High Yield Municipals Portfolio
Annual Shareholder Report
January 31, 1997
High Yield Municipals Portfolio
Portfolio of Investments
January 31, 1997
<TABLE>
<CAPTION>
Tax-Exempt Investment -- 100%
- -----------------------------------------------------------------------------------------------------------------
Principal
Amount
(000
Omitted) Security VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assisted Living -- 11.5%
$2,500 Arizona Health Facilities Authority, Care Institute-Mesa Project,
7.625%, 1/01/26 $2,359,950
2,000 Chester County, Pennsylvania, IDA, Senior LifeChoice of Paoli, (AMT)
8.05%, 1/01/24 2,039,120
1,000 Chester County, Pennsylvania, IDA, Senior LifeChoice of Kimberton
(AMT), 8.50%, 9/01/25 1,054,670
1,600 Delaware County, Pennsylvania, Industrial Development Authority, Senior
Quarters at Glen Riddle Project (AMT), 8.625%, 9/01/25 1,685,936
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 1/01/13 231,760
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 7/01/13 221,350
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 1/01/14 211,420
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 7/01/14 201,930
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 1/01/15 192,860
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 7/01/15 184,200
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 1/01/16 175,930
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 7/01/16 168,040
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 1/01/17 160,490
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 7/01/17 153,290
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 1/01/18 146,410
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 7/01/18 139,840
1,000 Glen Cove Industrial Development Agency, New York,
The Regency at Glen Cove, 0%, 1/01/19 133,560
1,000 Glen Cove Industrial Development Agency, New York,
The Regency of Glen Cove, 0%, 7/01/19 127,560
3,740 Illinois Development Finance Authority, Care Institute, 7.80%, 6/01/25 3,666,659
3,545 Louisiana Housing Finance Agency, HCC Assisted Living Group I (AMT),
9.00%, 3/01/25 3,749,263
3,500 New Jersey Economic Development Authority, The Chelsea
at East Brunswick Project (AMT), 8.25%, 10/01/26 3,491,635
------------
$20,495,875
------------
Cogeneration Facilities -- 7.3%
$3,500 Maryland Energy Cogeneration, AES Warrior Run Project
(AMT), 7.40%, 9/01/19(2) $3,687,950
3,500 Palm Beach County, Florida, Okeelanta Power Limited Partnership
Project (AMT), 6.85%, 2/15/21 3,100,055
2,000 Palm Beach County, Florida, Osceola Power Project (AMT), 6.95%, 1/01/22 1,790,220
3,500 Pennsylvania Economic Development Financing Authority, Northampton
Generating Project (AMT), 6.60%, 1/01/19 3,473,715
1,000 Pennsylvania Economic Development Financing Authority, Northampton
Generating Project-Subordinated (AMT), 6.875%, 1/01/11 983,000
------------
$13,034,940
------------
Colleges & Universities -- 1.2%
$2,000 New Hampshire Higher Educational and Health Facilities Authority,
Colby-Sawyer College, 7.50%, 6/01/26 $2,043,320
------------
Escrowed -- 7.0%
$2,600 Colorado Health Facilities Authority, Liberty Heights Project, 0%, 7/15/20 $532,012
17,000 Colorado Health Facilities Authority, Liberty Heights Project, 0%, 7/15/24 2,661,010
13,445 Colorado Health Facilities Authority, Liberty Heights Project, 0%, 7/15/22 2,408,941
