<PAGE>
Investing
[LOGO OF EATON for the [PICTURE OF EDUCATIONAL
VANCE APPEARS HERE] 21st INSTITUTION APPEARS HERE]
Century
Semiannual Report March 31, 1998
[PICTURE OF HIGHWAY EATON VANCE
APPEARS HERE] NATIONAL
MUNICIPALS
FUND
Global Management-Global Distribution
[PICTURE OF THE BROOKLYN
BRIDGE APPEARS HERE]
<PAGE>
Eaton Vance National Municipals Fund as of March 31, 1998
INVESTMENT UPDATE
[PHOTO OF
THOMAS M. METZOLD,
APPEARS HERE]
Thomas M. Metzold,
Portfolio Manager
Investment Environment
- --------------------------------------------------------------------------------
The Economy
. In the latter half of 1997 and into 1998, the economic climate in the U.S.
continued to be favorable for fixed-income investors. Moderate growth, very
low inflation, and a federal budget surplus were among the factors that
contributed to a general decline in interest rates during the period.
. Gross Domestic Product - the primary indicator of overall U.S. economic
growth - grew at real annual rates of 3.1% and 3.9% in the third and fourth
quarters of 1997, respectively. The U.S. civilian unemployment rate reached a
24-year low of 4.6% in February. Meanwhile, inflation, as measured by the
Consumer Price Index, increased 1.7% in 1997 and only 0.2% (annualized) in the
first quarter of 1998.
. The consensus among leading economists is that inflation has remained low due
to the effects of global competition, a strong dollar - made even stronger by
the Asian currency crisis - and higher productivity brought on by advances in
technology.
The Bond Market
. The municipal market turned in a solid performance during the period. The
Lehman Brothers Municipal Bond Index rose 3.9% in the six months ended March
31, 1998, while the overall bond market was helped by reports of continued low
inflation.+
. The municipal market slightly underperformed the Treasury market last year
due to a rise in municipal supply. According to the Bond Market Association,
long-term municipal issuance rose to more than $220 billion in 1997, up from
around $190 billion the previous year. Nevertheless, 1997 was still a good
year for municipal bonds.
Management Discussion
. The Fund maintained a slightly longer-than-average duration than our peer
group. As the market rallied during the period, our longer average maturity
helped boost the Fund's performance.
. The Fund benefited from a number of prerefundings, as higher-coupon bonds
were advance-refunded by their issuers. Because these escrowed bonds are
backed by Treasuries, their market value increases to reflect the fact they no
longer have any credit risk.
. The Fund remained well diversified. Among our largest sector weightings were
industrial development holdings, whose underlying projects benefited from the
strong economy. The Portfolio also had a large exposure to zero coupon bonds,
which performed extremely well in a falling rate environment.
Fund Performance
- --------------------------------------------------------------------------------
The Past Six Months
. During the six months ended March 31, 1998, the Fund's Class A shares had a
total return of 5.6%. This return resulted from an increase in net asset value
(NAV) per share to $11.56 on March 31, 1998 from $11.26 on September 30, 1997
and the reinvestment of $0.324 per share in tax-free dividend income./1/
. The Fund's Class B shares had a total return of 5.1% during the period, the
result of an increase in NAV to $10.79 from $10.53 and the reinvestment of
$0.274 per share in tax-free dividend income./1/
. The Fund's Class C shares had a total return of 5.1% during the period, the
result of an increase in NAV to $10.27 from $10.01 and the reinvestment of
$0.250 per share in tax-free dividend income./1/
. Based on the Fund's most recent dividends and NAVs per share of $11.56 for
Class A, $10.79 for Class B, and $10.27 for Class C, the distribution rates
were 5.67%, 5.00%, and 4.89%, respectively./2/ The SEC 30-day yields at March
31 were 4.80%, 4.23%, and 4.22%, respectively./3/
- --------------------------------------------------------------------------------
/1/These returns do not include the 4.75% maximum sales charge for the
Fund's Class A shares or the applicable contingent deferred sales charge
(CDSC) for the Fund's Class B and Class C shares; a portion of the Fund's
income may be subject to federal alternative minimum tax and/or federal and
state income tax. /2/The Fund's distribution rate represents actual
distributions paid to shareholders and is calculated by dividing the last
distribution per share (annualized) by the net asset value. /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/Returns are calculated by determining the
percentage change in net asset value (NAV) with all distributions
reinvested. SEC returns for Class A reflect maximum sales charge as noted.
For Class B, returns 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. For Class C, one year return reflects 1% CDSC.
/5/Subject to change due to active management. /+/It is not possible to
invest directly in an index.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
- --------------------------------------------------------------------------------
Fund Information
as of March 31, 1998
Performance/4/ Class A Class B Class C
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 16.4% 15.6% 15.5%
Five Years N.A. 7.6 N.A.
Ten Years N.A. 8.2 N.A.
Life of Fund* 10.4 7.8 6.4
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 10.9% 10.6% 14.5%
Five Years N.A. 7.3 N.A.
Ten Years N.A. 8.2 N.A.
Life of Fund* 9.1 7.8 6.4
5 Largest Sectors/5/
- --------------------------------------------------------------------------------
By total investments
Escrowed 19.7%
Industrial Development/
Pollution Control 13.1%
Hospitals 8.3%
Nursing Homes 7.0%
Transportation 6.5%
Portfolio Overview/5/
- --------------------------------------------------------------------------------
Number of Issues 223
Average Maturity 23.5 yrs.
Effective Maturity 10.3 yrs.
Average Rating A
Average Call 8.3 yrs.
Average Dollar Price $99.08
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
*Inception Dates - Class A: 4/5/94; Class B: 12/19/85; Class C: 12/3/93
2
<PAGE>
Eaton Vance National Municipals Fund as of March 31, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of March 31, 1998
Assets
- --------------------------------------------------------------------------------
Investment in National Municipals Portfolio, at value
(Note 1A) (identified cost, $1,955,188,395) $2,250,501,764
Receivable for Fund shares sold 6,741,920
Deferred organization expenses (Note 1D) 9,804
- --------------------------------------------------------------------------------
Total assets $2,257,253,488
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Dividends payable $ 4,570,166
Payable for Fund shares redeemed 3,280,879
Payable to affiliate for Trustees' fees (Note 4) 946
Accrued expenses 1,518,422
- --------------------------------------------------------------------------------
Total liabilities $ 9,370,413
- --------------------------------------------------------------------------------
Net Assets $2,247,883,075
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Paid-in capital $1,997,258,310
Accumulated net realized loss on investments from
Portfolio (computed on the basis of identified cost) (44,652,516)
Accumulated distributions in excess of net investment income (36,088)
Net unrealized appreciation of investments from
Portfolio (computed on the basis of identified cost) 295,313,369
- --------------------------------------------------------------------------------
Total $2,247,883,075
- --------------------------------------------------------------------------------
Class A Shares
- --------------------------------------------------------------------------------
Net Assets $ 85,116,839
Shares Outstanding 7,365,312
Net Asset Value and Redemption Price Per Share
(net assets / shares of beneficial
interest outstanding) $ 11.56
Offering Price Per Share
(100 / 95.25 of net assets value per share) $ 12.14
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Net Assets $2,073,746,602
Shares Outstanding 192,211,584
Net Asset Value, Offering Price and Redemption Price Per
Share (Note 6)
(net assets / shares of beneficial interest $ 10.79
outstanding)
- --------------------------------------------------------------------------------
Class C Shares
- --------------------------------------------------------------------------------
Net Assets $ 89,019,634
Shares Outstanding 8,668,047
Net Asset Value, Offering Price and Redemption Price Per
Share (Note 6)
(net assets / shares of beneficial interest $ 10.27
outstanding)
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended
March 31, 1998
Investment Income (Note 1B)
- --------------------------------------------------------------------------------
Interest income allocated from Portfolio $ 71,477,884
Expenses allocated from Portfolio (4,877,745)
- --------------------------------------------------------------------------------
Net investment income from Portfolio $ 66,600,139
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 1,323
Distribution and service fees (Note 5)
Class A 59,954
Class B 10,189,286
Class C 421,012
Transfer and dividend disbursing agent fees 772,129
Printing and postage 56,927
Registration fees 36,066
Amortization of organization expenses (Note 1D) 10,731
Miscellaneous 74,750
- --------------------------------------------------------------------------------
Total expenses $ 11,622,178
- --------------------------------------------------------------------------------
Net investment income $ 54,977,961
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 62,869,299
Financial futures contracts (12,173,968)
- --------------------------------------------------------------------------------
Net realized gain on investment transactions $ 50,695,331
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $ (2,970,250)
Financial futures contracts 8,081,000
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 5,110,750
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 55,806,081
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 110,784,042
- --------------------------------------------------------------------------------
On sales of $25,000 or more, the offering price of Class A shares is reduced.
