<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
As of July 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Arizona Fund Colorado Fund Connecticut Fund Michigan Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Investment in Municipals Portfolio --
Identified cost $ 100,639,257 $ 37,402,378 $ 163,492,975 $ 137,150,164
Unrealized appreciation 9,967,175 3,532,943 8,746,533 11,938,942
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment, at value (Note 1A) $ 110,606,432 $ 40,935,321 $ 172,239,508 $ 149,089,106
- ------------------------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold $ 221,623 $ 7,500 $ 68,050 $ 29,917
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 110,828,055 $ 40,942,821 $ 172,307,558 $ 149,119,023
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions payable $ 211,326 $ 80,623 $ 319,776 $ 279,445
Payable for Fund shares redeemed 1,191,617 53,922 304,839 237,150
Payable to affiliate for Trustees' fees
(Note 4) 277 14 276 277
Accrued expenses 45,765 22,096 48,717 60,647
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 1,448,985 $ 156,655 $ 673,608 $ 577,519
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 109,379,070 $ 40,786,166 $ 171,633,950 $ 148,541,504
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ 103,640,899 $ 39,087,261 $ 167,886,287 $ 140,616,411
Accumulated net realized loss from
portfolio (computed on the basis of
identified cost) (4,179,476) (1,906,185) (4,679,094) (3,838,063)
Accumulated undistributed (distributions
in excess of) net investment income (49,528) 72,147 (319,776) (175,786)
Net unrealized appreciation of investments
(computed on the basis of identified cost) 9,967,175 3,532,943 8,746,533 11,938,942
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 109,379,070 $ 40,786,166 $ 171,633,950 $ 148,541,504
- ------------------------------------------------------------------------------------------------------------------------------------
Shares of Beneficial Interest Outstanding
- ------------------------------------------------------------------------------------------------------------------------------------
9,745,612 3,775,441 16,242,953 13,662,577
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption
Price Per Share (Note 6)
- ------------------------------------------------------------------------------------------------------------------------------------
(Net assets / shares of beneficial
interest outstanding) $ 11.22 $ 10.80 $ 10.57 $ 10.87
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
11
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of July 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Minnesota Fund New Jersey Fund Pennsylvania Fund Texas Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------
Investment in Municipals Portfolio --
Identified cost $ 62,201,002 $ 315,453,846 $ 364,865,896 $ 19,607,781
Unrealized appreciation 5,859,583 31,452,257 32,279,882 1,735,804
- ----------------------------------------------------------------------------------------------------------------------
Total investment, at value (Note 1A) $ 68,060,585 $ 346,906,103 $ 397,145,778 $ 21,343,585
- ----------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold $ 36,992 $ 291,491 $ 266,667 $ --
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 68,097,577 $ 347,197,594 $ 397,412,445 $ 21,343,585
- ----------------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------
Distributions payable $ 131,235 $ 694,486 $ 830,773 $ 42,322
Payable for Fund shares redeemed 152,569 1,324,042 480,215 118
Payable to affiliate for Trustees' fees (Note 4) 139 277 277 11
Accrued expenses 32,852 99,282 127,098 18,511
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities $ 316,795 $ 2,118,087 $ 1,438,363 $ 60,962
- ----------------------------------------------------------------------------------------------------------------------
Net Assets $ 67,780,782 $ 345,079,507 $ 395,974,082 $ 21,282,623
- ----------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ----------------------------------------------------------------------------------------------------------------------
Paid-in capital $ 66,414,909 $ 328,701,098 $ 380,502,583 $ 20,386,687
Accumulated net realized loss from
portfolio (computed on the basis of
identified cost) (4,411,197) (14,883,316) (17,550,010) (858,754)
Accumulated undistributed (distributions in
excess of) net investment income (82,513) (190,532) 741,627 18,886
Net unrealized appreciation of
investments (computed on the basis of
identified cost) 5,859,583 31,452,257 32,279,882 1,735,804
- ----------------------------------------------------------------------------------------------------------------------
Total $ 67,780,782 $ 345,079,507 $ 395,974,082 $ 21,282,623
- ----------------------------------------------------------------------------------------------------------------------
Shares of Beneficial Interest Outstanding
- ----------------------------------------------------------------------------------------------------------------------
6,461,607 31,547,032 36,341,343 1,941,903
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption Price Per
Share (Note 6)
- ----------------------------------------------------------------------------------------------------------------------
(Net assets / shares of beneficial interest
outstanding) $ 10.49 $ 10.94 $ 10.90 $ 10.96
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
12
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Arizona Fund Colorado Fund Connecticut Fund Michigan Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- ----------------------------------------------------------------------------------------------------------------------
Interest income allocated from Portfolio $ 7,162,799 $ 2,560,652 $ 10,673,242 $ 9,530,853
Expenses allocated from Portfolio (577,411) (147,761) (935,758) (805,558)
- ----------------------------------------------------------------------------------------------------------------------
Net investment income from Portfolio $ 6,585,388 $ 2,412,891 $ 9,737,484 $ 8,725,295
- ----------------------------------------------------------------------------------------------------------------------
Expenses
- ----------------------------------------------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 3,297 $ 165 $ 3,268 $ 3,297
Distribution fees (Note 5) 1,100,886 377,799 1,638,773 1,487,408
Transfer and dividend disbursing agent fees 75,731 28,764 126,416 113,496
Printing and postage 32,967 19,067 49,612 45,801
Legal and accounting services 20,343 22,843 24,259 21,448
Custodian fee 12,627 5,593 16,016 14,497
Registration fees 4,752 1,000 3,788 1,377
Amortization of organization expenses (Note 1D) -- 2,100 2,342 --
Miscellaneous 26,373 5,995 18,459 29,577
- ----------------------------------------------------------------------------------------------------------------------
Total expenses $ 1,276,976 $ 463,326 $ 1,882,933 $ 1,716,901
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 5,308,412 $ 1,949,565 $ 7,854,551 $ 7,008,394
- ----------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,849,841 $ 748,521 $ 1,291,719 $ 2,038,612
Financial futures contracts (1,072,317) (312,133) (821,377) (2,016,068)
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions $ 777,524 $ 436,388 $ 470,342 $ 22,544
- ----------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions $ 5,139,625 $ 2,158,920 $ 7,342,200 $ 6,960,232
Financial futures contracts (264,834) (170,386) (445,615) (522,454)
- ----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 4,874,791 $ 1,988,534 $ 6,896,585 $ 6,437,778
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 5,652,315 $ 2,424,922 $ 7,366,927 $ 6,460,322
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 10,960,727 $ 4,374,487 $ 15,221,478 $ 13,468,716
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
13
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Minnesota Fund New Jersey Fund Pennsylvania Fund Texas Fund
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- -----------------------------------------------------------------------------------------------------------------------
Interest income allocated from Portfolio $ 4,312,154 $ 23,052,829 $ 26,954,193 $ 1,374,496
Expenses allocated from Portfolio (311,908) (1,899,487) (2,112,627) (77,316)
- -----------------------------------------------------------------------------------------------------------------------
Net investment income from Portfolio $ 4,000,246 $ 21,153,342 $ 24,841,566 $ 1,297,180
- -----------------------------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 1,527 $ 3,431 $ 3,297 $ 293
Distribution fees (Note 5) 648,328 3,353,181 3,887,240 208,896
Transfer and dividend disbursing agent fees 47,197 247,179 306,595 15,607
Custodian fee (Note 1F) 8,070 25,300 25,800 2,927
Printing and postage 28,199 99,584 69,441 12,495
Legal and accounting services 25,497 24,119 20,515 18,743
Registration fees 1,107 1,907 5,209 40
Amortization of organization expenses (Note 1D) -- -- -- 3,550
Miscellaneous 11,753 35,417 83,556 5,530
- -----------------------------------------------------------------------------------------------------------------------
Total expenses $ 771,678 $ 3,790,118 $ 4,401,653 $ 268,081
- -----------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1F) $ -- $ -- $ 25,000 $ --
- -----------------------------------------------------------------------------------------------------------------------
Total expense reductions $ -- $ -- $ 25,000 $ --
- -----------------------------------------------------------------------------------------------------------------------
Net expenses $ 771,678 $ 3,790,118 $ 4,376,653 $ 268,081
- -----------------------------------------------------------------------------------------------------------------------
Net investment income $ 3,228,568 $ 17,363,224 $ 20,464,913 $ 1,029,099
- -----------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 626,009 $ 4,373,998 $ 4,046,941 $ 161,471
Financial futures contracts (606,666) (2,388,705) (5,098,050) (167,709)
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions $ 19,343 $ 1,985,293 $ (1,051,109) $ (6,238)
- -----------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions $ 3,080,897 $ 14,743,952 $ 19,814,548 $ 1,160,820
Financial futures contracts (377,704) (846,203) (1,350,520) (67,871)
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments $ 2,703,193 $ 13,897,749 $ 18,464,028 $ 1,092,949
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 2,722,536 $ 15,883,042 $ 17,412,919 $ 1,086,711
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 5,951,104 $ 33,246,266 $ 37,877,832 $ 2,115,810
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
14
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Increase (Decrease) in Net Assets Arizona Fund Colorado Fund Connecticut Fund Michigan Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 5,308,412 $ 1,949,565 $ 7,854,551 $ 7,008,394
Net realized gain on investment transactions 777,524 436,388 470,342 22,544
Net change in unrealized appreciation
(depreciation) of investments 4,874,791 1,988,534 6,896,585 6,437,778
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 10,960,727 $ 4,374,487 $ 15,221,478 $ 13,468,716
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (5,284,385) $ (1,920,578) $ (7,825,912) $ (7,008,394)
In excess of net investment income -- -- -- (34,246)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (5,284,385) $ (1,920,578) $ (7,825,912) $ (7,042,640)
- ----------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 6,378,622 $ 3,160,432 $ 8,059,926 $ 2,876,721
Net asset value of shares issued to
shareholders in payment of distributions
declared 2,001,467 959,878 4,201,749 3,546,390
Cost of shares redeemed (32,357,879) (8,760,256) (29,631,741) (35,374,258)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share
transactions $(23,977,790) $ (4,639,946) $ (17,370,066) $ (28,951,147)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $(18,301,448) $ (2,186,037) $ (9,974,500) $ (22,525,071)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $127,680,518 $ 42,972,203 $ 181,608,450 $ 171,066,575
- ----------------------------------------------------------------------------------------------------------------------------------
At end of year $109,379,070 $ 40,786,166 $ 171,633,950 $ 148,541,504
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of) net investment
income included in net assets
- ----------------------------------------------------------------------------------------------------------------------------------
At end of year $ (49,528) $ 72,147 $ (319,776) $ (175,786)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
15
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Increase (Decrease) in Net Assets Minnesota Fund New Jersey Fund Pennsylvania Fund Texas Fund
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 3,228,568 $ 17,363,224 $ 20,464,913 $ 1,029,099
Net realized gain (loss) on investment
transactions 19,343 1,985,293 (1,051,109) (6,238)
Net change in unrealized appreciation
(depreciation) of investments 2,703,193 13,897,749 18,464,028 1,092,949
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 5,951,104 $ 33,246,266 $ 37,877,832 $ 2,115,810
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (3,186,013) $ (17,073,929) $ (20,078,825) $ (1,046,385)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (3,186,013) $ (17,073,929) $ (20,078,825) $ (1,046,385)
- ------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 3,588,530 $ 16,690,868 $ 15,557,539 $ 1,640,887
Net asset value of shares issued to
shareholders in payment of distributions
declared 1,654,522 8,710,206 9,150,623 396,839
Cost of shares redeemed (14,601,452) (75,142,843) (87,637,467) (5,820,480)
- ------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share
transactions $ (9,358,400) $ (49,741,769) $ (62,929,305) $ (3,782,754)
- ------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (6,593,309) $ (33,569,432) $ (45,130,298) $ (2,713,329)
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 74,374,091 $ 378,648,939 $ 441,104,380 $ 23,995,952
- ------------------------------------------------------------------------------------------------------------------------------
At end of year $ 67,780,782 $ 345,079,507 $ 395,974,082 $ 21,282,623
- ------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of) net investment income
included in net assets
- ------------------------------------------------------------------------------------------------------------------------------
At end of year $ (82,513) $ (190,532) $ 741,627 $ 18,886
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
16
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1996
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Increase (Decrease) in Net Assets Arizona Fund Colorado Fund Connecticut Fund Michigan Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 6,150,183 $ 2,092,966 $ 8,377,085 $ 8,060,855
Net realized gain (loss) on investment
transactions 892,368 301,984 (20,964) 2,768,823
Net change in unrealized appreciation
(depreciation) of investments 1,223,781 393,555 3,339,721 859,497
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 8,266,332 $ 2,788,505 $ 11,695,842 $ 11,689,175
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (6,222,739) $ (2,146,041) $ (8,377,085) $ (8,356,758)
In excess of net investment income (73,555) -- (360,566) (141,540)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (6,296,294) $ (2,146,041) $ (8,737,651) $ (8,498,298)
- -----------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial
interest (Note 3) --
Proceeds from sale of shares $ 8,482,050 $ 4,652,643 $ 9,339,399 $ 6,125,761
Net asset value of shares issued to
shareholders in payment of distributions
declared 2,467,498 1,043,767 4,841,727 4,399,914
Cost of shares redeemed (27,098,114) (7,266,498) (24,431,028) (29,012,687)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share
transactions $ (16,148,566) $ (1,570,088) $ (10,249,902) $ (18,487,012)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (14,178,528) $ (927,624) $ (7,291,711) $ (15,296,135)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 141,859,046 $ 43,899,827 $ 188,900,161 $ 186,362,710
- -----------------------------------------------------------------------------------------------------------------------------------
At end of year $ 127,680,518 $ 42,972,203 $ 181,608,450 $ 171,066,575
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed (distributions
in excess of) net investment income
included in net assets
- -----------------------------------------------------------------------------------------------------------------------------------
At end of year $ (73,555) $ 43,160 $ (359,774) $ (141,540)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
17
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1996
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Increase (Decrease) in Net Assets Minnesota Fund New Jersey Fund Pennsylvania Fund Texas Fund
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 3,606,912 $ 19,032,596 $ 23,119,118 $ 1,252,579
Net realized gain (loss) on investment
transactions 373,935 (305,571) 5,987,544 353,286
Net change in unrealized appreciation
(depreciation) of investments 631,925 3,879,246 (281,975) 155,796
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 4,612,772 $ 22,606,271 $ 28,824,687 $ 1,761,661
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (3,606,912) $ (19,032,596) $ (23,059,671) $ (1,295,270)
In excess of net investment income (20,434) (148,859) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (3,627,346) $ (19,181,455) $ (23,059,671) $ (1,295,270)
- ------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest
(Note 3) --
Proceeds from sale of shares $ 4,475,100 $ 21,519,563 $ 16,510,722 $ 1,080,119
Net asset value of shares issued to
shareholders in payment of distributions
declared 1,972,796 9,846,974 10,497,742 465,640
Cost of shares redeemed (12,029,259) (61,002,931) (87,524,749) (5,778,221)
- ------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share
transactions $ (5,581,363) $ (29,636,394) $ (60,516,285) $ (4,232,462)
- ------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (4,595,937) $ (26,211,578) $ (54,751,269) $ (3,766,071)
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 78,970,028 $ 404,860,517 $ 495,855,649 $ 27,762,023
- ------------------------------------------------------------------------------------------------------------------------------
At end of year $ 74,374,091 $ 378,648,939 $ 441,104,380 $ 23,995,952
- ------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed (distributions
in excess of) net investment income
included in net assets
- ------------------------------------------------------------------------------------------------------------------------------
At end of year $ (125,068) $ (479,827) $ 355,539 $ 36,172
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
18
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Arizona Fund
----------------------------------------------------------------------
Year Ended
----------------------------------------------------------------------
July 31, September 30,
--------------------------------------------- -----------------------
1997 1996 1995 1994* 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.680 $ 10.530 $ 10.390 $ 11.570 $ 10.700 $ 10.320
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.486 $ 0.482 $ 0.492 $ 0.404 $ 0.496 $ 0.526
Net realized and unrealized gain (loss) on investments 0.539 0.161 0.164 (0.862) 1.076 0.520
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 1.025 $ 0.643 $ 0.656 $ (0.458) $ 1.572 $ 1.046
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.485) $ (0.488) $ (0.492) $ (0.404) $ (0.496) $ (0.526)
In excess of net investment income -- (0.005) (0.024) (0.074) (0.127) (0.120)
From net realized gain on investment transactions -- -- -- (0.233) (0.079) (0.020)
In excess of net realized gain on investment transactions -- -- -- (0.011) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.485) $ (0.493) $ (0.516) $ (0.722) $ (0.702) $ (0.666)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value-- End of year $ 11.220 $ 10.680 $ 10.530 $ 10.390 $ 11.570 $ 10.700
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return /(1)/ 9.85% 6.17% 6.64% (4.16)% 15.29% 10.43%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $109,379 $127,681 $141,859 $150,879 $135,524 $ 62,498
Ratio of net expenses to average daily net assets /(2)//(3)/ 1.58% 1.56% 1.53% 1.46%+ 1.53% 1.52%
Ratio of net expenses to average daily net assets, after
custodian fee reduction /(2)/ 1.57% 1.55% -- -- -- --
Ratio of net investment income to average daily net assets 4.50% 4.49% 4.81% 4.47%+ 4.42% 4.83%
Portfolio Turnover /(4)/ -- -- -- -- 39% 133%
- ------------------------------------------------------------------------------------------------------------------------------------
++ For the year ended September 30, 1992, the operating expenses of the Fund reflect a reduction of the investment adviser fee, an
allocation of expenses to the Investment Adviser, or both. Had such actions not been taken, net investment income per share and
the ratios would have been as follows:
Ratios (As a percentage of average daily net assets):
Expenses /(3)/ 1.64%
Net investment income 4.71%
Net investment income per share $ 0.513
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten months ended July 31, 1994.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended July 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Fund, as well as its corresponding
Portfolio, to increase its expense ratio by the effect of any expense
offset arrangements with its service providers. The expense ratios for
each of the prior periods have not been adjusted to reflect this change.
/(4)/ Portfolio Turnover represents the rate of portfolio activity for the
period while the Fund was making investments directly in securities. The
portfolio turnover rate for the period since the Fund transferred
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
19
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Colorado Fund
---------------------------------------------------------------
Year Ended
---------------------------------------------------------------
July 31, September 30,
----------------------------------------- -------------------
1997 1996 1995 1994* 1993 1992**
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $10.170 $10.020 $10.010 $10.960 $10.060 $10.000
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.491 $ 0.480 $ 0.494 $ 0.403 $ 0.484 $ 0.026
Net realized and unrealized gain (loss) on investments 0.621 0.162 0.033 (0.880) 0.996 0.082++
- ---------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 1.112 $ 0.642 $ 0.527 $(0.477) $ 1.480 $ 0.108
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.482) $(0.492) $(0.494) $(0.403) $(0.484) $(0.026)
In excess of net investment income -- -- (0.023) (0.070) (0.096) (0.022)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.482) $(0.492) $(0.517) $(0.473) $(0.580) $(0.048)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $10.800 $10.170 $10.020 $10.010 $10.960 $10.060
- ---------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 11.26% 6.46% 5.58% (4.46)% 15.52% 0.60%
- ---------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+++
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $40,786 $42,972 $43,900 $42,085 $24,847 $ 2,464
Ratio of net expenses to average daily net assets/(2)(3)/ 1.53% 1.49% 1.28% 1.09%+ 1.00% 1.00%+
Ratio of net expenses to average daily net assets,
after custodian fee reduction/(2)/ 1.49% 1.45% -- -- -- --
Ratio of net investment income to average daily net assets 4.75% 4.69% 5.03% 4.59%+ 4.49% 2.26%+
Portfolio Turnover/(4)/ -- -- -- -- 3% 0%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the net
investment income per share and ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratios (As a percentage of average daily net assets):
Expenses/(2)(3)/ 1.51% 1.43% 1.42%+ 1.90% 2.34%+
Expenses after custodian fee reduction/(2)(3)/ 1.46% -- -- -- --
Net investment income 4.67% 4.88% 4.26%+ 3.60% 0.92%+
Net investment income per share $0.478 $0.479 $0.373 $0.387 $0.011
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gain (loss) for the period because of the timing of sales of Fund shares
and the amount of the per share realized and unrealized gains and losses at
such time.
* For the ten months ended July 31, 1994.
** For the period from the start of business, August 25, 1992, to September
30, 1992.
/(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 payable date. Total return is not
computed on an annualized basis.
/(2)/Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/The expense ratios for the year ended July 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Fund, as well as its corresponding
Portfolio, to increase its expense ratio by the effect of any expense
offset arrangements with its service providers. The expense ratios for each
of the prior periods have not been adjusted to reflect this change.
/(4)/Portfolio Turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover rate for the period since the Fund transferred 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
20
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Connecticut Fund
----------------------------------------------------------------------
Year Ended
----------------------------------------------------------------------
July 31, September 30,
------------------------------------------- -----------------------
1997 1996 1995 1994* 1993 1992**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.120 $ 9.970 $ 10.050 $ 11.030 $ 10.270 $10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.453 $ 0.452 $ 0.465 $ 0.388 $ 0.471 $ 0.192
Net realized and unrealized gain (loss) on investments 0.450 0.169 (0.037) (0.883) 0.885 0.331++
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.903 $ 0.621 $ 0.428 $ (0.495) $ 1.356 $ 0.523
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.453) $ (0.452) $ (0.465) $ (0.388) $ (0.471) $(0.192)
In excess of net investment income -- (0.019) (0.043) (0.079) (0.120) (0.061)
From net realized gain on investment transactions -- -- -- (0.018) (0.005) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.453) $ (0.471) $ (0.508) $ (0.485) $ (0.596) $(0.253)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.570 $ 10.120 $ 9.970 $ 10.050 $ 11.030 $10.270
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 9.17% 6.30% 4.55% (4.61)% 13.62% 5.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data +++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 171,634 $181,608 $188,900 $ 188,453 $ 160,790 $50,031
Ratio of net expenses to average daily net assets/(2)//(3)/ 1.60% 1.58% 1.55% 1.43%+ 1.56% 1.35%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.60% 1.57% -- -- -- --
Ratio of net investment income to average daily net assets 4.45% 4.45% 4.77% 4.42%+ 4.33% 4.13%+
Portfolio Turnover/(4)/ -- -- -- -- 14% 16%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ For the period ended September 30, 1992, the operating expenses of the Fund
reflect a reduction of the Investment Adviser fee and/or an allocation of
expenses to the Investment Adviser. Had such actions not been taken, the
ratios and net investment income per share would have been as follows:
<TABLE>
<S> <C>
Ratios (As a percentage of average daily net assets):
Expenses/(3)/ 1.52%+
Net investment income 3.96%+
Net investment income per share $ 0.184
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gain (loss) for the period because of the timing of sales of Fund shares
and the amount of the per share realized and unrealized gains and losses
at such time.
* For the ten months ended July 31, 1994.
** For the period from the start of business, May 1, 1992, to September 30,
1992.
/(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 payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended July 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Fund, as well as its corresponding
Portfolio, to increase its expense ratio by the effect of any expense
offset arrangements with its service providers. The expense ratios for
each of the prior periods have not been adjusted to reflect this change.