1,500 Cuyahoga County, Ohio, Judson Retirement Community, 8.875%, 11/15/19 1,715,895
10,000 Dawson Ridge Metropolitan District #1, Douglas County, Colorado, 0%,
10/1/22 1,847,000
3,500 Dawson Ridge Metropolitan District #1, Douglas County, Colorado, 0%,
10/1/22 646,450
3,295 Illinois Development Finance Authority, Regency Park Project, 0%, 7/15/25 482,058
1,000 Montgomery County, Pennsylvania, United Hospitals, 8.375%, 11/01/11 1,124,460
1,000 Montgomery County, Pennsylvania, United Hospitals, 7.50%, 11/01/15 1,085,180
------------
$12,503,006
------------
Hospitals -- 12.1%
$2,500 Hidalgo County, Texas, Health Services Corp., Mission Hospital, Inc.,
6.875%, 8/15/26 $2,525,875
3,000 Louisiana Public Finance Authority, General Health Systems Project,
6.80%, 11/01/16 3,040,260
2,250 Massachusetts Health and Education Facilities Authority, Sisters of Providence
Hospital, 6.625%, 11/15/22 2,247,210
3,000 Massachusetts Health and Education Facilities Authority,
Milford-Whitinsville Hospital, 7.75%, 7/15/17 3,155,100
2,205 Philadelphia, Pennsylvania, Graduate Health System, 6.625%, 7/01/21 2,176,754
2,650 Prince George's, Maryland, Greater Southeast Health, 6.375%, 1/01/23 2,609,534
1,000 San Bernadino, California, San Bernadino Community Hospital,
7.875%, 12/01/08 1,038,110
1,325 San Bernadino, California, San Bernadino Community Hospital,
7.875%, 12/01/19 1,375,496
1,500 Scranton-Lackawanna, Pennsylvania, Moses Taylor Hospital,
8.50%, 7/01/20 1,622,730
1,500 Wells County, Indiana, Caylor-Nickel Medical Center, 8.75%, 4/15/12 1,706,580
------------
$21,497,649
------------
Housing -- 8.8%
$4,850 Colorado Housing Finance Authority, Single Family Mortgage Revenue
(AMT), 7.65%, 12/01/25 $5,373,315
2,450 Cuyahoga County, Ohio, Rolling Hills Apartment Project (AMT),
8.00%, 1/01/28 2,397,643
2,500 Lucas County, Ohio, EDA, County Creek Project (AMT), 8.00%, 7/01/26 2,407,000
2,500 Maricopa County, Arizona, Industrial Development Authority,
Place Five and The Greenery Apartment Projects, 6.625%, 1/01/27 2,507,975
1,725 Maricopa County, Arizona, Industrial Development Authority,
Place Five and The Greenery Apartment Projects, 8.625%, 1/01/11 1,728,847
1,150 Texas Department of Housing and Community Affairs, NHP
Foundation-Asmara Project, 6.40%, 1/01/27 1,156,590
------------
$15,571,370
------------
Industrial Development Revenue -- 19.6%
$2,815 ABIA Development Corporation, Austin Cargoport Development,
L.L.C. Project (AMT), 9.25%, 10/01/21 $2,838,787
2,000 Camden County, New Jersey, Holt Hauling and Warehousing System, Inc.
Project (AMT), 9.875%, 1/01/21 2,186,840
1,895 Florence County, Kentucky, IDR, Stone Container Co., 7.375%, 2/01/07 1,987,703
2,700 Hancock County, Kentucky, Southwire Co. Project (AMT), 7.75%, 7/01/25 2,783,079
2,500 Kansas City, Missouri, IDA, AFCO Cargo MCI (AMT), 8.50%, 1/01/17 2,729,700
3,000 Kimball, Nebraska, Clean Harbors, Inc. Series-96 (AMT), 10.75%, 9/01/26 3,033,810
1,000 Michigan Strategic, PCR, Roseville K-Mart Co., 6.25%,10/01/06 968,310
3,500 Michigan Strategic, PCR, S.D. Warren Series-87C (AMT), 7.375%, 1/15/22 3,605,420
1,000 Mobile, Alabama, IDA, Mobile Energy Project, 6.95%, 1/01/20 1,060,950
1,135 New Albany, Indiana, IDA, K-Mart Co., 7.40%, 6/01/06 1,173,726
2,750 New Hampshire Business Finance Authority, Crown Paper Co. (AMT),
7.875%, 7/01/26 2,862,365
1,500 New Jersey EDA, Holt Hauling and Warehousing System, Inc. (AMT),