See notes to financial statements
3
<PAGE>
Eaton Vance National Municipals Fund as of March 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
Increase (Decrease) March 31, 1998 Year Ended
in Net Assets (Unaudited) September 30, 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment income $ 54,977,961 $ 111,643,873
Net realized gain on
investment transactions 50,695,331 1,306,387
Net change in unrealized
appreciation (depreciation)
of investments 5,110,750 125,499,848
- -------------------------------------------------------------------------------------
Net increase in net assets
from operations $ 110,784,042 $ 238,450,108
- -------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income
Class A $ (1,875,748) $ --
Class B (52,641,511) (112,620,886)
Class C (2,074,380) --
In excess of net
investment income
Class B (207,846) --
- -------------------------------------------------------------------------------------
Total distributions to shareholders $ (56,799,485) $ (112,620,886)
- -------------------------------------------------------------------------------------
Transactions in shares of beneficial
interest (Note 3) --
Proceeds from sale of shares
Class A $ 37,540,110 $ --
Class B 125,450,817 228,261,692
Class C 16,147,198 --
Net asset value of shares issued
to shareholders in payment
of distributions declared
Class A 894,834 --
Class B 20,466,777 42,171,754
Class C 1,277,520 --
Cost of shares redeemed
Class A (4,373,801) --
Class B (163,092,909) (457,268,290)
Class C (13,250,955) --
- -------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from Fund
share transactions $ 21,059,591 $ (186,834,844)
- -------------------------------------------------------------------------------------
Contribution from EV Traditional
and Classic National
Municipals Funds $ 132,212,939 $ --
- -------------------------------------------------------------------------------------
Net increase (decrease) in
net assets $ 207,257,087 $ (61,005,622)
- -------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended
March 31, 1998 Year Ended
(Unaudited) September 30, 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net Assets
- -------------------------------------------------------------------------------------
At beginning of period $ 2,040,625,988 $2,101,631,610
- -------------------------------------------------------------------------------------
At end of period $ 2,247,883,075 $2,040,625,988
- -------------------------------------------------------------------------------------
Accumulated
undistributed
(distribution in excess of)
net investment income
included in net assets
- -------------------------------------------------------------------------------------
At end of period $ (36,088) $ 1,646,304
- -------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
4
<PAGE>
Eaton Vance National Municipals Fund as of March 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30,
March 31, 1998 -----------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
-----------------------------------------------------------------------------------------------
Class A Class B Class C Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value --
Beginning of period $ 11.260 $ 10.530 $ 10.010 $ 9.900 $ 9.800 $ 9.410 $ 10.570 $ 9.820
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.324 $ 0.264 $ 0.250 $ 0.550 $ 0.557 $ 0.570 $ 0.556 $ 0.553
Net realized and unrealized
gain (loss) on investments 0.300 0.270 0.260 0.634 0.096 0.395 (1.043) 0.856
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from
operations $ 0.624 $ 0.534 $ 0.510 $ 1.184 $ 0.653 $ 0.965 $ (0.487) $ 1.409
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.324) $ (0.273) $ (0.250) $ (0.554) $ (0.553) $ (0.570) $ (0.556) $ (0.553)
In excess of net investment
income -- (0.001) -- -- -- (0.005) (0.077) (0.106)
In excess of net realized
gain on investments -- -- -- -- -- -- (0.040) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.324) $ (0.274) $ (0.250) $ (0.554) $ (0.553) $ (0.575) $ (0.673) $ (0.659)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of period $ 11.560 $ 10.790 $ 10.270 $ 10.530 $ 9.900 $ 9.800 $ 9.410 $ 10.570
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return /(1)/ 5.60% 5.12% 5.14% 12.33% 6.84% 10.60% (4.82)% 14.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000's omitted) $ 85,117 $2,073,747 $ 89,020 $2,040,626 $2,101,632 $ 2,191,240 $2,171,901 $2,090,482
Ratio of expenses to average
daily net assets /(2)(3)/ 0.72%+ 1.54%+ 1.55%+ 1.60% 1.55% 1.53% 1.51% 1.67%
Ratio of expenses to average
daily net assets after
custodian fee reduction /(2)/ 0.70%+ 1.52%+ 1.53%+ 1.60% 1.54% 1.52% -- --
Ratio of net investment
income to average daily
net assets 5.70%+ 4.95%+ 4.94%+ 5.45% 5.62% 6.00% 5.54% 5.43%
Portfolio Turnover /(4)/ -- -- -- -- -- -- -- 10%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
/(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 to be
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 for the period the fund was investing in the Portfolio.
/(3)/ The expense ratios for the year ended September 30, 1995 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the prior periods have not been adjusted to reflect
this change.
/(4)/ Portfolio Turnover represents the rate of portfolio activity for the
period while the Fund was making investments directly in securities. The
portfolio turnover rate for the period since the Fund transferred
substantially all of its investable assets to the Portfolio is shown in
the Portfolio's financial statements which are included elsewhere in this
report.
See notes to financial statements
5
<PAGE>
Eaton Vance National Municipals Fund as of March 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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 three classes of shares. Class A shares
are sold subject to a sales charge imposed at the 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). All classes of shares have
equal rights to assets and voting privileges. Realized and unrealized gains
and losses and net investment income, other than class specific expenses,
are allocated daily to each class of shares based on the relative net assets
of each class to the total net assets of the Fund. Each class of shares
differs in its distribution plan and certain other class specific expenses.
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 (100% at March 31, 1998). 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 Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally
accepted accounting principles.
C Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is necessary. At September 30,
1997, the Fund, for federal income tax purposes had a capital loss carryover
of $103,026,858 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 carryovers were acquired through the Fund Reorganization (see Note 8)
and may be subject to certain limitations. Such capital loss carryover will
expire on September 30, 2002 ($599,716), September 30, 2003 ($8,244,733),
September 30, 2004 ($86,936,357) and September 30, 2005 ($7,246,052).
Additionally, net capital losses of $525,811 attributable to security
transactions incurred after October 31, 1996, are treated as arising on the
first day of the Fund's current taxable year. 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 Deferred Organization Expenses -- Costs incurred by the Fund in connection
with its organization, including registration costs, are being amortized on
the straight-line basis over five years.
E 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.
F Other -- Investment transactions are accounted for on a trade-date basis.
6
<PAGE>
Eaton Vance National Municipals Fund as of March 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
G Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Fund and the Portfolio. Pursuant to the respective
custodian agreements, IBT receives a fee reduced by credits which are
determined based on the average daily cash balances the Fund or the
Portfolio 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.
H Interim Financial Information -- The interim financial statements relating
to March 31, 1998 and the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial
statements.
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 asset value as of the ex-dividend date. Distributions are paid in
the form of additional shares or, at the election of the shareholder, in
cash. The Fund distinguishes between distributions on a tax basis and a
financial reporting basis. Generally accepted accounting principles require
that only distributions in excess of tax basis earnings and profits be
reported in the financial statements as a return of capital. Differences in
the recognition or classification of income between the financial statements
and tax earnings and profits which result in over-distributions for
financial statement purposes 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.
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 classes.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended
March 31, 1998
Class A (Unaudited)
- ------------------------------------------------------------------------------------
<S> <C>
Sales 3,280,180
Issued to shareholders electing to
receive payment of distribution in Fundshares 77,853
Redemptions (382,145)
Issued to EV Traditional National Municipals
Fund Shareholders 4,389,424
- ------------------------------------------------------------------------------------
Net increase 7,365,312
- ------------------------------------------------------------------------------------
Six Months Ended
March 31, 1998 Year Ended
Class B (Unaudited) September 30, 1997
- ------------------------------------------------------------------------------------
Sales 11,729,641 22,677,891
Issued to shareholders
electing to receive
payment of distribution
in Fund shares 1,911,067 4,179,698
Redemptions (15,264,339) (45,329,984)
- ------------------------------------------------------------------------------------
Net decrease (1,623,631) (18,472,395)
- ------------------------------------------------------------------------------------
Six Months Ended
March 31, 1998
Class C (Unaudited)
- ------------------------------------------------------------------------------------
Sales 1,585,141
Issued to shareholders electing to receive
payment of distribution in Fund shares 125,374
Redemptions (1,310,531)
Issued to EV Classic National Municipals
Fund Shareholders 8,268,063
- ------------------------------------------------------------------------------------
Net increase 8,668,047
- ------------------------------------------------------------------------------------
</TABLE>
4 Investment Adviser Fee and Other Transactions with Affiliates
- -------------------------------------------------------------------------------
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation.
