranked fund
(Class A shares) for the five years ended September 30, 1999.* Over the long
term the Fund has an excellent track record.
Q: You mentioned asset allocation. Why should municipal bonds be a part of an
investor's portfolio?
A: Munis are very attractive from an after-tax yield perspective. If we look
at the taxable- equivalent yield of this fund, which is close to 10% for the
39.6% tax bracket, it compares quite favorably with similarly structured
asset classes with comparable credit quality.
In addition, the muni market is undervalued because of a supply/demand
imbalance. Since we are beginning to see demand increase and supply pressures
ease, munis are likely to outperform other fixed-income asset classes as the
supply/demand situation becomes more balanced.
Q: What are the benefits of being in the Fund in this uncertain investment
climate?
A: The Portfolio, with its exceptional call protection, is geared toward the
long-term. Although this may make it more susceptible to market volatility,
we believe a long-term approach affords a prudent way to capitalize on the
opportunities that exist in this complex market. We further believe that
investors should diversify across all asset classes. Munis make a lot of
sense in that context, not only because they provide excellent
diversification, but also because they are so undervalued. Right now,
compared to other fixed-income alternatives, the taxable-equivalent yields
are second-to-none. We think that makes them a very good buying opportunity
right now.
*Source: Lipper Inc. National Municipals Fund ranked #2 among 158
municipal funds for the 5 years ended 9/30/99. For the one year ended
9/30/99, National Municipals Fund ranked #239 out of 258 funds. Rankings are
for Class A shares only, ranking for other classes may vary. Rankings are
based on percentage change in net asset value and do not take sales charge
into consideration. Past performance is no guarantee of future results. It is
not possible to invest directly in a Lipper category.
4
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND as of September 30, 1999
PERFORMANCE
[MOUNTAIN CHART]
<TABLE>
<CAPTION>
Performance** Class A Class B Class C Class I
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Returns (at net asset value)
- ------------------------------------------------- ----------------------------------
One Year -5.14% -5.90% -5.92% N.A.
Five Years 7.17 6.29 6.11 N.A.
Ten Years N.A. 6.61 N.A. N.A.
Life of Fund+ 7.15 6.70 4.18 -2.44
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- -------------------------------------------------------------------------------------
One Year -9.64% -10.38% -6.81% N.A.
Five Years 6.13 5.98 6.11 N.A.
Ten Years N.A. 6.61 N.A. N.A.
Life of Fund+ 6.21 6.70 4.18 -2.44
</TABLE>
+Inception Dates - Class A: 4/5/94; Class B: 12/19/85; Class C: 12/3/93;
Class I: 7/1/99
* Source: TowersData Systems, Bethesda, MD. Investment operations commenced
12/19/85. Index information is available only at month-end; therefore, the
line comparison begins at the next month-end following the commencement of
the Fund's investment operations.
The chart compares the Fund's total return with that of the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged market index of municipal
bonds. Returns are calculated by determining the percentage change in net
asset value with all distributions reinvested. The lines on the chart
represent the total returns of $10,000 hypothetical investments in the Fund
(Class B) and in the Lehman Brothers Municipal Bond Index. An investment in
the Fund's Class A shares on 4/30/94 at net asset value would have grown to
$14,298 on September 30, 1999, $13,619 including applicable CDSC. An
investment in the Fund's Class C shares on 12/31/93 at net asset value would
have grown to $12,687 on September 30, 1999. An investment in the Fund's
Class I shares at its inception on 7/1/99 at net asset value would have grown
to $9,756 on September 30, 1999. The Index's total returns do not reflect any
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.
**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. SEC 1-Year
return for Class C reflects 1% CDSC.
- -------------------------------------------------------------------------------
Federal income tax information on distributions. For federal income tax
purposes, 99.85% of the total dividends paid by the Fund from net investment
income during the fiscal year ended September 30, 1999 was designated as an
exempt-interest dividend.
- -------------------------------------------------------------------------------
5
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND AS OF SEPTEMBER 30, 1999
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
<S> <C>
Assets
- --------------------------------------------------------
Investment in National Municipals
Portfolio, at value
(identified cost, $2,101,899,239) $2,125,544,790
Receivable for Fund shares sold 2,321,315
- --------------------------------------------------------
TOTAL ASSETS $2,127,866,105
- --------------------------------------------------------
Liabilities
- --------------------------------------------------------
Payable for Fund shares redeemed $ 4,571,009
Dividends payable 4,438,703
Payable to affiliate for Trustees' fees 1,267
Accrued expenses 2,383,832
- --------------------------------------------------------
TOTAL LIABILITIES $ 11,394,811
- --------------------------------------------------------
NET ASSETS $2,116,471,294
- --------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------
Paid-in capital $2,097,313,677
Accumulated net realized loss from
Portfolio (1,791,717)
Accumulated distributions in excess of
net investment income (2,696,217)
Net unrealized appreciation from
Portfolio (computed on the basis of
identified cost) 23,645,551
- --------------------------------------------------------
TOTAL $2,116,471,294
- --------------------------------------------------------
Class A Shares
- --------------------------------------------------------
NET ASSETS $ 211,205,554
SHARES OUTSTANDING 20,227,870
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 10.44
MAXIMUM OFFERING PRICE PER SHARE
(100 DIVIDED BY 95.25 of $10.44) $ 10.96
- --------------------------------------------------------
Class B Shares
- --------------------------------------------------------
NET ASSETS $1,764,615,872
SHARES OUTSTANDING 181,179,995
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 9.74
- --------------------------------------------------------
Class C Shares
- --------------------------------------------------------
NET ASSETS $ 140,182,340
SHARES OUTSTANDING 15,101,450
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 9.28
- --------------------------------------------------------
Class I Shares
- --------------------------------------------------------
NET ASSETS $ 467,528
SHARES OUTSTANDING 48,653
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 9.61
- --------------------------------------------------------
</TABLE>
On sales of $25,000 or more, the offering price of Class A shares is reduced.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30, 1999
<S> <C>
Investment Income
- -------------------------------------------------------
Interest allocated from Portfolio $ 146,903,416
Expenses allocated from Portfolio (9,914,546)
- -------------------------------------------------------
NET INVESTMENT INCOME FROM PORTFOLIO $ 136,988,870
- -------------------------------------------------------
Expenses
- -------------------------------------------------------
Trustees fees and expenses $ 6,086
Distribution and service fees
Class A 322,869
Class B 19,562,364
Class C 1,420,267
Transfer and dividend disbursing agent
fees 1,634,818
Registration fees 110,356
Printing and postage 103,560
Legal and accounting services 16,817
Custodian fee 4,334
Miscellaneous 132,104
- -------------------------------------------------------
TOTAL EXPENSES $ 23,313,575
- -------------------------------------------------------
NET INVESTMENT INCOME $ 113,675,295
- -------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- -------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 29,879,275
Financial futures contracts 1,881,412
- -------------------------------------------------------
NET REALIZED GAIN $ 31,760,687
- -------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(284,216,833)
Financial futures contracts 3,608,750
- -------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $(280,608,083)
- -------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(248,847,396)
- -------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $(135,172,101)
- -------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND AS OF SEPTEMBER 30, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase (Decrease) YEAR ENDED YEAR ENDED
IN NET ASSETS SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 113,675,295 $ 109,780,538
Net realized gain 31,760,687 62,170,469
Net change in unrealized appreciation
(depreciation) (280,608,083) 14,051,015
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (135,172,101) $ 186,002,022
- --------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (10,782,875) $ (4,961,910)
Class B (96,032,463) (101,970,342)
Class C (6,816,227) (4,580,088)
Class I (3,068) --
In excess of net investment income
Class B (642,529) (2,428,253)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (114,277,162) $ (113,940,593)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial interest --
Proceeds from sale of shares
Class A $ 132,294,349 $ 102,611,748
Class B 163,062,444 225,630,573
Class C 67,007,386 56,423,943
Class I 467,716 --
Issued in reorganization of EV
Traditional and EV Classic
National Municipals Funds
Class A -- 49,435,356
Class C -- 82,777,583
Net asset value of shares issued to
shareholders in
payment of distributions declared
Class A 5,807,264 2,455,264
Class B 37,369,476 40,750,734
Class C 4,191,417 2,814,562
Class I 2,734 --
Cost of shares redeemed
Class A (51,471,895) (11,442,195)
Class B (294,751,646) (301,849,492)
Class C (38,042,760) (22,311,421)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS $ 25,936,485 $ 227,296,655
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ (223,512,778) $ 299,358,084
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
NET ASSETS SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
At beginning of year $ 2,339,984,072 $ 2,040,625,988
- --------------------------------------------------------------------------------
AT END OF YEAR $ 2,116,471,294 $ 2,339,984,072
- --------------------------------------------------------------------------------
Accumulated distributions
in excess of net investment
income included in net assets
- --------------------------------------------------------------------------------
AT END OF YEAR $ (2,696,217) $ (2,345,554)
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND AS OF SEPTEMBER 30, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------
1999 1998
<S> <C> <C>
- ----------------------------------------------------------
Net asset value -- Beginning
of year $ 11.650 $ 11.260
- ----------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------
Net investment income $ 0.636 $ 0.644
Net realized and unrealized
gain (loss) (1.209) 0.398
- ----------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ (0.573) $ 1.042
- ----------------------------------------------------------
Less distributions
- ----------------------------------------------------------
From net investment income $ (0.637) $ (0.652)
- ----------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.637) $ (0.652)
- ----------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $ 10.440 $ 11.650
- ----------------------------------------------------------
TOTAL RETURN(1) (5.14)% 9.49%
- ----------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------
Net assets, end of year
(000's omitted) $211,206 $146,067
Ratios (As a percentage of
average daily net assets):
Expenses(2) 0.71% 0.71%
Expenses after custodian
fee reduction(2) 0.69% 0.69%
Net investment income 5.67% 5.60%
Portfolio Turnover of the
Portfolio 60% 28%
- ----------------------------------------------------------
</TABLE>
