N-CSRS 1 a2135170zn-csrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number: 811-07202 --------- North Carolina Municipals Portfolio ----------------------------------- (Exact Name of Registrant as Specified in Charter) The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109 ----------------------------------------------------------------------- (Address of Principal Executive Offices) Alan R. Dynner The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109 ----------------------------------------------------------------------- (Name and Address of Agent for Services) (617) 482-8260 -------------- (Registrant's Telephone Number) August 31 --------- Date of Fiscal Year End February 29, 2004 ----------------- Date of Reporting Period ITEM 1. REPORTS TO STOCKHOLDERS NORTH CAROLINA MUNICIPALS PORTFOLIO as of February 29, 2004 PORTFOLIO OF INVESTMENTS (UNAUDITED) TAX-EXEMPT INVESTMENTS -- 99.2%
PRINCIPAL AMOUNT (000'S OMITTED) SECURITY VALUE ---------------------------------------------------------------------------------------------- EDUCATION -- 10.4% $ 2,950 North Carolina Educational Facilities Finance Agency, (Duke University), 5.125%, 10/1/41 $ 3,078,177 300 North Carolina Educational Facilities Finance Agency, (High Point University), 5.125%, 9/1/21 313,302 8,410 University of North Carolina at Chapel Hill, 0.00%, 8/1/17 4,833,143 1,980 University of North Carolina at Chapel Hill, 0.00%, 8/1/21 896,287 ---------------------------------------------------------------------------------------------- $ 9,120,909 ---------------------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 20.1% $ 1,015 Chatham County Industrial Facilities and Pollution, (Carolina Power and Light), 6.30%, 6/15/14 $ 1,034,041 5,000 North Carolina Eastern Municipal Power Agency, 6.125%, 1/1/09 5,681,300 1,250 North Carolina Eastern Municipal Power Agency, 6.75%, 1/1/26 1,402,325 3,500 North Carolina Municipal Power Agency, (Catawba), 6.50%, 1/1/20 3,933,790 2,000 Puerto Rico Electric Power Authority, 0.00%, 7/1/17 1,112,360 2,000 Puerto Rico Electric Power Authority, 0.00%, 7/1/17 1,119,360 2,000 Puerto Rico Electric Power Authority, Variable Rate, 7/1/29(1)(2) 2,205,920 1,000 Wake County, Industrial Facilities and Pollution Control Financing Authority, (Carolina Power and Light Co.), 5.375%, 2/1/17 1,091,000 ---------------------------------------------------------------------------------------------- $ 17,580,096 ---------------------------------------------------------------------------------------------- ESCROWED / PREREFUNDED -- 14.0% $ 1,500 Charlotte, Water and Sewer, Prerefunded to 6/1/10, 5.25%, 6/1/25 $ 1,756,380 3,410 North Carolina Eastern Municipal Power Agency, Escrowed to Maturity, 4.00%, 1/1/18 3,499,410 2,210 North Carolina Eastern Municipal Power Agency, Escrowed to Maturity, 5.00%, 1/1/17 2,513,654 440 North Carolina Eastern Municipal Power Agency, Escrowed to Maturity, 5.00%, 1/1/21 487,749 1,500 North Carolina Medical Care Commission, (Annie Penn Memorial Hospital), Prerefunded to 1/1/15, 5.375%, 1/1/22 1,711,170 2,000 Winston-Salem, Water and Sewer System, Prerefunded to 6/1/11, 5.125%, 6/1/28 2,330,480 ---------------------------------------------------------------------------------------------- $ 12,298,843 ---------------------------------------------------------------------------------------------- GENERAL OBLIGATIONS -- 4.1% $ 1,000 Charlotte, 5.00%, 7/1/29 $ 1,057,680 1,000 Charlotte, 5.60%, 6/1/20 1,152,890 1,000 New Hanover County, 5.75%, 11/1/17 1,180,770 400 North Carolina, Variable Rate, 3/1/28(1)(2) 227,724 ---------------------------------------------------------------------------------------------- $ 3,619,064 ---------------------------------------------------------------------------------------------- HOSPITAL -- 9.0% $ 1,750 Charlotte-Mecklenberg Hospital Authority, 5.00%, 1/15/31 $ 1,795,185 3,400 North Carolina Medical Care Commission, (Duke University Hospital), 0.00%, 6/1/09 2,808,026 1,000 North Carolina Medical Care Commission, (Gaston Health Care), 5.00%, 2/15/29 1,008,960 500 North Carolina Medical Care Commission, (Halifax Regional Medical Center), 5.00%, 8/15/24 478,080 250 North Carolina Medical Care Commission, (Novant Health, Inc.), 5.00%, 11/1/20 266,678 1,000 North Carolina Medical Care Commission, (Southeastern Regional Medical Center), 5.375%, 6/1/32 1,032,310 500 North Carolina Medical Care Commission, (Union Regional Medical Center), 5.375%, 1/1/32 515,445 ---------------------------------------------------------------------------------------------- $ 7,904,684 ---------------------------------------------------------------------------------------------- HOUSING -- 3.4% $ 1,400 Charlotte Housing Authority, (Double Oaks), FHA, (FNMA), 7.35%, 5/15/26 $ 1,504,538 285 Guam Housing Corp., Single Family, (AMT), 5.75%, 