9.75%, 12/15/16 1,589,190
500 New Jersey EDA, 777 Pattison Ave., Inc. (AMT), 8.95%, 12/15/18 535,230
3,500 State of Ohio Solid Waste, Republic Engineered Steel, Inc. Project (AMT),
9.00%, 6/01/21 3,601,920
500 Philadelphia, Pennsylvania, IDA, Refrigerated Enterprises (AMT),
9.05%, 12/01/19 530,175
3,345 Riverdale Village, Illinois, IDA, ACME Metals, Inc. Project (AMT),
7.95%, 4/01/25 3,354,968
------------
$34,842,173
------------
Insured Water and Sewer -- 1.6%
$3,000 Detroit, Michigan, Sewer Revenue, (FGIC), Variable Rate, 7/01/23 (1) $2,801,250
------------
Lease/Certificates of Participation -- 1.2%
$9,190 Los Angeles, California, COP, Disney Parking Project, 0%, 9/01/19 $2,092,930
------------
Life Care -- 2.0%
$3,500 Delaware County, Pennsylvania, White Horse Village, 7.30%, 7/01/14 $3,581,305
------------
Miscellaneous -- 5.1%
$2,300 Atlanta, Georgia, Downtown Development Authority,
Central Atlanta Hospitality Childcare, Inc., 8.00%, 1/01/26 $2,240,729
3,300 Santa Fe, New Mexico, Crow Hobbs No. 1, 8.50%, 9/01/16 3,372,237
3,449 Santa Fe, New Mexico, First Interstate Plaza Associates Project,
8.00%, 7/01/13 3,450,713
------------
$9,063,679
------------
Miscellaneous Healthcare -- 2.5%
$2,000 Osceola County, Florida, IDA, Community Pooled Loan-93, 7.75%, 7/01/17 $2,051,380
2,382 Tax Exempt Securities Trust, Mezzanine Certificates Series-96, 8.50%, 12/01/36 2,382,000
------------
$4,433,380
------------
Multi-Purpose Utilities -- 4.0%
$2,500 Intermountain Power Agency, Utah, Variable Rate, 7/01/11, (1) $2,396,875
2,500 New York State Energy, Research and Development Authority,
Long Island Lighting Co. (AMT), 7.15%, 9/01/19 2,674,975
2,000 Southern California Public Power Authority, Variable Rate, 7/01/12 (1) 2,097,500
------------
$7,169,350
------------
Nursing Homes -- 8.2%
$1,220 Greene County, Ohio, IDA, Fairview Extended Care-91, 10.125%, 1/01/11 $1,379,430
1,790 Massachusetts Health & Education Facilities Authority, Fairview Extended Care,
10.125%, 1/01/11 2,023,917
2,500 Massachusetts Industrial Finance Authority, AGE Institute of Massachusetts,
8.05%, 11/01/25 2,531,150
1,200 Mississippi Business Finance Corp., Magnolia Health Care-95A,
7.99%, 7/01/25 1,195,332
2,175 Missouri Economic Development Authority, Beverly Enterprises, Inc.,
8.00%, 12/01/02 2,280,553
3,500 Westmoreland County, PA, Highland Health Systems, 9.25%, 6/01/22 3,761,065
1,250 Wilkins Area, Pennsylvania, IDA, Fairview Extended Care, 10.25%, 1/01/21 1,418,625
------------
$14,590,072
------------
Solid Waste -- 3.6%
$10,090 Mercer County, New Jersey, Solid Waste Improvement Bonds (AMT),
0%, 4/01/15 $2,685,857
3,500 Robbins, Cook County, Illinois, Resource Recovery-94B (AMT),
8.375%, 10/15/16 3,641,330
------------
$6,327,187
------------
Special Tax General -- 2.1%
$3,800 Cottonwood Water and Sanitation District, General Obligation
(Limited Tax Through 2000), 7.75%, 12/01/20 $3,808,132
------------
Transportation -- 2.2%
$500 Eagle County, Colorado, Airport Terminal Project, 7.50%, 5/01/21 $516,145
10,000 San Joaquin Hills, California, Toll Roads, 0%, 1/01/25 1,746,200
10,000 San Joaquin Hills, California, Toll Roads, 0%, 1/01/26 1,640,400
------------
$3,902,745
------------
Total Tax-Exempt Investments (identified cost, $172,859,583) $177,758,361
============
(1) Security has been issued as an inverse floater bond.