7
<PAGE>
Eaton Vance National Municipals Fund as of March 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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 of BMR's organization, officers and Trustees receive
remuneration for their services to the Fund out of the investment adviser
fee earned by BMR. Eaton Vance Distributors, Inc. (EVD), a subsidiary of EVM
and the Fund's principal underwriter, received $22,865 as its portion of the
sales charge on sales of Class A shares for the six months ended March 31,
1998.
Certain officers and Trustees of the Fund and of the Portfolio are officers
and/or directors/trustees of the above organizations.
5 Distribution Plan
----------------------------------------------------------------------------
The Fund has adopted distribution plans (Class B Plan and Class C Plan, the
Plans) pursuant to Rule 12b-1 under the Investment Company Act of 1940. The
Plans require the Fund to pay the Principal Underwriter, Eaton Vance
Distributors, Inc. (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 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)
distribution fees 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 $7,719,156 and
$315,759 for Class B, and Class C shares, respectively, to or payable to EVD
for the six months ended March 31, 1998, representing 0.75% (annualized) of
the average daily net assets for Class B and Class C shares. At March 31,
1998, the amount of Uncovered Distribution Charges EVD calculated under the
Plans was approximately $18,911,000 and $8,210,000 for Class B and Class C
shares, respectively.
In addition, the Plans authorize the Fund to make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in amounts
not exceeding 0.25% of the Fund's average daily net assets attributable to
Class A, Class B, and Class C shares for each fiscal year. The Trustees have
initially implemented the Plans by authorizing the Fund to make quarterly
payments of service fees to the Principal Underwriter and Authorized Firms
in amounts not expected to exceed 0.25% per annum of the Fund's average
daily net assets attributable to Class A, Class B and Class C shares based
on the value of Fund shares sold by such persons and remaining outstanding
for at least one 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 six months ended March 31, 1998
amounted to $59,954, $2,470,130, and $105,253 for Class A, Class B, and
Class C shares, respectively.
6 Contingent Deferred Sales Charge
----------------------------------------------------------------------------
A contingent deferred sales charge (CDSC) is imposed on any redemption of
Class B shares made within six years of purchase. A CDSC is imposed on
certain Class C shares redeemed 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. CDSC charges are
paid to EVD to reduce the amount of Uncovered Distribution Charges
calculated under each 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 $1,484,000 and $5,000 of CDSC paid by
shareholders for Class B shares and Class C shares, respectively, for the
six months ended March 31, 1998.
7 Investment Transactions
----------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the National Municipals
Portfolio aggregated $179,709,899 and $233,229,737, respectively, for the
six months ended March 31, 1998.
8
<PAGE>
Eaton Vance National Municipals Fund as of March 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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, respectively.
9 Name Change
--------------------------------------
Effective October 1, 1997, the EV Marathon National Municipals Fund changed
its name to Eaton Vance National Municipals Fund.
9
<PAGE>
National Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Tax-Exempt Investments -- 100.0%
Ratings (Unaudited) Principal
- -------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------
Assisted Living -- 5.0%
- -----------------------------------------------------------------------------
NR NR $ 6,035 Arizona Health Facilities
Authority, (Care
Institute, Inc.-Mesa),
7.625%, 1/1/26 $ 6,287,444
NR NR 17,070 Bell County, TX, Health
Facilities, (Care
Institute, Inc., Texas),
9.00%, 11/1/24 19,932,127
NR NR 5,000 Chester, PA, IDA, (Senior
Life Choice of Paoli,
L.P.), 8.05%, 1/1/24 5,557,350
NR NR 3,060 Chester, PA, IDA, (Senior
Life-Choice of Kimberton)
(AMT), 8.50%, 9/1/25 3,505,781
NR NR 5,000 Delaware, PA, IDA, Glen
Riddle, (AMT), 8.625%,
9/1/25 5,764,950
NR NR 10,000 Glen Cove, NY, IDA,
(Regency at Glen Cove),
9.50%, 7/1/12 10,000,000
NR NR 15,000 Illinois Development
Finance Authority (Care
Institute, Inc.-Illinois),
7.80%, 6/1/25 16,648,800
NR NR 4,605 New Jersey EDA, (Chelsea
at East Brunswick), (AMT),
8.25%, 10/1/20 5,125,641
NR NR 10,000 New Jersey EDA, (Forsgate),
(AMT), 8.625%, 6/1/25 11,527,900
NR NR 5,000 North Syracuse Village,
Housing Authority (AJM
Senior Housing, Inc.,
Janus Park), 8.00%, 6/1/24 5,206,450
NR NR 7,915 Roseville, MN, Elder Care
Inc.-Roseville), 7.75%,
11/1/23 8,268,088
NR NR 12,430 St. Paul, MN, Housing and
Redevelopment, (Care
Institute, Inc.-Highland),
8.75%, 11/1/24 14,551,677
- -----------------------------------------------------------------------------
$ 112,376,208
- -----------------------------------------------------------------------------
Cogeneration -- 4.7%
- -----------------------------------------------------------------------------
NR NR $20,250 Maryland Energy, AES
Warrior Run, (AMT), 7.40%,
9/1/19 $ 22,485,600
NR BB+ 30,775 New Jersey EDA, (Vineland
Cogeneration) (AMT),
7.875%, 6/1/19 33,884,814
NR NR 12,950 Palm Beach County, FL,
Osceola Power Project,
(AMT), 6.95%, 1/1/22/(1)/ 10,230,500
NR BBB- 6,100 Pennsylvania EDA,
(Northampton Generating
Project), (AMT),
6.50%, 1/1/13 6,512,360
NR BBB- 18,450 Pennsylvania EDA,
(Northampton Generating
Project), (AMT),
6.60%, 1/1/19 19,744,821
NR NR 5,000 Pennsylvania EDA,
(Northampton Generating
Project), Junior Liens
(AMT), 6.95%, 1/1/21 5,301,450
NR NR 7,000 Pennsylvania EDA,
(Northampton Generating
Project), Junior Liens,
(AMT), 6.875%, 1/1/11 7,412,090
- -----------------------------------------------------------------------------
$ 105,571,635
- -----------------------------------------------------------------------------
Colleges and Universities -- 0.8%
- -----------------------------------------------------------------------------
Aaa AAA $12,390 California Educational
Facilities Authority,
(Stanford University),
5.35%, 6/1/27 $ 12,610,914
NR BBB- 1,250 Massachusetts Health and
Educational Facilities
(Nichols College), 7.00%,
10/1/20 1,342,050
Ba1 NR 4,300 New Hampshire Higher
Educational and Health
(Franklin Pierce Law
Center), 7.50%, 7/1/22 4,607,665
- -----------------------------------------------------------------------------
$ 18,560,629
- -----------------------------------------------------------------------------
Electric Utilities -- 1.3%
- -----------------------------------------------------------------------------
B2 B $14,000 Apache County, AZ, IDA,
(Tuscon Electric Power
Co.), 5.85%, 3/1/28 $ 14,179,200
A1 A+ 9,500 Intermountain Power
Agency, UT, 5.00%, 7/1/23 9,079,530
See notes to financial statements
10
<PAGE>
National Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited)
- ---------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Electric Utilities (continued)
- --------------------------------------------------------------------------------
NR NR $ 5,000 West Feliciana, LA, Gulf
States Utilities, (AMT),
9.00%, 5/1/15 $ 5,551,400
- --------------------------------------------------------------------------------
$ 28,810,130
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 19.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 45,000 Bakersfield, CA,
Bakersfield Assisted
Living Center,
0.00%, 4/15/21 $ 13,363,650
NR NR 2,200 Bexar County, TX, Health
Facilities (St. Luke's
Lutheran), 7.00%, 5/1/21 2,778,248
NR AAA 177,055 Colorado Health Facilities
Authority, Retirement
Housing (Liberty Heights),
0.00%, 7/15/24 43,964,527
Aa2 NR 5,000 Colorado Housing and
Finance Authority,
Retirement Housing
(Liberty Heights), (AMT),
7.55%, 11/1/27 5,672,200
Aaa NR 225,500 Dawson Ridge, Metropolitan
District #1, CO,
0.00%, 10/1/22 62,003,479
Aaa NR 30,000 Dawson Ridge, Metropolitan
District #1, Douglas
County, CO, 0.00%, 10/1/22 8,248,800
Aaa BBB 1,660 Denver, CO, City and
County Airport Revenue,
(AMT), 7.00%, 11/15/25 1,817,202
Aaa BBB 990 Denver, CO, City and
County Airport Revenue,
(AMT), 7.50%, 11/15/23 1,183,535
Baa2 AAA 5,000 Detroit, MI, Unlimited
Tax, 8.70%, 4/1/10 5,551,600
NR NR 7,000 Florida State (Mid-Bay
Bridge Authority),
6.875%, 10/1/22 8,646,050
NR NR 4,470 Hazelton Luzerne, PA
(Saint Joseph Medical
Center), 8.375%, 7/1/12 5,312,327
NR AAA 101,555 Illinois Development
Finance Authority (Regency
Park), 0.00%, 7/15/23 26,134,164
NR AAA 60,360 Illinois Development
Finance Authority,
(Regency Park), 0.00%
7/15/25 13,841,755
NR NR 4,650 Illinois Health and
Educational Facilities
Authority, Chicago
Osteopathic Health
Systems, 7.125%, 5/15/11 5,484,071
NR NR 4,500 Illinois Health and
Educational Facilities
Authority, Chicago
Osteopathic Health
Systems, 7.25%, 5/15/22 5,600,430
NR AAA 12,340 Louisiana Public
Facilities Authority
(Southern Baptist
Hospitals, Inc.),
8.00%, 5/15/12 15,164,996
Aaa AAA 9,700 Louisville, KY (Alliant
Health System, Inc.)