/(4)/ Portfolio Turnover represents the rate of portfolio activity for the
period while the Fund was making investments directly in securities. The
portfolio turnover rate for the period since the Fund transferred
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
21
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Michigan Fund
------------------------------------------------------------------------
Year Ended
------------------------------------------------------------------------
July 31, September 30,
----------------------------------------------- ----------------------
1997 1996 1995 1994* 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value--Beginning of year $ 10.420 $ 10.250 $ 10.210 $ 11.110 $ 10.570 $ 10.220
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.460 $ 0.464 $ 0.486 $ 0.398 $ 0.480 $ 0.499
Net realized and unrealized gain (loss) on investments 0.454 0.195 0.059 (0.794) 0.745 0.507
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.914 $ 0.659 $ 0.545 $ (0.396) $ 1.225 $ 1.006
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.462) $ (0.481) $ (0.486) $ (0.398) $ (0.480) $ (0.499)
In excess of net investment income (0.002) (0.008) (0.019) (0.062) (0.114) (0.144)
From net realized gain on investment transactions -- -- -- (0.028) (0.058) (0.013)
In excess of net realized gain on investment transactions -- -- -- (0.016) (0.033) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.464) $ (0.489) $ (0.505) $ (0.504) $ (0.685) $ (0.656)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value--End of year $ 10.870 $ 10.420 $ 10.250 $ 10.210 $ 11.110 $ 10.570
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 9.01% 6.50% 5.61% (3.66)% 12.06% 10.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 148,542 $171,067 $186,363 $ 197,082 $ 188,290 $107,034
Ratio of net expenses to average daily net assets/(2)(3)/ 1.60% 1.61% 1.51% 1.49% + 1.54% 1.61%
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.58% 1.60% -- -- -- --
Ratio of net investment income to average daily net assets 4.40% 4.44% 4.84% 4.49% + 4.40% 4.65%
Portfolio Turnover/(4)/ -- -- -- -- 28% 72%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten months ended July 31, 1994.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended July 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Fund, as well as its corresponding
Portfolio, to increase its expense ratio by the effect of any expense
offset arrangements with its service providers. The expense ratios for
each of the prior periods have not been adjusted to reflect this change.
/(4)/ Portfolio Turnover represents the rate of portfolio activity for the
period while the Fund was making investments directly in securities. The
portfolio turnover rate for the period since the Fund transferred
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
22
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Minnesota Fund
------------------------------------------------------------------------
Year Ended
------------------------------------------------------------------------
July 31, September 30,
----------------------------------------------- ----------------------
1997 1996 1995 1994* 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value--Beginning of year $10.070 $ 9.950 $10.040 $10.910 $ 10.310 $10.080
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.466 $ 0.468 $ 0.470 $ 0.383 $ 0.473 $ 0.505
Net realized and unrealized gain (loss) on investments 0.415 0.123 (0.053) (0.788) 0.749 0.361
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.881 $ 0.591 $ 0.417 $(0.405) $ 1.222 $ 0.866
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.461) $ (0.468) $(0.470) $(0.383) $ (0.473) $(0.505)
In excess of net investment income -- (0.003) (0.037) (0.073) (0.125) (0.131)
From net realized gain on investment transactions -- -- -- (0.009) -- --
In excess of net realized gain on investment transactions -- -- -- -- (0.024) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.461) $ (0.471) $(0.507) $(0.465) $ (0.622) $(0.636)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $10.490 $ 10.070 $ 9.950 $10.040 $ 10.910 $10.310
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 9.01% 6.00% 4.41% (3.81)% 12.28% 8.82%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+++
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $67,781 $ 74,374 $78,970 $79,223 $ 68,004 $26,670
Ratio of net expenses to average daily net assets/(2)(3)/ 1.58% 1.56% 1.52% 1.54%+ 1.59% 1.42%
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.55% 1.54% -- -- -- --
Ratio of net investment income to average daily net assets 4.62% 4.63% 4.80% 4.38%+ 4.38% 4.74%
Portfolio Turnover/(4)/ -- -- -- -- 16% 25%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
+++ For the years ended September 30, 1993 and 1992, the operating expenses of the Fund and the Portfolio may reflect a reduction
of the investment adviser fee, an allocation of expenses to the Investment Adviser or Administrator, or both. Had such actions
not been taken, the ratios and net investment income per share would have been as follows:
Ratios (As a percentage of average daily net assets):
<S> <C> <C>
Expenses/(2)(3)/ 1.61% 2.05%
Net investment income 4.37% 4.11%
Net investment income per share $ 0.472 $ 0.438
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten months ended July 31, 1994.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended July 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Fund, as well as its corresponding
Portfolio, to increase its expense ratio by the effect of any expense
offset arrangements with its service providers. The expense ratios for
each of the prior periods have not been adjusted to reflect this change.
/(4)/ Portfolio Turnover represents the rate of portfolio activity for the
period while the Fund was making investments directly in securities. The
portfolio turnover rate for the period since the Fund transferred
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
23
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon New Jersey Fund
------------------------------------------------------------------------
Year Ended
------------------------------------------------------------------------
July 31, September 30,
----------------------------------------------- ----------------------
1997 1996 1995 1994* 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value--Beginning of year $10.440 $10.360 $10.410 $11.350 $10.680 $ 10.380
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.506 $ 0.505 $ 0.505 $ 0.421 $ 0.514 $ 0.516
Net realized and unrealized gain (loss) on investments 0.493 0.084 (0.009) (0.836) 0.841 0.452
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.999 $ 0.589 $ 0.496 $(0.415) $ 1.355 $ 0.968
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.499) $(0.505) $(0.505) $(0.421) $(0.514) $ (0.516)
In excess of net investment income -- (0.004) (0.035) (0.075) (0.112) (0.124)
From net realized gain on investment transactions -- -- -- (0.029) (0.059) (0.028)
In excess of net realized gain on investment transactions -- -- (0.006) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.499) $(0.509) $(0.546) $(0.525) $(0.685) $ (0.668)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value--End of year $10.940 $10.440 $10.360 $10.410 $11.350 $ 10.680
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 9.85% 5.74% 5.04% (3.77)% 13.15% 9.64%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $345,080 $378,649 $404,861 $420,117 $395,421 $235,324
Ratio of net expenses to average daily net assets/(2)(3)/ 1.59% 1.57% 1.53% 1.48%+ 1.56% 1.63%
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.57% 1.56% -- -- -- --
Ratio of net investment income to average daily net assets 4.82% 4.80% 4.97% 4.64%+ 4.66% 4.83%
Portfolio Turnover/(4)/ -- -- -- -- 20% 74%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten months ended July 31, 1994.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended July 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Fund, as well as its corresponding
Portfolio, to increase its expense ratio by the effect of any expense
offset arrangements with its service providers. The expense ratios for
each of the prior periods have not been adjusted to reflect this change.
/(4)/ Portfolio Turnover represents the rate of portfolio activity for the
period while the Fund was making investments directly in securities. The
portfolio turnover rate for the period since the Fund transferred
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
24
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Pennsylvania Fund
-----------------------------------------------------------------------
Year Ended
-----------------------------------------------------------------------
July 31, September 30,
----------------------------------------------- ----------------------
1997 1996 1995 1994* 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.430 $ 10.320 $ 10.340 $ 11.310 $ 10.650 $ 10.350
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.522 $ 0.512 $ 0.507 $ 0.422 $ 0.520 $ 0.531
Net realized and unrealized gain (loss) on investments 0.458 0.108 0.004++ (0.841) 0.794 0.430
- ----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.980 $ 0.620 $ 0.511 $ (0.419) $ 1.314 $ 0.961
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.510) $ (0.510) $ (0.507) $ (0.422) $ (0.520) $ (0.531)
In excess of net investment income -- -- (0.024) (0.069) (0.115) (0.130)
From net realized gain on investment transactions -- -- -- (0.042) (0.019) --
In excess of net realized gain on investment transactions -- -- -- (0.018) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.510) $ (0.510) $ (0.531) $ (0.551) $ (0.654) $ (0.661)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.900 $ 10.430 $ 10.320 $ 10.340 $ 11.310 $ 10.650
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 9.66% 6.08% 5.24% (3.84)% 12.76% 9.56%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $395,974 $441,104 $495,856 $530,115 $499,601 $280,193
Ratio of net expenses to average daily net assets/(2)(3)/ 1.61% 1.58% 1.51% 1.46%+ 1.56% 1.64%
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.56% 1.54% -- -- -- --
Ratio of net investment income to average daily net
assets 4.93% 4.89% 5.04% 4.68%+ 4.70% 4.92%
Portfolio Turnover/(4)/ -- -- -- -- 6% 15%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gain (loss) for the period because of the timing of sales of Fund shares
and the amount of the per share realized and unrealized gains and losses
at such time.
* For the ten months ended July 31, 1994.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended July 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Fund, as well as its corresponding
Portfolio, to increase its expense ratio by the effect of any expense
offset arrangements with its service providers. The expense ratios for
each of the prior periods have not been adjusted to reflect this change.
/(4)/ Portfolio Turnover represents the rate of portfolio activity for the
period while the Fund was making investments directly in securities. The
portfolio turnover rate for the period since the Fund transferred
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
25
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Texas Fund
---------------------------------------------------------------------
Year Ended
---------------------------------------------------------------------
July 31, September 30,
---------------------------------------- -------------------------
1997 1996 1995 1994* 1993 1992**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value-- Beginning of year $10.440 $ 10.280 $10.210 $11.110 $ 10.450 $10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.489 $ 0.492 $ 0.532 $ 0.436 $ 0.515 $ 0.255
Net realized and unrealized gain (loss) on investments 0.526 0.177 0.084 (0.824) 0.787 0.516
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 1.015 $ 0.669 $ 0.616 $(0.388) $ 1.302 $ 0.771
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.495) $ (0.509) $(0.532) $(0.436) $ (0.515) $(0.255)
In excess of net investment income -- -- (0.014) (0.076) (0.106) (0.066)
In excess of net realized gain on investment transactions -- -- -- -- (0.021) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.495) $ (0.509) $(0.546) $(0.512) $ (0.642) $(0.321)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $10.960 $ 10.440 $10.280 $10.210 $ 11.110 $10.450
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return /1/ 10.00% 6.60% 6.36% (3.65)% 12.90% 7.51%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data +++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $21,283 $ 23,996 $27,762 $26,677 $ 16,338 $ 4,020
Ratio of net expenses to average daily net assets /2//3/ 1.57% 1.43% 0.99% 0.82%+ 1.06% 1.00%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction /2/ 1.55% 1.39% -- -- -- --
Ratio of net investment income to average daily net assets 4.61% 4.70% 5.29% 4.81%+ 4.67% 4.61%+
Portfolio Turnover /4/ -- -- -- -- 7% 11%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the
ratios and net investment income per share would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratios (As a percentage of average daily net assets):
Expenses /2//3/ 1.53% 1.44% 1.67%+ 2.55% 2.35%+
Expenses after custodian fee reduction (2) 1.49% -- -- -- --
Net investment income 4.60% 4.84% 3.96%+ 3.18% 3.26%+
Net investment income per share $ 0.482 $ 0.487 $ 0.359 $ 0.350 $ 0.180
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten months ended July 31, 1994.
** For the period from the start of business, March 24, 1992, to September 30,
1992.
/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 payable date. Total return is not computed on
an annualized basis.
/2/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/3/ The expense ratios for the year ended July 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Fund, as well as its corresponding
Portfolio, to increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratios for each of the
prior periods have not been adjusted to reflect this change.
/4/ Portfolio Turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover rate for the period since the Fund transferred 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
26
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
------------------------------------------------------------------------------
Eaton Vance Municipals Trust (the Trust) is an entity of the type commonly
known as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Trust presently consists of sixty Funds, eight of which, each non-
diversified, are included in these financial statements. They include EV
Marathon Arizona Municipals Fund ("Marathon Arizona Fund"), EV Marathon
Colorado Municipals Fund ("Marathon Colorado Fund"), EV Marathon Connecticut
Municipals Fund ("Marathon Connecticut Fund"), EV Marathon Michigan Municipals
Fund ("Marathon Michigan Fund"), EV Marathon Minnesota Municipals Fund
("Marathon Minnesota Fund"), EV Marathon New Jersey Municipals Fund ("Marathon
New Jersey Fund"), EV Marathon Pennsylvania Municipals Fund ("Marathon
Pennsylvania Fund") and EV Marathon Texas Municipals Fund ("Marathon Texas
Fund"). Each Fund invests all of its investable assets in interests in a
separate corresponding open-end management investment company (a Portfolio), a
New York Trust, having the same investment objective as its corresponding
Fund. The Marathon Arizona Fund invests its assets in the Arizona Municipals
Portfolio, the Marathon Colorado Fund invests its assets in the Colorado
Municipals Portfolio, the Marathon Connecticut Fund invests its assets in the
Connecticut Municipals Portfolio, the Marathon Michigan Fund invests its
assets in the Michigan Municipals Portfolio, the Marathon Minnesota Fund
invests its assets in the Minnesota Municipals Portfolio, the Marathon New
Jersey Fund invests its assets in the New Jersey Municipals Portfolio, the
Marathon Pennsylvania Fund invests its assets in the Pennsylvania Municipals
Portfolio and the Marathon Texas Fund invests its assets in the Texas
Municipals Portfolio. The value of each Fund's investment in its corresponding
Portfolio reflects the Fund's proportionate interest in the net assets of that
Portfolio (98.3%, 96.0%, 98.4%, 99.2%, 96.3%, 98.3%, 98.7%, and 98.5% at July
31, 1997 for the Marathon Arizona Fund, Marathon Colorado Fund, Marathon
Connecticut Fund, Marathon Michigan Fund, Marathon Minnesota Fund, Marathon
New Jersey Fund, Marathon Pennsylvania Fund and Marathon Texas Fund,
respectively). The performance of each Fund is directly affected by the
performance of its corresponding Portfolio. The financial statements of each
Portfolio, including the portfolio of investments, are included elsewhere in
this report and should be read in conjunction with each Fund's financial
statements.
On June 23, 1997, the Board of Trustees approved a Plan of Reorganization (the
"Plan") for the Eaton Vance Municipals Trust (the "Trust"). Under the terms of
the Plan, the EV Marathon Arizona Municipals Fund, EV Marathon Colorado
Municipals Fund, EV Marathon Connecticut Municipals Fund, EV Marathon Michigan
Municipals Fund, EV Marathon Minnesota Municipals Fund, EV Marathon New Jersey
Municipals Fund, EV Marathon Pennsylvania Municipals Fund and EV Marathon
Texas Municipals Fund (the Successor Funds), separate series of the Eaton
Vance Municipals Trust, would acquire substantially all of the assets and
liabilities of the EV Traditional Arizona Municipals Fund, EV Traditional
Colorado Municipals Fund, EV Traditional Connecticut Municipals Fund, EV
Traditional Michigan Municipals Fund, EV Traditional Minnesota Municipals
Fund, EV Traditional New Jersey Municipals Fund, EV Traditional Pennsylvania
Municipals Fund and EV Traditional Texas Municipals Fund, respectively (the
Acquired Funds). The transactions will be structured for tax purposes to
qualify as a tax-free reorganization under the Internal Revenue Code. The
Trust will issue and deliver to the Acquired Funds a number of full and
fractional shares of beneficial interest of a separate class of the Successor
Fund (Class A Shares), which will be equal in value to the net asset value per
share of the Acquired Fund multiplied by the number of full and fractional
shares of the Acquired Fund then outstanding. Such transaction will occur at
the close of business, July 31, 1997.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuation -- Valuation of securities by the Portfolios is
discussed in Note 1A of the Portfolios' Notes to Financial Statements which
are included elsewhere in this report.
B Income -- Each Fund's net investment income consists of the Fund's pro rata
share of the net investment income of its corresponding Portfolio, less all
actual and accrued expenses of each Fund determined in accordance with
generally accepted accounting principles.
C Federal Taxes -- Each Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is necessary. At July 31, 1997, the Funds, for
federal income tax purposes, had capital loss carryovers which will
27
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
reduce taxable income arising from future net realized gain on investments, if
any, to the extent permitted by the Internal Revenue Code, and thus will
reduce the amount of the distributions to shareholders which would otherwise
be necessary to relieve the Funds of any liability for federal income or
excise tax. The amounts and expiration dates of the capital loss carryovers
are as follows:
<TABLE>
<CAPTION>
Fund Amount Expires
------------------------------------------------------------------------------
<S> <C> <C>
Marathon Arizona Fund $ 4,776,889 July 31, 2004
Marathon Colorado Fund $ 1,970,946 July 31, 2004
162,075 July 31, 2003
Marathon Connecticut Fund $ 5,022,410 July 31, 2004
206,627 July 31, 2003
Marathon Michigan Fund $ 315,466 July 31, 2005
2,603,474 July 31, 2004
1,242,774 July 31, 2003
662,305 July 31, 2002
Marathon Minnesota Fund $ 329,867 July 31, 2005
3,725,307 July 31, 2004
802,699 July 31, 2003
11,959 July 31, 2002
Marathon New Jersey Fund $ 15,920,136 July 31, 2004
Marathon Pennsylvania Fund $ 1,914,166 July 31, 2005
12,982,411 July 31, 2004
4,209,137 July 31, 2003
439,448 July 31, 2002
Marathon Texas Fund $ 78,115 July 31, 2005
623,434 July 31, 2004
184,977 July 31, 2003
68,395 July 31, 2002
</TABLE>
Dividends paid by each Fund from net interest on tax-exempt municipal bonds
allocated from its corresponding Portfolio are not includable by shareholders
as gross income for federal income tax purposes because each Fund and
Portfolio intend to meet certain requirements of the Internal Revenue Code
applicable to regulated investment companies which will enable the Funds to
pay exempt-interest dividends. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986 may be considered a tax
preference item to shareholders.
D Deferred Organization Expenses -- Costs incurred by each Fund in connection
with its organization, including registration costs, are being amortized on
the straight-line basis over five years.
E 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 Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Funds and the Portfolios. Pursuant to the respective
custodian agreements, IBT receives a fee reduced by credits which are
determined based on the average cash balances the Funds or the Portfolios
maintain with IBT. All significant credit balances used to reduce each Fund's
custodian fees are reported as a reduction of expenses on the Statement Of
Operations.
G Other -- Investment transactions are accounted for on a trade date basis.
2 Distributions to Shareholders
------------------------------------------------------------------------------
The net income of each Fund is determined daily and substantially all of the
net income so determined is declared as a dividend to shareholders of record
at the time of declaration. Distributions are paid monthly. Distributions are
paid in the form of additional shares or, at the election of the shareholder,
in cash. Distributions of allocated realized capital gains, if any, are made
at least annually. Shareholders may reinvest capital gain distributions in
additional shares of the Fund at the net asset value as of the ex-dividend
date.
The Funds distinguish between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in temporary over distributions for financial statement
purposes are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital.
During the year ended July 31, 1997, the following reclassifications were made
due to permanent differences between book and tax accounting for reallocation
of gain/loss:
28
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Increase/ Arizona Connecticut Pennsylvania New Jersey
(decrease) Fund Fund Fund Fund
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated net
realized loss on
investments and
financial futures
contracts $99 $(12,211) $(1,003) $(20,873)
Accumulated
distributions in
excess of net
investment income (11,359) - -
Paid-in capital 99 (23,570) (1,003) (20,873)
------------------------------------------------------------------------------
</TABLE>
Net investment income, net realized gains, and net assets were not affected by
these reclassifications. The tax treatment of distributions for the calendar
year will be reported to shareholders prior to February 1, 1998 and will not
be based on tax accounting methods which may differ from amounts determined
for financial statement purposes.
3 Shares of Beneficial Interest
------------------------------------------------------------------------------
The Funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Marathon Arizona Fund
------------------------------------
Year Ended July 31,
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 587,035 786,362
Issued to shareholders electing 184,561 230,105
to receive payments of
distributions in Fund shares
Redemptions (2,984,656) (2,524,433)
------------------------------------------------------------------------------
Net decrease (2,213,060) (1,507,966)
------------------------------------------------------------------------------
<CAPTION>
Marathon Colorado Fund
-----------------------------------
Year Ended July 31,
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 305,999 451,567
Issued to shareholders electing to 92,921 102,119
receive payments of distributions
in Fund shares
Redemptions (847,903) (709,163)
------------------------------------------------------------------------------
Net decrease (448,983) (155,477)
------------------------------------------------------------------------------
<CAPTION>
Marathon Connecticut Fund
-----------------------------------
Year Ended July 31,
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 785,303 919,865
Issued to shareholders electing to 410,380 476,931
receive payments of distributions
in Fund shares
Redemptions (2,893,701) (2,399,907)
------------------------------------------------------------------------------
Net decrease (1,698,018) (1,003,111)
------------------------------------------------------------------------------
<CAPTION>
Marathon Michigan Fund
-----------------------------------
Year Ended July 31,
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 273,591 582,920
Issued to shareholders electing to 336,586 420,812
receive payments of distributions
in Fund shares
Redemptions (3,360,285) (2,772,953)
------------------------------------------------------------------------------
Net decrease (2,750,108) (1,769,221)
------------------------------------------------------------------------------
<CAPTION>
Marathon Minnesota Fund
-----------------------------------
Year Ended July 31,
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 354,478 440,323
Issued to shareholders electing to 163,187 194,918
electing to receive payments of
distributions in Fund shares
Redemptions (1,442,543) (1,186,213)
------------------------------------------------------------------------------
Net decrease (924,878) (550,972)
------------------------------------------------------------------------------
<CAPTION>
Marathon New Jersey Fund
-----------------------------------
Year Ended July 31,
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 1,576,459 2,040,378
Issued to shareholders electing to 824,152 937,046
receive payments of distributions
in Fund shares
Redemptions (7,114,631) (5,798,323)
------------------------------------------------------------------------------
Net decrease (4,714,020) (2,820,899)
------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
<TABLE>
<CAPTION>
Marathon Pennsylvania Fund
-----------------------------------
Year Ended July 31,
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 1,471,266 1,571,629
Issued to shareholders electing to 853,998 1,002,119
receive payments of distributions
in Fund shares
Redemptions (8,289,968) (8,334,163)
------------------------------------------------------------------------------
Net decrease (5,964,704) (5,760,415)
------------------------------------------------------------------------------
<CAPTION>
Marathon Texas Fund
-----------------------------------
Year Ended July 31,
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 156,332 103,039
Issued to shareholders electing to 37,478 44,489
receive payments of distributions
in Fund shares
Redemptions (549,906) (551,219)
------------------------------------------------------------------------------
Net decrease (356,096) (403,691)
------------------------------------------------------------------------------
</TABLE>
4 Transactions with Affiliates
------------------------------------------------------------------------------
Eaton Vance Management (EVM) serves as the Administrator of each Fund, but
receives no compensation. The Portfolios have engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolios' Notes to Financial Statements which are included
elsewhere in this report. Except as to Trustees of the Funds and Portfolios
who are not members of EVM's or BMR's organization, officers and Trustees
receive remuneration for their services to each fund out of the investment
adviser fee earned by BMR.
Certain of the officers and Trustees of the Funds and Portfolios are officers
and directors/trustees of EVM and BMR.
5 Distribution Plan
------------------------------------------------------------------------------
Each Fund has adopted a distribution plan (the Plans) pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plans require the Funds to pay
the principal underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal
to 1/365 of 0.75% of each Fund's daily net assets, for providing ongoing
distribution services and facilities to the respective Fund. A Fund will
automatically discontinue payments to EVD during any period in which there are
no outstanding Uncovered Distribution Charges, which are equivalent to the sum
of (i) 5% of the aggregate amount received by the Fund for shares sold plus
(ii) distribution fees calculated by applying the rate of 1% over the
prevailing prime rate to the outstanding balance of Uncovered Distribution
Charges of EVD reduced by the aggregate amount of contingent deferred sales
charges (Note 6) and daily amounts theretofore paid to EVD. The amount payable
to EVD with respect to each day is accrued on such day as a liability of each
Fund and, accordingly, reduces the Fund's net assets. For the year ended July
31, 1997, Marathon Arizona Fund, Marathon Colorado Fund, Marathon Connecticut
Fund, Marathon Michigan Fund, Marathon Minnesota Fund, Marathon New Jersey
Fund, Marathon Pennsylvania Fund and Marathon Texas Fund paid $884,420,
$307,911, $1,324,103, $1,195,780, $523,956, $2,705,068, $3,113,225 and
$167,369, respectively, to EVD, representing 0.75% of each Fund's average
daily net assets. At July 31, 1997, the amount of Uncovered Distribution
Charges of EVD calculated under the Plans for Marathon Arizona Fund, Marathon
Colorado Fund, Marathon Connecticut Fund, Marathon Michigan Fund, Marathon
Minnesota Fund, Marathon New Jersey Fund, Marathon Pennsylvania Fund and
Marathon Texas Fund were approximately $3,305,000, $1,522,000, $5,372,000,
$3,764,000, $2,052,000, $8,681,000, $10,506,000 and $570,000, respectively.