(1) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. 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.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND AS OF SEPTEMBER 30, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Net asset value -- Beginning
of year $ 10.870 $ 10.530 $ 9.900 $ 9.800 $ 9.410
- ----------------------------------------------------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------------------------------------------------
Net investment income $ 0.508 $ 0.523 $ 0.550 $ 0.557 $ 0.570
Net realized and unrealized
gain (loss) (1.126) 0.361 0.634 0.096 0.395
- ----------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ (0.618) $ 0.884 $ 1.184 $ 0.653 $ 0.965
- ----------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------
From net investment income $ (0.508) $ (0.531) $ (0.554) $ (0.553) $ (0.570)
In excess of net investment
income (0.004) (0.013) -- -- (0.005)
- ----------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.512) $ (0.544) $ (0.554) $ (0.553) $ (0.575)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $ 9.740 $ 10.870 $ 10.530 $ 9.900 $ 9.800
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN(1) (5.90)% 8.60% 12.33% 6.84% 10.60%
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------
Net assets, end of year
(000's omitted) $1,764,616 $2,071,078 $2,040,626 $2,101,632 $2,191,240
Ratios (As a percentage of
average daily net assets):
Expenses(2) 1.53% 1.53% 1.60% 1.55% 1.53%
Expenses after custodian
fee reduction(2) 1.51% 1.51% 1.60% 1.54% 1.52%
Net investment income 4.86% 4.87% 5.45% 5.62% 6.00%
Portfolio Turnover of the
Portfolio 60% 28% 17% 19% 54%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. 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.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND AS OF SEPTEMBER 30, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
-------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------
1999 1998
<S> <C> <C>
- ----------------------------------------------------------
Net asset value -- Beginning
of year $ 10.350 $ 10.010
- ----------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------
Net investment income $ 0.482 $ 0.493
Net realized and unrealized
gain (loss) (1.073) 0.349
- ----------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ (0.591) $ 0.842
- ----------------------------------------------------------
Less distributions
- ----------------------------------------------------------
From net investment income $ (0.479) $ (0.502)
- ----------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.479) $ (0.502)
- ----------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $ 9.280 $ 10.350
- ----------------------------------------------------------
TOTAL RETURN(1) (5.92)% 8.59%
- ----------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------
Net assets, end of year
(000's omitted) $140,182 $122,839
Ratios (As a percentage of
average daily net assets):
Expenses(2) 1.54% 1.54%
Expenses after custodian
fee reduction(2) 1.52% 1.52%
Net investment income 4.84% 4.83%
Portfolio Turnover of the
Portfolio 60% 28%
- ----------------------------------------------------------
</TABLE>
(1) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. 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.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND AS OF SEPTEMBER 30, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS I
-----------------------
PERIOD ENDED
SEPTEMBER 30, 1999(1)
<S> <C>
- --------------------------------------------------------
Net asset value -- Beginning
of period $10.000
- --------------------------------------------------------
Income (loss) from operations
- --------------------------------------------------------
Net investment income $ 0.149
Net realized and unrealized
loss (0.390)
- --------------------------------------------------------
TOTAL LOSS FROM OPERATIONS $(0.241)
- --------------------------------------------------------
Less distributions
- --------------------------------------------------------
From net investment income $(0.149)
- --------------------------------------------------------
TOTAL DISTRIBUTIONS $(0.149)
- --------------------------------------------------------
NET ASSET VALUE -- END OF
PERIOD $ 9.610
- --------------------------------------------------------
TOTAL RETURN(2) (2.44)%
- --------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------
Net assets, end of period
(000's omitted) $ 468
Ratios (As a percentage of
average daily net assets):
Expenses(3) 0.55%(4)
Expenses after custodian
fee reduction(3) 0.53%(4)
Net investment income 6.12%(4)
Portfolio Turnover of the
Portfolio 60%
- --------------------------------------------------------
</TABLE>
(1) For the period from the commencement of offering of Class I shares, July 1,
1999, to September 30, 1999.
(2) 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.
(3) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
(4) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND AS OF SEPTEMBER 30, 1999
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
Eaton Vance National Municipals Fund (the Fund) is a diversified series of
Eaton Vance Municipals Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund offers four classes of shares. Class A shares
are generally sold subject to a sales charge imposed at time of purchase.
Class B and Class C shares are sold at net asset value and are subject to a
contingent deferred sales charge (see Note 6). Class I shares are sold at net
asset value to certain institutional investors. Each class represents a pro
rata interest in the Fund, but votes separately on class-specific matters and
(as noted below) is subject to different expenses. Realized and unrealized
gains and losses 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. Net
investment income, other than class-specific expenses, is allocated daily to
each class of shares based upon the ratio of the value of each class' paid
shares to the total value of all paid shares. Each class of shares differs in
its distribution plan and certain other class specific expenses. The Fund
invests all of its investable assets in interests in National Municipals
Portfolio (the Portfolio), a New York trust, having the same investment
objective as the Fund. The value of the Fund's investment in the Portfolio
reflects the Fund's proportionate interest in the net assets of the Portfolio
(99.9% at September 30, 1999). The performance of the Fund is directly
affected by the performance of the Portfolio. The financial statements of the
Portfolio, including the portfolio of investments, are included elsewhere in
this report and should be read in conjunction with the Fund's financial
statements.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuations -- Valuation of securities by the Portfolio is
discussed in Note 1A of the Portfolio's Notes to Financial Statements, which
are included elsewhere in this report.
B Income -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the corresponding Portfolio, less all
actual and accrued expenses of the Fund determined in accordance with
generally accepted accounting principles.
C Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable, if any, and
tax-exempt income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is necessary. At
September 30, 1999, the Fund, for federal income tax purposes, had a capital
loss carryover of $1,571,525 which will reduce the taxable income arising
from future net realized gains on investments, if any, to the extent
permitted by the Internal Revenue Code, and thus will reduce the amount of
the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal income or excise tax. A portion
of such capital loss carryover was acquired through the Fund Reorganization
(see Note 8) and may be subject to certain limitations. Such capital loss
carryover will expire on September 30, 2005. Dividends paid by the Fund from
net tax-exempt interest on municipal bonds allocated from the Portfolio are
not includable by shareholders as gross income for federal income tax
purposes because the Fund and Portfolio intend to meet certain requirements
of the Internal Revenue Code applicable to regulated investment companies
which will enable the Fund to pay exempt-interest dividends. The portion of
such interest, if any, earned on private activity bonds issued after
August 7, 1986, may be considered a tax preference item to shareholders.
D Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
E Other -- Investment transactions are accounted for on a trade-date basis.
F Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
to the Fund and the Portfolio. Pursuant to the custodian agreement, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances the Fund or the Portfolio maintains with IBT. All
significant credit balances used to reduce the Fund's custodian fees are
reported as a reduction of operating expenses on the Statement of Operations.
2 Distributions to Shareholders
- -------------------------------------------
The net income of the 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 of
allocated realized gains, if any, are made at least annually. Shareholders
may reinvest capital gain distributions in additional shares of the Fund at
the net
12
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND AS OF SEPTEMBER 30, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
asset value as of the ex-dividend date. Distributions are paid in the form of
additional shares or, at the election of the shareholder, in cash.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition
or classification of income between the financial statements and tax earnings
and profits which result in 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 September 30, 1999, accumulated
distributions in excess of net investment income decreased by $251,204 and
accumulated net realized loss from Portfolio increased by $251,204 due to
permanent differences between book and tax accounting. Net investment income,
net realized gains and net assets were not affected by these
reclassifications.
3 Shares of Beneficial Interest
- -------------------------------------------
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Such shares may be issued in a number of different series (such as
the Fund and) or classes. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
CLASS A 1999 1998
<S> <C> <C>
--------------------------------------------------------------------
Sales 11,806,517 8,929,025
Issued to shareholders electing to
receive payment of distribution in Fund
shares 521,090 213,017
Redemptions (4,636,351) (994,852)
Issued to EV Traditional National
Municipals
Fund Shareholders -- 4,389,424
--------------------------------------------------------------------
NET INCREASE 7,691,256 12,536,614
--------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
CLASS B 1999 1998
--------------------------------------------------------------------
<S> <C> <C>
Sales 15,476,801 21,046,222
Issued to shareholders electing to
receive payment of distribution in Fund
shares 3,573,074 3,796,542
Redemptions (28,384,309) (28,163,550)
--------------------------------------------------------------------
NET DECREASE (9,334,434) (3,320,786)
--------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
CLASS C 1999 1998
--------------------------------------------------------------------
<S> <C> <C>
Sales 6,674,087 5,517,422
Issued to shareholders electing to
receive payment of distribution in Fund
shares 421,840 275,339
Redemptions (3,859,279) (2,196,022)
Issued to EV Classic National Municipals
Fund Shareholders -- 8,268,063
--------------------------------------------------------------------
NET INCREASE 3,236,648 11,864,802
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
CLASS I SEPTEMBER 30, 1999(1)
<S> <C>
---------------------------------------------------------------
Sales 48,369
Issued to shareholders electing to
receive
payment of distribution in Fund shares 284
---------------------------------------------------------------
NET INCREASE 48,653
---------------------------------------------------------------
</TABLE>
(1) For the period from the commencement of offering of Class I shares,
July 1, 1999, to September 30, 1999.