(MBIA), Variable Rate,
10/1/14/(2)/ 11,603,625
Baa1 BBB- 10,000 Maricopa County, AZ (Sun
Health Corporation),
8.125%, 4/1/12 11,590,800
NR NR 5,675 Maricopa County, AZ,
IDA, Multi-family,
6.625%, 1/1/27 6,672,325
NR NR 1,000 Maricopa County, AZ, IDA,
Multifamily, 6.45%, 1/1/17 1,129,990
NR NR 5,835 Massachusetts Health and
Educational Facilities
Authority, (1st Mortgage -
Fairview Extended Care),
10.125%, 1/1/11 6,888,393
NR NR 4,450 Mille Lacs Capital
Improvements, MN (Mille
Lacs Band of Chippewa
Indians), 9.25%, 11/1/12 5,521,427
Aaa NR 100,000 Mississippi Housing
Finance Corp., Single
Family, (AMT), 0.00%,
6/1/15 41,669,000
Aaa AAA 10,000 New Hampshire Higher
Educational and Health
Facilities
(Riverwoods at Exeter),
9.00%, 3/1/23 12,358,800
NR NR 3,500 New Jersey EDA (Cadbury
Corp.), 7.50%, 7/1/21 3,729,985
A2 A- 5,035 New York, NY, Municipal
Water Finance Authority,
6.25%, 6/15/21 5,363,584
Aaa NR 6,120 North Salt Lake
Municipal Building
Authority, Davis County,
UT.,
8.625%, 12/1/17 7,423,560
See notes to financial statements
11
<PAGE>
National Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited)
- -------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Escrowed/Prerefunded (continued)
- --------------------------------------------------------------------------------
Baa1 AAA $ 4,000 Philadelphia, PA Municipal
Water Finance Authority,
7.00%, 8/1/18 $ 4,358,320
NR NR 3,500 Philadelphia, PA (The
Philadelphia Protestant
Home Project), 8.625%,
7/1/21 4,023,810
NR NR 5,000 Rhode Island Health and
Education Building (Steere
House), 8.25%, 7/1/15 5,541,000
Aaa AAA 15,000 San Joaquin Hills
Transportation Corrider
Agency, CA, Toll Roads,
0.00%, 1/1/25 3,874,350
Aaa NR 46,210 San Joaquin Hills
Transportation Corridor
Agency, CA, Toll Roads,
0.00%, 1/1/20 15,372,219
Aaa NR 72,685 San Joaquin Hills
Transportation Corridor
Agency, CA, Toll Roads,
0.00%, 1/1/21 22,985,904
Aaa NR 45,045 San Joaquin Hills
Transportation Corridor
Agency, CA, Toll Roads,
0.00%, 1/1/23 12,873,861
NR AAA 4,500 Scranton-Lackawanna, PA,
Health and Welfare
Authority (Moses Taylor
Hospital), 8.50%, 7/1/20 5,171,445
Aaa AAA 19,165 Texas Turnpike Authority
(Houston Ship Channel
Bridge), 12.625%, 1/1/20/(3)/ 25,684,166
Aaa AAA 2,145 Washington Public Power
Supply System, Nuclear
Project Number 2 (MBIA),
14.375%, 7/1/01 2,547,466
- --------------------------------------------------------------------------------
$ 441,151,064
- --------------------------------------------------------------------------------
General Obligations -- 2.0%
- --------------------------------------------------------------------------------
Aa2 NR $ 5,250 Lakeville, MN, Independent
School District,
5.125%, 2/1/20 $ 5,246,220
Aa2 NR 7,500 Lakeville, MN, Independent
School District,
5.125%, 2/1/22 7,484,100
A3 BBB+ 15,790 New York City, NY,
5.25%, 8/1/16 15,715,313
A3 BBB+ 17,000 New York City, NY,
5.25%, 8/1/17 16,917,040
- --------------------------------------------------------------------------------
$ 45,362,673
- --------------------------------------------------------------------------------
Hospitals -- 8.3%
- --------------------------------------------------------------------------------
NR BBB $ 6,500 Arizona Health Facilities
(Phoenix Memorial
Hospital), 8.20%, 6/1/21 $ 7,065,565
NR NR 2,395 Berlin, MD (Atlantic
General), 8.375%, 6/1/22 2,613,232
Baa NR 10,180 Chaves County, NM (Eastern
New Mexico Medical
Center), 7.25%, 12/1/22 11,247,678
NR BBB- 3,000 Colorado Health Facilities
Authority (National Jewish
Center For Immunology),
6.875%, 2/15/12 3,182,370
NR BBB- 5,015 Colorado Health Facilities
Authority (National Jewish
Center For Immunology),
7.10%, 2/15/22 5,348,748
Baa BBB 32,000 Colorado Health Facilities
Authority (Rocky Mountain
Adventist Healthcare),
6.625%, 2/1/22 34,451,840
Baa1 NR 4,000 Crossville, TN, Health and
Educational Financing
Authority (Cumberland
Medical Center), 6.75%,
11/1/12 4,313,800
A3 BBB+ 6,000 District of Columbia
(Washington Hospital
Center Issue - Medlantic
Healthcare Group, Inc.),
7.125%, 8/15/19 6,766,980
NR A- 5,000 Dubuque, IA (Finley
Hospital), 6.875%, 1/1/12 5,415,650
NR NR 5,350 Grove City Area Hospital
Authority, PA (United
Community Hospital),
8.125%, 7/1/12 5,390,928
NR BBB- 4,000 Hawaii Department of
Budget and Finance
(Wahiawa General Hospital),
7.50%, 7/1/12 4,403,080
Baa1 NR 1,000 Illinois Health Facilities
Authority (Holy Cross
Hospital), 6.70%, 3/1/14 1,094,010
Baa1 NR 2,650 Illinois Health Facilities
Authority (Holy Cross
Hospital), 6.75%, 3/1/24 2,905,831
See notes to financial statements
12
<PAGE>
National Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited)
- -------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Hospitals (continued)
- --------------------------------------------------------------------------------
Baa2 NR $ 4,500 Indiana Health Facility
Financing Authority
(Memorial Hospital and
Health Care Center),
7.40%, 3/1/22 $ 4,890,825
A3 NR 3,750 Louisiana Public
Facilities Authority
(Woman's Hospital Foundation),
7.25%, 10/1/22 4,270,950
NR BBB 8,250 Louisiana Public
Facilities Authority,
General Health Systems
Project, 6.80%, 11/1/16 9,148,013
Baa NR 2,000 Marshall County, AL
(Guntersville-Arab Medical
Center), 7.00%, 10/1/09 2,166,380
Baa NR 2,000 Marshall County, AL