(2) The security has been segregated to cover margin requirements for open financial futures contracts.
AMT -- Interest earned from these securities may be considered a tax preference item for purpose of the Federal
Alternative Minimum Tax.
At January 31, 1997, the concentration of the Portfolio's investments in various states determined as a
percentage of total investments is as follows:
Pennsylvania 13.8%
Colorado 10.0%
Others, representing less than 10% individually 76.2%
See notes to financial statements
</TABLE>
High Yield Muinicipals Portfolio
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------------------------------------
January 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (Note 1A) (identified cost, $172,859,583) $177,758,361
Cash 1,649,611
Receivable for investments sold 145,510
Interest receivable 2,407,062
Deferred organization expenses (Note 1D) 9,252
------------
Total assets $181,969,796
Liabilities:
Payable for investments purchased $1,037,250
Payable for daily variation margin on open
financial futures contracts (Note 1E) 218,750
Payable to affiliate --
Trustees' fees 750
Accrued expenses 12,587
----------
Total liabilities 1,269,337
------------
Net Assets applicable to investors' interest in Portfolio $180,700,459
============
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $176,144,425
Unrealized appreciation of investments and financial futures contracts
(computed on the basis of identified cost) 4,556,034
------------
Total $180,700,459
============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
- ------------------------------------------------------------------------------------------------------------
For the Year Ended January 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income (Note 1B):
Interest income $ 9,301,713
Expenses --
Investment adviser fee (Note 2) $ 772,713
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 8,411
Custodian fee (Note 1H) 55,405
Legal and accounting services 21,966
Bond pricing 11,895
Amortization of organization expenses (Note 1D) 10,756
Miscellaneous 29,553
-----------
Total expenses $ 910,699
-----------
Deduct --
Reduction of investment advisor fee (Note 2) $ 478,420
Reduction of custodian fee (Note 1H) 49,391
-----------
Total $ 527,811
-----------
Net expenses 382,888
-----------
Net investment income $ 8,918,825
Realized and Unrealized Gain (Loss) on Investments:
Net realized loss --
Investment transactions (identified cost basis) $ (231,719)
Financial futures contracts (1,027,871)
-----------
Net realized loss $(1,259,590)
-----------
Change in net unrealized appreciation (depreciation) --
Investments $ 3,247,169
Financial futures contracts (342,744)
-----------
Net unrealized appreciation $ 2,904,425
-----------
Net realized and unrealized gain 1,644,835
-----------
Net increase in net assets resulting from operations $10,563,660
===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------
Year Ended January 31,
------------------------------------
1997 1996*
------------ -----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 8,918,825 $ 1,186,284
Net realized gain (loss) on investments (1,259,590) 9,767
Change in unrealized appreciation of investments 2,904,425 1,651,609
------------ -----------
Net increase in net assets resulting from operations $ 10,563,660 $ 2,847,660
------------ -----------
Capital transactions --
Contributions $118,977,124 $71,481,492
Withdrawals (20,917,792) (2,351,685)
------------ -----------
Increase in net assets resulting from capital transactions $ 98,059,332 $69,129,807
------------ -----------
Total increase in net assets $108,622,992 $71,977,467
Net Assets:
At beginning of year 72,077,467 100,000
------------ -----------
At end of year $180,700,459 $72,077,467
============ ===========
* For the period from the start of business, August 7, 1995 to January 31, 1996.