4 Investment Adviser Fee and Other Transactions with Affiliates
- -------------------------------------------
Eaton Vance Management (EVM) serves as the Administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report. Except as to Trustees of the Fund and the
Portfolio who are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their services to the Fund out of the
investment adviser fee earned by BMR. The Fund was informed that Eaton Vance
Distributors, Inc. (EVD), a subsidiary of EVM and the Fund's principal
underwriter, received $75,070 as its portion of the sales charge on sales of
Class A shares for the year ended September 30, 1999.
Certain officers and Trustees of the Fund and of the Portfolio are officers
of the above organizations.
5 Distribution and Service Plans
- -------------------------------------------
The Fund has in effect distribution plans for Class B shares (Class B Plan)
and Class C shares (Class C Plan) pursuant to Rule 12b-1 under the Investment
Company Act of 1940 and a service plan for Class A shares (Class A Plan)
(collectively, the Plans). The Class B and Class C Plans require the Fund to
pay EVD amounts equal to 1/365 of 0.75% of the Fund's average daily net
assets attributable to Class B and Class C shares for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during
13
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND AS OF SEPTEMBER 30, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
any period in which there are no outstanding Uncovered Distribution Charges,
which are equivalent to the sum of (i) 5% and 6.25% of the aggregate amount
received by the Fund for the Class B and Class C shares sold, respectively,
plus (ii) interest calculated by applying the rate of 1% over the prevailing
prime rate to the outstanding balance of Uncovered Distribution Charges of
EVD of each respective class reduced by the aggregate amount of contingent
deferred sales charges (see Note 6) and daily amounts theretofore paid to EVD
by each respective class. The Fund paid or accrued $14,820,158 and $1,065,200
for Class B and Class C shares, respectively, to or payable to EVD for the
year ended September 30, 1999, representing 0.75% of the average daily net
assets for Class B and Class C shares. At September 30, 1999, the amount of
Uncovered Distribution Charges EVD calculated under the Plans was
approximately $6,408,000 and $14,115,000 for Class B and Class C shares,
respectively.
The Plans authorize the Fund to make payments of service fees to EVD,
investment dealers and other persons in amounts not exceeding 0.25% of the
Fund's average daily net assets attributable to Class A, Class B, and
Class C shares for each fiscal year. The Trustees initially implemented the
Plans by authorizing the Fund to make quarterly payments of service fees to
EVD and investment dealers equal to 0.25% per annum of the Fund's average
daily net assets attributable to 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. On October 4, 1999, the Trustees approved service fee
payments equal to 0.25% per annum of the Fund's average daily net assets
attributable to Class A and Class B shares for any fiscal year on shares of
the Fund sold on or after October 12, 1999. The Class C Plan permits the Fund
to make monthly payments of service fees in amounts not expected to exceed
0.25% of the Fund's average daily net assets attributable to Class C shares
for any fiscal year. 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 the Fund
to EVD, and, as such, are not subject to automatic discontinuance when there
are no outstanding Uncovered Distribution Charges of EVD. Service fee
payments for the year ended September 30, 1999 amounted to $322,869,
$4,742,206, and $355,067 for Class A, Class B, and Class C shares,
respectively.
6 Contingent Deferred Sales Charge
- -------------------------------------------
A contingent deferred sales charge (CDSC) generally is imposed on redemptions
of Class B shares made within six years of purchase and on redemptions of
Class C shares made within one year of purchase. Generally, the CDSC is based
upon the lower of the net asset value at date of redemption or date of
purchase. No charge is levied on shares acquired by reinvestment of dividends
or capital gains distributions. Class B 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. Class C
shares will be subject to a 1% CDSC if redeemed within one year of purchase.
No CDSC is levied on shares which have been sold to EVM or its affiliates or
to their respective employees or clients and may be waived under certain
other limited conditions. CDSC charges are paid to EVD to reduce the amount
of Uncovered Distribution Charges calculated under the Fund's Distribution
Plan (see Note 5). CDSC charges received when no Uncovered Distribution
Charges exist will be credited to the Fund. EVD received approximately
$1,980,000 and $80,000 of CDSC paid by shareholders for Class B shares and
Class C shares, respectively, for the year ended September 30, 1999.
7 Investment Transactions
- -------------------------------------------
Increases and decreases in the Fund's investment in the National Municipals
Portfolio aggregated $375,986,994 and $478,708,432, respectively, for the
year ended September 30, 1999.
8 Transfer of Net Assets
- -------------------------------------------
On October 1, 1997, the EV Marathon National Municipals Fund acquired the net
assets of the EV Traditional National Municipals Fund and EV Classic National
Municipals Fund pursuant to an Agreement and Plan of Reorganization dated
June 23, 1997. In accordance with the agreement, EV Marathon National
Municipals Fund, at the closing, issued 4,389,424 Class A shares and
8,268,063 Class C shares of the Fund having an aggregate value of $49,435,356
and $82,777,583, respectively. As a result, the Fund issued one Class A share
and one Class C share for each share of EV Traditional National Municipals
Fund and EV Classic National Municipals Fund, respectively. The transaction
was structured for tax purposes to qualify as a tax free reorganization under
the Internal Revenue Code. The EV Traditional National Municipals Fund's and
EV Classic National Municipals Fund's net assets at the date of the
transaction were $49,435,356 and $82,777,583, respectively, including
$3,854,847 and $6,655,724 of unrealized appreciation. Directly after the
merger, the combined net assets of the Eaton Vance National Municipals Fund
(formerly "EV Marathon National Municipals Fund") were $2,172,838,927 with a
net asset value of $11.26, $10.53 and $10.01 for Class A, Class B and
Class C shares, respectively.
14
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND AS OF SEPTEMBER 30, 1999
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS
OF EATON VANCE MUNICIPALS TRUST
- ---------------------------------------------
We have audited the accompanying statement of assets and liabilities of Eaton
Vance National Municipals Fund (one of the series constituting Eaton Vance
Municipals Trust) as of September 30, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
the years ended September 30, 1999 and 1998 and the financial highlights for
each of the years in the five-year period ended September 30, 1999. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Eaton Vance
National Municipals Fund at September 30, 1999, and the results of its
operations, the changes in its net assets, and its financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 29, 1999
15
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
PORTFOLIO OF INVESTMENTS
TAX-EXEMPT INVESTMENTS -- 99.8%
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Assisted Living -- 5.0%
- -------------------------------------------------------------------------------
$ 6,035 Arizona Health Facilities Authority,
(Care Institute, Inc. - Mesa),
7.625%, 1/1/26 $ 6,002,773
17,070 Bell County, TX, Health Facilities
Authority, (Care Institute, Inc.,
Texas), 9.00%, 11/1/24 18,777,171
3,060 Chester, PA, IDA, (Senior LifeChoice of
Kimberton), (AMT), 8.50%, 9/1/25 3,355,810
5,000 Chester, PA, IDA, (Senior LifeChoice of
Paoli, L.P.), (AMT), 8.05%, 1/1/24 5,378,950
4,960 Delaware, PA, IDA, (Glen Riddle), (AMT),
8.625%, 9/1/25 5,469,194
10,000 Glen Cove, NY, IDA, (Regency at Glen