In addition, the Plans authorize the Funds to make payments of service fees to
the Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding 0.25% of each Fund's average daily net assets for any fiscal year.
The Trustees have initially implemented the Plans by authorizing the Funds to
make quarterly service fee payments to the Principal Underwriter and
Authorized Firms in amounts not expected to exceed 0.20% per annum of each
Fund's average daily net assets based on the value of Fund shares sold by such
persons and remaining outstanding for at least one year. For the year ended
July 31, 1997, Marathon Arizona Fund, Marathon Colorado Fund, Marathon
Connecticut Fund, Marathon Michigan Fund, Marathon Minnesota Fund, Marathon
New Jersey Fund, Marathon Pennsylvania Fund and Marathon Texas Fund paid or
accrued service fees to or payable to EVD in the amount of $216,466, $69,888,
$314,670, $291,628, $124,372, $648,113, $774,015 and $41,527, respectively.
Service fee payments are made for personal services and/or maintenance of
shareholder accounts. Service fees paid to EVD and Authorized Firms are
separate and distinct from the sales commissions and distribution fees payable
by each Fund to EVD, and as such
30
<PAGE>
EV Marathon Municipals Fund as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
are not subject to automatic discontinuance when there are no outstanding
Uncovered Distribution Charges of EVD.
Certain officers and Trustees of the Funds are officers or directors of EVD.
6 Contingent Deferred Sales Charge
------------------------------------------------------------------------------
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon
the lower of the net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital
gains distributions. The CDSC is imposed at declining rates that begin at 5%
in the case of redemptions in the first and second year after purchase,
declining one percentage point each subsequent year. No CDSC is levied on
shares which have been sold to EVD or its affiliates or to their respective
employees or clients. CDSC charges are paid to EVD to reduce the amount of
Uncovered Distribution Charges calculated under each Fund's Distribution Plan.
CDSC charges received when no Uncovered Distribution Charges exist will be
credited to the Fund. EVD received approximately $581,000, $206,000, $528,000,
$510,000, $296,000, $1,212,000, $1,294,000 and $88,000 of CDSC paid by
shareholders of Marathon Arizona Fund, Marathon Colorado Fund, Marathon
Connecticut Fund, Marathon Michigan Fund, Marathon Minnesota Fund, Marathon
New Jersey Fund, Marathon Pennsylvania Fund and Marathon Texas Fund,
respectively, for the year ended July 31, 1997.
7 Investment Transactions
------------------------------------------------------------------------------
Increases and decreases in each Fund's investment in its corresponding
Portfolio for the year ended July 31, 1997 were as follows:
<TABLE>
<CAPTION>
Marathon Arizona Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 6,313,284
Decreases 36,184,826
<CAPTION>
Marathon Colorado Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 3,193,770
Decreases 10,198,536
<CAPTION>
Marathon Connecticut Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 8,815,104
Decreases 35,647,402
<CAPTION>
Marathon Michigan Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 3,537,095
Decreases 41,468,753
<CAPTION>
Marathon Minnesota Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 3,707,959
Decreases 16,903,086
<CAPTION>
Marathon New Jersey Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 17,209,895
Decreases 87,102,850
<CAPTION>
Marathon Pennsylvania Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 16,478,004
Decreases 104,394,263
<CAPTION>
Marathon Texas Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 1,715,747
Decreases 6,775,928
</TABLE>
8 Subsequent Event
------------------------------------------------------------------------------
Effective August 1, 1997, the EV Marathon Arizona Municipals Fund, EV Marathon
Colorado Municipals Fund, EV Marathon Connecticut Municipals Fund, EV Marathon
Michigan Municipals Fund, EV Marathon Minnesota Municipals Fund, EV Marathon
New Jersey Municipals Fund, EV Marathon Pennsylvania Municipals Fund and EV
Marathon Texas Municipals Fund changed their respective names to Eaton Vance
Arizona Municipals Fund, Eaton Vance Colorado Municipals Fund, Eaton Vance
Connecticut Municipals Fund, Eaton Vance Michigan Municipals Fund, Eaton Vance
Minnesota Municipals Fund, Eaton Vance New Jersey Municipals Fund, Eaton Vance
Pennsylvania Municipals Fund and Eaton Vance Texas Municipals Fund.
31
<PAGE>
EV Marathon Municipals Funds as of July 31, 1997
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of:
Eaton Vance Municipals Trust:
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities of EV
Marathon Arizona Municipals Fund, EV Marathon Colorado Municipals Fund, EV
Marathon Connecticut Municipals Fund, EV Marathon Michigan Municipals Fund, EV
Marathon Minnesota Municipals Fund, EV Marathon New Jersey Municipals Fund, EV
Marathon Pennsylvania Municipals Fund and EV Marathon Texas Municipals Fund (the
Funds) (certain of the series of Eaton Vance Municipals Trust) as of July 31,
1997, the related statements of operations for the year then ended, the
statements of changes in net assets for the years ended July 31, 1997 and 1996
and financial highlights for the years ended July 31, 1997, 1996 and 1995, the
ten months ended July 31, 1994 and for the years ended September 30, 1993 and
1992. These financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion on the
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
aforementioned Funds of Eaton Vance Municipals Trust at July 31, 1997, the
results of their operations, the changes in their net assets and their financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 5, 1997
32
<PAGE>
Arizona Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments-- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assisted Living -- 1.6%
- --------------------------------------------------------------------------------
NR NR $ 1,800 Arizona Health Facilities
Authority, (Mesa Project),
7.625%, 1/1/26 $ 1,802,268
- --------------------------------------------------------------------------------
$ 1,802,268
- --------------------------------------------------------------------------------
Education -- 6.6%
- --------------------------------------------------------------------------------
NR NR $ 2,000 Arizona Educational Loan
Marketing Corp., (AMT),
6.25%, 6/1/06 $ 2,152,920
NR NR 2,000 Arizona Educational Loan
Marketing Corp., (AMT),
6.30%, 12/1/08 2,134,540
A NR 1,500 Arizona Student Loan
Acquisition Authority, (AMT),
7.625%, 5/1/10 1,678,920
A1 AA 1,250 University of Arizona,
6.25%, 6/1/11 1,363,000
- --------------------------------------------------------------------------------
$ 7,329,380
- --------------------------------------------------------------------------------
Electric Utilities -- 11.9%
- --------------------------------------------------------------------------------
A A+ $ 1,000 Commonwealth of Puerto Rico,
Telephone Authority,
Variable Rate, 1/1/20/(1)/ $ 1,106,250
Ba2 BB+ 3,500 Maricopa County, AZ, Pollution
Control, 6.375%, 8/15/23 3,637,514
Baa1 BBB+ 5,300 Navajo County, AZ, Pollution
Control, 5.875%, 8/15/28 5,427,941
Baa1 BBB+ 550 Puerto Rico Electric Power
Authority, 7.00%, 7/1/07 591,168
Baa1 BBB+ 370 Puerto Rico Electric Power
Authority, 7.125%, 7/1/14 397,184
Aa AA 1,000 Salt River Project Agricultural
Improvement and Power District,
5.25%, 1/1/19 1,001,170
Aa AA 1,000 Salt River Project Agricultural
Improvement and Power District,
6.25%, 1/1/27 1,074,090
- --------------------------------------------------------------------------------
$13,235,317
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 10.8%
- --------------------------------------------------------------------------------
Aaa AA $ 1,000 Arizona Transportation Board
Highway, 6.50%, 7/1/11 $ 1,116,000
NR AAA 1,000 Glendale, AZ, Industrial
Development Authority,
7.125%, 7/1/20 1,186,430
Aaa AAA 7,500 Maricopa County, AZ, Single
Family Mortgage, 0.00%, 2/1/16 2,836,800
Aaa AAA 1,750 Phoenix, AZ, Civic Improvement
Excise Tax, (MBIA), 6.60%,
7/1/08 1,993,128
Aaa AAA 5,000 Phoenix, AZ, Industrial
Development Authority, IDA,
Single Family, 0.00%, 12/1/14 2,034,650
NR AA 2,500 Phoenix, AZ, Street and Highway
User, 6.25%, 7/1/11 2,798,775
- --------------------------------------------------------------------------------
$11,965,783
- --------------------------------------------------------------------------------
General Obligations -- 6.2%
- --------------------------------------------------------------------------------
Aa1 AA+ $ 2,000 Phoenix, AZ, 5.25%, 7/1/20 $ 2,021,100
Aa1 AA+ 1,500 Phoenix, AZ, 6.375%, 7/1/13 1,651,755
Baa1 A 1,000 Puerto Rico Aqueduct and Sewer
Authority, 5.00%, 7/1/19 966,370
NR A 2,000 Tatum Ranch, AZ, 6.875%, 7/1/16 2,206,780
- --------------------------------------------------------------------------------
$ 6,846,005
- --------------------------------------------------------------------------------
Hospitals -- 4.3%
- --------------------------------------------------------------------------------
NR BBB $ 1,130 Arizona Health Facilities
Authority, (Phoenix Memorial
Hospital), 8.125%, 6/1/12 $ 1,239,497
NR BBB 1,250 Arizona Health Facilities,
(Phoenix Memorial Hospital),
8.20%, 6/1/21/(2)/ 1,374,450
Baa1 BBB- 1,000 Maricopa County, AZ, (Sun Health
Corporation), 8.125%, 4/1/12 1,178,070
NR NR 905 Winslow, AZ, Industrial
Development Authority (Winslow
Memorial Hospital), 9.50%,
6/1/22 1,022,931
- --------------------------------------------------------------------------------
$ 4,814,948
- --------------------------------------------------------------------------------
Housing -- 9.9%
- --------------------------------------------------------------------------------
NR A $ 2,250 Maricopa County, AZ, IDA,
(Greenery Apartments), 6.625%,
7/1/26 $ 2,350,305
NR A 2,000 Maricopa County, AZ, IDA,
(Laguna Point Apartments),
6.75%, 7/1/19 2,096,660
NR A 3,000 Maricopa County, AZ, IDA,
Multi-family, 6.625%, 1/1/27 3,150,630
NR NR 1,250 Maricopa County, AZ, IDA, Place
Five and The Greenery Projects,
8.625%, 1/1/11 1,273,638
</TABLE>
See notes to financial statements
33
<PAGE>
Arizona Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- -------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Housing (continued)
- --------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
NR AA $1,000 Phoenix, AZ, (Woodstone and
Silver Springs Apartments),
Multi-family Housing, (Asset
Guaranty), 6.25%, 4/1/23 $ 1,033,680
NR AAA 1,000 Tempe, AZ, Industrial
Development Authority,
(Quadrangle Village
Apartments), 6.25%, 6/1/26 1,035,540
- --------------------------------------------------------------------------------
$ 10,940,453
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 1.9%
- --------------------------------------------------------------------------------
A1 NR $1,000 Casa Grande, AZ, Pollution
Control, (Frito Lay, Inc.),
6.60%, 12/1/10 $ 1,100,090
A2 A 1,000 Greenlee County, AZ,
Pollution Control, (Phelps
Dodge Corp.), 5.45%, 6/1/09 1,036,730
- --------------------------------------------------------------------------------
$ 2,136,820
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 3.0%
- --------------------------------------------------------------------------------
Aaa AAA $2,910 Pima County, AZ, (Irvington
Power), (FGIC), 7.25%,
7/15/10 $ 3,271,044
- --------------------------------------------------------------------------------
$ 3,271,044
- --------------------------------------------------------------------------------
Insured-General Obligations -- 8.2%
- --------------------------------------------------------------------------------
NR AAA $1,500 Commonwealth of Puerto Rico
"RIBS", (AMBAC), Variable
Rate, 7/1/15/(1)/ $ 1,663,125
Aaa AAA 1,000 Commonwealth of Puerto Rico,
Variable Rate, (FSA),
7/1/20/(1)/ 1,102,500
Aaa AAA 1,000 Maricopa County, AZ, Alhambra
Elementary School District
(AMBAC), 5.625%, 7/1/13 1,046,390
Aaa AAA 1,000 Maricopa County, AZ, Alhambra
School District (AMBAC),
5.125%, 7/1/13 1,011,080
Aaa AAA 1,000 Maricopa County, AZ, Chandler
Unified School District (FGIC),
6.40%, 7/1/10 1,083,380
Aaa AAA 1,000 Maricopa County, AZ, School
District, (MBIA), 6.40%,
7/1/10 1,083,750
Aaa AAA 1,000 Maricopa County, AZ, Tolleson
High School District (MBIA),
5.00%, 7/1/13 1,003,200
Aaa AAA 1,000 Puerto Rico (FSA), Variable
Rate, 7/1/22/(1)/ 1,116,250
- --------------------------------------------------------------------------------
$ 9,109,675
- --------------------------------------------------------------------------------
Insured-Hospitals -- 17.8%
- --------------------------------------------------------------------------------
Aaa AAA $2,140 Arizona Health Facilities
Authority, (MBIA), 5.25%,
10/1/26 $ 2,111,517
Aaa AAA 2,000 Maricopa County, AZ, Hospital
District No. 1, (FGIC),
6.125%, 6/1/15 2,139,400
Aaa AAA 2,000 Maricopa County, AZ,
Samaritan Health, (MBIA),
7.00%, 12/1/16 2,491,900
Aaa AAA 2,000 Mohave County, AZ, (Kingman
Regional Medical Center)
(FGIC), 6.50%, 6/1/15 2,187,080
Aaa AAA 1,000 Pima County, AZ, (Carondelet
Health Care Corp.) (MBIA),
5.25%, 7/1/12 1,047,500
Aaa AAA 3,500 Pima County, AZ, (Tucson
Medical Center) (MBIA),
5.00%, 4/1/15 3,443,300
Aaa AAA 1,500 Pima County, AZ, (Tucson
Medical Center) (MBIA),
6.375%, 4/1/12 1,640,790
Aaa AAA 1,000 Pima County, AZ, Industrial
Development Authority, (MBIA),
5.25%, 7/1/11 1,050,450
Aaa AAA 1,500 Scottsdale, AZ, Industrial
Development Authority,
(AMBAC), 6.125%, 9/1/17 1,640,175
Aaa AAA 1,000 University of Arizona Medical
Center Corp. (MBIA), 5.00%,
7/1/21 963,490
Aaa AAA 1,000 Yuma, AZ, Industrial
Development Authority, (MBIA),
5.50%, 8/1/17 1,025,630
- --------------------------------------------------------------------------------
$ 19,741,232
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 2.0%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Chandler, AZ, Water and Sewer
(FGIC), 6.25%, 7/1/13 $ 1,089,200
Aaa AAA 1,200 Phoenix, AZ, (Civic
Improvement Corp.) (MBIA),
5.00%, 7/1/18 1,171,056
- --------------------------------------------------------------------------------
$ 2,260,256
- --------------------------------------------------------------------------------
Special Tax Revenue -- 1.9%
- --------------------------------------------------------------------------------
Baa1 A $1,000 Commonwealth of Puerto Rico
Highway and Transportation
Authority, 5.50%, 7/1/36 $ 1,022,450
NR NR 1,000 Virgin Islands Public Finance
Authority, 7.25%, 10/1/18 1,109,010
- --------------------------------------------------------------------------------
$ 2,131,460
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
34
<PAGE>
Arizona Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Transportation -- 4.8%
- --------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
NR BBB $3,000 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 $ 3,233,670
Baa3 BBB- 2,000 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.25%, 6/1/26 2,145,520
- --------------------------------------------------------------------------------
$ 5,379,190
- --------------------------------------------------------------------------------
Water and Sewer -- 9.1%
- --------------------------------------------------------------------------------
Aa1 AA+ $2,000 Arizona Wastewater Management
Authority, 6.80%, 7/1/11 $ 2,247,080
A1 AA- 1,000 Central Arizona Water
Conservation District, 5.50%,
11/1/09 1,083,490
Aa3 A 5,000 Phoenix, AZ, (Civic
Improvement Corp.), 4.75%,
7/1/23 4,588,299
Aa3 A 1,100 Phoenix, AZ, (Civic
Improvement Corp.), 5.00%,
7/1/18 1,066,648
A1 A+ 1,000 Tucson, AZ, Water Systems,
6.50%, 7/1/16 1,085,960
- --------------------------------------------------------------------------------
$ 10,071,477
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $100,333,893) $111,035,308
- --------------------------------------------------------------------------------
</TABLE>
AMT-Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio primarily invests in debt securities issued by Arizona
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 32.8% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institution ranged from 2.0% to 17.1% of total investments.
/(1)/Security has been issued as an inverse floater bond.
/(2)/Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
35
<PAGE>
Colorado Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Rating (Unaudited)
- ------------------ Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electric Utilities -- 1.3%
- --------------------------------------------------------------------------------
NR BBB $ 500 Guam Power Authority,
6.625%, 10/1/14 $ 544,340
- --------------------------------------------------------------------------------
$ 544,340
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 9.9%
- --------------------------------------------------------------------------------
NR AAA $4,000 Colorado Health Facilities Authority,
(Liberty Heights), (FSA),
0.00%, 7/15/24 $ 933,920
Aa2 NR 1,000 Colorado Housing and Finance
Authority, Retirement Housing,
(Liberty Heights Project), (AMT),
7.55%, 11/1/27 1,128,280
Aaa NR 8,500 Dawson Ridge, Metropolitan
District #1, Douglas County, CO,
0.00%, 10/1/22 2,122,365
- --------------------------------------------------------------------------------
$ 4,184,565
- --------------------------------------------------------------------------------
General Obligations -- 2.6%
- --------------------------------------------------------------------------------
A1 AA $1,000 Boulder and Gilpin Counties, Boulder
Valley School District,
6.30%, 12/1/13 $ 1,100,090
- --------------------------------------------------------------------------------
$ 1,100,090
- --------------------------------------------------------------------------------
Hospitals -- 18.9%
- --------------------------------------------------------------------------------
NR NR $ 900 Colorado Health Facilities Authority,
(Cleo Wallace Center),
7.00%, 8/1/15 $ 935,577
NR BBB- 650 Colorado Health Facilities Authority,
(National Jewish Center For
Immunology and Respiratory
Medicine), 6.875%, 2/15/12 675,428
Baa1 NR 2,000 Colorado Health Facilities Authority,
(Parkview Memorial Hospital),
6.125%, 9/1/25 2,053,580
Baa BBB 2,050 Colorado Health Facilities Authority,
(Rocky Mountain Adventist
Healthcare), 6.625%, 2/1/13 2,174,681
NR BBB 2,000 Colorado Health Facilities Authority,
(Vail Valley Medical Center),
6.60%, 1/15/20 2,116,300
- --------------------------------------------------------------------------------
$ 7,955,566
- --------------------------------------------------------------------------------
Housing -- 15.4%
- --------------------------------------------------------------------------------
NR AAA $1,000 City of Lakewood, Multi-family
Housing, FHA Insured Mortgage Loan,
(AMT), 6.65%, 10/1/25 $ 1,058,980
Aa AA 750 Colorado Housing and Finance
Authority, Multi-family Mortgage
Revenue, MFMR, (AMT),
6.40%, 10/1/27 789,615
Aa2 NR 1,510 Colorado Housing and Finance
Authority, Single Family Access
Program, 7.90%, 12/1/24 1,697,285
Aa2 NR 805 Colorado Housing and Finance
Authority, Single Family Access
Program, 8.00%, 12/1/24 916,831
Aa2 NR 565 Colorado Housing and Finance
Authority, Single Family Housing,
(AMT), 7.65%, 12/1/25 636,393
NR AAA 1,000 Denver, CO, Multifamily Housing,
(Lofts Project), (AMT),
6.15%, 12/1/16 1,037,060
NR NR 345 Lake Creek Affordable Housing Corp.,
Multi-family, 8.00%, 12/1/23 363,951
- --------------------------------------------------------------------------------
$ 6,500,115
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 2.9%
- --------------------------------------------------------------------------------
A2 NR $1,250 Commonwealth of Puerto Rico
Industrial, Medical and Environmental
Pollution Control Facility Finance
Authority (American Home Products),
5.10%, 12/1/18 $ 1,227,588
- --------------------------------------------------------------------------------
$ 1,227,588
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 2.1%
- --------------------------------------------------------------------------------
Aaa AAA $ 300 Commonwealth of Puerto Rico Electric
Power Authority, (FSA), Variable
Rate, 7/1/03/(1)/ $ 342,375
Aaa AAA 500 Commonwealth of Puerto Rico,
Telephone Authority, (MBIA), Variable
Rate, 1/16/15/(1)/ 520,625
- --------------------------------------------------------------------------------
$ 863,000
- --------------------------------------------------------------------------------
Insured-General Obligations -- 11.9%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Douglas and Elbert Counties, Douglas
County School District, (MBIA),
6.40%, 12/15/11 $ 1,132,960
Aaa AAA 1,750 Eagle, Garfield and Routt Counties,
School District No. RE 50J, (FGIC),
6.30%, 12/1/12 1,952,545
</TABLE>
See notes to financial statements
36
<PAGE>
Colorado Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Rating (Unaudited)
- ------------------ Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-General Obligations (continued)
- --------------------------------------------------------------------------------
Aaa AAA $1,160 Highlands Ranch Metropolitan District
No. 2, (FSA), 6.50%, 6/15/10/(2)/ $ 1,363,568
Aaa AAA 1,265 Larimer, Weld and Boulder County,
CO, (FGIC), 0.00%, 12/15/12 578,067
- --------------------------------------------------------------------------------
$ 5,027,140
- --------------------------------------------------------------------------------
Insured-Housing -- 2.6%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 City of Thornton, SCA Realty MFMR,
(FSA), 7.10%, 1/1/30 $ 1,095,930
- --------------------------------------------------------------------------------
$ 1,095,930
- --------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 2.6%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 City of Broomfield Sales and Use Tax,
(AMBAC), 6.30%, 12/1/14 $ 1,086,410
- --------------------------------------------------------------------------------
$ 1,086,410
- --------------------------------------------------------------------------------
Insured-Transportation -- 1.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 750 Denver, CO, (Denver International
Airport), (AMT), (MBIA),
5.75%, 11/15/15 $ 776,715
- --------------------------------------------------------------------------------
$ 776,715
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 2.3%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Municipal Subdistrict, Northern
Colorado Water Conservancy District,
(AMBAC), 5.00%, 12/1/17 $ 971,340
- --------------------------------------------------------------------------------
$ 971,340
- --------------------------------------------------------------------------------
Special Tax Revenue -- 4.3%
- --------------------------------------------------------------------------------
Baa1 A $1,750 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/36 $ 1,789,288
- --------------------------------------------------------------------------------
$ 1,789,288
- --------------------------------------------------------------------------------
Transportation -- 18.9%
- --------------------------------------------------------------------------------
Baa3 BB+ $2,000 Denver, CO, (United Airlines), (AMT),
6.875%, 10/1/32 $ 2,155,060
Baa1 BBB 1,500 Denver, CO, Airport System Revenue,
(AMT), 6.75%, 11/15/22 1,613,130
Baa1 BBB 750 Denver, CO, Airport System Revenue,
(AMT), 7.00%, 11/15/25 800,040
Baa1 BBB 500 Denver, CO, Airport System Revenue,
(AMT), 7.50%, 11/15/23 581,160
NR NR $ 500 Eagle County, CO, (Eagle County
Airport Terminal Project), (AMT),
7.50%, 5/1/21 $ 530,760
NR BBB 750 Guam Airport Authority, (AMT),
6.60%, 10/1/10 808,635
NR BBB 100 Guam Airport Authority, (AMT),
6.70%, 10/1/23 107,789
Baa3 BBB- 1,250 Puerto Rico Port Authority, (American
Airlines), (AMT), 6.25%, 6/1/26 1,340,950
- --------------------------------------------------------------------------------
$ 7,937,524
- --------------------------------------------------------------------------------
Water and Sewer -- 2.5%
- --------------------------------------------------------------------------------
NR NR $1,000 Cottonwood Water and Sanitation
District, 7.75%, 12/1/20 $ 1,038,040
- --------------------------------------------------------------------------------
$ 1,038,040
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $38,187,386) $42,097,651
- --------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by Colorado
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 28.1% 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 4.6% to 8.9% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
37
<PAGE>
Connecticut Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 8.8%
- --------------------------------------------------------------------------------
NR BBB- $ 4,775 Connecticut Health and
Education Facilities
Authority, (Quinnipiac
College), 6.00%, 7/1/23 $ 4,834,640
Baa3 BBB- 1,000 Connecticut HEFA, (Sacred
Heart University), 5.80%,
7/1/23 990,680
Ba2 BBB- 5,500 Connecticut HEFA, (University
of Hartford), 6.80%, 7/1/22 5,651,854
Aaa AAA 3,400 Connecticut HEFA, (Yale
University), Variable Rate,
6/10/30/(1)/ 3,672,000
- --------------------------------------------------------------------------------
$15,149,174
- --------------------------------------------------------------------------------
Electric Utilities -- 5.0%
- --------------------------------------------------------------------------------
NR BBB $ 1,100 Guam Power Authority, 6.625%,
10/1/14 $ 1,197,548
NR NR 3,625 Guam Power Authority Revenue
Bonds, 6.30%, 10/1/22 3,783,630
NR NR 3,365 Virgin Islands Water and Power
Authority, 7.40%, 7/1/11 3,652,909
- --------------------------------------------------------------------------------
$ 8,634,087
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 1.5%
- --------------------------------------------------------------------------------
NR A $ 1,000 Connecticut HEFA, (Sacred
Heart University), 6.80%,
7/1/12 $ 1,128,530
A1 AAA 645 Connecticut Special Tax
Obligation Bonds, (STOB),
Transportation Infrastructure
Purposes, 6.50%, 7/1/09 687,080
NR AA- 650 State of Connecticut, General
Obligations Bonds, 6.875%,
7/15/10 711,913
- --------------------------------------------------------------------------------
$ 2,527,523
- --------------------------------------------------------------------------------
General Obligations -- 1.6%
- --------------------------------------------------------------------------------
Aa2 AA $ 1,270 City of Danbury, 4.50%, 2/1/14 $ 1,196,492
NR BBB 500 Government of Guam, 5.40%,
11/15/18 494,345
Aa3 AA- 1,750 State of Connecticut, Capital
Appreciation Bonds, 0.00%,
11/1/09 974,698
- --------------------------------------------------------------------------------
$ 2,665,535
- --------------------------------------------------------------------------------
Hospitals -- 8.6%
- --------------------------------------------------------------------------------
Baa2 NR $ 5,400 Connecticut HEFA, (Griffin
Hospital), 5.75%, 7/1/23 $ 5,349,402
NR BBB- 2,000 Connecticut HEFA, (New Britan
Memorial Hospital), 7.75%,
7/1/22 2,173,580
NR A+ 1,100 Connecticut HEFA, (William W.