<CAPTION>
Supplementary Data
Year Ended January 31,
------------------------------------
1997 1996*
------------ -----------
Ratios (as a percentage of net assets)**:
Expenses 0.34% 0.06%+
Expenses after custodian fee reduction 0.30% 0.06%+
Net investment income 6.96% 6.95%+
Portfolio Turnover 41% 32%
** The operating expenses of the Portfolio reflect a reduction of the investment advisor fee. Had such
action 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 0.71% 0.71%+
Expenses after custodian fee reduction 0.67% 0.71%+
Net investment income 6.59% 6.30%+
+ Annualized.
* For the period from the start of business, August 7, 1995, to January 31, 1996.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(1) Significant Accounting Policies
High Yield Municipals Portfolio (the Portfolio) is registered under
the Investment Company Act of 1940 as a non-diversified open-end
management investment company. The Portfolio, which was organized as
a trust under the laws of the State of New York on May 1, 1995, seeks
to provide high current income exempt from regular federal income
tax. The Declaration of Trust permits the Trustees to issue interests
in the Portfolio. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity
with generally accepted accounting principles.
A. Investment 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 listed on commodity exchanges are valued at
closing settlement prices. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which approximates value.
Investments for which valuations or market quotations are unavailable
are valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
B. Income -- Interest income is determined on the basis of interest
accrued, adjusted for amortization of premium or discount when
required for federal income tax purposes.
C. Income Taxes -- The Portfolio is treated as a partnership for
Federal tax purposes. No provision is made by the Portfolio for
federal or state taxes on any taxable income of the Portfolio because
each investor in the Portfolio is ultimately responsible for the
payment of any taxes. Since some of the Portfolio's investors are
regulated investment companies that invest all or substantially all
of their assets in the Portfolio, the Portfolio normally must satisfy
the applicable source of the income and diversification requirements
(under the Internal Revenue Code) in order for its investors to
satisfy them. The Portfolio will allocate at least annually among its
investors each investor's distributive share of the Portfolio's net
taxable (if any) and tax-exempt investment income, net realized
capital gains, and any other items of income, gain, loss, deduction
or credit. Interest income received by the Portfolio on investments
in municipal bonds, which is excludable from gross income under the
Internal Revenue Code, will retain its status as income exempt from
Federal income tax when allocated to the Portfolio's investors. The
portion of such interest, if any, earned on private activity bonds
issued after August 7, 1986 may be considered a tax preference item
for investors.
D. Deferred Organization Expenses -- Costs incurred by the Portfolio
in connection with its organization are being amortized on the
straight-line basis over five years.
E. Financial Futures Contracts -- Upon the entering of a financial
futures contract, the Portfolio is required to deposit ("initial
margin") either in cash or securities an amount equal to a certain
percentage of the purchase price indicated in the financial futures
contract. Subsequent payments are made or received by the Portfolio
("margin maintenance") each day, dependent on the daily fluctuations
in the value of the underlying security, and are recorded for book
purposes as unrealized gains or losses by the Portfolio. The
Portfolio's investment in financial futures contracts is designed
only to hedge against anticipated future changes in interest rates.
Should interest rates move unexpectedly, the Portfolio may not
achieve the anticipated benefits of the financial futures contracts
and may realize a loss.
F. Legal Fees -- Legal fees and other related expenses incurred as
part of negotiations of the terms and requirements of capital
infusions, or that are expected to result in the restructuring of or
a plan of reorganization for an investment are recorded as realized
losses. Ongoing expenditures to protect or enhance an investment are
treated as operating expenses.
G. When-issued and Delayed Delivery Transactions -- The Portfolio may
engage in when-issued and delayed delivery transactions. The
Portfolio records when-issued securities on trade date and maintains
security positions such that sufficient liquid assets will be
available to make payments for the securities purchased. Securities
purchased on when-issued or delayed delivery basis are marked to
market daily and begin accruing interest on settlement date.
H. Expense Reduction -- Investors Bank & Trust Company (IBT) serves
as custodian of the Portfolio. Pursuant to the custodian agreement,
IBT receives a fee reduced by credits which are determined based on
the average daily cash balance the Portfolio maintains with IBT. All
significant credit balances used to reduce the Portfolio's custodian
fees are reported as a reduction of expenses in the statement of
operations.