Cove), 9.50%, 7/1/12 10,487,300
15,000 Illinois Development Finance Authority,
(Care Institute, Inc. - Illinois),
7.80%, 6/1/25 15,745,050
4,605 New Jersey EDA, (Chelsea at East
Brunswick), (AMT), 8.25%, 10/1/20 4,900,917
9,715 New Jersey EDA, (Forsgate), (AMT),
8.625%, 6/1/25 10,779,375
4,935 North Syracuse Village Housing
Authority, NY, (AJM Senior Housing,
Inc., Janus Park), 8.00%, 6/1/24 4,760,202
7,915 Roseville, MN, Elder Care Facility,
(Care Institute, Inc. - Roseville),
7.75%, 11/1/23 7,770,393
12,430 St. Paul, MN, Housing and Redevelopment,
(Care Institute, Inc. - Highland),
8.75%, 11/1/24 13,816,194
- -------------------------------------------------------------------------------
$ 107,243,329
- -------------------------------------------------------------------------------
Cogeneration -- 5.6%
- -------------------------------------------------------------------------------
$22,150 Maryland Energy Cogeneration, (AES
Warrior Run), (AMT), 7.40%, 9/1/19 $ 23,381,097
30,775 New Jersey EDA, (Vineland Cogeneration),
(AMT), 7.875%, 6/1/19 32,423,617
12,950 Palm Beach County, FL, (Osceola Power),
(AMT), 6.95%, 1/1/22(1) 7,834,750
6,100 Pennsylvania EDA, (Northampton
Generating), (AMT), 6.50%, 1/1/13 6,199,247
18,450 Pennsylvania EDA, (Northampton
Generating), (AMT), 6.60%, 1/1/19 18,984,127
7,000 Pennsylvania EDA, (Northampton
Generating), Junior Liens, (AMT),
6.875%, 1/1/11 7,123,900
5,000 Pennsylvania EDA, (Northampton
Generating), Junior Liens, (AMT),
6.95%, 1/1/21 5,113,400
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Cogeneration (continued)
- -------------------------------------------------------------------------------
$35,000 Robbins, Cook County, IL, (Robbins
Resource Recovery Partners, L.P.),
8.375%, 10/15/16 $ 18,812,500
- -------------------------------------------------------------------------------
$ 119,872,638
- -------------------------------------------------------------------------------
Economic Development Revenue -- 1.0%
- -------------------------------------------------------------------------------
$21,775 New Jersey EDA, (Continental Airlines),
(AMT), 6.25%, 9/15/29 $ 21,185,768
- -------------------------------------------------------------------------------
$ 21,185,768
- -------------------------------------------------------------------------------
Education -- 1.4%
- -------------------------------------------------------------------------------
$ 4,130 California Educational Facilities
Authority, (Stanford University),
Variable Rate, 6/1/27(2) $ 3,558,780
12,500 Houston, TX, Higher Education Finance
Corp., Variable Rate, 5/15/23(2)(3) 10,742,750
9,000 New York Dormitory Authority, (State
University Educational Facilities),
7.50%, 5/15/11 10,408,230
5,000 Vermont Educational and Health Buildings
Financing Agency, (Middlebury College),
5.00%, 11/1/38 4,265,550
- -------------------------------------------------------------------------------
$ 28,975,310
- -------------------------------------------------------------------------------
Electric Utilities -- 1.4%
- -------------------------------------------------------------------------------
$ 9,500 Intermountain Power Agency, UT,
5.00%, 7/1/23 $ 8,419,660
22,000 Long Island Power Authority, NY,
Electric System Revenue,
5.50%, 12/1/29(4) 20,545,140
- -------------------------------------------------------------------------------
$ 28,964,800
- -------------------------------------------------------------------------------
Escrowed / Prerefunded -- 17.7%
- -------------------------------------------------------------------------------
$ 6,317 Albuquerque, NM, Retirement Facilities,
(La Vida Liena Retirement Center),
Prerefunded to 2/1/03, 8.625%, 2/1/20 $ 7,244,099
42,500 Bakersfield, CA, (Bakersfield Assisted
Living Center), Escrowed to Maturity,
0.00%, 4/15/21 11,562,550
2,200 Bexar County, TX, Health Facilities,
(St. Luke's Lutheran), Escrowed to
Maturity, 7.00%, 5/1/21 2,556,092
171,955 Colorado Health Facilities Authority,
(Liberty Heights), Escrowed to Maturity,
0.00%, 7/15/24 37,168,073
244,325 Dawson Ridge, CO, Metropolitan District
#1, Escrowed to Maturity,
0.00%, 10/1/22 52,065,657
11,175 Dawson Ridge, CO, Metropolitan District
#1, Escrowed to Maturity,
0.00%, 10/1/22 2,381,392
6,000 District of Columbia, (Washington
Hospital Center Issue - Medlantic
Healthcare Group, Inc.), Prerefunded to
8/15/02, 7.125%, 8/15/19 6,537,900
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Escrowed / Prerefunded (continued)
- -------------------------------------------------------------------------------
$ 7,000 Florida, (Mid-Bay Bridge Authority),
Escrowed to Maturity, 6.875%, 10/1/22 $ 8,037,050
4,135 Hazelton Luzerne, PA, (Saint Joseph
Medical Center), Prerefunded to 7/1/03,
8.375%, 7/1/12 4,675,693
101,555 Illinois Development Finance Authority,
(Regency Park), Escrowed to Maturity,
0.00%, 7/15/23 21,099,067
60,360 Illinois Development Finance Authority,
(Regency Park), Escrowed to Maturity,
0.00%, 7/15/25 10,988,538
4,650 Illinois HEFA, (Chicago Osteopathic
Health Systems), Escrowed to Maturity,
7.125%, 5/15/11 5,252,500
4,500 Illinois HEFA, (Chicago Osteopathic
Health Systems), Prerefunded to
11/15/19, 7.25%, 5/15/22 5,247,270
11,395 Louisiana Public Facilities Authority,
(Southern Baptist Hospitals, Inc.),
Escrowed to Maturity, 8.00%, 5/15/12 13,366,563
5,675 Maricopa County, AZ, IDA, (Place Five
and The Greenery), Escrowed to Maturity,
6.625%, 1/1/27 6,378,586
1,000 Maricopa County, AZ, IDA, Multifamily,
Escrowed to Maturity, 6.45%, 1/1/17 1,096,290
41,015 Massachusetts Turnpike Authority,
Escrowed to Maturity, (FGIC),
5.125%, 1/1/23 38,048,385
4,300 Mille Lacs Capital Improvements, MN,
(Mille Lacs Band of Chippewa Indians),
Prerefunded to 11/1/02, 9.25%, 11/1/12 4,977,594
5,000 Mississippi Hospital Equipment and
Facilities Authority, (Magnolia
Hospital), Prerefunded to 10/1/01,
7.375%, 10/1/21 5,377,850
100,000 Mississippi Housing Finance Corp.,
Single Family, Escrowed to Maturity,
(AMT), 0.00%, 6/1/15 40,949,000
22,500 New Jersey Sports and Exposition
Authority, (Monmouth Park), Prerefunded
to 1/1/05, 8.00%, 1/1/25 26,379,900
6,105 North Salt Lake Municipal Building
Authority, Davis County, UT, Prerefunded
to 12/1/02, 8.625%, 12/1/17 7,033,876
46,210 San Joaquin Hills Transportation
Corridor Agency, CA, Toll Road Bonds,
Escrowed to Maturity, 0.00%, 1/1/20 14,487,297
72,685 San Joaquin Hills Transportation
Corridor Agency, CA, Toll Road Bonds,
Escrowed to Maturity, 0.00%, 1/1/21 21,342,497
45,045 San Joaquin Hills Transportation
Corridor Agency, CA, Toll Road Bonds,
Escrowed to Maturity, 0.00%, 1/1/23 11,732,421
15,000 San Joaquin Hills Transportation
Corridor Agency, CA, Toll Road Bonds,
Escrowed to Maturity, 0.00%, 1/1/25 3,463,050
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Escrowed / Prerefunded (continued)
- -------------------------------------------------------------------------------
$ 5,435 South Dakota HEFA, (Prairie Lakes Health
Care), Prerefunded to 04/1/03,
7.25%, 4/1/22 $ 5,991,544
- -------------------------------------------------------------------------------
$ 375,440,734
- -------------------------------------------------------------------------------
Gas Utilities -- 0.2%
- -------------------------------------------------------------------------------
$ 5,250 Philadelphia, PA, Natural Gas Works,
Variable Rate, 7/1/28(2) $ 3,902,745
- -------------------------------------------------------------------------------
$ 3,902,745
- -------------------------------------------------------------------------------
General Obligations -- 1.6%
- -------------------------------------------------------------------------------
$10,250 Florida Board of Education,
4.75%, 6/1/28(4) $ 8,622,300
10,190 Georgia, 4.25%, 8/1/18(4) 8,512,013
15,000 North East Independent School District,
TX, 4.50%, 10/1/28 11,830,650
4,800 Texas, Variable Rate, 8/1/24(2)(3) 4,279,872
2,080 Texas, Variable Rate, 8/1/29(2)(3) 1,798,347
- -------------------------------------------------------------------------------
$ 35,043,182
- -------------------------------------------------------------------------------
Hospital -- 5.8%
- -------------------------------------------------------------------------------