Backus Hospital), 6.00%, 7/1/12 1,142,108
NR A+ 5,780 Connecticut HEFA, (William W.
Backus Hospital), 6.375%,
7/1/22 6,125,296
- --------------------------------------------------------------------------------
$14,790,386
- --------------------------------------------------------------------------------
Housing -- 12.4%
- --------------------------------------------------------------------------------
Aa AA $ 1,695 Connecticut HFA, MRB, 6.35%,
5/15/17 $ 1,785,716
Aa AA 210 Connecticut HFA, MRB, 6.55%,
11/15/13 220,886
Aa AA 2,490 Connecticut HFA, MRB, 6.60%,
11/15/23 2,627,946
Aa AA 5,315 Connecticut HFA, MRB, 6.70%,
11/15/12 5,668,340
Aa AA 1,685 Connecticut HFA, MRB, 6.75%,
11/15/23 1,792,840
Aa AA 200 Connecticut HFA, MRB, 7.00%,
11/15/09 212,262
Aa AA 15 Connecticut HFA, MRB, 7.625%,
11/15/17 15,400
Aa AA 3,000 Connecticut HFA, MRB, 6.20%,
5/15/14 3,133,230
Aa AA 4,735 Connecticut HFA, MRB, (AMT),
6.20%, 11/15/22 4,927,241
Aa AA 755 Connecticut HFA, MRB, (AMT),
6.90%, 5/15/20 808,250
Aa NR 100 Connecticut HFA, MRB, (AMT),
7.40%, 11/15/99 102,353
- --------------------------------------------------------------------------------
$21,294,464
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 2.5%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,000 Connecticut Development
Authority PCR, (Pfizer Inc.),
6.55%, 2/15/13 $ 1,099,750
NR NR 3,065 Connecticut Development
Authority, Airport Facility,
(Signature Flight), (AMT),
6.625%, 12/1/14 3,181,930
- --------------------------------------------------------------------------------
$ 4,281,680
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
38
<PAGE>
Connecticut Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Education -- 5.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 4,000 Connecticut HEFA,
(Choate Rosemary
College), (MBIA),
5.00%, 7/1/27 $ 3,885,000
Aaa AAA 1,555 Connecticut HEFA,
(Choate Rosemary
College), (MBIA),
6.80%, 7/1/15/(2)/ 1,786,415
Aaa AAA 1,000 University of Connecticut,
(FGIC), 5.00%, 2/1/16 986,940
Aaa AAA 2,525 University of Connecticut,
(MBIA), 5.25%, 4/1/14 2,577,874
- --------------------------------------------------------------------------------
$ 9,236,229
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 1.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 3,160 Connecticut Municipal
Electric Energy
Cooperative Bonds (MBIA),
5.00%, 1/1/18 $ 3,080,937
- --------------------------------------------------------------------------------
$ 3,080,937
- --------------------------------------------------------------------------------
Insured-General Obligations -- 1.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,000 City of New Britain,
(MBIA), 6.00%, 3/1/12 $ 1,128,150
Aaa AAA 1,000 Puerto Rico Commonwealth,
(MBIA), 5.375%, 7/1/25 1,009,520
- --------------------------------------------------------------------------------
$ 2,137,670
- --------------------------------------------------------------------------------
Insured-Hospitals -- 9.1%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,000 Connecticut HEFA,
(Bridgeport Hospital),
(MBIA), 6.625%, 7/1/18 $ 1,108,350
Aaa AAA 1,000 Connecticut HEFA,
(Danbury Hospital),
(AMBAC), 5.375%, 7/1/17 1,008,290
Aaa AAA 1,000 Connecticut HEFA,
(Hospital of St.
Raphael), (AMBAC),
6.50%, 7/1/11 1,180,040
Aaa AAA 1,500 Connecticut HEFA,
(Hospital of St.
Raphael), (AMBAC),
6.625%, 7/1/14 1,643,535
Aaa AAA 5,750 Connecticut HEFA,
(Lawrence and Memorial
Hospital), (MBIA),
5.00%, 7/1/22 5,504,993
Aaa AAA 2,965 Connecticut HEFA,
(Veterans Memorial
Medical Center),
(MBIA), 5.375%, 7/1/15 3,029,993
Aaa AAA 2,000 Connecticut HEFA,
(Yale-New Haven
Hospital), (MBIA),
6.50%, 7/1/12 2,205,780
- --------------------------------------------------------------------------------
$15,680,981
- --------------------------------------------------------------------------------
Insured-Housing -- 0.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 305 Puerto Rico Housing
Finance Corp., (AMBAC),
7.50%, 10/1/11 $ 318,984
- --------------------------------------------------------------------------------
$ 318,984
- --------------------------------------------------------------------------------
Insured-Transportation -- 5.6%
- --------------------------------------------------------------------------------
Aaa AAA $ 8,200 State of Connecticut,
Airport Revenue
Bonds, (Bradley
International),
(FGIC), 7.65%, 10/1/12 $ 9,634,835
- --------------------------------------------------------------------------------
$ 9,634,835
- --------------------------------------------------------------------------------
Nursing Homes -- 14.2%
- --------------------------------------------------------------------------------
NR NR $ 1,240 Connecticut Development
Authority, (Baptist
Homes), 9.00%, 9/1/22 $ 1,408,826
A2 NR 9,000 Connecticut Development
Authority, Health
Care Bonds, (Duncaster),
6.75%, 9/1/15 9,754,292
A1 AA- 720 Connecticut HEFA,
(NHP), (Highland View),
(AMT), 7.00%, 11/1/07 830,484
A1 AA- 1,305 Connecticut HEFA,
(NHP), (Sharon
Healthcare), 6.25%,
11/1/14 1,417,139
A1 AA- 655 Connecticut HEFA,
(NHP), (St. Camillus),
6.25%, 11/1/18 706,306
A1 AA- 3,250 Connecticut HEFA,
(NHP), (St. Joseph's
Manor), 6.25%, 11/1/16 3,514,843
A1 AA- 335 Connecticut HEFA,
(NHP), (Wadsworth Glen),
(AMT), 7.00%, 11/1/07 386,406
A1 AA- 2,000 Connecticut HEFA,
(NHP), (Wadsworth Glen),
(AMT), 7.50%, 11/1/16 2,336,700
A1 AA- 3,000 Connecticut HEFA,
(NHP), (Windsor),
7.125%, 11/1/14 3,453,090
A1 AA- 500 Connecticut HEFA,
(NHP), (Windsor),
7.125%, 11/1/24 573,860
- --------------------------------------------------------------------------------
$24,381,946
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
39
<PAGE>
Connecticut Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Solid Waste -- 10.2%
- --------------------------------------------------------------------------------
A NR $ 2,500 Bristol Resource
Recovery Facility
Operating Committee
(Ogden Martin Systems),
6.50%, 7/1/14 $ 2,712,625
A2 A 4,250 Connecticut Resources
Recovery Authority,
(American REF-FUEL Co.),
(AMT), 6.45%, 11/15/22 4,517,240
Baa1 AA- 450 Connecticut Resources
Recovery Authority,
(American REF-FUEL Co.),
(AMT), 8.00%, 11/15/15 483,134
A2 A 1,000 Connecticut Resources
Recovery Authority,
(American REF-FUEL Co.),
(AMT), 8.10%, 11/15/15 1,074,100
NR A- 8,970 Eastern Connecticut
Resource Recovery
Authority, (Wheelabrator
Lisbon), (AMT), 5.50%,
1/1/20 8,741,892
- --------------------------------------------------------------------------------
$17,528,991
- --------------------------------------------------------------------------------
Special Tax Revenue -- 7.1%
- --------------------------------------------------------------------------------
Baa1 A $ 4,965 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/15 $ 5,190,262
A1 AA- 3,180 State of Connecticut,
(STOB), 6.125%, 9/1/12 3,602,717
A1 AA- 2,000 State of Connecticut,
(STOB), 6.50%, 10/1/12 2,346,560
NR NR 1,000 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 1,109,010
- --------------------------------------------------------------------------------
$12,248,549
- --------------------------------------------------------------------------------
Student Loans -- 2.6%
- --------------------------------------------------------------------------------
A1 NR $ 1,250 Connecticut Higher
Education Supplemental
Loan Authority Revenue
Bonds, (AMT), 6.20%,
11/15/09 $ 1,328,738
A1 NR 410 Connecticut Higher
Education Supplemental
Loan Authority Revenue
Bonds, (AMT), 7.375%,
11/15/05 429,131
A1 NR 2,565 Connecticut Higher
Education Supplemental
Loan Authority Revenue
Bonds, (AMT), 7.50%,
11/15/10 2,682,400
- --------------------------------------------------------------------------------
$ 4,440,269
- --------------------------------------------------------------------------------
Transportation -- 1.3%
- --------------------------------------------------------------------------------
NR BBB $ 2,000 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 $ 2,155,780
- --------------------------------------------------------------------------------
$ 2,155,780
- --------------------------------------------------------------------------------
Water and Sewer -- 0.8%
- --------------------------------------------------------------------------------
Aaa AA+ $ 1,250 State of Connecticut
Clean Water Fund Revenue
Bonds, 6.00%, 10/1/12 $ 1,414,538
- --------------------------------------------------------------------------------
$ 1,414,538
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $162,032,152) $171,602,558
- --------------------------------------------------------------------------------
</TABLE>
AMT -- Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by Connecticut
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 18.9% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 1.8% to 7.6% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
40
<PAGE>
Michigan Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Tax-Exempt Investments -- 100.0%
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electric Utilities -- 2.7%
- -----------------------------------------------------------------------------
NR BBB $1,000 Guam Power Authority,
6.625%, 10/1/14 $ 1,088,680
Baa1 BBB+ 500 Michigan South Central Power
Agency Supply System,
6.75%, 11/1/10 541,185
Baa1 BBB 1,780 Monroe County, MI, PCR, (Detroit
Edison Project) (AMT),
7.75%, 12/1/19 1,934,290
Baa1 BBB+ 365 Puerto Rico Electric Power
Authority, 7.125%, 7/1/14 391,817
- -----------------------------------------------------------------------------
$ 3,955,972
- -----------------------------------------------------------------------------
Escrowed / Prerefunded -- 6.0%
- -----------------------------------------------------------------------------
NR NR $2,550 Clintondale, MI, Community
Schools, 6.75%, 5/1/24 $ 2,883,158
Aaa AAA 1,000 Lake Orion, MI, School District
General Obligations (AMBAC),
7.00%, 5/1/20 1,173,700
Aaa AAA 750 Michigan HFA, (Oakwood Hospital)
(FGIC), 7.20%, 11/1/15 829,073
Aaa AAA 3,500 Monroe County, MI, EDA, (Mercy
Memorial Hospital), (MBIA), 3,933,685
7.00%, 9/1/21
- -----------------------------------------------------------------------------
$ 8,819,616
- -----------------------------------------------------------------------------
General Obligations -- 5.3%
- -----------------------------------------------------------------------------
Aa2 AA $ 500 Avondale School District, MI,
School Building and Site, 6.75%,
5/1/14 $ 544,415
Baa2 BBB 5,295 Detroit, MI, 6.35%, 4/1/14 5,637,638
Baa2 BBB 500 Detroit, MI, 6.70%, 4/1/10 551,585
Aa2 AA 1,000 Mattawan, MI, Consolidated
Schools, 6.40%, 5/1/09 1,099,710
- -----------------------------------------------------------------------------
$ 7,833,348
- -----------------------------------------------------------------------------
Hospitals -- 16.1%
- -----------------------------------------------------------------------------
NR BBB $2,000 Michigan HFA, (Central Michigan
Community Hospital),
6.25%, 10/1/27 $ 2,069,700
A2 A 4,225 Michigan HFA, (Detroit Medical
Center Obligated Group),
5.50%, 8/15/23 4,230,831
A2 A 4,000 Michigan HFA, (Detroit Medical
Center Obligated Group),
6.25%, 8/15/13 4,275,680
A2 A 450 Michigan HFA, (Detroit Medical
Center Obligated Group),
7.50%, 8/15/11 501,372
Aa AA 250 Michigan HFA, (Henry Ford
Continuing Care Corp.),
6.75%, 7/1/11 272,483
A1 NR 9,000 Michigan HFA, (McLaren Obligated
Group), 4.50%, 10/15/21 7,912,349
A2 A 4,130 Michigan HFA, (MidMichigan
Obligated Group), 6.625%, 6/1/10 4,283,925
- -----------------------------------------------------------------------------
$23,546,340
- -----------------------------------------------------------------------------
Housing -- 1.4%
- -----------------------------------------------------------------------------
NR A+ $1,020 Michigan HDA Rental Housing,
(AMT), 7.15%, 4/1/10 $ 1,089,166
NR AA+ 1,000 Michigan HDA, SFMR, (AMT),
6.20%, 12/1/27 1,040,380
- -----------------------------------------------------------------------------
$ 2,129,546
- -----------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 9.8%
- -----------------------------------------------------------------------------
Baa1 BBB $3,970 Dickinson, MI, PCR, (Champion
International), 5.85%, 10/1/18 $ 4,115,898
A3 A- 5,970 Michigan Strategic Fund, (General
Motors Corp.), 6.20%, 9/1/20 6,306,409
NR BB- 110 Michigan Strategic Fund, (KMart,
Corp.), 6.80%, 6/15/07 115,137
NR NR 3,000 Michigan Strategic Fund, (S.D.
Warren Co.) (AMT),
7.375%, 1/15/22 3,224,520
NR BB- 530 Richmond, MI, EDC, (Kmart Corp.),
6.625%, 1/1/07 557,624
- -----------------------------------------------------------------------------
$14,319,588
- -----------------------------------------------------------------------------
Insured-Education -- 7.2%
- -----------------------------------------------------------------------------
Aaa AAA $ 500 Eastern Michigan University, $ 545,220
(AMBAC), 6.375%, 6/1/14
Aaa AAA 2,870 Eastern Michigan University,
(FGIC), 5.50%, 6/1/27 2,920,656
Aaa AAA 3,360 Ferris State University, MI,
(MBIA), 5.25%, 10/1/20 3,302,275
Aaa AAA 1,000 Grand Rapids, MI, Community
College, (MBIA), 5.375%, 5/1/19 1,005,180
</TABLE>
See notes to financial statements
41
<PAGE>
Michigan Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Education (continued)
- -----------------------------------------------------------------------------
Aaa AAA $ 500 Western Michigan University,
(AMBAC), 6.50%, 7/15/21 $ 546,335
Aaa AAA 2,350 Western Michigan University,
(FGIC), 5.00%, 7/15/21 2,261,076
- -----------------------------------------------------------------------------
$10,580,742
- -----------------------------------------------------------------------------
Insured-Electric Utilities -- 3.7%
- -----------------------------------------------------------------------------
Aaa AAA $ 300 Michigan Strategic Fund,
(Detroit Edison Co.) (FGIC), $ 365,985
6.95%, 5/1/11
Aaa AAA 4,000 Michigan Strategic Fund,
(Detroit Edison Co.)
(FGIC), 6.95%, 9/1/21 4,447,400
Aaa AAA 550 Monroe County, MI, PCR,
(Detroit Edison Co.) (FGIC)
(AMT), 7.65%, 9/1/20 608,416
- -----------------------------------------------------------------------------
$ 5,421,801
- -----------------------------------------------------------------------------
Insured-General Obligations -- 11.5%
- -----------------------------------------------------------------------------
Aaa AAA $ 500 Detroit, MI, (FGIC),
5.50%, 4/1/16 $ 510,480
Aaa AAA 4,750 Grand Ledge, MI, School District,
(MBIA), 5.375%, 5/1/24 4,765,675
Aaa AAA 2,000 Holland, MI, School District,
(AMBAC), 0.00%, 5/1/17 711,780
Aaa AAA 3,000 Kalamazoo, MI, Public Library,
(MBIA), 5.40%, 5/1/14 3,180,420
Aaa AAA 1,500 Lincoln Park, MI, School District,
(FGIC), 5.90%, 5/1/26 1,585,755
Aaa AAA 2,000 Livonia, MI, School District,
(FGIC), 5.125%, 5/1/22 1,951,880
Aaa AAA 1,300 Mason, MI, School District, (FGIC),
5.40%, 5/1/21 1,309,685
Aaa AAA 2,610 Okemos, MI, Public Schools, (MBIA),
0.00%, 5/1/16 987,755
Aaa AAA 250 Traverse, MI, Public Schools,
(MBIA), 5.70%, 5/1/16 261,500
Aaa AAA 1,500 Ypsilanti, MI, School District,
(FGIC), 5.375%, 5/1/26 1,507,215
- -----------------------------------------------------------------------------
$16,772,145
- -----------------------------------------------------------------------------
Insured-Hospitals -- 7.1%
- -----------------------------------------------------------------------------
Aaa AAA $3,500 Jackson, MI, HFA, (W.A. Foote
Memorial) (FGIC), 4.75%, 6/1/15 $ 3,256,505
Aaa AAA 3,500 Kent, MI, HFA, (Butterworth
Health System), (MBIA),
6.125%, 1/15/21 3,764,320
Aaa AAA 3,200 Michigan HFA, (Linked Bulls &
Bears) (FSA), 6.10%, 8/15/22 3,337,184
- -----------------------------------------------------------------------------
$10,358,009
- -----------------------------------------------------------------------------
Insured-Housing -- 1.8%
- -----------------------------------------------------------------------------
Aaa AAA $ 500 Michigan HDA, (Parkway Meadows
Project) (FSA), 6.85%, 10/15/18 $ 536,725
Aaa AAA 2,075 Michigan HDA, SFMR, (AMBAC),
(AMT), 6.05%, 12/1/27 2,149,347
- -----------------------------------------------------------------------------
$ 2,686,072
- -----------------------------------------------------------------------------
Insured-Water and Sewer -- 8.8%
- -----------------------------------------------------------------------------
Aaa AAA $ 300 Clinton Township, MI, Water and
Sewage System, (AMBAC),
4.75%, 7/1/09 $ 299,178
Aaa AAA 400 Clinton Township, MI, Water and
Sewage System, (AMBAC),
4.75%, 7/1/10 395,044
Aaa AAA 400 Clinton Township, MI, Water and
Sewage System, (AMBAC),
4.75%, 7/1/11 391,612
Aaa AAA 400 Clinton Township, MI, Water and
Sewage System, (AMBAC),
4.75%, 7/1/12 387,108
Aaa AAA 8,180 Detroit City, MI, Water Supply
System, (FGIC), 4.75%, 7/1/19 7,640,692
Aaa AAA 3,425 Detroit City, MI, Water Supply
System, (FGIC), 6.25%, 7/1/12 3,740,032
- -----------------------------------------------------------------------------
$12,853,666
- -----------------------------------------------------------------------------
Life Care -- 1.8%
- -----------------------------------------------------------------------------
NR BBB $1,500 Kalamazoo Michigan Economic
Development, 6.25%, 5/15/27 $ 1,554,315
NR NR 1,000 Michigan HFA, (Presbyterian
Village), 6.50%, 1/1/25 1,044,550
- -----------------------------------------------------------------------------
$ 2,598,865
- -----------------------------------------------------------------------------
Miscellaneous -- 4.7%
- -----------------------------------------------------------------------------
NR A $590 Michigan Municipal Bond Authority
Local Government Loan,
6.90%, 5/1/21 $ 652,481
Aa2 AA 2,550 Michigan Municipal Bond Authority
Local Government Loan-Qualified
School, 6.50%, 5/1/07 2,851,716
</TABLE>
See notes to financial statements
42
<PAGE>
Michigan Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Miscellaneous (continued)
- -----------------------------------------------------------------------------
NR A- $1,770 Michigan Strategic Environmental
Research Institute, $ 1,900,785
6.375%, 8/15/12
NR NR 1,500 Pittsfield Township, MI, EDC,
(Arbor Hospice Project), 1,476,360
7.875%, 8/15/27
- -----------------------------------------------------------------------------
$ 6,881,342
- -----------------------------------------------------------------------------
Pooled Loans -- 2.0%
- -----------------------------------------------------------------------------
NR A $1,825 Michigan Muni Bond Authority Local
Government Loan, 6.75%, 5/1/12 $ 2,053,892
Aa2 AA 760 Michigan Municipal Parking Bond
Authority, 6.50%, 11/1/08 846,123
- -----------------------------------------------------------------------------
$ 2,900,015
- -----------------------------------------------------------------------------
Solid Waste -- 0.7%
- -----------------------------------------------------------------------------
Ba1 BBB- $1,000 Central Wayne County, MI,
Sanitation Authority,
6.50%, 7/1/07 $ 1,070,070
- -----------------------------------------------------------------------------
$ 1,070,070
- -----------------------------------------------------------------------------
Special Tax Revenue -- 6.8%
- -----------------------------------------------------------------------------
NR BBB+ $ 250 Battle Creek, MI, Downtown
Development Authority Tax
Increment, 7.60%, 5/1/16 $ 292,450
NR BBB+ 1,315 Battle Creek, MI, Downtown
Development Authority Tax 1,542,022
Increment, 7.65%, 5/1/22
NR A 6,550 Detroit, MI, (Convention
Facility Cobo Hall
Expansion Project), 5.25%,
9/30/12/(1)/ 6,492,097
NR A- 3,050 Detroit, MI, Downtown Tax
Increment, 0.00%, 7/1/16 1,047,553
NR A- 2,000 Detroit, MI, Downtown Tax
Increment, 0.00%, 7/1/20 541,900
- -----------------------------------------------------------------------------
$ 9,916,022
- -----------------------------------------------------------------------------
Transportation -- 2.6%
- -----------------------------------------------------------------------------
Baa3 BBB- $3,500 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.25%, 6/1/26 $ 3,754,660
- -----------------------------------------------------------------------------
$ 3,754,660
- -----------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $133,350,836) $146,397,819
- -----------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by Michigan
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 44.1% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institution ranged from 2.6% to 22.5%.