(Guntersville-Arab Medical
Center), 7.00%, 10/1/13 2,173,960
Baa3 NR 2,500 Massachusetts HEFA
(Milford-Whitinsville
Hospital), 7.75%, 7/15/17 2,883,950
Baa3 NR 5,000 Mississippi Hospital
Equipment and Facilities
Authority (Magnolia
Hospital), 7.375%, 10/1/21 5,390,800
A BBB+ 10,000 Philadelphia, PA (Albert
Eistein Medical Center),
7.00%, 10/1/21 10,823,300
B2 BB 9,000 Philadelphia, PA (Graduate
Health System),
6.625%, 7/1/21 9,215,640
B2 BB 2,250 Philadelphia, PA (Graduate
Health System),
7.25%, 7/1/18 2,391,030
Baa3 NR 2,000 Prince George's County, MD
(Greater SouthEast
Healthcare System),
6.375%, 1/1/23 2,072,280
Baa1 BBB+ 10,000 Randolph County Building
Commission, WV (Davis
Memorial Hospital),
7.65%, 11/1/21 10,989,100
NR AAA 8,000 Scranton-Lackawanna Health
and Welfare Authority, PA
(Moses Taylor Hospital),
8.25%, 7/1/09 9,117,680
Baa2 BBB 8,000 South Dakota Health and
Educational Finance
Authority (Prarie Lakes
Health Care System),
7.25%, 4/1/22 9,171,280
NR NR 4,855 Winslow, AZ, Industrial
Development Authority
(Winslow Memorial
Hospital), 9.50%, 6/1/22 5,606,942
- --------------------------------------------------------------------------------
$ 184,511,842
- --------------------------------------------------------------------------------
Housing -- 2.2%
- --------------------------------------------------------------------------------
Aa AA- $ 9,450 California Housing Finance
Agency (AMT), Residual
Interest Bonds, Variable
Rate, 8/1/23/(2)/ $ 10,773,000
NR NR 9,295 Lake Creek Affordable
Housing Corp., CO,
Multifamily, 8.00%, 12/1/23 9,797,488
NR NR 8,000 Los Angeles County Housing
Authority, CA, Multifamily
Housing (Corporate Fund
for Housing), 10.50%, 12/1/29 7,407,760
NR NR 1,500 Maricopa County, AZ, IDA,
Multifamily (National
Health Facilities II
Project), 6.375%, 1/1/19 1,492,125
NR NR 2,185 Minneapolis, MN, Community
Development, Multifamily
(Lindsay Brothers),
1.50%, 12/1/07 1,206,535
NR NR 3,180 Minneapolis, MN, Community
Development, Multifamily
(Lindsay Brothers),
9.50%, 12/1/07 3,462,734
NR NR 8,635 North Miami, FL, Health
Care Facilities (The
Imperial Club), 9.25%,
1/1/13 9,884,225
NR NR 4,000 North Miami, FL, Health
Care Facilities (The
Imperial Club), 10.00%,
1/1/13 3,974,480
- --------------------------------------------------------------------------------
$ 47,998,347
- --------------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
National Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited)
- --------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Industrial Development Revenue /
Pollution Control Revenue -- 13.1%
- --------------------------------------------------------------------------------
NR NR $ 7,500 Austin, TX (Cargoport
Development LLC) (AMT),
8.30%, 10/1/21 $ 8,350,575
NR NR 2,000 California Pollution
Control Financing
Authority, (Laidlaw
Environmental), (AMT),
6.70%, 7/1/07 2,107,760
NR BB- 2,000 Camden County, NJ,
(Holt Hauling), (AMT),
9.875%, 1/1/21 2,547,700
Baa2 BBB+ 6,050 Carbon County, UT (Laidlaw
Enviormental), (AMT),
7.50%, 2/1/10 7,022,417
Baa2 BBB- 28,000 Chicago, IL, O'Hare
International (American
Airlines), 7.875%, 11/1/25 30,705,920
Baa2 BBB- 20,275 Chicago, IL, O'Hare
International, (American
Airlines), 8.20%, 12/1/24 24,827,549
NR NR 6,000 Clark County, NV,
(Nevada Power), (AMT),
7.80%, 10/1/30/(4)/ 6,285,000
Baa1 BBB 24,000 Courtland, AL (Champion
International), (AMT),
7.00%, 6/1/22 26,249,760
Baa2 BBB- 41,000 Dallas-Fort Worth, TX,
International Airport
Facility (American
Airlines), 7.25%, 11/1/30 45,926,560
Baa1 BBB 11,480 Gulf Coast Waste Disposal,
TX (Champion
International), (AMT),
6.875%, 12/1/28 12,731,550
NR NR 5,928 Gwinnett County, GA
(Plastics/Packaging, Inc.)
(AMT), 9.00%, 5/1/13/(1)/ 3,141,612
NR NR 6,500 Kimball, NE, EDA, (Clean
Harbors Inc.) (AMT),
10.75%, 9/1/26 7,146,945
NR NR 1,900 Los Angeles International
Airport (Continental
Airlines) (AMT), 9.00%,
8/1/08 1,963,308
Baa1 BBB 10,000 Maine Finance Authority,
(Great Northern Paper,
Inc., Project - Bowater
Inc.) (AMT), 7.75%, 10/1/22 11,266,100
NR BBB- 5,000 Maine Solid Waste Disposal
(Boise Cascade) (AMT),
7.90%, 6/1/15 5,387,150
Baa1 BBB 5,000 McMinn County, TN
(Calhoun Newsprint Co.
Project - Bowater Inc.),
(AMT), 7.40%, 12/1/22 5,592,900
NR NR 10,000 Michigan Strategic
(S.D. Warren Co.),
7.375%, 1/15/22 11,129,400
NR NR 15,000 Michigan Strategic
(S.D. Warren Co.),
7.375%, 1/15/22 16,694,100
NR NR 3,980 Middleboro, MA (Read
Corp.), 9.50%, 10/1/10 4,275,236
NR NR 17,000 New Jersey EDA, (Holt
Hauling), 7.75%, 3/1/27 19,185,520
NR NR 1,500 New Jersey EDA, (Holt
Hauling), 7.90%, 3/1/27 1,714,290
NR NR 1,000 Ohio Solid Waste Revenue,
(Republic Engineered
Steels Inc.), (AMT),
9.00%, 6/1/21 1,078,220
Baa2 BBB- 7,500 Pennsylvania, IDA,
(MacMillan Bloedel) (AMT),
7.60%, 12/1/20 8,422,425
Baa3 BBB 10,000 Pennsylvania, IDA, (Sun
Company), (AMT),
7.60%, 12/1/24 11,716,800
B1 B 2,585 Riverdale Village, IL,
ACME Metals, Inc., (AMT),
7.90%, 4/1/24 2,898,457
B1 B 2,000 Riverdale Village, IL,
ACME Metals, Inc., (AMT),
7.95%, 4/1/25 2,248,780
NR NR 2,505 Savannah, GA
(Intercat-Savannah, Inc.)
(AMT), 9.75%, 7/1/10 2,702,469
NR NR 3,910 Savannah, GA, EDA
(Intercat-Savannah, Inc.),
(AMT), 9.00%, 1/1/15 4,333,531
NR NR 2,000 Skowhegan, ME, (S. D.