$ 6,500 Arizona Health Facilities Authority,
(Phoenix Memorial Hospital),
8.20%, 6/1/21 $ 6,674,005
2,325 Berlin, MD, (Atlantic General Hospital),
8.375%, 6/1/22 2,446,388
22,000 Colorado Health Facilities Authority,
(Rocky Mountain Adventist),
6.625%, 2/1/22 20,250,780
4,000 Corinth and Alcorn County, MS, (Magnolia
Registered Health Center),
5.50%, 10/1/21 3,531,000
300 Corinth and Alcorn County, MS, (Magnolia
Registered Health Center),
5.50%, 10/1/21 264,825
4,000 Crossville, TN, HEFA, (Cumberland
Medical Center), 6.75%, 11/1/12 4,162,360
3,775 Hawaii State Department of Budget and
Finance, (Wahiawa General Hospital),
7.50%, 7/1/12 3,953,406
1,000 Illinois Health Facilities Authority,
(Holy Cross Hospital), 6.70%, 3/1/14 1,059,760
2,650 Illinois Health Facilities Authority,
(Holy Cross Hospital), 6.75%, 3/1/24 2,784,752
4,500 Indiana Health Facility Financing
Authority, (Memorial Hospital and Health
Care Center), 7.40%, 3/1/22 4,711,905
8,010 Louisiana Public Facilities Authority,
(General Health Systems),
6.80%, 11/1/16 8,398,966
10,000 Maricopa County, AZ, IDA, (Mayo
Foundation), Residual Certificates,
Variable Rate, 11/15/37(2)(3) 7,883,800
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Hospital (continued)
- -------------------------------------------------------------------------------
$ 2,000 Marshall County, AL, (Guntersville-Arab
Medical Center), 7.00%, 10/1/09 $ 2,091,260
2,000 Marshall County, AL, (Guntersville-Arab
Medical Center), 7.00%, 10/1/13 2,094,120
13,815 Massachusetts HEFA, (Partners Healthcare
System), 5.25%, 7/1/29 12,133,853
3,500 Orange County, FL, HFA, (Westminster
Community Care), 6.75%, 4/1/34 3,500,000
9,000 Philadelphia, PA, HEFA, (Graduate Health
System), 6.625%, 7/1/21(1) 3,330,000
2,250 Philadelphia, PA, HEFA, (Graduate Health
System), 7.25%, 7/1/18(1) 832,500
3,075 Prince George's County, MD, (Greater
Southeast Healthcare System),
6.375%, 1/1/23(1) 1,382,766
7,750 Rhode Island HEFA, (Saint Joseph Health
Services), 5.50%, 10/1/29 6,678,252
25,000 Rochester, MN, (Mayo Clinic),
5.50%, 11/15/27 24,148,750
- -------------------------------------------------------------------------------
$ 122,313,448
- -------------------------------------------------------------------------------
Hotel -- 0.1%
- -------------------------------------------------------------------------------
$ 4,205 Niagara County, NY IDA, (Wintergarden
Inn Associates), 9.75%, 6/1/11(1) $ 1,660,975
- -------------------------------------------------------------------------------
$ 1,660,975
- -------------------------------------------------------------------------------
Housing -- 5.3%
- -------------------------------------------------------------------------------
$ 3,000 ABAG Finance Authority for Nonprofit
Corp., CA, (Civic Center Drive
Apartments), (AMT), 6.375%, 9/1/32 $ 2,999,790
7,505 Arkansas Development Finance Authority,
MFMR, (Park Apartments), (AMT),
5.95%, 12/1/28 7,004,416
6,200 Bexar County, TX, Housing Finance Corp.,
(Arboretum Apartments), (AMT),
6.10%, 8/1/36 6,154,368
7,000 Bexar County, TX, Housing Finance Corp.,
(North Knoll Apartments), 5.90%, 4/1/37 6,579,930
9,350 California Housing Finance Agency, RIBS,
(AMT), Variable Rate, 8/1/23(2) 10,121,375
12,000 California Statewide Communities
Development Authority, (Chesapeake Bay
Apartments), 6.00%, 6/1/32 11,396,280
6,750 California Statewide Communities
Development Authority, (Nantucket Bay
Apartments), 6.00%, 6/1/32 6,410,407
2,500 California Statewide Communities
Development Authority, (Oaks at Sunset
Apartments), 6.00%, 6/1/36 2,370,100
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Housing (continued)
- -------------------------------------------------------------------------------
$ 7,800 California Statewide Communities
Development Authority, (San Luis Bay
Village Apartments), (AMT),
6.25%, 9/1/36 $ 7,777,146
5,000 Colorado HFA, Single Family Housing,
(AMT), 7.55%, 11/1/27 5,498,850
1,890 El Paso County, TX, Housing Finance
Corp., (San Jose Ltd.), (AMT),
6.00%, 8/1/31 1,871,270
3,750 El Paso County, TX, Housing Finance
Corp., (San Jose Ltd.), (AMT),
6.10%, 8/1/31 3,713,212
10,800 Lake Creek, CO, (Affordable Housing
Corp.), 6.25%, 12/1/23 10,320,156
8,000 Los Angeles County Housing Authority,
CA, (Corporate Fund for Housing),
10.50%, 12/1/29 7,926,080
995 Louisiana Public Facilities Authority,
(Eden Point), 6.25%, 3/1/34 924,992
1,455 Maricopa County, AZ, IDA, (National
Health Facilities II), 6.375%, 1/1/19 1,399,521
6,830 Minneapolis, MN, Community Development,
Multifamily Housing, (Lindsay Brothers),
6.60%, 12/1/18 6,792,503
5,820 Montana Board of Housing, Single Family,
(AMT), 5.45%, 6/1/27 5,389,902
8,300 Speedway Industrial, IN, (Hermitage
Apartments), (AMT), 6.00%, 5/1/31 7,873,048
- -------------------------------------------------------------------------------
$ 112,523,346
- -------------------------------------------------------------------------------
Industrial Development Revenue -- 11.8%
- -------------------------------------------------------------------------------
$ 7,500 Austin, TX, (Cargoport Development LLC),
(AMT), 8.30%, 10/1/21 $ 7,880,550
2,000 California Pollution Control Financing
Authority, (Laidlaw Environmental),
(AMT), 6.70%, 7/1/07 2,020,040
2,000 Camden County, NJ, (Holt Hauling),
(AMT), 9.875%, 1/1/21 2,358,280
6,050 Carbon County, UT, (Laidlaw
Environmental), (AMT), 7.50%, 2/1/10 6,566,972
6,000 Clark County, NV, (Nevada Power), RITES,
(AMT), Variable Rate, 10/1/30(2) 5,346,480
5,000 Connecticut Development Authority,
(Connecticut Light and Power), Variable
Rate, 9/1/28(2)(3) 4,266,700
6,500 Connecticut Development Authority,
(Western Mass Electric), Variable Rate,
9/1/28(2)(3) 5,554,705
13,550 Courtland, AL, (Champion International
Corp.), (AMT), 7.00%, 6/1/22 14,244,980
31,500 Denver, CO, Airport Special Facilities,
(United Airlines), (AMT),
6.875%, 10/1/32 32,395,860
8,000 Effingham County, GA, Solid Waste
Disposal, (Fort James), (AMT),
5.625%, 7/1/18 7,633,920
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Industrial Development Revenue (continued)
- -------------------------------------------------------------------------------
$13,480 Gulf Coast, TX, Waste Disposal,
(Champion International Corp.), (AMT),
6.875%, 12/1/28 $ 14,269,793
5,928 Gwinnett County, GA,
(Plastics/Packaging, Inc.), (AMT),
10.75%, 5/1/13(1) 2,193,201
6,435 Kimball, NE, EDA, (Clean Harbors, Inc.),
10.75%, 9/1/26 6,794,330
7,500 Little River County, AR,
(Georgia-Pacific Corp.), (AMT),
5.60%, 10/1/26 6,771,675
6,500 Los Angeles, CA, Regional Airports
Improvement Corp., (LAXFuel), (AMT),
6.50%, 1/1/32 6,613,945
5,000 McMinn County, TN, (Calhoun Newsprint
Co. - Bowater, Inc.), (AMT),
7.40%, 12/1/22 5,352,750
10,000 Michigan Strategic, (S.D. Warren Co.),
7.375%, 1/15/22 10,635,400
15,000 Michigan Strategic, (S.D. Warren Co.),
(AMT), 7.375%, 1/15/22 15,953,100
3,810 Middleboro, MA, (Read Corp.),
9.50%, 10/1/10 3,972,573
17,000 New Jersey EDA, (Holt Hauling),
7.75%, 3/1/27 18,192,890
1,500 New Jersey EDA, (Holt Hauling), (AMT),
7.90%, 3/1/27 1,625,565
1,000 Ohio Solid Waste Revenue, (Republic
Engineered Steels, Inc.), (AMT),
9.00%, 6/1/21 1,053,690
22,600 Peninsula Ports Authority, VA, (Zeigler
Coal), 6.90%, 5/2/22 22,125,400
10,000 Pennsylvania, IDA, (Sun Company), (AMT),
7.60%, 12/1/24 10,885,500
2,585 Riverdale Village, IL, (ACME Metals,
Inc.), (AMT), 7.90%, 4/1/24(5) 2,223,100
2,000 Riverdale Village, IL, (ACME Metals,
Inc.), (AMT), 7.95%, 4/1/25(5) 1,720,000
2,285 Savannah, GA, (Intercat-Savannah, Inc.),
(AMT), 9.75%, 7/1/10 1,763,197
3,810 Savannah, GA, EDA, (Intercat-Savannah,
Inc.), (AMT), 9.00%, 1/1/15 2,929,509
2,000 Skowhegan, ME, (S.D. Warren Co.), (AMT),
6.65%, 10/15/15 2,034,180
3,500 Toole County, UT, Pollution Control,
(Laidlaw Environmental), (AMT),
7.55%, 7/1/27 3,698,170
18,500 Valdez, AK, (British Petroleum),
Variable Rate, 8/1/25(2)(3) 17,891,720
4,000 Yavapai County, AZ, IDA, (Citizens
Utilities Co.), (AMT), 5.45%, 6/1/33 3,939,440
- -------------------------------------------------------------------------------
$ 250,907,615
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Insured-Education -- 0.8%
- -------------------------------------------------------------------------------
$ 7,500 Massachusetts Industrial Financing