(1) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
43
<PAGE>
Minnesota Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assisted Living -- 1.6%
- --------------------------------------------------------------------------------
NR NR $1,000 St. Paul, MN, Housing and
Redevelopment, (Elder Care
Institute, Inc.),8.75%, 11/1/24 $1,136,410
- --------------------------------------------------------------------------------
$1,136,410
- --------------------------------------------------------------------------------
Education -- 3.2%
- --------------------------------------------------------------------------------
Baa2 NR $ 500 Minnesota Higher Education
Facilities Authority,
(St. Mary's College),
6.15%, 10/1/23 $ 519,805
A3 NR 100 Minnesota State Higher
Education Facilities
Authority, (St.
Olaf College), 6.25%, 4/1/10 100,213
A3 NR 500 Minnesota State Higher
Education Facilities,
(St. John's University),
5.40%, 10/1/22 501,900
A2 NR 1,100 Minnesota State Higher
Education Facilities,
(University of St. Thomas),
5.40%, 4/1/22 1,108,976
- --------------------------------------------------------------------------------
$2,230,894
- --------------------------------------------------------------------------------
Electric Utilities -- 4.0%
- --------------------------------------------------------------------------------
Baa1 BBB+ $1,130 Bass Brook, MN, Pollution
Control Revenue, (Minnesota
Power and Light), 6.00%,
7/1/22 $1,163,651
A2 A 500 Northern Municipal Power
Agency, Minnesota Electric,
7.25%, 1/1/16 530,380
A2 A+ 1,100 Southern Minnesota Municipal
Power Agency, 5.00%, 1/1/12 1,081,663
- --------------------------------------------------------------------------------
$2,775,694
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 3.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 150 Minnesota Public Facilities
Authority, Pollution
Control, Prerefunded to
3/1/01, 6.70%, 3/1/13 $ 165,701
Aaa AAA 100 Minnesota Public Facilities
Authority, Pollution Control,
Prerefunded to
3/1/99, 7.00%, 3/1/09 106,557
Aaa AAA 1,700 State of Minnesota,
Prerefunded to
8/1/02, Variable
Rate, 8/1/11/(1)/ 2,018,750
- --------------------------------------------------------------------------------
$2,291,008
- --------------------------------------------------------------------------------
General Obligations -- 4.1%
- --------------------------------------------------------------------------------
Aaa AAA $ 200 Minneapolis and St. Paul, MN,
Apartments Commission, (AMT),
6.60%, 1/1/09 $ 217,144
Aaa AAA 300 Minneapolis and St. Paul, MN,
Apartments Commission, (AMT),
6.60%, 1/1/10 325,092
A1 AA- 200 St. Cloud, MN, Variable
Rate, 8/1/13/(1)/ 222,000
Aaa AAA 1,000 State of Minnesota,
5.40%, 8/1/13 1,023,740
Aaa AAA 1,000 State of Minnesota,
(Duluth Airport), (AMT),
6.25%, 8/1/14 1,088,470
- --------------------------------------------------------------------------------
$2,876,446
- --------------------------------------------------------------------------------
Hospitals -- 14.5%
- --------------------------------------------------------------------------------
A A- $1,250 Minneapolis and St. Paul,
MN, Housing and Redevelopment
Authority, (Group
Health Plan,Inc.),
6.75%, 12/1/13 $1,380,313
A A- 250 Minneapolis and St. Paul,
MN, Housing and Redevelopment
Authority, (Group
Health Plan, Inc.),
6.90%, 10/15/22 276,438
NR BBB+ 2,120 Red Wing, MN,
Health Care Facilities,
6.50%, 9/1/22 2,232,699
NR AA+ 2,200 Rochester, MN, Health Care
Facilities, (AMT),
Variable Rate, 11/15/15/(1)/ 2,491,499
Baa BBB 1,000 St. Paul, MN, Housing and
Redevelopment Authority,
(Healtheast), 6.625%, 11/1/17 1,065,510
Baa BBB 2,500 St. Paul, MN, Housing and
Redevelopment Authority,
(Healtheast), 6.625%, 11/1/17 2,663,774
- --------------------------------------------------------------------------------
$10,110,233
- --------------------------------------------------------------------------------
Housing -- 23.6%
- --------------------------------------------------------------------------------
NR AAA $ 300 Coon Rapids, MN, Multifamily
Housing, (Browns Meadow),
(FHA), (AMT), 6.85%, 8/1/33 $ 313,560
NR AAA 1,395 Dakota County, MN,
Housing and Redevelopment
Authority, (GNMA),
7.375%, 12/1/29/(2)/ 1,527,999
Aaa NR 500 Eagan, MN, Multifamily
Revenue, (Woodridge
Apartments),(GNMA),
5.95%, 2/1/32 511,710
Aaa NR 500 Little Canada, MN,
Facilities Revenue,
(Cedars Lakeside)
(GNMA), 5.90%, 8/1/20 513,445
</TABLE>
See notes to financial statements
44
<PAGE>
Minnesota Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unauditied)
- -------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing (continued)
- --------------------------------------------------------------------------------
Aaa NR $ 500 Little Canada, MN, Facilities
Revenue, (Cedars Lakeside)
(GNMA), 5.95%, 2/1/32 $ 511,710
Aa NR 1,200 Maplewood, MN, Multifamily
Housing, (Beaver Creek),
(FHA), 6.50%, 9/1/24 1,264,656
NR AAA 90 Minneapolis and St. Paul,
MN, Housing Finance
Board, SFM,(GNMA), (AMT),
7.30%, 8/1/31 95,297
Aa2 AA+ 400 Minnesota State Housing
Finance Agency, SFM,
6.95%, 7/1/16 425,660
Aa2 AA+ 4,035 Minnesota State Housing
Finance Agency, SFM, (AMT),
6.50%, 1/1/26 4,217,865
Aa2 AA+ 1,000 Minnesota State Housing
Finance Agency, SFM,
(AMT), 6.75%, 7/1/12 1,056,930
Aa2 AA+ 660 Minnesota State Housing
Finance Agency, SFM,
(AMT),6.75%, 1/1/26 695,290
Aa2 AA+ 1,235 Minnesota State Housing
Finance Agency, SFM,
(AMT), 6.85%, 1/1/24 1,305,062
Aa2 AA+ 380 Minnesota State Housing
Finance Agency, SFM,
(AMT), 7.05%, 7/1/22 398,552
Aa NR 1,250 St. Louis Park, MN,
Multifamily Revenue,
(Knollwood Apartments),
(FHA), 6.25%, 12/1/28 1,296,088
Aaa NR 1,685 St. Paul, MN, Housing and
Redevelopment Authority,
Multifamily Housing,
(Cliffe Apartments),
(GNMA), 6.00%, 1/1/31 1,732,197
NR AAA 330 St. Paul, MN, Housing
and Redevelopment
Authority, SFM, (FNMA),
6.90%, 12/1/21 348,114
NR AAA 210 St. Paul, MN, Housing
and Redevelopment
Authority, SFM, (FNMA),
6.95%, 12/1/31 221,195
- --------------------------------------------------------------------------------
$16,435,330
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 7.6%
- --------------------------------------------------------------------------------
NR A- $ 1,000 Cloquet, MN,
Pollution Control
Revenue, (Potlach
Corp.), 5.90%, 10/1/26 $ 1,035,830
NR A- 750 Minneapolis, MN,
Community Development
Agency, 6.00%, 6/1/11 772,193
NR A- 100 Minneapolis, MN,
Community Development
Agency, 7.35%, 12/1/09 106,581
NR A- 1,250 Minneapolis, MN,
Community Development
Agency, 7.40%, 12/1/21 1,330,675
NR A- 1,605 Minneapolis, MN,
Community Development
Agency, (AMT),
6.80%, 12/1/24 1,730,591
NR A- 300 Minneapolis, MN,
Community Development
Agency, (FICN),
6.40%, 12/1/04 312,849
- --------------------------------------------------------------------------------
$ 5,288,719
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 14.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 300 Northern Municipal
Power Agency, (Minnesota
Electric) (AMBAC),
6.00%, 1/1/19 $ 307,215
Aaa AAA 300 Southern Minnesota
Municipal Power
Agency, Variable
Rate, (AMT), 1/1/18/(1)/ 317,250
Aaa AAA 6,950 Southern Minnesota
Municipal Power Agency,
(MBIA), 0.00%, 10/1/21 2,009,454
Aaa AAA 10,000 Southern Minnesota
Municipal Power Agency,
(MBIA), 0.00%, 1/1/25 2,329,000
Aaa AAA 9,880 Southern Minnesota
Municipal Power Agency,
(MBIA), 0.00%, 1/1/26 2,179,528
Aaa AAA 4,800 Southern Minnesota
Municipal Power Agency,
(MBIA), 0.00%, 1/1/27 1,004,064
Aaa AAA 1,250 Southern Minnesota
Municipal Power Agency,
(MBIA), 4.75%, 1/1/16 1,185,225
Aaa AAA 450 Southern Minnesota
Municipal Power Agency,
(MBIA), 5.00%, 1/1/12 449,523
Aaa AAA 510 Western Minnesota
Municipal Power Agency,
(MBIA), 5.50%, 1/1/15 510,117
- --------------------------------------------------------------------------------
$10,291,376
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
45
<PAGE>
Minnesota Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unauditied)
- -------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-General Obligations -- 2.2%
- --------------------------------------------------------------------------------
Aaa AAA $1,330 St. Francis, MN, Independent
School District No. 15,
(FGIC), 6.35%, 2/1/12 $ 1,497,008
- --------------------------------------------------------------------------------
$ 1,497,008
- --------------------------------------------------------------------------------
Insured-Hospitals -- 10.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 100 Minneapolis and St. Paul,
MN, Health Care Systems,
(Health One), (MBIA),
7.40%, 8/15/11 $ 110,468
Aaa AAA 4,330 Minneapolis and St. Paul,
MN, Housing and Redevelopment,
(Healthspan), (AMBAC),
4.75%, 11/15/18 4,048,852
Aaa AAA 250 Minneapolis, MN,
Hospital Revenue,
(Fairview Hospital), (MBIA),
6.50%, 1/1/11 273,815
Aaa AAA 450 Minnesota Agricultural
and Economic Development,
(Fairview Hospital), (MBIA),
5.75%, 11/15/26 472,644
Aaa AAA 450 Plymouth, MN, Health
Facilities, (Westhealth),
(CGIC), 6.25%, 6/1/16 488,336
Aaa AAA 1,000 St. Louis Park, MN,
Health Care Facilities,
(AMBAC), Variable
Rate, 7/1/13/(1)/ 983,750
Aaa AAA 750 St. Louis Park, MN,
Health Care Facilities,
Health System Minnesota
Obligated Group, (AMBAC),
5.20%, 7/1/23 733,260
- --------------------------------------------------------------------------------
$ 7,111,125
- --------------------------------------------------------------------------------
Insured-Housing -- 2.4%
- --------------------------------------------------------------------------------
Aaa AAA $1,500 SCA MFMR Receipts,
Burnsville, MN,
(FSA), 7.10%, 1/1/30 $ 1,643,895
- --------------------------------------------------------------------------------
$ 1,643,895
- --------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 4.5%
- --------------------------------------------------------------------------------
Aaa AAA $3,000 St. Paul, MN, Housing
and Redevelopment
Authority, (Civic Center),
(MBIA), 5.45%, 11/1/13 $ 3,114,119
- --------------------------------------------------------------------------------
$ 3,114,119
- --------------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 3.3%
- --------------------------------------------------------------------------------
Baa1 NR $ 350 Cambridge, MN, Economic
Development Authority,
6.25%, 2/1/14 $ 363,584
Aa2 AA $1,770 Hennepin County, MN,
6.80%, 5/1/17/(2)/ $ 1,941,478
- --------------------------------------------------------------------------------
$ 2,305,062
- --------------------------------------------------------------------------------
Solid Waste -- 0.7%
- --------------------------------------------------------------------------------
Aa3 A1+ $ 450 Anoka County, MN,
Solid Waste Disposal,
National Rural Utility,
(AMT), 6.95%, 12/1/08 $ 487,130
- --------------------------------------------------------------------------------
$ 487,130
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $63,057,066) $69,594,449
- --------------------------------------------------------------------------------
</TABLE>
AMT -- Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by Minnesota
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 37.2% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from .07% to 19.6% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
46
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Rating (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Assisted Living -- 2.7%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A2 A $ 1,455 New Jersey EDA,
7.05%, 3/1/16 $ 1,505,605
NR NR 3,750 New Jersey EDA, (Chelsea
at East Brunswick Project),
(AMT), 8.25%, 10/1/20 3,888,638
NR NR 3,630 New Jersey EDA,
(Forsgate Project),
(AMT), 8.625%, 6/1/25 4,006,830
- --------------------------------------------------------------------------------
$ 9,401,073
- --------------------------------------------------------------------------------
Cogeneration -- 4.0%
- --------------------------------------------------------------------------------
NR BB+ $12,750 New Jersey EDA, (Vineland
Cogeneration), (AMT),
7.875%, 6/1/19 $ 13,955,512
- --------------------------------------------------------------------------------
$ 13,955,512
- --------------------------------------------------------------------------------
Education -- 2.5%
- --------------------------------------------------------------------------------
Baa1 BBB+ $ 2,480 New Jersey Education
Facilities Authority,
7.00%, 7/1/21 $ 2,653,054
- --------------------------------------------------------------------------------
NR NR 8,800 New Jersey Higher
Educational Student Loan
Bonds, (AMT), 0.00%, 7/1/10 3,273,248
- --------------------------------------------------------------------------------
A1 AA 2,500 Rutgers, The State
University of New Jersey,
6.85%, 5/1/21 2,758,275
- --------------------------------------------------------------------------------
$ 8,684,577
- --------------------------------------------------------------------------------
Electric Utilities -- 3.2%
- --------------------------------------------------------------------------------
NR BBB $ 100 Guam Power Authority,
5.25%, 10/1/13 $ 98,600
- --------------------------------------------------------------------------------
NR BBB 750 Guam Power Authority,
5.25%, 10/1/23 726,113
- --------------------------------------------------------------------------------
NR BBB 3,000 Guam Power Authority,
6.75%, 10/1/24 3,269,340
- --------------------------------------------------------------------------------
Baa1 BBB+ 5,000 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 1,767,450
- --------------------------------------------------------------------------------
NR NR 4,905 Virgin Islands Water and Power
Authority, 7.40%, 7/1/11 5,324,672
- --------------------------------------------------------------------------------
$ 11,186,175
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 2.9%
- --------------------------------------------------------------------------------
Aaa A+ $ 1,000 New Jersey EDA, Performing
Arts Center, Prerefunded to
6/15/01, 6.75%, 6/15/12 $ 1,111,590
- --------------------------------------------------------------------------------
Aaa AAA 1,155 New Jersey Educational
Facilities Authority,
(Seton Hall University),
Prerefunded to 7/1/99,
6.85%, 7/1/19 1,238,183
- --------------------------------------------------------------------------------
Aa2 AAA 1,205 New Jersey Health Care
Facilities Financing
Authority, (Barnett
Hospital), Prerefunded to
8/1/01, 6.80%, 8/1/19 1,332,031
- --------------------------------------------------------------------------------
Aaa AA 1,040 New Jersey Wastewater
Treatment Trust, Prerefunded
to 5/15/98, 7.25%, 5/15/08 1,088,599
- --------------------------------------------------------------------------------
NR AA 920 New Jersey Wastewater
Treatment Trust, Prerefunded
to 6/15/00, 6.875%, 6/15/09 1,006,278
- --------------------------------------------------------------------------------
NR AA 230 New Jersey Wastewater
Treatment Trust, Prerefunded to
6/15/00, 7.00%, 6/15/10 252,342
- --------------------------------------------------------------------------------
Aaa AAA 870 Newark, NJ, (AMBAC),
Prerefunded to 10/1/99,
7.375%, 10/1/07 947,500
- --------------------------------------------------------------------------------
NR NR 2,000 Passaic County, NJ, Prerefunded
to 9/1/99, 6.70%, 9/1/13 2,142,620
A3 AA- 1,000 University of Medicine and
Dentistry, Prerefunded to
12/1/99, 7.20%, 12/1/19 1,089,830
- --------------------------------------------------------------------------------
$ 10,208,973
- --------------------------------------------------------------------------------
General Obligations -- 10.6%
- --------------------------------------------------------------------------------
NR BBB $ 9,745 Government of Guam,
5.40%, 11/15/18 $ 9,634,784
- --------------------------------------------------------------------------------
Aa2 NR 3,000 Mercer County Improvement
Authority, 0.00%, 4/1/10 1,622,850
- --------------------------------------------------------------------------------
A1 AA- 19,000 Port Authority of
New York and New Jersey,
6.125%, 6/1/2094 21,828,339
- --------------------------------------------------------------------------------
Baa1 A 2,000 Puerto Rico Public Buildings
Authority, Public Education
and Health Facilities,
5.50%, 7/1/21 2,013,920
- --------------------------------------------------------------------------------
NR BBB 400 Puerto Rico, (Guaynabo
Municipal Government Center
Lease), 5.625%, 7/1/22 401,760
- --------------------------------------------------------------------------------
NR A+ 1,500 The Hudson County Improvement
Authority, 6.625%, 8/1/25 1,625,940
- --------------------------------------------------------------------------------
$ 37,127,593
- --------------------------------------------------------------------------------
Hospitals -- 8.5%
- --------------------------------------------------------------------------------
A3 A- $ 2,300 New Jersey Health Care
Facilities Financing
Authority, (Atlantic
City Medical Center),
6.80%, 7/1/11 $ 2,509,185
</TABLE>
See notes to financial statements
47
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Rating (Unaudited)
- ------------------ Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hospitals (continued)
- --------------------------------------------------------------------------------
A2 A $3,750 New Jersey Health Care Facilities
Financing Authority, (Chilton
Memorial Hospital),
5.00%, 7/1/13 $ 3,675,263
Baa2 NR 5,875 New Jersey Health Care Facilities
Financing Authority, (Deborah
Heart and Lung Center),
6.30%, 7/1/23 6,146,190
Baa NR 4,000 New Jersey Health Care Facilities
Financing Authority, (Southern
Ocean County Hospital),
6.25%, 7/1/23 4,168,360
Aa2 AAA 9,585 New Jersey Health Care Facilities
Financing Authority, (St.