I. 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.
J. Other --Investment transactions are accounted for on a trade date
basis.
(2) Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Boston Management and
Research (BMR), a wholly-owned subsidiary of Eaton Vance Management
(EVM), as compensation for management and investment advisory
services rendered to the Portfolio. The fee is based upon a
percentage of average daily net assets plus a percentage of gross
income (i.e. income other than gains from the sale of securities).
For the year ended January 31, 1997, the fee was equivalent to 0.60%
(annualized) of the Portfolio's average net assets for such period
and amounted to $772,713. To enhance the net income of the Portfolio,
BMR made a reduction of its fee in the amount of $478,420. Except as
to Trustees of the Portfolio who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their
services to the Portfolio out of such investment adviser fee. Certain
of the officers and Trustees of the Portfolio are officers and
directors/trustees of the above organizations. Trustees of the
Portfolio that are not affiliated with the Investment Adviser may
elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of the Trustees Deferred Compensation Plan.
For the year ended January 31, 1997, no significant amounts have been
deferred.
(3) Investments
Purchases and sales of investments, other than U.S. Government
securities and short term obligations, aggregated $154,349,851 and
$51,977,848, respectively, for the year ended January 31, 1997.
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the
investments owned at January 31, 1997, as computed on a federal
income tax basis, were as follows:
Aggregate cost $172,859,583
============
Gross unrealized appreciation $ 5,065,286
Gross unrealized depreciation 166,508
------------
Net unrealized appreciation $ 4,898,778
============
(5) Line of Credit
The Fund participates with other portfolios and funds managed by EVM
and affiliates in a $120 million unsecured line of credit with a
bank. Borrowings will be made by the Portfolio or Fund solely to
facilitate the handling of unusual and/or unanticipated short-term
cash requirements. Interest is charged to each participating
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, a Eurodollar rate, or a federal funds effective rate. In
addition, a fee computed at an annual rate of 0.15% on the daily
unused portion facility is allocated among the participating funds
and portfolios at the end of each quarter. The Fund did not have any
significant borrowings or allocated fees during the year ended
January 31, 1997.
(6) Financial Instruments
The Portfolio regularly trades in financial instruments with off-
balance sheet risk in the normal course of its investing activities
to assist in managing exposure to various market risks. These
financial instruments include futures contracts and may involve, to a
varying degree, elements of risk in excess of the amounts recognized
for financial statement purposes. The notional or contractual amounts
of these instruments represent the investment the Portfolio has in
particular classes of financial instruments and do 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 January 31, 1997 is
as follows:
Futures
Contracts Net Unrealized
Expiration Date Contracts Position Depreciation
- --------------- --------- ----------- --------------
3/97 250 U.S. Treasury Bond Short $342,744
Independent Auditors' Report
To the Trustees and Investors of
High Yield Municipals Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of High Yield Municipals
Portfolio as of January 31, 1997, the related statement of operations
for the year then ended, and the statements of changes in net assets
and the supplementary data for the year ended January 31, 1997 and
the period from the start of business, August 7, 1995, to January 31,
1996. These financial statements and supplementary data are the
responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and supplementary
data based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and 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.
Our procedures included confirmation of securities owned at January
31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and supplementary data
present fairly, in all material respects, the financial position of
the High Yield Municipals Portfolio at January 31, 1997, and the
results of its operations, the changes in its net assets, and its
supplementary data for the respective stated periods, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 7, 1997
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President, Trustee
Robert B. MacIntosh, CFA
Vice President
and Portfolio Manager
James L. O'Connor
Treasurer
Thomas Otis
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking, Harvard University
Graduate School of Business Administration
Norton H. Reamer
President and Director, United Asset Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Investment Adviser of Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of Portfolio
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(617) 482-8260
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
Transfer Agent
First Data Investor Services Group, Inc.
Attn: Eaton Vance Funds
P.O. Box 5123
Boston, MA 01581-5123
(800) 262-1122
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