Authority, (Tufts University), (MBIA),
4.75%, 2/15/28 $ 6,251,175
12,000 Virginia College, Building Authority,
Educational Facility, (Washington and
Lee University), (MBIA), 5.25%, 1/1/31 11,190,360
- -------------------------------------------------------------------------------
$ 17,441,535
- -------------------------------------------------------------------------------
Insured-Electric Utilities -- 6.5%
- -------------------------------------------------------------------------------
$10,000 Brazos River Authority, TX, (Houston
Lighting and Power Co.), (AMBAC), (AMT),
5.05%, 11/1/18(4) $ 9,100,800
11,000 Hawaii Budget and Finance Department,
(Hawaiian Electric Co.), (AMBAC), (AMT),
5.75%, 12/1/18(4) 10,755,470
9,000 Intermountain Power Agency, UT, (MBIA),
5.00%, 7/1/19 8,095,590
22,000 Intermountain Power Agency, UT, (MBIA),
5.75%, 7/1/19 21,907,820
10,000 Intermountain Power Agency, UT, (MBIA),
6.00%, 7/1/16(4) 10,374,300
10,000 Long Island Power Authority, NY, (FSA),
5.125%, 12/1/22 9,117,500
10,000 Los Angeles, CA, Department of Water and
Power, (MBIA), 5.00%, 10/15/33 8,785,300
12,500 Matagorda County, TX, Navigation
District, (Houston Lighting), (AMBAC),
(AMT), 5.125%, 11/1/28 11,074,750
26,000 Piedmont, SC, Municipal Power Agency,
(MBIA), 4.75%, 1/1/25 21,519,940
16,500 Sacramento, CA, Municipal Utility
District, (MBIA), Variable Rate,
11/15/15(2) 16,706,250
15,350 South Carolina Public Services, RIBS,
(FGIC), Variable Rate, 1/1/25(2)(3) 11,186,313
- -------------------------------------------------------------------------------
$ 138,624,033
- -------------------------------------------------------------------------------
Insured-General Obligations -- 2.6%
- -------------------------------------------------------------------------------
$14,000 Chicago, IL, Board of Education, (FGIC),
0.00%, 12/1/29 $ 2,279,340
25,725 Dallas County, TX, Utility and
Reclamation District, (AMBAC),
5.875%, 2/15/29(6) 25,561,132
10,000 Lancaster, PA, (FGIC), 4.50%, 5/1/28 7,955,100
5,330 McGuffey, PA, School District, (AMBAC),
4.75%, 8/1/28 4,436,905
3,125 Spring Ford, PA, School District,
(FGIC), 4.75%, 3/1/25 2,631,188
3,950 Umatilla County, OR, School District,
(MBIA), Variable Rate, 6/15/14(2)(3) 3,518,344
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Insured-General Obligations (continued)
- -------------------------------------------------------------------------------
$10,000 University of Vermont and State
Agricultural College, VT, (MBIA),
4.75%, 10/1/38 $ 8,017,800
- -------------------------------------------------------------------------------
$ 54,399,809
- -------------------------------------------------------------------------------
Insured-Hospital -- 1.0%
- -------------------------------------------------------------------------------
$15,460 Maryland HEFA, (Medlantic/Helix Issue),
(FSA), 5.25%, 8/15/38 $ 14,057,160
7,000 Montgomery County, PA, HEFA, (Abington
Memorial Hospital) (AMBAC), Variable
Rate, 7/5/11(2) 7,770,000
- -------------------------------------------------------------------------------
$ 21,827,160
- -------------------------------------------------------------------------------
Insured-Housing -- 0.4%
- -------------------------------------------------------------------------------
$ 7,525 SCA Multifamily Mortgage, Industrial
Development Board, Hamilton County, TN,
(FSA), (AMT), 7.35%, 1/1/30 $ 8,126,925
- -------------------------------------------------------------------------------
$ 8,126,925
- -------------------------------------------------------------------------------
Insured-Industrial Development Revenue -- 0.5%
- -------------------------------------------------------------------------------
$11,950 Chicago, IL, (The Peoples Gas Light and
Coke Company), RIBS, (AMBAC), (AMT),
Variable Rate, 12/1/23(2)(3) $ 11,250,089
- -------------------------------------------------------------------------------
$ 11,250,089
- -------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 3.9%
- -------------------------------------------------------------------------------
$13,500 East Bay, CA, Municipal Utility
District, (MBIA), 4.75%, 6/1/34 $ 11,295,720
17,500 East Bay, CA, Municipal Utility
District, (MBIA), 4.75%, 6/1/28(4) 14,913,150
7,000 George L. Smith, (Georgia World Congress
Center-Domed Stadium), (MBIA), (AMT),
5.50%, 7/1/20(6) 6,562,570
9,800 Metropolitan Pier and Exposition
Authority, IL, (McCormick Place
Expansion), RIBS, (MBIA), Variable Rate,
6/15/27(2)(3) 10,643,682
4,500 Pennsylvania Turnpike Commission Oil
Franchise Tax, (AMBAC), Variable Rate,
12/1/27(2)(3) 2,994,930
3,415 Regional Transportation Authority, LA,
(FGIC), 0.00%, 12/1/12 1,669,218
10,935 Regional Transportation Authority, LA,
(FGIC), 0.00%, 12/1/15 4,379,358
10,000 Regional Transportation Authority, LA,
(FGIC), 0.00%, 12/1/21 2,732,200
20,000 South Orange County, CA, Public
Financing Authority, (FGIC), Variable
Rate, 8/15/15(4) 19,450,000
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Insured-Special Tax Revenue (continued)
- -------------------------------------------------------------------------------
$ 7,000 Utah Municipal Finance Corp., Local
Government Revenue, (FSA), 0.00%, 3/1/10 $ 4,038,160
6,000 Utah Municipal Finance Corp., Local
Government Revenue, (FSA),
0.00%, 3/1/11 3,247,020
- -------------------------------------------------------------------------------
$ 81,926,008
- -------------------------------------------------------------------------------
Insured-Transportation -- 5.4%
- -------------------------------------------------------------------------------
$ 1,680 Central Puget Sound, WA, Transportation
Authority, (FGIC), 4.75%, 2/1/28 $ 1,382,623
12,000 Florida Turnpike Authority, (FSA),
4.50%, 7/1/28(4) 9,581,760
8,750 Manchester Airport, NH, (MBIA),
4.50%, 1/1/28 6,772,675
19,000 Massachusetts State Turnpike Authority,
(FGIC), 5.00%, 1/1/20 17,552,010
14,400 Metropolitan Washington, DC Airport
Authority, (MBIA), Variable Rate,
4/1/21(2)(3) 14,010,912
18,200 Mobile, AL, Airport Authority, (MBIA),
6.375%, 10/1/14(4) 19,526,780
15,250 New Hampshire Turnpike System, (FGIC),
4.75%, 4/1/29 12,673,818
10,000 Ohio Turnpike Commission, (FGIC),
4.50%, 2/15/24 8,074,700
8,000 Ohio Turnpike Commission, (FGIC),
4.75%, 2/15/28 6,667,920
10,000 Triborough Bridge and Tunnel Authority,
NY, (MBIA), Variable Rate, 1/1/19(2)(3) 10,276,400
10,000 West Virginia, (FGIC), 4.50%, 6/1/23 8,143,300
- -------------------------------------------------------------------------------
$ 114,662,898
- -------------------------------------------------------------------------------
Insured-Water and Sewer -- 3.8%
- -------------------------------------------------------------------------------
$31,125 Atlanta, GA, (Water and Wastewater),
(FGIC), 5.00%, 11/1/38 $ 26,553,049
20,980 Chicago, IL, Wastewater Transmission,
(MBIA), 0.00%, 1/1/26 4,332,160
7,150 Harrisburg, PA, Water Revenue Bonds,
RIBS, (FGIC), Variable Rate, 8/11/16(2) 6,560,125
15,000 Honolulu, HI, City and County Waterworks
System Revenue, (FGIC), 4.50%, 7/1/28 11,925,300
11,645 King County, WA, Sewer, (FGIC),
5.25%, 1/1/35 10,361,605
7,100 Louisville and Jefferson County, KY,
Metropolitan Sewer District and Drainage
System Revenue, (FGIC), 4.75%, 5/15/28 5,913,732
9,965 New York City, NY, Municipal Water
Finance Authority, (Water and Sewer
System), (FGIC), 4.75%, 6/15/31 8,250,422
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Insured-Water and Sewer (continued)
- -------------------------------------------------------------------------------
$ 9,000 Tampa Bay, FL, Water Utility System,
(FGIC), 4.75%, 10/1/27 $ 7,541,640
- -------------------------------------------------------------------------------
$ 81,438,033
- -------------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 0.3%
- -------------------------------------------------------------------------------
$ 6,645 Hardeman County, TN, (Correctional
Facilities Corp.), 7.75%, 8/1/17 $ 7,111,147
- -------------------------------------------------------------------------------
$ 7,111,147
- -------------------------------------------------------------------------------
Miscellaneous -- 1.5%
- -------------------------------------------------------------------------------