Elizabeth's Hospital),
6.80%, 8/1/19 10,316,431
NR BBB+ 2,720 New Jersey Health Care Facilities,
(Holy Name Hospital),
6.00%, 7/1/25 2,796,133
- --------------------------------------------------------------------------------
$ 29,611,562
- --------------------------------------------------------------------------------
Housing -- 3.4%
- --------------------------------------------------------------------------------
NR AAA $2,000 New Jersey Housing and Mortgage
Finance Agency, (Presidential
Plaza), (FHA), 6.95%, 5/1/13 $ 2,173,940
NR AAA 3,700 New Jersey Housing and Mortgage
Finance Agency, (Presidential
Plaza), (FHA), 7.00%, 5/1/30 4,019,014
NR A+ 1,000 New Jersey Housing and Mortgage
Finance Agency, Rental Housing,
(AMT), 7.10%, 5/1/22 1,059,860
NR AA+ 1,975 New Jersey Housing and Mortgage
Finance Agency, Section 8,
7.10%, 11/1/11 2,108,925
NR AA+ 1,000 New Jersey Housing and Mortgage
Finance Agency, Section 8,
7.10%, 11/1/12 1,067,810
NR A+ 1,250 New Jersey Housing Finance
Agency, (AMT), 7.25%, 11/1/22 1,321,638
Aaa AAA 190 Puerto Rico Housing Finance Corp.,
Single Family Mortgage Revenue,
(GNMA), 6.85%, 10/15/23 201,026
- --------------------------------------------------------------------------------
$ 11,952,213
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 7.3%
- --------------------------------------------------------------------------------
NR NR $4,000 Middlesex County Pollution Control
Financing Authority, (Amerada
Hess Corp.), 6.875%, 12/1/22 $ 4,367,080
NR NR $2,000 Middlesex County Pollution Control
Financing Authority, (Amerada
Hess Corp.), 7.875%, 6/1/22 $ 2,307,440
NR NR 5,640 New Jersey EDA, (777 Pattison
Ave., Inc.), (AMT),
8.95%, 12/15/18 6,232,538
Aa1 NR 3,000 New Jersey EDA, (Garden State
Paper Co.), 7.125%, 4/1/22 3,293,580
NR NR 1,160 New Jersey EDA, (National
Association of Accountants),
7.65%, 7/1/09 1,243,160
NR NR 2,000 New Jersey EDA, (The Seeing Eye,
Inc.), 7.30%, 4/1/11 2,130,160
NR BBB- 1,725 New Jersey EDA, (Trigen Trenton),
(AMT), 6.20%, 12/1/07 1,806,817
Baa1 BBB+ 2,135 New Jersey EDA, GATX Terminals
Corp., 7.30%, 9/1/19 2,431,594
NR NR 1,500 New Jersey EDA, Holt Hauling and
Warehousing System, Inc.,
7.90%, 3/1/27 1,620,075
- --------------------------------------------------------------------------------
$ 25,432,444
- --------------------------------------------------------------------------------
Insured-Education -- 0.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 845 New Jersey Educational Facilities
Authority, (Seton Hall University),
(BIGI), 6.85%, 7/1/19 $ 905,612
- --------------------------------------------------------------------------------
$ 905,612
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 0.4%
- --------------------------------------------------------------------------------
Aaa AAA $1,150 New Jersey EDA, New Jersey
American Water Co., (AMT)
(FGIC), 6.875%, 11/1/34 $ 1,298,753
- --------------------------------------------------------------------------------
$ 1,298,753
- --------------------------------------------------------------------------------
Insured-Hospitals -- 2.9%
- --------------------------------------------------------------------------------
Aaa NR $3,800 New Jersey EDA, (Hillcrest Health
Services), (AMBAC),
0.00%, 1/1/18 $ 1,332,280
Aaa NR 4,250 New Jersey EDA, (Hillcrest Health
Services), (AMBAC),
0.00%, 1/1/19 1,415,505
Aaa NR 1,235 New Jersey EDA, (St. Barnabus
Project), (MBIA), 0.00%, 7/1/18 422,024
Aaa NR 1,575 New Jersey EDA, (St. Barnabus
Project), (MBIA), 0.00%, 7/1/22 429,975
</TABLE>
See notes to financial statements
48
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Rating (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Hospitals (continued)
- --------------------------------------------------------------------------------
Aaa NR $ 1,000 New Jersey EDA,
(St. Barnabus
Project), (MBIA),
0.00%, 7/1/23 $ 258,750
Aaa NR 10,620 New Jersey EDA,
(St. Barnabus
Project), (MBIA),
0.00%, 7/1/26 2,339,905
Aaa AAA 1,570 New Jersey Health
Care Facilities
Financing Authority,
(Cathedral Health
Services) (MBIA),
7.25%, 2/15/21 1,741,491
Aaa AAA 2,000 New Jersey Health
Care Facilities
Financing Authority,
(Hackensack Medical
Center) (FGIC),
6.25%, 7/1/21 2,117,680
- --------------------------------------------------------------------------------
$10,057,610
- --------------------------------------------------------------------------------
Insured-Housing -- 1.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,200 New Jersey Housing and
Mortgage Finance
Agency, (AMT) (MBIA),
7.70%, 10/1/29 $ 1,260,336
Aaa AAA 1,410 New Jersey Housing and
Mortgage Finance
Agency, (MBIA), 7.375%,
10/1/17 1,482,897
Aaa AAA 1,620 Pennsauken Township,
Housing Finance Corp.,
(MBIA), 8.00%, 4/1/11 1,690,778
- --------------------------------------------------------------------------------
$ 4,434,011
- --------------------------------------------------------------------------------
Insured-Lease Revenue/Certificates of
Participation -- 3.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 3,900 County of Atlantic, NJ,
Public Facilities
Lease Agreement, (FGIC),
6.00%, 3/1/13 $ 4,404,621
Aaa AAA 1,750 Hudson County,
NJ, Correctional
Facility, (MBIA),
6.50%, 12/1/11 1,920,748
Aaa AAA 2,500 Hudson County,
NJ, Improvement
Authority, Secondary
Yield Curve Notes,
(FGIC) Variable
Rate, 12/1/25/(1)/ 2,828,125
Aaa AAA 1,800 Middlesex County,
NJ, Certificates
of Participation,
(MBIA), 6.125%, 2/15/19 1,938,312
Aaa AAA 2,125 University of Medicine
and Dentistry,
Certificates of
Participation, (MBIA),
6.75%, 12/1/09 2,285,629
- --------------------------------------------------------------------------------
$13,377,435
- --------------------------------------------------------------------------------
Insured-Transportation -- 5.0%
- --------------------------------------------------------------------------------
Aaa AAA $ 3,250 Delaware River
and Bay Authority,
(MBIA), 4.75%, 1/1/24 $ 3,036,670
NR AAA 5,000 New Jersey Turnpike
Authority, "RITES" (MBIA),
Variable Rate, 1/1/16/(1)/ 6,681,250
Aaa AAA 5,450 New Jersey Turnpike
Authority, (MBIA), 6.50%,
1/1/16 6,440,810
Aaa AAA 1,000 New Jersey Turnpike
Authority, (MBIA), 6.50%,
1/1/16 1,181,800
- --------------------------------------------------------------------------------
$17,340,530
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 0.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,500 Middlesex County
Utilities Authority,
(MBIA), Variable
Rate, 8/15/10/(1)/ $ 2,848,425
- --------------------------------------------------------------------------------
$ 2,848,425
- --------------------------------------------------------------------------------
Lease Revenue/Certificates of Participation -- 4.1%
- --------------------------------------------------------------------------------
Baa1 A- $ 720 County of Atlantic, NJ,
Public Facilities
Lease Agreement,
8.875%, 1/15/14 $ 987,113
Baa1 A- 785 County of Atlantic, NJ,
Public Facilities
Lease Agreement,
8.875%, 1/15/15 1,079,281
Aa AA- 2,000 Mercer County Improvement
Authority, (Richard J.
Hughes Justice),
6.05%, 1/1/15 2,000,760
Aa AA- 1,500 Mercer County Improvement
Authority, (Richard J.
Hughes Justice),
6.05%, 1/1/16 1,500,585
Aa AA- 1,500 Mercer County Improvement
Authority, (Richard J.
Hughes Justice),
6.05%, 1/1/17 1,500,570
Aa AA- 2,591 New Jersey Building
Authority, (Garden State
Savings Bonds),
0.00%, 6/15/10 1,370,380
Aa AA- 1,250 New Jersey Building
Authority, State
Building Revenue,
7.20%, 6/15/13 1,302,175
A1 A+ 5,500 New Jersey EDA,
Economic Recovery
Fund, 0.00%, 3/15/13 2,444,035
A1 A+ 1,650 New Jersey EDA,
State Contract,
0.00%, 9/15/09 905,685
A1 NR 1,000 Township of Bedminster,
NJ, Board of Education,
7.125%, 9/1/10 1,107,900
- --------------------------------------------------------------------------------
$14,198,484
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
49
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Life Care -- 5.3%
- --------------------------------------------------------------------------------
Baa2 NR $ 5,250 Camden County,
NJ, Improvement
Authority Revenue,
6.00%, 2/15/27 $ 5,331,113
NR NR 615 New Jersey EDA,
(Cadbury Corp.),
7.50%, 7/1/21 632,564
NR NR 2,000 New Jersey EDA,
(Cadbury Corp.),
8.00%, 7/1/15 2,138,960
NR NR 300 New Jersey EDA,
(Cadbury Corp.),
8.70%, 7/1/07 326,199
NR NR 4,000 New Jersey EDA,
(Keswick Pines
Project), 8.75%, 1/1/24 4,374,880
Baa2 BBB 5,400 New Jersey Health
Care Facilities,
6.00%, 7/1/27 5,555,358
- --------------------------------------------------------------------------------
$18,359,074
- --------------------------------------------------------------------------------
Nursing Homes -- 1.2%
- --------------------------------------------------------------------------------
NR NR $ 1,400 New Jersey EDA,
(Claremont Health
System, Inc.),
9.10%, 9/1/22 $ 1,558,508
NR NR 2,500 New Jersey EDA,
(Victoria Health
Corp.), 7.65%, 1/1/14 2,679,725
- --------------------------------------------------------------------------------
$ 4,238,233
- --------------------------------------------------------------------------------
Solid Waste -- 3.5%
- --------------------------------------------------------------------------------
NR BB $11,930 Union County, NJ,
Utilities Authority,
(AMT), 7.20%, 6/15/14 $12,312,475
- --------------------------------------------------------------------------------
$12,312,475
- --------------------------------------------------------------------------------
Special Tax Revenue -- 13.4%
- --------------------------------------------------------------------------------
Baa1 A $ 125 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
5.00%, 7/1/22 $ 119,343
NR NR 7,600 New Jersey Sports and
Exposition Authority,
(Monmouth Park Project),
8.00%, 1/1/25/(2)/ 8,549,924
NR NR 5,000 Port Authority of
New York and New
Jersey, (KIAC),
6.75%, 10/1/19 5,428,800
Baa1 BBB+ 550 Puerto Rico Finance
Authority, 7.90%, 7/1/07 581,499
Baa1 A 4,800 Puerto Rico Highway and
Transportation Authority,
5.00%, 7/1/36 4,593,984
Baa1 A 12,325 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/36 12,601,695
NR NR 13,350 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 14,805,283
- --------------------------------------------------------------------------------
$46,680,528
- --------------------------------------------------------------------------------
Transportation -- 10.8%
- --------------------------------------------------------------------------------
NR BBB $ 1,400 Guam Airport Authority,
6.50%, 10/1/23 $ 1,493,828
NR BBB 1,700 Guam Airport Authority,
(AMT),6.60%, 10/1/10 1,832,906
NR BBB 2,000 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 2,155,780
Aaa AAA 5,155 Port Authority of
New York and New Jersey,
(AMT), 5.75%, 12/1/22 5,395,996
A1 AA- 4,750 Port Authority of
New York and New Jersey,
(AMT), 6.25%, 1/15/27 5,003,080
Baa3 BB+ 5,100 Port Authority of
New York and New Jersey,
(Delta Airlines), 6.95%,
6/1/08 5,576,850
Baa3 BBB- 3,050 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.25%, 6/1/26 3,271,918
Baa3 BBB- 5,950 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.30%, 6/1/23 6,305,394
NR BBB 1,520 South Jersey Transportation
Authority, 6.15%, 1/1/22 1,586,074
A1 AA- 5,000 The Port Authority of New
York and New Jersey, 5.375%,
3/1/28 5,251,550
- --------------------------------------------------------------------------------
$37,873,376
- --------------------------------------------------------------------------------
Water and Sewer -- 2.1%
- --------------------------------------------------------------------------------
A1 AA- $ 2,000 Gloucester County Utilities
Authority, 6.50%, 1/1/21 $ 2,170,580
A3 A 4,500 New Jersey EDA,
Elizabethtown Water
Revenue, (AMT),
6.70%, 8/1/21 4,827,780
Aa2 AA 80 New Jersey Wastewater
Treatment Trust,
6.875%, 6/15/09 87,743
Aa2 AA 20 New Jersey Wastewater
Treatment Trust,
7.00%, 6/15/10 21,974
Aa3 AA 360 New Jersey Wastewater
Treatment Trust,
7.25%, 5/15/08 376,668
- --------------------------------------------------------------------------------
$ 7,484,745
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
50
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C>
Total Tax-Exempt Investments -- 100%
(identified cost $316,103,220) $348,969,413
- --------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by New Jersey
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 18.0% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institution ranged from 0.3% to 11.5% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
51
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assisted Living -- 3.5%
- -----------------------------------------------------------------------------
NR NR $ 2,680 Chester, PA, IDA,
(Senior Life
Choice of Paoli, $ 2,869,824
L.P.), 8.05%, 1/1/24
NR NR 5,000 Chester, PA, IDA,
(Senior Life Choice of
Kimberton) (AMT),
8.50%, 9/1/25 5,476,950
NR NR 5,000 Delaware, PA, IDA,
(Senior Quarters
Project) (AMT),
8.625%, 9/1/25 5,528,100
- -----------------------------------------------------------------------------
$13,874,874
- -----------------------------------------------------------------------------
Cogeneration -- 3.1%
- -----------------------------------------------------------------------------
NR NR $12,000 Pennsylvania
Economic Development
Authority, EDA,
(Northampton
Generation
Project) (AMT),
6.50%, 1/1/13 $12,307,559
- -----------------------------------------------------------------------------
$12,307,559
- -----------------------------------------------------------------------------
Education -- 2.5%
- -----------------------------------------------------------------------------
NR AAA $ 2,000 Lehigh, PA,
(Allentown
College of St.
Francis), 6.75%,
12/15/12 $ 2,181,100
NR BBB- 1,100 Lehigh, PA, (Cedar
Crest College),
6.70%, 4/1/26 1,161,677
NR BBB+ 2,000 Pennsylvania Higher
Educational
Facilities Authority,
HEFA, 5.90%, 1/1/27 2,051,700
NR A- 4,225 Scranton-Lackawanna,
PA, (University
of Scranton),
6.40%, 3/1/07 4,535,369
- -----------------------------------------------------------------------------
$ 9,929,846
- -----------------------------------------------------------------------------
Electric Utilities -- 2.6%
- -----------------------------------------------------------------------------
Baa3 BB- $ 500 Beaver, PA, IDA,
(Ohio Edison Co.),
7.75%, 9/1/24 $ 530,430
Baa1 BBB+ 3,250 Delaware, PA, IDA,
(Philadelphia
Electric Co.),
7.375%, 4/1/21 3,558,783
Baa2 BBB+ 4,070 Montgomery, PA, IDA,
(Philadelphia
Electric Co.) (AMT),
7.60%, 4/1/21 4,449,283
NR NR 1,445 Virgin Islands
Water and Power
Authority, 7.40%,
7/1/11 1,568,634
- -----------------------------------------------------------------------------
$10,107,130
- -----------------------------------------------------------------------------
Escrowed/Prerefunded -- 6.2%
- -----------------------------------------------------------------------------
Aaa AAA $5,600 Berks, PA, General
Obligations,
(FGIC),Variable
Rate, 11/10/20/(1)/ $ 6,839,000
Aaa NR 1,750 Chester, PA, HEFA,
(Bryn Mar Hospitals),
6.75%, 7/1/14 1,973,580
Aaa AAA 1,405 Lycoming, PA, General
Obligation, (FGIC),
6.40%, 8/15/11 1,523,863
NR A- 1,000 Pennsylvania HEFA,
(Elizabeth College),
7.25%, 6/15/11 1,126,640
NR NR 6,900 Pennsylvania IDA,
Economic Development,
7.00%, 1/1/11 7,706,679
Aaa AAA 4,845 Westmoreland, PA,
Municipal Authority,
(FGIC),
0.00%, 8/15/19 1,529,712
Aaa AAA 5,400 Westmoreland, PA,
Municipal Authority,
(FGIC),
0.00%, 8/15/20 1,580,418
Aaa AAA 5,880 Westmoreland, PA,
Municipal Authority,
(FGIC), 0.00%, 8/15/20 1,742,244
Aaa AAA 500 York, PA, Hospital
Authority, (AMBAC),
7.00%, 7/1/21 554,560
- -----------------------------------------------------------------------------
$24,576,696
- -----------------------------------------------------------------------------
General Obligations -- 3.7%
- -----------------------------------------------------------------------------
NR A $2,000 Chester Upland,
PA, School District,
6.375%, 9/1/21 $ 2,106,420
NR A 3,000 Dauphin, PA,
6.90%, 6/1/26 3,203,550
A1 A+ 2,050 Lower Providence
Township, PA,
Sewer Authority,
6.75%, 5/1/22 2,268,633
NR A 1,950 McKeesport Area, PA,
School District,
5.00%, 4/1/13 1,920,731
Aaa NR 4,065 Montgomery, PA,
5.45%, 9/15/22 4,134,755
A1 AAA 465 Pennsylvania,
6.75%, 1/1/07 510,356
A1 AAA 500 Pennsylvania,
6.75%, 1/1/08 548,770
- -----------------------------------------------------------------------------
$14,693,215
- -----------------------------------------------------------------------------
Hospitals -- 17.4%
- -----------------------------------------------------------------------------
A3 NR $5,330 Allegheny County,
PA, Hospital
Development
Authority, HDA,
5.75%, 5/15/27 $ 5,402,381
NR AAA 2,360 Allegheny, PA,
IDA, (Presbyterian
Medical Center),
6.75%, 2/1/26 2,560,836
</TABLE>
See notes to financial statements
52
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hospitals (continued)
- -----------------------------------------------------------------------------
Baa BBB $2,000 Dauphin, PA, (Community
General Osteopathic
Hospital), 7.375%,
6/1/16 $ 2,179,360
NR NR 4,475 Hazelton Luzerne,
PA (Saint Joseph
Medical Center),
8.375%, 7/1/12 5,382,709
NR BBB 1,150 Horizon Hospital
Systems Authority, PA,
6.35%, 5/15/26 1,191,860
A NR 2,670 Indiana, PA, (Indiana
Hospital), 7.125%,
7/1/23 2,934,250
A3 A 3,250 Lehigh, PA, (Muhlenberg
Hospital), 6.60%,
7/15/22 3,490,923
NR BBB- 3,500 McKean, PA, (Bradford
Hospital), 6.00%,
10/1/13 3,556,350
A3 BBB+ 2,550 Monroeville, PA,
(Forbes Health
System), 6.25%, 10/1/15 2,673,905
Baa2 NR 1,375 Montgomery, PA,
(Montgomery Hospital
Medical Center), 6.60%,
7/1/10 1,466,410
NR BBB+ 2,615 Montgomery, PA,
(Pottstown Medical
Center), 6.875%,
11/15/20 2,774,332
A BBB+ 8,500 Pennsylvania Hospital
and Higher Education,
(Albert Einstein
Medical Center),
7.625%, 4/1/11 9,047,825
A2 A+ 500 Pennsylvania Hospital
and Higher Education,
(Allegheny General
Hospital), 7.25%, 9/1/17 551,970
Ba BBB+ 7,115 Pennsylvania Hospital
and Higher Education,
(Graduate Health
System), 7.25%, 7/1/18 7,715,079
Ba BBB+ 5,625 Philadelphia, PA,
(Graduate Health
System), 6.625%, 7/1/21 5,852,363
Baa2 NR 4,115 Somerset, PA,
(Community Hospital
Project), 6.75%, 3/1/11 4,291,904
A3 A 7,000 Washington, PA,
(Monongahela Valley
Hospital), 6.75%,
12/1/08 7,574,840
- -----------------------------------------------------------------------------
$68,647,297
- -----------------------------------------------------------------------------
Housing -- 7.2%
- -----------------------------------------------------------------------------
Aaa NR $2,015 Allegheny, PA,
SFMR, (GNMA),
7.15%, 6/1/17 $ 2,112,284
NR AAA 2,900 Allegheny, PA,
SFMR, (Ladies
Grand Army) (FHA),
8.275%, 10/1/36 3,083,686
Aa2 AA+ 2,000 Pennsylvania HFA,
SFMR, (AMT),
6.15%, 10/1/27 2,074,020
Aa AA+ 8,350 Pennsylvania HFA,
SFMR, (AMT),
7.50%, 10/1/25 9,122,960
Aa2 AA 1,000 Pennsylvania, HFA,
(AMT), Variable,
10/3/23/(1)/ 1,167,500
Aa2 AA+ 1,590 Pennsylvania
Housing and Finance
Authority, HFA,
SFMR, (AMT),
5.80%, 10/1/29 1,609,239
Aaa NR 3,000 Philadelphia, PA,
Multifamily,
6.95%, 5/15/24 3,180,630
A1 AAA 1,000 Urban Redevelopment
Authority of
Pittsburgh Mortgage,
7.125%, 4/1/15 1,055,570
Aa2 AAA 265 Urban Redevelopment
Authority of Pittsburgh
Mortgage, 7.45%, 4/1/10 280,725
Aa2 AAA 3,435 Urban Redevelopment
Authority of Pittsburgh
Mortgage, (AMT),
7.10%, 4/1/24 3,653,672
A1 NR 1,055 Urban Redevelopment
Authority of Pittsburgh
Mortgage, (AMT),
7.40%, 4/1/24 1,116,253
- -----------------------------------------------------------------------------
$28,456,539
- -----------------------------------------------------------------------------
Industrial Development Revenue/Pollution
Control Revenue -- 15.1%
- -----------------------------------------------------------------------------
A3 A- $ 6,450 Butler, PA, (Witco
Corp.), 5.85%, 12/1/23 $ 6,628,214
NR BB- 1,005 Clearfield, PA, (Kmart
Corp.), 6.80%, 5/15/07 1,062,958
NR A 4,000 Franklin, PA, (Corning
Inc.), 6.25%, 8/1/05 4,476,760
A2 A 12,000 New Morgan, PA,
(New Morgan Landfill)
(AMT), 6.50%, 4/1/19 12,915,479
NR BBB- 9,000 Pennsylvania EDA,
(Colver) (AMT),
7.125%, 12/1/15 9,894,150
NR BBB- 5,000 Pennsylvania EDA,
(Colver) (AMT),
7.15%, 12/1/18 5,504,150
Baa2 BBB- 5,000 Pennsylvania, IDA,
(MacMillan Bloedel
Project) (AMT),
7.60%, 12/1/20 5,812,350
Baa3 BBB 4,450 Pennsylvania, IDA,
(Sun Company Project),
(AMT), 7.60%, 12/1/24 5,154,346
NR NR 6,500 Philadelphia, PA,
(Refrigerated
Enterprises) (AMT),
9.05%, 12/1/19 7,207,915
NR BB- 1,105 Shamokin, PA, (Kmart
Corp.), 6.70%, 7/1/07 1,161,245
- -----------------------------------------------------------------------------
$59,817,567
- -----------------------------------------------------------------------------
</TABLE>
See notes to financial statements
53
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Education -- 4.2%
- --------------------------------------------------------------------------------
Aaa AAA $2,000 Alleghany, PA,
(Duquesne University
Project), (AMBAC),
5.00%, 3/1/21 $ 1,945,920
Aaa AAA 5,000 Cumberland, PA,
(Messiah College
Project), (AMBAC),
5.125%, 10/1/15 4,985,600
Aaa AAA 250 Pennsylvania HEFA,
(AMBAC), 5.625%, 6/15/19 256,938
Aaa AAA 2,000 Pennsylvania HEFA,
(MBIA), 5.75%, 5/1/22 2,101,020
Aaa AAA 2,500 Pennsylvania Higher
Education Student Loan,
(AMBAC), (AMT),
7.15%, 9/1/21 2,674,050
Aaa AAA 1,500 Pennsylvania Higher
Education Student Loan,
(AMBAC), (AMT),
Variable Rate,
3/1/22/(1)/ 1,657,500
Aaa AAA 700 Pennsylvania Higher
Education Student Loan,
(AMBAC), (AMT),
Variable Rate,
9/1/26/(1)/ 813,750
Aaa AAA 2,000 University of
Pittsburgh, (FGIC),
5.125%, 6/1/22 1,962,660
- --------------------------------------------------------------------------------
$16,397,438
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 5.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 4,000 Beaver, PA, IDA,
(Ohio Edison Co.)
(FGIC), 7.00%, 6/1/21 $ 4,432,080
Aaa AAA 10,000 Beaver, PA, IDA,
(Ohio Edison Co.)