Warren Co.), (AMT),
6.65%, 10/15/15 2,140,120
See notes to financial statements
14
<PAGE>
National Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Industrial Development Revenue /
Pollution Control Revenue (continued)
- --------------------------------------------------------------------------------
NR NR $ 3,500 Toole County, UT,
Pollution Control
Revenue, (AMT),
7.55%, 7/1/27 $ 3,884,405
- --------------------------------------------------------------------------------
$ 293,676,559
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 3.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 22,000 Intermountain Power
Agency, UT (MBIA),
5.75%, 7/1/19 $ 23,307,460
Aaa AAA 10,000 Intermountain Power
Agency, UT (MBIA),
6.00%, 7/1/16 10,826,900
Aaa AAA 10,000 Los Angeles, CA,
Department of Water
and Power (MBIA),
5.00%, 10/15/33 9,630,200
Aaa AAA 16,500 Sacramento, CA,
Municipal Utility
District, (MBIA),
Variable Rate,
11/15/15/(2)/ 17,716,875
Aaa AAA 15,350 South Carolina Public
Services, Residual
Interest Bonds,
(FGIC), Variable
Rate, 1/1/25/(2)/ 14,160,375
- --------------------------------------------------------------------------------
$ 75,641,810
- --------------------------------------------------------------------------------
Insured-General Obligations -- 0.9%
- --------------------------------------------------------------------------------
Aaa AAA $ 21,175 Chicago, IL, (FGIC),
5.25%, 1/1/28/(4)/ $ 20,953,086
- --------------------------------------------------------------------------------
$ 20,953,086
- --------------------------------------------------------------------------------
Insured-Hospitals -- 0.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 8,170 Michigan Hospital
Finance Authority,
(Oakwood Obligation
Group), (FSA),
5.00%, 8/15/26/(4)/ $ 7,789,033
Aaa AAA 7,000 Montgomery, PA,
(Abington Memorial
Hospital) (AMBAC),
Variable Rate, 8,295,000
7/5/11/(2)/
- --------------------------------------------------------------------------------
$ 16,084,033
- --------------------------------------------------------------------------------
Insured-Housing -- 0.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 7,525 SCA Multifamily
Mortgage, Industrial
Development Board,
Hamilton County, TN,
(AMT) (FSA), 7.35%,
1/1/30 $ 8,297,065
- --------------------------------------------------------------------------------
$ 8,297,065
- --------------------------------------------------------------------------------
Insured-Industrial Development Revenue /
Pollution Control Revenue -- 0.6%
- --------------------------------------------------------------------------------
Aaa AAA $ 11,950 Chicago, IL (The
Peoples Gas Light and
Coke Company) (AMT),
(AMBAC), RIBS, Variable
Rate, 12/1/23/(2)/ $ 12,681,938
- --------------------------------------------------------------------------------
$ 12,681,938
- --------------------------------------------------------------------------------
Insured-Pooled Loans -- 0.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 7,000 George L. Smith,
(Georgia World
Congress Center -
Domed Stadium Project),
(MBIA), (AMT), 5.50%,
7/1/20/(4)/ $ 6,848,660
- --------------------------------------------------------------------------------
$ 6,848,660
- --------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 2.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 9,800 Metropolitan Pier and
Exposition Authority,
IL, McCormick Place
Expansion Project,
Residual Interest
Bonds, (MBIA), Variable
Rate, 6/15/27/(2)/ $ 11,404,750
Aaa AAA 3,415 Regional
Transportation
Authority, LA (FGIC),
0.00%, 12/1/12 1,640,942
Aaa AAA 10,935 Regional
Transportation
Authority, LA (FGIC),
0.00%, 12/1/15 4,407,570
Aaa AAA 10,000 Regional
Transportation
Authority, LA (FGIC), 2,909,700
0.00%, 12/1/21
Aaa AAA 20,000 South Orange County,
CA, Public Financing
Authority, (FGIC), Variable
Rate, 8/15/15/(2)(3)/ 21,175,000
Aaa AAA 7,000 Utah Municipal Finance
Corp., Local Government
Revenue, (FSA),
0.00%, 3/1/10 3,949,890
Aaa AAA 6,000 Utah Municipal Finance
Corp., Local
Government Revenue,
(FSA), 0.00%, 3/1/11 3,186,480
- --------------------------------------------------------------------------------
$ 48,674,332
- --------------------------------------------------------------------------------
See notes to financial statements
15
<PAGE>
National Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings
(Unaudited)
- --------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Insured-Transportation -- 5.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 19,000 Massachusetts State
Turnpike Authority
(MBIA), 5.00%, 1/1/20 $ 19,111,530
Aaa AAA 1,000 Massachusetts State
Turnpike Authority
(MBIA), 5.00%, 1/1/20 1,005,870
Aaa AAA 41,015 Massachusetts State
Turnpike Authority,
(FGIC), 5.125%, 1/1/23 41,929,224
Aaa AAA 11,000 Massachusetts Turnpike
Authority, Metropolitan
District Highway System,
(MBIA), 5.00%, 1/1/27 10,625,010
Aaa AAA 14,400 Metropolitan Washington DC
Airport Authority (MBIA),
Variable Rate, 4/1/21/(2)/ 15,642,000
Aaa AAA 18,200 Mobile, AL, Airport
Authority (MBIA), 6.375%,
10/1/14/(3)/ 20,147,400
NR AAA 10,000 Triborough Bridge and
Tunnel Authority, NY,
(MBIA), Variable Rate,
1/1/19/(2)/ 10,812,500
- --------------------------------------------------------------------------------
$ 119,273,534
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 2.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 30,395 California Water
Resources, Central
Valley Project,
(FGIC), 5.25%, 12/1/28 $ 30,436,641
Aaa AAA 10,000 Detroit, MI, Sewer
Revenue (FGIC), Variable
Rate, 7/1/23/(2)/ 10,900,000
Aaa AAA 7,150 Harrisburg, PA, Water
Revenue Bonds, Residual
Interest Bonds (FGIC),
Variable Rate, 8/11/16/(2)/ 7,257,250
Aaa AAA 10,000 New York, NY, Municipal Water
Finance Authority, (FSA),
Variable Rate, 6/15/21/(2)/ 11,337,500
- --------------------------------------------------------------------------------
$ 59,931,391
- --------------------------------------------------------------------------------
Lease Revenue/
Certificates of Participation -- 0.7%
- --------------------------------------------------------------------------------
Baa1 BBB+ $ 11,825 New York Urban
Development Corp.,
(Capital Facilities),
5.00%, 1/1/20 $ 11,354,483
NR AA- 3,500 Plymouth County, MA
(Plymouth County
Correctional Facility),
7.00%, 4/1/22 3,920,840
- --------------------------------------------------------------------------------
$ 15,275,323
- --------------------------------------------------------------------------------
Life Care -- 6.6%
- --------------------------------------------------------------------------------
NR NR $ 8,616 Albuquerque, NM, First
Mortgage IDR, (La Vida
Llena Retirement Center),
8.625%, 2/1/20 $ 9,092,292
NR NR 6,900 Albuquerque, NM, First
Mortgage IDR, (La Vida
Llena Retirement Center),
8.85%, 2/1/23 7,584,618
NR NR 5,744 Albuquerque, NM, First
Mortgage IDR, (La Vida
Lllena Retirement Center),
2.25%, 2/1/23 1,724,751
NR NR 10,000 Atlantic Beach, Fixed
Rate Improvement, FL,
(Fleet Landing Project),
8.00%, 6/1/24 11,221,600
NR NR 12,435 De Kalb County, Private
Hospital Authority, GA,
(Atlanta Incorporated),
8.50%, 3/1/25 9,326,250
NR NR 4,995 Kansas City, MO, IDA,
(Kingswood United
Methodist Manor), 5,772,971
9.00%, 11/15/13
Aaa AAA 20,400 Loudoun County, VA,
IDA, (Falcons Landing),
8.75%, 11/1/24 26,052,432
Aaa AAA 2,100 Loudoun County, VA,
IDA, Residential Care
(Falcons Landing),
9.25%, 7/1/04 2,494,464
NR NR 15,000 Louisiana Housing
Finance Agency, (HCC
Assisted Living Group 1),
(AMT), 9.00%, 3/1/25 16,927,350
NR NR 650 New Hampshire Higher
Educational and Health
Facilities (Riverwoods
at Exeter), 8.00%, 3/1/01 663,832
See notes to financial statements
16
<PAGE>
National Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited)
- -------------------
Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Life Care (continued)
- --------------------------------------------------------------------------------
Aaa AAA $ 20,000 New Jersey EDA, (Keswick
Pines Project),
8.75%, 1/1/24 $ 24,757,800
NR NR 5,800 Ridgeland, MS, Urban
Renewal, (The Orchard
Project), 7.75%, 12/1/15 6,336,210
NR NR 10,000 Saint Tammany, LA,
Public Finance,
(Christwood Project),
9.00%, 11/15/25 11,703,100
NR NR 4,500 Vermont IDA, (Wake
Robin Corp.), 8.75%,
3/1/23/(3)/ 5,098,050
NR NR 7,500 Vermont IDA, (Wake
Robin Corp.), 8.75%,
4/1/23 8,510,475
- --------------------------------------------------------------------------------
$ 147,266,195
- --------------------------------------------------------------------------------
Miscellaneous -- 2.5%
- --------------------------------------------------------------------------------
NR NR $ 6,225 American Samoa Economic
Development, Executive Office
Building, 10.125%, 9/1/08 $ 6,528,282
NR NR 6,645 Hardeman County, TN,
(Correctional Facilities
Corp.), 7.75%, 8/1/17 7,495,095
NR A- 6,500 Los Angeles Regional Airports
Improvement Corporation, CA,
(LAXFuel), (AMT),
6.50%, 1/1/32 6,753,175
NR NR 22,500 New Jersey Sports and
Exposition Authority,
(Monmouth Park),
8.00%, 1/1/25 25,732,350
NR NR 4,205 Niagara County, NY,
Industrial Development
Authority (Wintergarden Inn
Associates), 9.75%, 6/1/11/(1)/ 1,682,000
NR NR 10,200 Orange County Community
Activity Corporation, NC,
8.00%, 3/1/24 6,120,000
NR NR 1,600 Pittsfield Township,
MI, EDC, (Arbor Hospice
Project), 7.875%, 8/15/27 1,688,944
- --------------------------------------------------------------------------------
$ 55,999,846
- --------------------------------------------------------------------------------
Nursing Homes -- 7.0%
- --------------------------------------------------------------------------------
NR NR $ 13,270 Bell County, TX, (Riverside
Healthcare, Inc. - Normandy
Terrace), 9.00%, 4/1/23 $ 15,993,004
NR NR 4,200 Collier County, FL, IDA,
Retirement Rental, (Beverly
Enterprises - Florida,
Inc.), 10.75%, 3/1/03 4,835,334
NR NR 5,000 Delaware County, PA
(Mainline - Haverford
Nursing and Rehabilitation
Centers), 9.00%, 8/1/22 5,943,400
NR NR 4,650 Hillsborough County, FL,
IDA, Center for Independent
Living, Tampa Projects,
10.25%, 3/1/09/(5)/ 4,185,000
NR NR 5,460 Hillsborough County, FL,
IDA, Center for Independent
Living, Tampa Projects,
11.00%, 3/1/19/(5)/ 4,914,000
Baa1 NR 10,000 Indianapolis, IN
(National Benevolent
Association - Robin Run
Village), 7.625%, 10/1/22 11,144,100
NR NR 3,575 Lackawanna County, PA,
IDA, (Edella Street
Associates), 8.875%, 9/1/14 4,003,428
NR NR 3,085 Luzerne County, PA,
Industrial Development
Authority (River Street
Associates), 8.75%,
6/15/07 3,433,512
NR NR 13,250 Massachusetts IFA, (Age
Institute of Massachusetts),
8.05%, 11/1/25 14,900,288
NR NR 11,780 Mississippi Business
Finance Corp.