$ 5,520 American Samoa Economic Development
Authority, (Executive Office Building),
10.125%, 9/1/08 $ 5,721,259
12,000 Charter Mac Equity, (AMT),
6.625%, 6/30/09 11,823,360
10,200 Orange County, NC, (Community Activity
Corp.), 8.00%, 3/1/24(1) 5,100,000
1,600 Pittsfield Township, MI, EDC, (Arbor
Hospice), 7.875%, 8/15/27 1,610,464
3,416 Tax Exempt Securities Trust,
5.50%, 12/1/36(3) 3,072,455
3,664 Tax Exempt Securities Trust,
5.875%, 12/1/36(3) 3,466,358
- -------------------------------------------------------------------------------
$ 30,793,896
- -------------------------------------------------------------------------------
Nursing Home -- 6.5%
- -------------------------------------------------------------------------------
$13,125 Bell County, TX, (Riverside Healthcare,
Inc. - Normandy Terrace), 9.00%, 4/1/23 $ 15,129,188
3,755 Collier County, FL, IDA, Retirement
Rental, (Beverly Enterprises - Florida,
Inc.), 10.75%, 3/1/03 4,064,187
4,885 Delaware County, PA, (Mainline -
Haverford Nursing and Rehabilitation
Centers), 9.00%, 8/1/22 5,478,039
2,150 Hillsborough County, FL, IDA, (Tampa Bay
Retirement Center), 0.00%, 6/1/25 1,071,904
10,085 Hillsborough County, FL, IDA, (Tampa Bay
Retirement Center), 7.00%, 6/1/25 9,719,520
10,000 Indianapolis, IN, (National Benevolent
Association - Robin Run Village),
7.625%, 10/1/22 10,591,000
3,370 Lackawanna County, PA, IDA, (Edella
Street Associates), 8.875%, 9/1/14 3,626,963
2,660 Luzerne County, PA, IDA, (River Street
Associates), 8.75%, 6/15/07 2,848,009
13,250 Massachusetts Industrial Financing
Authority, (Age Institute of
Massachusetts), 8.05%, 11/1/25 14,287,740
11,755 Mississippi Business Finance Corp.,
(Magnolia Healthcare), 7.99%, 7/1/25 12,136,215
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Nursing Home (continued)
- -------------------------------------------------------------------------------
6,750 Missouri HEFA, (Bethesda Health Group of
Saint Louis, Inc.), 6.625%, 8/15/05 6,994,148
$14,000 Missouri HEFA, (Bethesda Health Group of
Saint Louis, Inc.), 7.50%, 8/15/12 $ 15,177,540
12,370 Montgomery, PA, IDA, (Advancement of
Geriatric Health Care Institute),
8.375%, 7/1/23 13,207,325
4,885 New Jersey EDA, (Claremont Health
System, Inc.), 9.10%, 9/1/22 5,321,866
5,915 New Jersey EDA, (Victoria Health Corp.),
7.75%, 1/1/24 6,276,702
5,000 Sussex County, DE, (Delaware Health
Corp.), 7.50%, 1/1/14 5,136,750
5,000 Sussex County, DE, (Delaware Health
Corp.), 7.60%, 1/1/24 5,149,000
2,440 Westmoreland, PA, (Highland Health
Systems, Inc.), 9.25%, 6/1/22 2,663,040
- -------------------------------------------------------------------------------
$ 138,879,136
- -------------------------------------------------------------------------------
Senior Living / Life Care -- 3.9%
- -------------------------------------------------------------------------------
$14,700 Albuquerque, NM, Retirement Facilities,
(La Vida Liena Retirement Center),
5.75%, 12/15/28 $ 13,246,464
10,000 Albuquerque, NM, Retirement Facilities,
(La Vida Liena Retirement Center),
6.60%, 12/15/28 9,225,300
10,000 Atlantic Beach, FL, (Fleet Landing),
8.00%, 10/1/24 10,818,500
12,435 De Kalb County, GA, Private Hospital
Authority, (Atlanta, Inc.),
8.50%, 3/1/25(5) 6,217,500
2,100 Loudoun County, VA, IDA, (Falcons
Landing), 9.25%, 7/1/04 2,362,374
15,000 Louisiana HFA, (HCC Assisted Living
Group 1), (AMT), 9.00%, 3/1/25 16,231,350
12,400 North Miami, FL, Health Facilities
Authority, (Imperial Club),
6.75%, 1/1/33 11,363,608
800 North Miami, FL, Health Facilities
Authority, (Imperial Club),
9.00%, 1/1/12 803,400
5,500 Ridgeland, MS, Urban Renewal, (The
Orchard), 7.75%, 12/1/15 5,780,720
2,565 South Dakota HEFA, (Prairie Lakes Health
Care), 7.25%, 4/1/22 2,763,326
4,000 Wisconsin HEFA, (Senior Housing),
7.00%, 8/1/29 3,969,760
640 Wisconsin HEFA, (Senior Housing),
8.00%, 8/1/02 640,467
- -------------------------------------------------------------------------------
$ 83,422,769
- -------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Special Tax Revenue -- 0.5%
- -------------------------------------------------------------------------------
$10,000 Lincoln, CA, Public Financing Authority,
(Twelve Bridges), 6.20%, 9/2/25 $ 9,993,000
- -------------------------------------------------------------------------------
$ 9,993,000
- -------------------------------------------------------------------------------
Transportation -- 2.6%
- -------------------------------------------------------------------------------
$20,000 Atlanta, GA, Metropolitan Rapid
Transportation Authority, Variable Rate,
7/1/20(2)(3) $ 16,688,800
5,750 Connector 2000 Association, Inc., South
Carolina Bridge & Toll Road Revenue,
(Southern Connector), 5.25%, 1/1/23 4,908,775
4,735 Denver, CO, City and County Airport
Revenue, (AMT), 7.50%, 11/15/23 5,220,906
10,000 Kansas Highway Transportation
Department, 5.75%, 9/1/18 10,078,400
15,000 Port Authority of New York and New
Jersey, (AMT), Variable Rate, 1/15/27(2) 15,660,000
3,000 Tri-County, OR, Metropolitan
Transportation District, Variable Rate,
8/1/19(2)(3) 2,481,060
- -------------------------------------------------------------------------------
$ 55,037,941
- -------------------------------------------------------------------------------
Water and Sewer -- 2.7%
- -------------------------------------------------------------------------------
$10,960 California Water Resources, (Central
Valley), Variable Rate, 12/1/24(2)(3) $ 9,455,082
10,135 California Water Resources, (Central
Valley), Variable Rate, 12/1/28(2)(3) 8,136,783
10,000 De Kalb County, GA, (Water and Sewer),
5.00%, 10/1/28 8,826,200
12,500 Jacksonville, FL, (Water and Sewer),
5.375%, 10/1/29 11,656,625
7,000 Metropolitan Southern California
Waterworks, Variable Rate, 7/1/27(2)(3) 4,840,360
1,805 Metropolitan Southern California
Waterworks, 3.05%, 7/1/21 1,805,000
9,400 Metropolitan Southern California
Waterworks, Variable Rate, 7/1/21(2)(3) 6,499,442
8,100 New York City, NY, Municipal Water
Finance Authority, 5.00%, 6/15/29 7,108,884
- -------------------------------------------------------------------------------
$ 58,328,376
- -------------------------------------------------------------------------------
Total Tax-Exempt Investments
(identified cost, $2,097,651,227) $2,121,296,645
- -------------------------------------------------------------------------------
TAXABLE-INVESTMENT -- 0.0%
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Senior Living / Life Care -- 0.0%
- -------------------------------------------------------------------------------
$ 305 Ridgeland, MS, Urban Renewal, (The
Orchard), 9.00%, 12/1/00 $ 305,131
- -------------------------------------------------------------------------------
$ 305,131
- -------------------------------------------------------------------------------
Total Taxable-Investment
(identified cost, $305,000) $ 305,131
- -------------------------------------------------------------------------------
Total Investments -- 99.8%
(identified cost, $2,097,956,227) $2,121,601,776
- -------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.2% $ 3,943,037
- -------------------------------------------------------------------------------
Net Assets -- 100.0% $2,125,544,813
- -------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
At September 30, 1999, the concentration of the Portfolio's investments in the
various states, determined as a percentage of total investments, is as follows:
<TABLE>
<CAPTION>
<S> <C>
California 11.1%
Others, representing less than 10% 88.7%
individually
</TABLE>
The Portfolio invests primarily in debt securities issued by 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
September 30, 1999, 26.8% of the securities in the portfolio of investments are
backed by bond insurance of various financial institutions and financial
guaranty assurance agencies. The aggregate percentage insured by financial
institutions ranged from 2.3% to 10.5% of total investments.
(1) Non-income producing security.
(2) Security has been issued as an inverse floater bond.
(3) 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.
(4) Security (or a portion thereof) has been segregated to cover when-issued
securities.
(5) The Portfolio is accruing only partial interest on this security.