(FGIC), 7.05%, 10/1/20 11,669,899
Aaa AAA 3,800 Puerto Rico Electric
Power Authority, (FSA),
Variable Rate,
7/1/02/(1)/ 4,256,000
- --------------------------------------------------------------------------------
$20,357,979
- --------------------------------------------------------------------------------
Insured-General Obligations -- 6.9%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,170 Elizabeth Forward, PA,
School District,
(MBIA), 0.00%, 9/1/20 $ 641,474
Aaa AAA 2,170 Elizabeth Forward, PA,
School District,
(MBIA), 0.00%, 9/1/21 605,061
Aaa AAA 2,170 Elizabeth Forward, PA,
School District,
(MBIA), 0.00%, 9/1/22 572,967
Aaa AAA 2,170 Elizabeth Forward, PA,
School District,
(MBIA), 0.00%, 9/1/23 542,522
Aaa AAA 2,500 Erie, PA, School
District, (MBIA),
0.00%, 5/1/19 801,350
Aaa AAA 2,625 Erie, PA, School
District, (MBIA),
0.00%, 5/1/20 789,731
Aaa AAA 2,625 Erie, PA, School
District, (MBIA),
0.00%, 5/1/21 745,316
Aaa AAA 3,625 Erie, PA, School
District, (MBIA),
0.00%, 5/1/22 974,690
Aaa AAA 5,000 Gateway, PA,
School District,
(FGIC), 5.25%, 7/15/27 5,007,550
Aaa AAA 5,175 Hazelton, PA,
School District,
(FGIC), 0.00%, 3/1/21 1,482,741
Aaa AAA 7,500 Keystone Oaks,
PA, School District,
(AMBAC), Variable
Rate, 9/1/16/(1)/ 7,996,875
Aaa AAA 1,430 Mars Area, PA,
School District,
(MBIA), 0.00%, 3/1/14 610,396
Aaa AAA 1,900 Philadelphia, PA,
(MBIA), 5.00%, 5/15/15 1,866,902
Aaa AAA 3,200 Philadelphia, PA,
(MBIA), 5.00%, 5/15/20 3,110,720
Aaa AAA 655 Rochester Area,
PA, School District,
(AMBAC), 0.00%, 5/1/10 348,532
Aaa AAA 1,000 Venango, PA, (AMBAC),
6.30%, 12/1/19 1,086,410
- --------------------------------------------------------------------------------
$27,183,237
- --------------------------------------------------------------------------------
Insured-Hospitals -- 5.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,000 Allegheny County,
PA, HDA, (MBIA),
5.625%, 4/1/27 $ 2,055,860
Aaa AAA 3,750 Allegheny, PA
(Magee-Womens Hospital),
(FGIC), 0.00%, 10/1/15 1,462,725
Aaa AAA 1,170 Allegheny, PA,
(Children's Hospital of
Pittsburgh), (MBIA),
6.75%, 7/1/08 1,247,407
Aaa AAA 1,400 Armstrong, PA, (Saint
Francis Health Care)
(AMBAC), 6.25%, 6/1/13 1,503,138
Aaa AAA 2,500 Armstrong, PA, (Saint
Francis Health Care),
(AMBAC), 6.00%, 8/15/08 2,662,550
Aaa AAA 775 Carbon, PA, (Gnaden
Memorial Hospital)
(AMBAC), 7.00%, 11/15/14 851,694
Aaa AAA 750 Erie County, PA,
Hospital Authority,
(Hamot Health System),
(AMBAC), 7.10%, 2/15/10 828,278
Aaa AAA 230 Lehigh, PA, (Health
East, Inc.) (MBIA),
7.00%, 7/1/15 252,471
Aaa AAA 1,000 Montgomery, PA,
(Abington Memorial
Hospital) (AMBAC),
Variable Rate,
6/1/11/(1)/ 1,170,000
Aaa AAA 5,000 Philadelphia, PA,
Hospital and
Higher Education
Authority, (FGIC),
Variable Rate,
2/15/12/(1)/ 5,068,750
</TABLE>
See notes to financial statements
54
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Hospitals (continued)
- --------------------------------------------------------------------------------
Aaa AAA $ 1,500 Scranton-Lackawanna,
PA, (Mercy Health),
(MBIA), 6.90%, 1/1/23 $ 1,625,190
Aaa AAA 2,550 Washington, PA,
(Shadyside Hospital),
(AMBAC), 5.75%, 12/15/14 2,650,623
- --------------------------------------------------------------------------------
$21,378,686
- --------------------------------------------------------------------------------
Insured-Industrial Development Revenue -- 0.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,000 Delaware, PA,
(Philadelphia Water)
(FGIC), 6.35%, 8/15/25 $ 1,082,480
- --------------------------------------------------------------------------------
$ 1,082,480
- --------------------------------------------------------------------------------
Insured-Lease Revenue/Certificates of
Participation -- 2.5%
- --------------------------------------------------------------------------------
Aaa AAA $10,000 Commonwealth of
Pennsylvania,
(AMBAC), 5.00%,
7/1/15/(2)/ $ 9,779,700
- --------------------------------------------------------------------------------
$ 9,779,700
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 3.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 3,000 Bethlehem, PA, Water
Authority, (MBIA),
5.20%, 11/15/21 $ 2,946,960
Aaa AAA 3,960 Philadelphia, PA, Water
and Wastewater, (CGIC),
5.00%, 6/15/16 3,865,237
Aaa AAA 2,500 Philadelphia, PA, Water
and Wastewater, (CGIC),
Variable Rate,
6/15/12/(1)/ 2,656,250
Aaa AAA 3,490 Pittsburgh, PA, Water
and Sewer Authority,
(FGIC), 4.75%, 9/1/16 3,309,323
- --------------------------------------------------------------------------------
$12,777,770
- --------------------------------------------------------------------------------
Life Care -- 2.0%
- --------------------------------------------------------------------------------
NR NR $ 4,050 Delaware, PA, (White
Horse Village), 7.50%,
7/1/18 $ 4,290,003
NR BBB+ 3,620 Delaware, PA, HFA,
5.75%, 12/15/22 3,619,240
- --------------------------------------------------------------------------------
$ 7,909,243
- --------------------------------------------------------------------------------
Nursing Homes -- 2.5%
- --------------------------------------------------------------------------------
NR NR $ 3,500 Montgomery, PA, IDA
(Advancement of
Geriatric Health Care
Institute), 8.375%,
7/1/23 $ 3,808,175
NR NR 1,190 Philadelphia, PA,
(The Philadelphia
Protestant Home
Project), 8.625%,
7/1/21 1,280,345
NR NR 1,460 Westmoreland, PA,
(Highland Health
Systems, Inc.),
9.25%, 6/1/22 1,636,280
NR NR 2,750 Wilkins Area, PA,
IDA, (Fairview
Extended Care),
10.25%, 1/1/21 3,271,620
- --------------------------------------------------------------------------------
$ 9,996,420
- --------------------------------------------------------------------------------
Pooled Loans -- 5.0%
- --------------------------------------------------------------------------------
NR A $16,950 Pennsylvania Finance
Authority, Beaver
County, 6.60%, 11/1/09 $18,647,372
NR AA+ 870 Pennsylvania
Infrastructure
Investment Authority,
(Pennvest), 6.80%,
9/1/10 961,707
- --------------------------------------------------------------------------------
$19,609,079
- --------------------------------------------------------------------------------
Special Tax Revenue -- 0.1%
- --------------------------------------------------------------------------------
Baa1 BBB+ $ 500 Puerto Rico Special Tax
Revenue, 7.50%, 7/1/09 $ 526,850
- --------------------------------------------------------------------------------
$ 526,850
- --------------------------------------------------------------------------------
Transportation -- 1.4%
- --------------------------------------------------------------------------------
Baa3 BBB- $ 4,000 Puerto Rico Port
Authority, (American
Airlines), (AMT),
6.25%, 6/1/26 $ 4,291,040
Baa3 BBB- 1,000 Puerto Rico Port
Authority, (American
Airlines), (AMT),
6.30%, 6/1/23 1,059,730
- --------------------------------------------------------------------------------
$ 5,350,770
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
55
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C>
Total Tax-Exempt Investments -- 100%
(identified cost $359,688,720) $394,760,375
- --------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The portfolio invests primarily in debt securities issued by Pennsylvania
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 31.1% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institution ranged from 1.1% to 12.7%.
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
56
<PAGE>
Texas Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Rating (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assisted Living -- 2.6%
- --------------------------------------------------------------------------------
NR NR $ 500 Bell County, TX,
Health Facilities,
(Care Institute,
Inc.),
9.00%, 11/1/24 $ 564,935
- --------------------------------------------------------------------------------
$ 564,935
- --------------------------------------------------------------------------------
Education -- 3.4%
- --------------------------------------------------------------------------------
A NR $ 700 Brazos, TX, Higher
Education
Authority, (AMT),
6.50%, 6/1/04 $ 756,098
- --------------------------------------------------------------------------------
$ 756,098
- --------------------------------------------------------------------------------
Electric Utilities -- 2.2%
- --------------------------------------------------------------------------------
NR BBB $ 500 Guam Power
Authority,
5.25%, 10/1/23 $ 484,075
- --------------------------------------------------------------------------------
$ 484,075
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 5.0%
- --------------------------------------------------------------------------------
NR NR $ 200 Bexar County, TX,
Health Facilities,
(St. Luke's
Lutheran),
7.00%, 5/1/21 $ 241,542
Aaa NR 1,000 Central Texas
Housing Corp.,
(Single Family),
0.00%, 9/1/16 360,060
Aaa AAA 85 Harris County, TX,
Toll Road Unlimited
Tax and Subordinate
Lien, (AMBAC),
6.625%, 8/15/17 86,791
Aaa AAA 200 Montgomery County,
TX, Hospital
District, (FSA),
6.625%, 4/1/17 223,504
Aaa AAA 150 Texas National
Research Lab Super
Collider, 6.95%,
12/1/12 177,209
- --------------------------------------------------------------------------------
$1,089,106
- --------------------------------------------------------------------------------
General Obligations -- 9.5%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Bastrop, TX,
Independent School
District U.T.G.O.,
(PSF), 0.00%,
2/15/13 $ 449,680
NR NR 500 Leander, TX,
6.75%, 8/15/16 533,980
Aa2 AA 690 Texas Veterans'
Housing Assistance
U.T., (AMT), 6.70%,
12/1/24 729,937
Aa2 AA 360 Texas Veterans'
Housing Assistance
U.T., (AMT), 6.80%,
12/1/23 382,021
- --------------------------------------------------------------------------------
$2,095,618
- --------------------------------------------------------------------------------
Hospitals -- 12.9%
- --------------------------------------------------------------------------------
NR BBB+ $ 500 Denison, TX,
Hospital Authority,
(Texoma Medical
Center), 6.125%,
8/15/17 $ 513,220
NR BBB+ 500 Denison, TX,
Hospital Authority,
(Texoma Medical
Center), 7.10%,
8/15/24 546,230
Aaa NR 100 Ector County, TX,
Hospital District,
7.30%, 4/15/12 114,678
A2 A- 100 Harris County, TX,
Hospital District,
(Memorial), 7.125%,
6/1/15 115,751
Aa NR 975 Port Arthur, TX,
Health Facilities,
(FHA), 6.50%,
8/1/24 1,041,056
A2 NR 500 Tarrant County, TX,
Methodist Health
System, 6.00%,
9/1/24 515,135
- --------------------------------------------------------------------------------
$2,846,070
- --------------------------------------------------------------------------------
Housing -- 13.3%
- --------------------------------------------------------------------------------
NR AAA $ 80 Bexar County, TX, HFC,
8.10%, 3/1/24 $ 85,558
NR AAA 500 Dallas, TX, HFC, (GNMA),
7.95%, 12/1/23/(1)/ 534,025
NR AAA 150 North Central, TX, HFC, (GNMA),
7.875%, 10/1/22 159,711
Aaa AAA 50 Puerto Rico Housing Finance Corp.,
Single Family Mortgage Revenue,
(GNMA), 6.85%, 10/15/23 52,902
NR A 500 Texas Department of Housing and
Community Affairs, NHP Foundation-
Asmara Project, 6.40%, 1/1/27 523,065
NR A 750 Travis County, TX, HFC
Multifamily, (Travis Station
Apartments), 6.75%, 4/1/19 789,570
NR AAA 725 Travis County, TX, HFC, (GNMA)
(FNMA), 7.05%, 12/1/25 777,345
- --------------------------------------------------------------------------------
$2,922,176
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 12.0%
- --------------------------------------------------------------------------------
Baa1 BBB $ 450 Gulf Coast, TX, Waste Disposal
Authority, (Champion
International) (AMT),
7.25%, 4/1/17 $ 491,787
- --------------------------------------------------------------------------------
A2 A+ 1,000 Port Corpus Christi, TX, (Hoechst
Celanese Corp.) (AMT),
6.875%, 4/1/17 1,086,870
- --------------------------------------------------------------------------------
NR A 1,000 Trinity River Authority, TX,
(PCR) (AMT), 6.20%, 3/1/20 1,052,260
- --------------------------------------------------------------------------------
$2,630,917
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
57
<PAGE>
Texas Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Rating (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Electric Utilities -- 20.3%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Austin, TX, Combined Utility,
(AMBAC), 6.75%, 11/15/12/(2)/ $1,164,659
- --------------------------------------------------------------------------------
Aaa AAA 1,000 Austin, TX, Utility System,
(FGIC), 6.25%, 5/15/16/(3)/ 1,099,110
- --------------------------------------------------------------------------------
Aaa AAA 500 Lower Colorado River Authority
Junior Lien, TX, (FGIC), 0.00%,
1/1/12 239,880
- --------------------------------------------------------------------------------
Aaa AAA 1,000 San Antonio, TX, Electric and
Natural Gas, (MBIA), 5.375%,
2/1/18 1,006,780
- --------------------------------------------------------------------------------
Aaa AAA 1,395 Texas Municipal Power Agency,
(MBIA), 0.00%, 9/1/13 609,992
- --------------------------------------------------------------------------------
Aaa AAA 1,000 Texas Municipal Power Agency,
(MBIA), 0.00%, 9/1/17 346,340
- --------------------------------------------------------------------------------
$4,466,761
- --------------------------------------------------------------------------------
Insured-Hospitals -- 7.5%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Harris County, TX, HFC, (Hermann
Hospital) (MBIA), 6.375%, 10/1/24 $ 542,250
- --------------------------------------------------------------------------------
Aaa AAA 1,000 Tyler County, TX, HFC, (Mother
Frances Hospital) (FGIC),
6.50%, 7/1/22 1,102,889
- --------------------------------------------------------------------------------
$1,645,139
- --------------------------------------------------------------------------------
Lease Revenue /
Certificates of Participation -- 1.2%
- --------------------------------------------------------------------------------
NR BBB- $ 250 Rio Grande, TX, Independent School
District Lease, 6.75%, 7/15/10 $ 267,135
- --------------------------------------------------------------------------------
$ 267,135
- --------------------------------------------------------------------------------
Transportation -- 10.1%
- --------------------------------------------------------------------------------
NR NR $ 250 Abia Dev. Corp., TX, (Austin
Cargoport), 9.25%, 10/1/21 $ 275,498
- --------------------------------------------------------------------------------
Baa2 BBB- 505 Alliance Airport Authority,
(American Airlines) (AMT),
7.50%, 12/1/29 549,773
- --------------------------------------------------------------------------------
Baa2 BBB- 225 Dallas-Fort Worth, TX, Airport,
(American Airlines) (AMT),
7.50%, 11/1/25 244,589
- --------------------------------------------------------------------------------
Baa3 BB+ 300 Dallas-Fort Worth, TX, Airport,
(Delta Airlines) (AMT), 7.125%,
11/1/26 322,206
- --------------------------------------------------------------------------------
NR BBB 755 Guam Airport Authority, (AMT),
6.70%, 10/1/23 813,807
- --------------------------------------------------------------------------------
Aa2 AA 25 Harris County, TX, Toll Road
Subordinate Lien, 6.75%, 8/1/14 27,525
- --------------------------------------------------------------------------------
$2,233,398
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $20,172,048) $22,001,428
- --------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
HFC - Housing Finance Corporation
The Portfolio invests primarily in debt securities issued by Texas
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 33.9% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institution ranged from 1.0% to 11.4% of total investments.
(1) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
(2) When-issued security.
(3) Security has been segregated to cover when-issued securities.
See notes to financial statements
58
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
As of July 31, 1997
<TABLE>
<CAPTION>
Arizona Colorado Connecticut Michigan
Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Assets
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments --
Identified cost $ 100,333,893 $ 38,187,386 $ 162,032,152 $ 133,350,836
Unrealized appreciation 10,701,415 3,910,265 9,570,406 13,046,983
- ----------------------------------------------------------------------------------------------------------------------
Investments, at value (Note 1A) $ 111,035,308 $ 42,097,651 $ 171,602,558 $ 146,397,819
- ----------------------------------------------------------------------------------------------------------------------
Cash $ 396,176 $ 876 $ 973,034 $ 1,695,930
Receivable for investments sold -- -- 905,692 --
Interest receivable 1,081,951 542,137 2,018,844 2,196,361
Deferred organization expenses (Note 1D) 887 229 1,574 1,508
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 112,514,322 $ 42,640,893 $ 175,501,702 $ 150,291,618
- ----------------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------
Demand note payable (Note 5) $ -- $ 3,000 $ 478,000 $ --
Payable for daily variation margin on open
financial futures contracts (Note 1E) 34,875 12,375 31,125 54,605
Payable to affiliate for Trustees' fees (Note 2) 735 -- -- 956
Accrued expenses 6,919 1,074 14,987 12,411
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities $ 42,529 $ 16,449 $ 524,112 $ 67,972
- ----------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $ 112,471,793 $ 42,624,444 $ 174,977,590 $ 150,223,646
- ----------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ----------------------------------------------------------------------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $ 102,398,651 $ 38,937,115 $ 165,967,901 $ 138,179,628
Net unrealized appreciation of investments and
financial futures contracts (computed on the
basis of identified cost) 10,073,142 3,687,329 9,009,689 12,044,018
- ----------------------------------------------------------------------------------------------------------------------
Total $ 112,471,793 $ 42,624,444 $ 174,977,590 $ 150,223,646
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
59
<PAGE>
- --------------------------------------------------------------------------------
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of July 31, 1997
<TABLE>
<CAPTION>
Minnesota New Jersey Pennsylvania Texas
Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------------------
Assets
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments --
Identified cost $ 63,057,066 $ 316,103,220 $ 359,688,720 $ 20,172,048
Unrealized appreciation 6,537,383 32,866,193 35,071,655 1,829,380
- -------------------------------------------------------------------------------------------------------------------------
Investment at value (Note 1A) $ 69,594,449 $ 348,969,413 $ 394,760,375 $ 22,001,428
- -------------------------------------------------------------------------------------------------------------------------
Cash $ 330 $ 266 $ 385 $ 520,405
Receivable for investments sold 416,080 -- 5,939,677 --
Interest receivable 815,179 4,381,706 5,229,597 341,723
Deferred organization expenses (Note 1D) 309 2,330 2,988 209
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 70,826,347 $ 353,353,715 $ 405,933,022 $ 22,863,765
- -------------------------------------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------------------------------------
Payable for when-issued securities (Note 1G) $ -- $ -- $ -- $ 1,046,570
Payable for investments purchased -- -- 1,602,746 --
Demand note payable (Note 5) 131,000 540,000 1,962,000 134,000
Payable for daily variation margin on open
financial futures contracts (Note 1E) 15,937 24,375 140,413 4,500
Payable to affiliate for Trustees' fees (Note 2) 568 1,455 1,621 13
Accrued expenses 5,168 15,815 5,502 2,541
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 152,673 $ 581,645 $ 3,712,282 $ 1,187,624
- -------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $ 70,673,674 $ 352,772,070 $ 402,220,740 $ 21,676,141
- -------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------------------------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $ 64,605,947 $ 320,953,467 $ 369,728,139 $ 19,927,829
Net unrealized appreciation of investments and
financial futures contracts (computed on the
basis of identified cost) 6,067,727 31,818,603 32,492,601 1,748,312
- -------------------------------------------------------------------------------------------------------------------------
Total $ 70,673,674 $ 352,772,070 $ 402,220,740 $ 21,676,141
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
60
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Arizona Colorado Connecticut Michigan
Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Investment Income (Note 1B)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest $ 7,268,691 $ 2,695,514 $ 10,879,408 $ 9,610,630
- ----------------------------------------------------------------------------------------------------------------------
Total investment income $ 7,268,691 $ 2,695,514 $ 10,879,408 $ 9,610,630
- ----------------------------------------------------------------------------------------------------------------------
Expenses
- ----------------------------------------------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 482,775 $ 113,698 $ 771,883 $ 676,686
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 8,703 1,648 9,552 11,340
Custodian fee (Note 1I) 61,116 25,407 96,161 77,993
Legal and accounting services 24,111 20,821 26,538 27,761
Bond pricing 9,660 4,225 10,253 9,457
Amortization of organization expenses(Note 1D) 1,792 617 2,621 2,493
Registration fees 125 -- -- --
Miscellaneous 8,675 5,055 45,398 30,088
- ----------------------------------------------------------------------------------------------------------------------
Total expenses $ 596,957 $ 171,471 $ 962,406 $ 835,818
- ----------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1I) $ 11,039 $ 15,644 $ 8,505 $ 23,524
- ----------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 11,039 $ 15,644 $ 8,505 $ 23,524
- ----------------------------------------------------------------------------------------------------------------------
Net expenses $ 585,918 $ 155,827 $ 953,901 $ 812,294
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 6,682,773 $ 2,539,687 $ 9,925,507 $ 8,798,336
- ----------------------------------------------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 1,885,489 $ 778,185 $ 1,328,014 $ 2,069,770
Financial futures contracts (1,086,932) (331,557) (855,720) (2,033,737)
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions $ 799,157 $ 446,628 $ 472,294 $ 36,033
- ----------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments $ 5,208,662 $ 2,272,499 $ 7,521,283 $ 7,002,953
Financial futures contracts (270,132) (176,826) (452,852) (526,094)
- ----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments $ 4,938,530 $ 2,095,673 $ 7,068,431 $ 6,476,859
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on
investments $ 5,737,687 $ 2,542,301 $ 7,540,725 $ 6,512,892
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
operations $ 12,420,460 $ 5,081,988 $ 17,466,232 $ 15,311,228
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
61
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Minnesota New Jersey Pennsylvania Texas
Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- -------------------------------------------------------------------------------------------------------------------------------
Interest $ 4,433,353 $ 23,413,127 $ 27,256,842 $ 1,395,209
- -------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 4,433,353 $ 23,413,127 $ 27,256,842 $ 1,395,209
- -------------------------------------------------------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 252,187 $ 1,707,028 $ 1,982,739 $ 41,158
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 6,729 17,286 19,254 40
Custodian fee (Note 1I) 40,161 158,061 183,435 14,279
Legal and accounting services 19,651 36,962 36,295 15,512
Bond pricing 8,491 12,311 10,543 6,034
Amortization of organization expenses (Note 1D) 1,019 4,464 5,278 602
Interest expense (Note 5) -- -- -- 4,889
Miscellaneous 11,757 46,155 82,289 1,636
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 339,995 $ 1,982,267 $ 2,319,833 $ 84,150
- -------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1I) $ 19,539 $ 53,187 $ 183,435 $ 5,671
- -------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 19,539 $ 53,187 $ 183,435 $ 5,671
- -------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 320,456 $ 1,929,080 $ 2,136,398 $ 78,479
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 4,112,897 $ 21,484,047 $ 25,120,444 $ 1,316,730
- -------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 648,772 $ 4,417,150 $ 4,052,612 $ 158,144
Financial futures contracts (620,151) (2,432,682) (5,166,232) (170,143)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions $ 28,621 $ 1,984,468 $ (1,113,620) $ (11,999)
- -------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $ 3,179,004 $ 15,063,481 $ 20,122,717 $ 1,183,287
Financial futures contracts (392,847) (859,551) (1,367,008) (68,884)
- -------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments $ 2,786,157 $ 14,203,930 $ 18,755,709 $ 1,114,403
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 2,814,778 $ 16,188,398 $ 17,642,089 $ 1,102,404
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 6,927,675 $ 37,672,445 $ 42,762,533 $ 2,419,134
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
62
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Arizona Portfolio Colorado Portfolio Connecticut Portfolio Michigan Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 6,682,773 $ 2,539,687 $ 9,925,507 $ 8,798,336
Net realized gain on investment
transactions 799,157 446,628 472,294 36,033
Net change in unrealized appreciation
(depreciation) of investments 4,938,530 2,095,673 7,068,431 6,476,859
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 12,420,460 $ 5,081,988 $ 17,466,232 $ 15,311,228
- -----------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 7,001,783 $ 4,009,912 $ 9,762,822 $ 3,699,109
Withdrawals (36,811,997) (11,883,030) (39,868,349) (42,251,299)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $ (29,810,214) $ (7,873,118) $ (30,105,527) $ (38,552,190)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (17,389,754) $ (2,791,130) $ (12,639,295) $ (23,240,962)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 129,861,547 $ 45,415,574 $ 187,616,885 $ 173,464,608
- -----------------------------------------------------------------------------------------------------------------------------------
At end of year $ 112,471,793 $ 42,624,444 $ 174,977,590 $ 150,223,646
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
63
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Minnesota Portfolio New Jersey Portfolio Pennsylvania Portfolio Texas Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 4,112,897 $ 21,484,047 $ 25,120,444 $ 1,316,730
Net realized gain (loss) on investment
transactions 28,621 1,984,468 (1,113,620) (11,999)
Net change in unrealized appreciation
(depreciation) of investments 2,786,157 14,203,930 18,755,709 1,114,403
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 6,927,675 $ 37,672,445 $ 42,762,533 $ 2,419,134
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 4,877,845 $ 20,443,481 $ 19,109,521 $ 1,759,693
Withdrawals (17,221,919) (91,588,197) (107,833,175) (6,869,522)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $ (12,344,074) $ (71,144,716) $ (88,723,654) $ (5,109,829)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (5,416,399) $ (33,472,271) $ (45,961,121) $ (2,690,695)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 76,090,073 $ 386,244,341 $ 448,181,861 $ 24,366,836
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 70,673,674 $ 352,772,070 $ 402,220,740 $ 21,676,141
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
64
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1996
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Arizona Portfolio Colorado Portfolio Connecticut Portfolio Michigan Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 7,710,632 $ 2,697,672 $ 10,721,638 $ 10,187,783
Net realized gain (loss) on investment
transactions 901,764 299,431 (814) 2,810,989
Net change in unrealized appreciation
(depreciation) of investments 1,257,563 402,252 3,384,135 971,245
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 9,869,959 $ 3,399,355 $ 14,104,959 $ 13,970,017
- ----------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 9,272,110 $ 5,588,344 $ 11,976,667 $ 7,755,466
Withdrawals (33,801,537) (9,649,291) (33,740,530) (39,523,856)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $ (24,529,427) $ (4,060,947) $ (21,763,863) $ (31,768,390)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (14,659,468) $ (661,592) $ (7,658,904) $ (17,798,373)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 144,521,015 $ 46,077,166 $ 195,275,789 $ 191,262,981
- ----------------------------------------------------------------------------------------------------------------------------------
At end of year $ 129,861,547 $ 45,415,574 $ 187,616,885 $ 173,464,608
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
65
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1996
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Minnesota Portfolio New Jersey Portfolio Pennsylvania Portfolio Texas Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 4,601,643 $ 23,488,315 $ 28,316,855 $ 1,575,243
Net realized gain (loss) on investment
transactions 410,797 (316,728) 5,992,215 342,298
Net change in unrealized appreciation
(depreciation) of investments 697,008 3,926,712 (244,311) 178,638
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 5,709,448 $ 27,098,299 $ 34,064,759 $ 2,096,179
- ----------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 5,070,544 $ 25,074,635 $ 20,910,102 $ 1,285,449
Withdrawals (17,657,615) (76,967,015) (109,043,304) (7,241,813)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $ (12,587,071) $ (51,892,380) $ (88,133,202) $ (5,956,364)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (6,877,623) $ (24,794,081) $ (54,068,443) $ (3,860,185)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 82,967,696 $ 411,038,422 $ 502,250,304 $ 28,227,021
- ----------------------------------------------------------------------------------------------------------------------------------
At end of year $ 76,090,073 $ 386,244,341 $ 448,181,861 $ 24,366,836
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
66
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Arizona Portfolio Colorado Portfolio
-------------------------------------------- -------------------------------------------
Year Ended Year Ended
-------------------------------------------- -------------------------------------------
July 31, Sept. 30, July 31, Sept. 30,
-------------------------------- --------- -------------------------------- ---------
1997 1996 1995 1994* 1993** 1997 1996 1995 1994* 1993**
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average daily
net assets:
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses /(1)/ 0.50% 0.51% 0.52% 0.46%+ 0.42%+ 0.40% 0.40% 0.25% 0.02%+ 0.06%+
Net expenses, after
custodian fee reduction 0.49% 0.50% -- -- -- 0.36% 0.36% -- -- --
Net investment income 5.56% 5.53% 5.81% 5.43%+ 5.46%+ 5.86% 5.75% 6.05% 5.73%+ 5.60%+
Portfolio Turnover 10% 18% 22% 23% 107% 14% 53% 52% 23% 10%
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(000s omitted) $112,472 $129,862 $144,521 $154,068 $133,539 $42,624 $45,416 $46,077 $44,399 $24,346
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
++ The operating expenses of the Colorado Portfolio may reflect a reduction of
the Investment Advisor fee and/or an allocation of expenses to the
Investment Advisor. Had such action not been taken, the ratios would have
been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Expenses /(1)/ 0.42% 0.40% 0.35%+ 0.35%+
Net expenses, after custodian fee reduction 0.38% -- -- --
Net investment income 5.73% 5.90% 5.40%+ 5.31%+
</TABLE>
- --------------------------------------------------------------------------------
+ Annualized.