(Magnolia Healthcare),
7.99%, 7/1/25 12,755,384
NR NR 6,750 Missouri Health and
Education Authority,
(Bethesda Health Group
of Saint Louis Inc.),
6.625%, 8/15/05 7,194,083
NR NR 14,000 Missouri Health and
Education Authority
(Bethesda Health Group
of Saint Louis, Inc.),
7.50%, 8/15/12 15,741,320
NR NR 12,500 Montgomery, PA, IDA,
(Advancement of
Geriatric Health Care
Institute), 8.375%,
7/1/23 13,540,875
See notes to financial statements
17
<PAGE>
National Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Nursing Homes (continued)
- --------------------------------------------------------------------------------
NR NR $ 5,000 New Jersey EDA,
(Claremont Health
System, Inc.),
9.10%, 9/1/22 $ 5,705,550
NR NR 5,915 New Jersey EDA,
(Victoria Health
Corporation),
7.75%, 1/1/24 6,466,278
NR NR 2,895 Okaloosa County,
(Beverly Enterprises),
10.75%, 10/1/03 2,992,619
A3 BBB 3,870 Racine County, WI,
Health Center, 8.125%,
8/1/21 3,972,362
NR NR 5,000 Sussex County, DE
(Delaware Health
Corporation),
7.50%, 1/1/14 5,377,550
NR NR 5,000 Sussex County, DE
(Delaware Health
Corporarion),
7.60%, 1/1/24 5,388,850
NR NR 4,500 Tarrant County Health
Facilities, TX (3927
Foundation), 10.25%,
9/1/19 4,802,085
NR NR 2,500 Westmoreland, PA
(Highland Health
Systems, Inc.),
9.25%, 6/1/22 2,864,400
- --------------------------------------------------------------------------------
$ 156,153,422
- --------------------------------------------------------------------------------
Pooled Loans -- 0.2%
- --------------------------------------------------------------------------------
Aa3 AA- $ 5,000 Port Seattle, WA,
6.00%, 12/1/14 $ 5,133,000
- --------------------------------------------------------------------------------
$ 5,133,000
- --------------------------------------------------------------------------------
Solid Waste -- 1.7%
- --------------------------------------------------------------------------------
NR NR $ 35,000 Robbins, Cook County,
IL (Robbins Resource
Recovery Partners, L.P.),
8.375%, 10/15/16/(3)/ $ 36,650,250
- --------------------------------------------------------------------------------
$ 36,650,250
- --------------------------------------------------------------------------------
Special Tax Revenue -- 0.5%
- --------------------------------------------------------------------------------
Aa2 AA+ $ 7,000 Florida Department of
Transportation, (Right
Of Way), 5.00%, 7/1/27 $ 6,800,430
Baa BBB 3,755 Inglewood, CA Public
Financing Authority,
In-Town, Manchester-
Prairie and North
Inglewood Industrial Park
Redevelopment Projects
- Redevelopment Loans,
7.00%, 5/1/22 $ 4,074,475
- --------------------------------------------------------------------------------
$ 10,874,905
- --------------------------------------------------------------------------------
Transportation -- 6.5%
- --------------------------------------------------------------------------------
Baa1 BBB $ 6,340 Denver, CO, City and
County Airport Revenue,
(AMT), 7.00%, 11/15/25 $ 6,796,036
Baa1 BBB 4,735 Denver, CO, City and
County Airport Revenue,
(AMT), 7.50%, 11/15/23 5,457,466
Baa3 BB+ 52,500 Denver, CO, City and
County, (United Airlines)
(AMT), 6.875%, 10/1/32 57,252,825
A A- 5,000 Hawaii Airport System
(AMT), 7.00%, 7/1/18 5,415,750
Baa1 BBB+ 6,000 Metropolitan Transportation
Authority, NY, 5.50%, 7/1/17 6,106,560
Aa3 A+ 10,000 New Jersey Turnpike
Authority, 5.00%, 6/15/17 9,829,600
A1 AA- 15,000 Port Authority of New
York and New Jersey
(AMT), Variable Rate,
1/15/27/(2)/ 16,837,500
Aa3 A+ 9,050 Triborough Bridge And
Tunnel Authority, NY,
5.125%, 1/1/22 8,920,857
Aa3 A+ 10,450 Triborough Bridge and
Tunnel Authority, NY,
5.20%, 1/1/27 10,372,043
Aa3 A+ 19,030 Triborough Bridge and
Tunnel Authority, NY,
5.25%, 1/1/28 19,028,287
- --------------------------------------------------------------------------------
$ 146,016,924
- --------------------------------------------------------------------------------
Water and Sewer -- 0.7%
- --------------------------------------------------------------------------------
Aa2 AA $ 10,000 Metropolitan Water
District, Southern
California Waterworks,
5.00%, 7/1/26 $ 9,733,700
See notes to financial statements
18
<PAGE>
National Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Water and Sewer (continued)
- --------------------------------------------------------------------------------
A2 A- $ 4,965 New York, NY,
Municipal Water
Finance Authority,
6.25%, 6/15/21 $ 5,194,135
- --------------------------------------------------------------------------------
$ 14,927,835
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments
(identified cost $1,939,293,672) $2,234,702,636
- --------------------------------------------------------------------------------
Taxable-Investment -- 0.0%
Life Care -- 0.0%
- --------------------------------------------------------------------------------
NR NR $ 570 Ridgeland, MS, Urban
Renewal (The Orchard),
9.00%, 12/1/00 $ 575,301
- --------------------------------------------------------------------------------
$ 575,301
- --------------------------------------------------------------------------------
Total Taxable-Investment
(identified cost $570,000) $ 575,301
- --------------------------------------------------------------------------------
Total Investments -- 100.0%
(identified cost $1,939,863,672) $2,235,277,937
- --------------------------------------------------------------------------------
At March 31, 1998, the concentration of the Portfolio's investments in the
various states, determined as a percentage of total investments, is
as follows:
Colorado 11.0%
Others, representing less than 10% individually 89.0%
The Portfolio invests primarily in debt securities issued by municipalties. The
ability of the issuers of the debt securities to meet their obligations may be
affected by economic developments in a specific industry or municipality. In
order to reduce the risk associated with such economic developments, at March
31, 1998, 17.1% of the securities in the portfolio of investments are backed by
bond insurance of various financial institutions and financial guaranty
assurance agencies. The aggregate percentage insured by financial institutions
ranged from 6.9% to 7.9% of total investments.
/(1)/ Non-income producing security.
/(2)/ Security has been issued as an inverse floater bond.
/(3)/ Security has been segregated to cover when-issued securities.
/(4)/ When-issued security.
/(5)/ The Portfolio is accruing only partial interest on this security.