(6) When-issued security.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
<S> <C>
Assets
- --------------------------------------------------------
Investments, at value
(identified cost, $2,097,956,227) $2,121,601,776
Cash 11,257,519
Receivable for investments sold 183,270
Interest receivable 37,079,429
- --------------------------------------------------------
TOTAL ASSETS $2,170,121,994
- --------------------------------------------------------
Liabilities
- --------------------------------------------------------
Payable for investments purchased $ 10,733,119
Demand note payable 2,000,000
Payable to affiliate for Trustees' fees 3,716
Payable for when-issued securities 31,818,945
Accrued expenses 21,401
- --------------------------------------------------------
TOTAL LIABILITIES $ 44,577,181
- --------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $2,125,544,813
- --------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $2,101,899,264
Net unrealized appreciation (computed on
the basis of identified cost) 23,645,549
- --------------------------------------------------------
TOTAL $2,125,544,813
- --------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30, 1999
<S> <C>
Investment Income
- -------------------------------------------------------
Interest $ 146,903,416
- -------------------------------------------------------
TOTAL INVESTMENT INCOME $ 146,903,416
- -------------------------------------------------------
Expenses
- -------------------------------------------------------
Investment adviser fee $ 9,604,930
Trustees fees and expenses 46,609
Legal and accounting services 121,705
Custodian fee 393,855
Miscellaneous 141,302
- -------------------------------------------------------
TOTAL EXPENSES $ 10,308,401
- -------------------------------------------------------
Deduct:
Reduction of custodian fee $ 393,855
- -------------------------------------------------------
TOTAL EXPENSE REDUCTIONS $ 393,855
- -------------------------------------------------------
NET EXPENSES $ 9,914,546
- -------------------------------------------------------
NET INVESTMENT INCOME $ 136,988,870
- -------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- -------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 29,879,276
Financial futures contracts 1,881,412
- -------------------------------------------------------
NET REALIZED GAIN $ 31,760,688
- -------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(284,216,835)
Financial futures contracts 3,608,750
- -------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $(280,608,085)
- -------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(248,847,397)
- -------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $(111,858,527)
- -------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase (Decrease) YEAR ENDED YEAR ENDED
IN NET ASSETS SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 136,988,870 $ 133,228,452
Net realized gain 31,760,688 62,170,470
Net change in unrealized appreciation
(depreciation) (280,608,085) 13,950,121
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (111,858,527) $ 209,349,043
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 375,986,994 $ 389,124,010
Withdrawals (478,708,432) (439,963,679)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ (102,721,438) $ (50,839,669)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ (214,579,965) $ 158,509,374
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $ 2,340,124,778 $ 2,181,615,404
- --------------------------------------------------------------------------------
AT END OF YEAR $ 2,125,544,813 $ 2,340,124,778
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Ratios to average daily net assets
- -----------------------------------------------------------------------------------------------
Expenses 0.45% 0.45% 0.52% 0.49% 0.50%
Expenses after custodian fee
reduction 0.43% 0.43% 0.52% 0.48% 0.49%
Net investment income 5.92% 5.93% 6.51% 6.65% 7.00%
Portfolio Turnover 60% 28% 17% 19% 54%
- -----------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S OMITTED) $2,125,545 $2,340,125 $2,181,615 $2,212,478 $2,260,646
- -----------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
National Municipals Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified open-end management
investment company which was organized as a trust under the laws of the State
of New York on May 1, 1992. The Declaration of Trust permits the Trustees to
issue interests in the Portfolio. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A Investment Valuation -- Municipal bonds are normally valued on the basis of
valuations furnished by a pricing service. Taxable obligations, if any, for
which price quotations are readily available are normally valued at the mean
between the latest bid and asked prices. Futures contracts listed on the
commodity exchanges are valued at closing settlement prices. Short-term
obligations, maturing in sixty days or less, are valued at amortized cost,
which approximates value. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for Federal
income tax purposes.
C Federal Taxes -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally
must satisfy the applicable source of income and diversification requirements
(under the Internal Revenue Code) in order for its investors to satisfy them.
The Portfolio will allocate at least annually among its investors each
investor's distributive share of the Portfolio's net taxable (if any) and
tax-exempt investment income, net realized capital gains, and any other items
of income, gain, loss, deduction or credit. Interest income received by the
Portfolio on investments in municipal bonds, which is excludable from gross
income under the Internal Revenue Code, will retain its status as income
exempt from federal income tax when allocated to the Portfolio's investors.
The portion of such interest, if any, earned on private activity bonds issued
after August 7, 1986 may be considered a tax preference item for investors.
D Financial Futures Contracts -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit ("initial margin") either in
cash or securities an amount equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio ("margin maintenance") each day, dependent
on the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio.
The Portfolio's investment in financial futures contracts is designed for
both hedging against anticipated future changes in interest rates and
investment purposes. Should interest rates move unexpectedly, the Portfolio
may not achieve the anticipated benefits of the financial futures contracts
and may realize a loss.
E Options on Financial Futures Contracts -- Upon the purchase of a put option
on a financial futures contract by the Portfolio, the premium paid is
recorded as an investment, the value of which is marked-to-market daily. When
a purchased option expires, the Portfolio will realize a loss in the amount
of the cost of the option. When the 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 the Portfolio exercises a put option, settlement
is made in cash. The risk associated with purchasing put options is limited
to the premium originally paid.
F Legal Fees -- Legal fees and other related expenses incurred as part of
negotiations of the terms and requirements of capital infusions, or that are
expected to result in the restructuring of or a plan of reorganization for an
investment are recorded as realized losses. Ongoing expenditures to protect
or enhance an investment are treated as operating expenses.
G When-issued and Delayed Delivery Transactions -- The Portfolio may engage in
when-issued and 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 basis are marked-to-market daily and begin earning interest on
settlement date.
H Use of Estimates -- The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported
26
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period.
Actual results could differ from those estimates.
I Other -- Investment transactions are accounted for on a trade date basis.
J Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
of the Portfolio. Pursuant to the custodian agreement, IBT receives a fee
reduced by credits which are determined based on the average daily cash
balance the Portfolio maintains with IBT. All significant credit balances
used to reduce the Portfolio's custodian fees are reflected as a reduction of
operating expenses on the Statement of Operations.
2 Investment Adviser Fee and Other Transactions with Affiliates
- -------------------------------------------
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation
for management and investment advisory services rendered to the Portfolio.
The fee is based upon a percentage of average daily net assets plus a
percentage of gross income (i.e., income other than gains from the sale of
securities). For the year ended September 30, 1999, the fee was equivalent to
0.42% of the Portfolio's average daily net assets for such period and
amounted to $9,604,930. Except as to Trustees of the Portfolio who are not
members of EVM's or BMR's organization, officers and Trustees receive
remuneration for their services to the Portfolio out of such investment
adviser fee. Trustees of the Portfolio that are not affiliated with the
Investment Adviser may elect to defer receipt of all or a percentage of their
annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the year ended September 30, 1999, no significant
amounts have been deferred.
Certain officers and Trustees of the Portfolio are officers of the above
organizations.
3 Investments
- -------------------------------------------
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $1,418,989,864 and $1,370,293,031,
respectively, for the year ended September 30, 1999.
4 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation/depreciation in the value of the
investments owned at September 30, 1999, as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $2,098,176,419
--------------------------------------------------------
Gross unrealized appreciation $ 120,834,158
Gross unrealized depreciation (97,408,801)
--------------------------------------------------------
NET UNREALIZED APPRECIATION $ 23,425,357
--------------------------------------------------------
</TABLE>
5 Line of Credit
- -------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $130 million unsecured line of credit agreement
with a group of banks ($120 million effective October 12, 1999). The
Portfolio may temporarily borrow from the line of credit to satisfy
redemption requests or settle investment transactions. Interest is charged to
each portfolio or fund based on its borrowings at an amount above either the
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 line of credit is
allocated among the participating portfolios and funds at the end of each
quarter. At September 30, 1999, the Portfolio had a balance outstanding
pursuant to this line of credit of $2,000,000. The Portfolio did not have any
significant borrowings or allocated fees during the year ended September 30,
1999.
6 Financial Instruments
- -------------------------------------------
The Portfolio regularly trades in financial instruments with off-balance
sheet risk in the normal course of its investing activities to assist in
managing exposure to various market risks. These financial instruments
include futures contracts and may involve, to a varying degree, elements of
risk in excess of the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment 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.
At September 30, 1999, there were no outstanding obligations under these
financial instruments.
27
<PAGE>
NATIONAL MUNICIPALS PORTFOLIO AS OF SEPTEMBER 30, 1999
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS
OF NATIONAL MUNICIPALS PORTFOLIO
- ---------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of National Municipals Portfolio as of
September 30, 1999, the related statement of operations for the year then ended,
the statements of changes in net assets for the years ended September 30, 1999
and 1998 and the supplementary data for each of the years in the five-year
period ended September 30, 1999. These financial statements and supplementary
data are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and supplementary data based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities held as of
September 30, 1999 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and supplementary data present fairly,
in all material respects, the financial position of National Municipals
Portfolio at September 30, 1999, the results of its operations, the changes in
its net assets, and its supplementary data for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 29, 1999
28
<PAGE>
EATON VANCE NATIONAL MUNICIPALS FUND AS OF SEPTEMBER 30, 1999
INVESTMENT MANAGEMENT
EATON VANCE NATIONAL MUNICIPALS FUND
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
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partner
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University Graduate School
of Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
NATIONAL MUNICIPALS PORTFOLIO
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President and Trustee
Robert B. MacIntosh
Vice President
Thomas M. Metzold
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partner
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
29
<PAGE>
INVESTMENT ADVISOR OF
NATIONAL MUNICIPALS PORTFOLIO
BOSTON MANAGEMENT AND RESEARCH
The Eaton Vance Building
255 State Street
Boston, MA 02109
ADMINISTRATOR OF
EATON VANCE NATIONAL MUNICIPALS FUND
EATON VANCE MANAGEMENT
The Eaton Vance Building
255 State Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
(617)482-8260
CUSTODIAN
INVESTORS BANK & TRUST COMPANY
200 Clarendon Street
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
200 Berkeley Street
Boston, MA 02116-5022
EATON VANCE MUNICIPALS TRUST
The Eaton Vance Building
255 State Street
Boston, MA 02109
- ------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution
plan, sales charges and expenses. Please read the prospectus carefully before
you invest or send money.
- -------------------------------------------------------------------------------
2-2268-11/99 HMSRC-11/99