* For the ten months ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
/(1)/ The expense ratios for the years ended July 31, 1996 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Portfolio to
increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratios for each of
the prior periods have not been adjusted to reflect this change.
See notes to financial statements
67
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Connecticut Portfolio Michigan Portfolio
------------------------------------------------- ----------------------------------------------
Year Ended Year Ended
------------------------------------------------- ----------------------------------------------
July 31, Sept. 30, July 31, Sept. 30,
------------------------------------ --------- ---------------------------------- -----------
1997 1996 1995 1994* 1993** 1997 1996 1995 1994* 1993**
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily
net assets:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses /(1)/ 0.53% 0.52% 0.53% 0.47%+ 0.46%+ 0.52% 0.54% 0.48% 0.47%+ 0.44%+
Net expenses, after
custodian fee reduction 0.53% 0.50% -- -- -- 0.50% 0.52% -- -- --
Net investment income 5.50% 5.49% 5.77% 5.40%+ 5.45%+ 5.45% 5.50% 5.85% 5.48%+ 5.46%+
Portfolio Turnover 11% 23% 29% 10% 10% 16% 49% 54% 45% 20%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(000s omitted) $174,978 $187,617 $195,276 $192,038 $159,848 $150,224 $173,465 $191,263 $204,032 $187,665
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten months ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
/(1)/ The expense ratios for the years ended July 31, 1996 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Portfolio to
increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratios for each of
the prior periods have not been adjusted to reflect this change.
See notes to financial statements
68
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Minnesota Portfolio New Jersey Portfolio
------------------------------------------------ -----------------------------------------------
Year Ended Year Ended
------------------------------------------------ -----------------------------------------------
July 31, Sept. 30, July 31, Sept. 30,
------------------------------------ --------- ----------------------------------- ---------
1997 1996 1995 1994* 1993** 1997 1996 1995 1994* 1993**
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily
net assets:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses /(1)/ 0.47% 0.48% 0.47% 0.45%+ 0.40%+ 0.54% 0.53% 0.52% 0.50%+ 0.50%+
Net expenses, after
custodian fee reduction 0.44% 0.46% -- -- -- 0.52% 0.52% -- -- --
Net investment income 5.71% 5.69% 5.83% 5.50%+ 5.58%+ 5.84% 5.82% 5.96% 5.62%+ 5.67%+
Portfolio Turnover 22% 45% 76% 20% 10% 24% 39% 54% 25% 12%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(000s omitted) $70,674 $76,090 $82,968 $84,005 $67,019 $352,772 $386,244 $411,038 $423,854 $393,677
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten months ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
/(1)/ The expense ratios for the year ended July 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require each Portfolio to increase its expense ratio
by the effect of any expense offset arrangements with its service
providers. The expense ratios for each of the prior periods have not been
adjusted to reflect this change.
See notes to financial statements
69
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Pennsylvania Portfolio Texas Portfolio
--------------------------------------------- -----------------------------------------------
Year Ended Year Ended
--------------------------------------------- -----------------------------------------------
July 31, Sept. 30, July 31, Sept. 30,
------------------------------------ --------- --------------------------------- -----------
1997 1996 1995 1994* 1993** 1997 1996 1995 1994* 1993**
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily
net assets:
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses /(1)/ 0.55% 0.54% 0.49% 0.48%+ 0.50%+ 0.37% 0.32% 0.08% 0.00%+ 0.03%+
Net expenses, after
custodian fee reduction 0.51% 0.50% -- -- -- 0.35% 0.27% -- -- --
Net investment income 5.96% 5.90% 6.02% 5.66%+ 5.71%+ 5.79% 5.81% 6.20% 5.69%+ 5.82%+
Portfolio Turnover 17% 30% 44% 21% 17% 17% 39% 49% 27% 8%
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(000s omitted) $402,221 $448,182 $502,250 $536,786 $497,001 $21,676 $24,367 $28,227 $27,589 $16,029
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
++ The operating expenses of the Texas Portfolio may reflect a reduction of the
Investment Adviser fee and/or an allocation of expenses to the Investment
Adviser. Had such action not been taken, the ratios would have been as
follows:
<TABLE>
<S> <C> <C> <C> <C>
Expenses /(1)/ 0.42% 0.35% 0.37%+ 0.42%+
Expenses after custodian fee reduction 0.37% -- -- --
Net investment income 5.71% 5.93% 5.32%+ 5.43%+
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the ten months ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
/(1)/ The expense ratios for the years ended July 31, 1996 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Portfolio to
increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratios for each of
the prior periods have not been adjusted to reflect this change.
See notes to financial statements
70
<PAGE>
EV Municipals Portfolio as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
-----------------------------------------------------------------------------
Arizona Municipals Portfolio (Arizona Portfolio), Colorado Municipals
Portfolio (Colorado Portfolio), Connecticut Municipals Portfolio (Connecticut
Portfolio), Michigan Municipals Portfolio (Michigan Portfolio), Minnesota
Municipals Portfolio (Minnesota Portfolio), New Jersey Municipals Portfolio
(New Jersey Portfolio), Pennsylvania Municipals Portfolio (Pennsylvania
Portfolio) and Texas Municipals Portfolio (Texas Portfolio), collectively the
Portfolios, are registered under the Investment Company Act of 1940 as
non-diversified open-end management investment companies which were organized
as trusts under the laws of the State of New York on May 1, 1992. The
Declarations of Trust permit the Trustees to issue interests in the
Portfolios. The following is a summary of significant accounting policies of
the Portfolios. The policies are in conformity with generally accepted
accounting principles.
A Investment Valuations -- Municipal bonds are normally valued on the basis
of valuations furnished by a pricing service. Taxable obligations, if any,
for which price quotations are readily available are normally valued at the
mean between the latest bid and asked prices. Futures contracts and options
on futures contracts listed on commodity exchanges are valued at closing
settlement prices. Over-the-counter options on financial futures contracts
are normally valued at the mean between the latest bid and asked prices.
Short-term obligations, maturing in sixty days or less, are valued at
amortized cost, which approximates value. Investments for which valuations or
market quotations are unavailable are valued at fair value using methods
determined in good faith by or at the direction of the Trustees.
B Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes.
C Income Taxes -- The Portfolios are treated as partnerships for federal tax
purposes. No provision is made by the Portfolios for federal or state taxes
on any taxable income of the Portfolios because each investor in the
Portfolios is ultimately responsible for the payment of any taxes. Since some
of the Portfolios' investors are regulated investment companies that invest
all or substantially all of their assets in the Portfolios, the Portfolios
normally must satisfy the applicable source of income and diversification
requirements (under the Internal Revenue Code) in order for their respective
investors to satisfy them. The Portfolios will allocate at least annually
among their respective investors each investor's distributive share of the
Portfolios' net taxable (if any) and tax-exempt investment income, net
realized capital gains, and any other items of income, gain, loss, deduction
or credit. Interest income received by the Portfolios on investments in
municipal bonds, which is excludable from gross income under the Internal
Revenue Code, will retain its status as income exempt from federal income tax
when allocated to each Portfolio's investors. The portion of such interest,
if any, earned on private activity bonds issued after August 7, 1986, may be
considered a tax preference item for investors.
D Deferred Organization Expenses -- Costs incurred by a Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
E Financial Futures Contracts -- Upon the entering of a financial futures
contract, a Portfolio is required to deposit ("initial margin") either in
cash or securities an amount equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by a Portfolio ("margin maintenance") each day, dependent on
the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by a Portfolio. A
Portfolio's investment in financial futures contracts is designed only to
hedge against anticipated future changes in interest rates. Should interest
rates move unexpectedly, a Portfolio may not achieve the anticipated benefits
of the financial futures contracts and may realize a loss.
F Options on Financial Futures Contracts -- Upon the purchase of a put option
on a financial futures contract by a Portfolio, the premium paid is recorded
as an investment, the value of which is marked-to-market daily. When a
purchased option expires, a Portfolio will realize a loss in the amount of
the cost of the option. When a Portfolio enters into a closing sale
transaction, the Portfolio will realize a gain or loss depending on whether
the sales proceeds from the closing sale transaction are greater or less than
the cost of the option. When a Portfolio exercises a put option, settlement
is made in cash. The risk associated with purchasing options is limited to
the premium originally paid.
G When-issued and Delayed Delivery Transactions -- The Portfolios may engage
in when-issued or delayed delivery transactions. The Portfolios
71
<PAGE>
EV Municipals Portfolio as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
record when-issued securities on trade date and maintain security positions
such that sufficient liquid assets will be available to make payments for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked-to-market daily and begin earning interest on
settlement date.
H Other -- Investment transactions are accounted for on a trade date basis.
I Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolios. Pursuant to the custodian agreements, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances each Portfolio maintains with IBT. All significant credit
balances used to reduce each Portfolio's custodian fees are reported as a
reduction of expenses in the Statement of Operations.
J Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
2 Investment Adviser Fee and Other Transactions with Affiliates
------------------------------------------------------------------------------
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation
for management and investment advisory services rendered to each Portfolio.
The fee is based upon a percentage of average daily net assets plus a
percentage of gross income (i.e., income other than gains from the sale of
securities). For the year ended July 31, 1997, each Portfolio paid advisory
fees as follows:
<TABLE>
<CAPTION>
Portfolio Amount Effective Rate*
----------------------------------------------------------------
<S> <C> <C>
Arizona $ 482,775 0.40%
Colorado 113,698 0.26%
Connecticut 771,883 0.43%
Michigan 676,686 0.42%
Minnesota 252,187 0.35%
New Jersey 1,707,028 0.46%
Pennsylvania 1,982,739 0.47%
Texas 41,158 0.18%
</TABLE>
* Advisory fees paid as a percentage of average daily net assets.
Except as to Trustees of the Portfolios who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services
to the Portfolios out of such investment adviser fee.
Trustees of the Portfolios that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual
fees in accordance with the terms of the Trustees Deferred Compensation Plan.
For the year ended July 31, 1997, no significant amounts have been deferred.
Certain of the officers and Trustees of the Portfolios are officers and
directors/trustees of the above organizations.
3 Investments
------------------------------------------------------------------------------
Purchases and sales of investments, other than U.S. Government securities,
purchased options and short-term obligations, for the year ended July 31,
1997 were as follows:
<TABLE>
<S> <C>
Arizona Portfolio
------------------------------------------------------------------------------
Purchases $12,128,826
Sales 39,144,161
Colorado Portfolio
------------------------------------------------------------------------------
Purchases $ 6,054,087
Sales 11,606,010
Connecticut Portfolio
------------------------------------------------------------------------------
Purchases $19,479,187
Sales 43,558,639
Michigan Portfolio
------------------------------------------------------------------------------
Purchases $25,182,510
Sales 60,493,772
Minnesota Portfolio
------------------------------------------------------------------------------
Purchases $15,827,661
Sales 24,808,420
</TABLE>
72
<PAGE>
EV Municipals Portfolio as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
<TABLE>
<S> <C>
New Jersey Portfolio
------------------------------------------------------------------------------
Purchases $ 87,291,588
Sales 141,546,106
Pennsylvania Portfolio
------------------------------------------------------------------------------
Purchases $ 71,293,527
Sales 145,751,814
Texas Portfolio
------------------------------------------------------------------------------
Purchases $ 3,930,670
Sales 8,145,375
</TABLE>
4 Federal Income Tax Basis of Investments
-------------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned by each Portfolio at July 31, 1997, as computed on a federal
income tax basis, are as follows:
<TABLE>
<S> <C>
Arizona Portfolio
------------------------------------------------------------------------------
Aggregate Cost $100,333,893
------------------------------------------------------------------------------
Gross unrealized appreciation $ 10,701,415
Gross unrealized depreciation --
------------------------------------------------------------------------------
Net unrealized appreciation $ 10,701,415
------------------------------------------------------------------------------
Colorado Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 38,187,386
------------------------------------------------------------------------------
Gross unrealized appreciation $ 3,910,265
Gross unrealized depreciation --
------------------------------------------------------------------------------
Net unrealized appreciation $ 3,910,265
------------------------------------------------------------------------------
Connecticut Portfolio
------------------------------------------------------------------------------
Aggregate Cost $162,032,152
------------------------------------------------------------------------------
Gross unrealized appreciation $ 9,577,332
Gross unrealized depreciation (6,926)
------------------------------------------------------------------------------
Net unrealized appreciation $ 9,570,406
------------------------------------------------------------------------------
Michigan Portfolio
------------------------------------------------------------------------------
Aggregate Cost $133,350,836
------------------------------------------------------------------------------
Gross unrealized appreciation $ 13,046,983
Gross unrealized depreciation --
------------------------------------------------------------------------------
Net unrealized appreciation $ 13,046,983
------------------------------------------------------------------------------
Minnesota Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 63,057,066
------------------------------------------------------------------------------
Gross unrealized appreciation $ 6,537,383
Gross unrealized depreciation --
------------------------------------------------------------------------------
Net unrealized appreciation $ 6,537,383
------------------------------------------------------------------------------
New Jersey Portfolio
------------------------------------------------------------------------------
Aggregate Cost $316,103,220
------------------------------------------------------------------------------
Gross unrealized appreciation $ 32,903,699
Gross unrealized depreciation (37,506)
------------------------------------------------------------------------------
Net unrealized appreciation $ 32,866,193
------------------------------------------------------------------------------
Pennsylvania Portfolio
------------------------------------------------------------------------------
Aggregate Cost $359,688,720
------------------------------------------------------------------------------
Gross unrealized appreciation $ 35,071,655
Gross unrealized depreciation --
------------------------------------------------------------------------------
Net unrealized appreciation $ 35,071,655
------------------------------------------------------------------------------
Texas Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 20,172,048
------------------------------------------------------------------------------
Gross unrealized appreciation $ 1,829,380
Gross unrealized depreciation --
------------------------------------------------------------------------------
Net unrealized appreciation $ 1,829,380
------------------------------------------------------------------------------
</TABLE>
5 Line of Credit
------------------------------------------------------------------------------
The Portfolios participate with other portfolios and funds managed by BMR and
EVM and their affiliates in a committed $120 million unsecured line of credit
agreement with a group of banks. Borrowings will be made by the
73
<PAGE>
EV Municipals Portfolio as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
portfolios or funds solely to facilitate the handling of unusual and/or
unanticipated short-term cash requirements. Interest is charged to each
portfolio or fund based on its borrowings at the bank's base rate or at an
amount above either the bank's adjusted certificate of deposit rate,
Eurodollar rate or federal funds effective rate. In addition, a fee computed
at an annual rate of 0.15% on the daily unused portion of the facility is
allocated among the participating portfolios and funds at the end of each
quarter. At July 31, 1997, the Colorado Portfolio, Connecticut Portfolio,
Minnesota Portfolio, New Jersey Portfolio, Pennsylvania Portfolio and Texas
Portfolio had balances outstanding pursuant to this line of credit of $3,000,
$478,000, $131,000, $540,000, $1,962,000 and $134,000, respectively. At July
31, 1997, the average daily loan balance was $190,722 and the average interest
rate was 5.95% for the Texas Portfolio. The maximum borrowing outstanding for
the Texas Portfolio at any time during the year ended July 31, 1997 was
$892,000. The Portfolios (with the exception of the Texas Portfolio) did not
have any significant borrowings or allocated fees during the year ended July
31, 1997.
6 Financial Instruments
------------------------------------------------------------------------------
The Portfolios regularly trade in financial instruments with off-balance sheet
risk in the normal course of their investing activities to assist in managing
exposure to various market risks. These financial instruments include futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes. The notional or
contractual amounts of these instruments represent the investment a Portfolio
has in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the
risks associated with these instruments is meaningful only when all related
and offsetting transactions are considered.
A summary of obligations under these financial instruments at July 31, 1997,
is as follows:
<TABLE>
<CAPTION>
Futures
Contracts
Expiration Net Unrealized
Portfolio Date Contracts Position Depreciation
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona 9/97 93 U.S. Treasury Bonds Short $ 628,273
- -----------------------------------------------------------------------------------------
Colorado 9/97 33 U.S. Treasury Bonds Short 222,936
- -----------------------------------------------------------------------------------------
Connecticut 9/97 83 U.S. Treasury Bonds Short 560,717
- -----------------------------------------------------------------------------------------
Michigan 9/97 147 U.S. Treasury Bonds Short 1,002,965
- -----------------------------------------------------------------------------------------
Minnesota 9/97 65 U.S. Treasury Bonds Short 469,656
- -----------------------------------------------------------------------------------------
New Jersey 9/97 140 U.S. Treasury Bonds Short 1,047,590
- -----------------------------------------------------------------------------------------
Pennsylvania 9/97 378 U.S. Treasury Bonds Short 2,579,054
- -----------------------------------------------------------------------------------------
Texas 9/97 12 U.S. Treasury Bonds Short 81,068
- -----------------------------------------------------------------------------------------
</TABLE>
At July 31, 1997, the Portfolios had sufficient cash and/or securities to
cover margin requirements on open futures contracts.
74
<PAGE>
EV Municipals Portfolio as of July 31, 1997
INDEPENDENT AUDITORS' REPORT
To the Trustees and Investors of: Arizona Municipals Portfolio, Colorado
Municipals Portfolio, Connecticut Municipals Portfolio, Michigan Municipals
Portfolio, Minnesota Municipals Portfolio, New Jersey Municipals Portfolio,
Pennsylvania Municipals Portfolio, and Texas Municipals Portfolio
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Arizona Municipals Portfolio, Colorado
Municipals Portfolio, Connecticut Municipals Portfolio, Michigan Municipals
Portfolio, Minnesota Municipals Portfolio, New Jersey Municipals Portfolio,
Pennsylvania Municipals Portfolio and Texas Municipals Portfolio as of July 31,
1997, the related statements of operations for the year then ended, the
statements of changes in net assets for the years ended July 31, 1997 and 1996
and supplementary data for the years ended July 31, 1997, 1996 and 1995, the ten
months ended July 31, 1994, and for the period from the start of business,
February 1, 1993 to September 30, 1993. These financial statements and
supplementary data are the responsibility of the Trusts' management. Our
responsibility is to express an opinion on the financial statements and
supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at July 31,
1997, by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other audit procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and supplementary data present fairly,
in all material respects, the financial positions of Arizona Municipals
Portfolio, Colorado Municipals Portfolio, Connecticut Municipals Portfolio,
Michigan Municipals Portfolio, Minnesota Municipals Portfolio, New Jersey
Municipals Portfolio, Pennsylvania Municipals Portfolio and Texas Municipals
Portfolio at July 31, 1997, the results of their operations, the changes in
their net assets and their supplementary data for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 5, 1997
75
<PAGE>
EV Municipals Portfolios as of July 31, 1997
INVESTMENT MANAGEMENT
Municipals Portfolios Independent Trustees
Officers Donald R. Dwight
Thomas J. Fetter President, Dwight Partners, Inc.
President Chairman, Newspaper of New England, Inc.
James B. Hawkes Samuel L. Hayes, III
Vice President and Trustee Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate
Robert B. MacIntosh School of
Vice President of Arizona, Business Administration
Colorado, Connecticut,
Michigan, Minnesota, New Norton H. Reamer
Jersey, Pennsylvania and President and Director, United Asset
Texas Municipals Portfolios Management Corporation
and Portfolio Manager of
Minnesota and New Jersey John L. Thorndike
Municipals Portfolios Formerly Director, Fiduciary Company
Incorporated
Cynthia J. Clemson
Vice President and Portfolio Jack L. Treynor
Manager of Arizona Investment Adviser and Consultant
Municipals Portfolio
William H. Ahearn, Jr.
Vice President and Portfolio
Manager of Colorado
Municipals Portfolio
Nicole Anderes
Vice President and Portfolio
Manager of Connecticut and
Texas Municipals Portfolios
Timothy T. Browse
Vice President and Portfolio
Manager of Michigan and
Pennsylvania Municipals Portfolios
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
76