See notes to financial statements
19
<PAGE>
National Municipals Portfolio as of March 31, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of March 31, 1998
Assets
- -------------------------------------------------------------------------
Investments, at value (Note 1A)
(identified cost, $1,939,863,672) $2,235,277,937
Cash 906
Receivable for investments sold 27,428,353
Receivable for when-issued securities sold (Note 1G) 4,940,075
Interest receivable 39,232,582
- -------------------------------------------------------------------------
Total assets $2,306,879,853
- -------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------
Demand note payable (Note 5) $ 4,013,000
Payable for when-issued securities (Note 1G) 52,332,791
Payable to affiliate for Trustees' fees (Note 2) 8,567
Accrued expenses 23,707
- -------------------------------------------------------------------------
Total liabilities $ 56,378,065
- -------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $2,250,501,788
- -------------------------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $1,955,087,523
Net unrealized appreciation of investments
(computed on the basis of identified cost) 295,414,265
- -------------------------------------------------------------------------
Total $2,250,501,788
- -------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended
March 31, 1998
Investment Income (Note 1B)
- -------------------------------------------------------------------------
Interest income $ 71,477,884
- -------------------------------------------------------------------------
Total investment income $ 71,477,884
- -------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 4,687,827
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 15,947
Custodian fee (Note 1J) 241,220
Legal and accounting services 75,200
Amortization of organization expenses (Note 1D) 7,562
Miscellaneous 82,157
- -------------------------------------------------------------------------
Total expenses $ 5,109,913
- -------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1J) $ 232,168
- -------------------------------------------------------------------------
Total expense reductions $ 232,168
- -------------------------------------------------------------------------
Net expenses $ 4,877,745
- -------------------------------------------------------------------------
Net investment income $ 66,600,139
- -------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- -------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 62,869,299
Financial futures contracts (12,173,968)
- -------------------------------------------------------------------------
Net realized gain on investment transactions $ 50,695,331
- -------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ (2,970,248)
Financial futures contracts 8,081,000
- -------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments $ 5,110,752
- -------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 55,806,083
- -------------------------------------------------------------------------
Net increase in net assets from operations $ 122,406,222
- -------------------------------------------------------------------------
See notes to financial statements
20
<PAGE>
National Municipals Portfolio as of March 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Six Months Ended
Increase (Decrease) March 31, 1998 Year Ended
in Net Assets (Unaudited) September 30, 1997
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 66,600,139 $ 141,173,780
Net realized gain on
investment transactions 50,695,331 683,719
Net change in unrealized
appreciation (depreciation)
of investments 5,110,752 133,564,032
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 122,406,222 $ 275,421,531
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 179,709,899 $ 304,512,126
Withdrawals (233,229,737) (610,796,255)
- --------------------------------------------------------------------------------
Net decrease in net assets from
capital transactions $ (53,519,838) $ (306,284,129)
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets $ 68,886,384 $ (30,862,598)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $2,181,615,404 $2,212,478,002
- --------------------------------------------------------------------------------
At end of period $2,250,501,788 $2,181,615,404
- --------------------------------------------------------------------------------
See notes to financial statements
21
<PAGE>
National Municipals Portfolio as of March 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30,
March 31, 1998 ---------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses/(1)/ 0.46%+ 0.52% 0.49% 0.50% 0.50% 0.47%+
Expenses after custodian fee reduction 0.44%+ 0.52% 0.48% 0.49% -- --
Net investment income 6.01%+ 6.51% 6.65% 7.00% 6.55% 6.58%+
Portfolio Turnover 14% 17% 19% 54% 40% 13%
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $2,250,502 $2,181,615 $2,212,478 $2,260,646 $2,210,936 $2,083,322
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, February 1, 1993, to
September 30, 1993.
/(1)/ The expense ratios for the year ended September 30, 1995 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Portfolio to
increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratios for each of
the prior periods have not been adjusted to reflect this change.
See notes to financial statements
22
<PAGE>
National Municipals Portfolio as of March 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
----------------------------------------------------------------------------
National Municipals Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified open-end management
investment company which was organized as a trust under the laws of the
State of New York on May 1, 1992. The Declaration of Trust permits the
Trustees to issue interests in the Portfolio. The following is a summary of
significant accounting policies of the Portfolio. The policies are in
conformity with generally accepted accounting principles.
A Investment Valuation -- Municipal bonds are normally valued on the basis
of valuations furnished by a pricing service. Taxable obligations, if any,
for which price quotations are readily available are normally valued at the
mean between the latest bid and asked prices. Futures contracts listed on
the commodity exchanges are valued at closing settlement prices. Short-term
obligations, maturing in sixty days or less, are valued at amortized cost,
which approximates value. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes.
C Federal Taxes -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes
on any taxable income of the Portfolio because each investor in the
Portfolio is ultimately responsible for the payment of any taxes. Since some
of the Portfolio's investors are regulated investment companies that invest
all or substantially all of their assets in the Portfolio, the Portfolio
normally must satisfy the applicable source of income and diversification
requirements (under the Internal Revenue Code) in order for its investors to
satisfy them. The Portfolio will allocate at least annually among its
investors each investor's distributive share of the Portfolio's net taxable
(if any) and tax-exempt investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit. Interest income
received by the Portfolio on investments in municipal bonds, which is
excludable from gross income under the Internal Revenue Code, will retain
its status as income exempt from federal income tax when allocated to the
Portfolio's investors. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986 may be considered a tax
preference item for investors.
D Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
E Financial Futures Contracts -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit ("initial margin") either in
cash or securities an amount equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio ("margin maintenance") each day, dependent
on the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio.
The Portfolio's investment in financial futures contracts is designed only
to hedge against anticipated future changes in interest rates. Should
interest rates move unexpectedly, the Portfolio may not achieve the
anticipated benefits of the financial futures contracts and may realize a
loss.
F Legal Fees -- Legal fees and other related expenses incurred as part of
negotiations of the terms and requirements of capital infusions, or that are
expected to result in the restructuring of or a plan of reorganization for
an investment are recorded as realized losses. Ongoing expenditures to
protect or enhance an investment are treated as operating expenses.
G When-issued and Delayed Delivery Transactions -- The Portfolio may engage
in when-issued or delayed delivery transactions. The Portfolio records
when-issued securities on trade date and maintains security positions such
that sufficient liquid assets will be available to make payments for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked-to-market daily and begin accruing interest on
settlement date.
H Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
I Other -- Investment transactions are accounted for on a trade date basis.
23
<PAGE>
National Municipals Portfolio as of March 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
J Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balance the Portfolio maintains with IBT. All significant credit
balances used to reduce the Portfolio's custodian fees are reflected as a
reduction of operating expense on the Statement of Operations.
K Interim Financial Information -- The interim financial statements relating
to March 31, 1998 and for the six-month period then ended have not been
audited by independent certified public accountants, but in the opinion of
the Fund's management, reflect all adjustments, consisting only of normal
recurring adjustments necessary for the fair presentation of the financial
statements.
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 six months ended March 31, 1998, the fee was
equivalent to 0.42% (annualized) of the Portfolio's average daily net assets
for such period and amounted to $4,687,827. 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 six months ended March 31,
1998, no significant amounts have been deferred.
Certain of the officers and Trustees of the Portfolio are officers and
directors/trustees of the above organizations.
3 Investments
----------------------------------------------------------------------------
Purchases and sales of investments, other than U.S. Government securities
and short-term obligations, aggregated $316,089,166 and $357,485,625,
respectively, for the six months ended March 31, 1998.
4 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at March 31, 1998, as computed on a federal income tax
basis, were as follows:
Aggregate cost $ 1,939,863,672
------------------------------------------------------------------------
Gross unrealized appreciation $ 311,242,372
Gross unrealized depreciation (15,828,107)
------------------------------------------------------------------------
Net unrealized appreciation $ 295,414,265
------------------------------------------------------------------------
5 Line of Credit
----------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR
and EVM and its affiliates in a $100 million unsecured line of credit
agreement with a group of banks. The portfolio may temporarily borrow from
the line of credit to satisfy redemption requests or settle investment
transactions. Interest is charged to each portfolio or fund based on its
borrowings at an amount above either the 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 March 31, 1998, the
Portfolio had a balance outstanding pursuant to this line of credit of
$4,013,000. The Portfolio did not have any significant borrowings or
allocated fees during the six months ended March 31, 1998.
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 the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered. There were
no open obligations under these financial instruments at March 31, 1998.
24
<PAGE>
Eaton Vance National Municipals Fund as of March 31, 1998
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
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking,
Harvard University Graduate School of
Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
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
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking,
Harvard University Graduate School of Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
25
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<PAGE>
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<PAGE>
Investment Advisor of
National Municipals Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of
Eaton Vance National Municipals Fund
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617)482-8260
Custodian
Investors Bank & Trust Company
200 Clarendon Street, 16th Floor
Boston, MA 02116
Transfer Agent
First Data Investor Services Group, Inc.
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Eaton Vance Municipals Fund
24 Federal Street
Boston, MA 02110
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This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution
plan, sales charges and expenses. Please read the prospectus carefully
before you invest or send money.
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HMSRC-5/98