9/1/31 325,154 1,055 North Carolina HFA, MFMR, (AMT), 6.45%, 9/1/27 1,101,863 970 Raleigh Housing Authority, Multifamily, (Cedar Point), 7.00%, 11/1/30(3) 99,425 ---------------------------------------------------------------------------------------------- $ 3,030,980 ---------------------------------------------------------------------------------------------- INDUSTRIAL DEVELOPMENT REVENUE -- 1.1% $ 850 Robeson County, Industrial Facilities and Pollution Control Financing Authority, (Campbell Soup), 6.40%, 12/1/06 $ 959,574 ---------------------------------------------------------------------------------------------- $ 959,574 ---------------------------------------------------------------------------------------------- INSURED-EDUCATION -- 5.5% $ 1,375 East Carolina University, (AMBAC), 5.25%, 11/1/21 $ 1,506,821 1,320 North Carolina Educational Facilities Finance Agency, (Johnson & Wales University), (XLCA), 5.00%, 4/1/33 1,379,281 1,900 University of North Carolina, (MBIA), 4.50%, 10/1/18(4) 1,964,600 ---------------------------------------------------------------------------------------------- $ 4,850,702 ---------------------------------------------------------------------------------------------- INSURED-ELECTRIC UTILITIES -- 1.7% $ 1,500 North Carolina Eastern Municipal Power Agency, (FSA), Variable Rate, 1/1/19(1)(2) $ 1,511,055 ---------------------------------------------------------------------------------------------- $ 1,511,055 ----------------------------------------------------------------------------------------------
See notes to financial statements 78
PRINCIPAL AMOUNT (000'S OMITTED) SECURITY VALUE ---------------------------------------------------------------------------------------------- INSURED-GENERAL OBLIGATIONS -- 4.2% $ 1,000 Puerto Rico Commonwealth, (FGIC), 5.50%, 7/1/22 $ 1,184,230 280 Puerto Rico General Obligation, (MBIA), Variable Rate, 7/1/20(2)(5) 441,832 945 Smithville Township, Brunswick County, (MBIA), 5.00%, 6/1/23 1,016,177 995 Smithville Township, Brunswick County, (MBIA), 5.00%, 6/1/24 1,065,317 ---------------------------------------------------------------------------------------------- $ 3,707,556 ---------------------------------------------------------------------------------------------- INSURED-HOSPITAL -- 5.3% $ 500 Cumberland County Hospital, (MBIA), 0.00%, 10/1/09 $ 430,335 1,200 North Carolina Medical Care Commission, (Betsy Johnson), (FSA), 5.375%, 10/1/24 1,317,816 935 North Carolina Medical Care Commission, (Memorial Mission Hospital), (FSA), 0.00%, 10/1/06 895,281 1,000 North Carolina Medical Care Commission, (Wakemed), (AMBAC), 5.00%, 10/1/32 1,046,010 1,500 North Carolina Medical Care Commission, (Wilson Memorial Hospital), (AMBAC), 0.00%, 11/1/15 934,875 ---------------------------------------------------------------------------------------------- $ 4,624,317 ---------------------------------------------------------------------------------------------- INSURED-LEASE REVENUE / CERTIFICATES OF PARTICIPATION -- 0.7% $ 420 Puerto Rico Public Finance Corp., (AMBAC), Variable Rate, 12/1/19(2)(5) $ 580,654 ---------------------------------------------------------------------------------------------- $ 580,654 ---------------------------------------------------------------------------------------------- INSURED-SPECIAL TAX REVENUE -- 1.0% $ 800 Puerto Rico Infrastructure Financing Authority, (AMBAC), Variable Rate, 7/1/07(1)(2) $ 861,040 ---------------------------------------------------------------------------------------------- $ 861,040 ---------------------------------------------------------------------------------------------- INSURED-TRANSPORTATION -- 4.4% $ 1,375 Puerto Rico Highway and Transportation Authority, (MBIA), 5.50%, 7/1/36 $ 1,600,445 1,000 Puerto Rico Highway and Transportation Authority, (MBIA), Variable Rate, 7/1/36(2)(5) 1,228,900 1,000 Raleigh Durham, Airport Authority, (FGIC), 5.00%, 11/1/31 1,040,430 ---------------------------------------------------------------------------------------------- $ 3,869,775 ---------------------------------------------------------------------------------------------- INSURED-WATER AND SEWER -- 4.0% $ 1,745 Broad River, Water Authority Water System, (MBIA), 5.375%, 6/1/26 $ 1,898,228 1,500 Kannapolis, Water and Sewer, (FSA), (AMT), 5.25%, 2/1/26 1,583,610 ---------------------------------------------------------------------------------------------- $ 3,481,838 ---------------------------------------------------------------------------------------------- LEASE REVENUE / CERTIFICATES OF PARTICIPATION -- 3.0% $ 1,000 Charlotte, (Government Facilities), 5.00%, 6/1/28 $ 1,045,480 1,500 Charlotte, (Government Facilities), 5.00%, 6/1/33 1,563,690 ---------------------------------------------------------------------------------------------- $ 2,609,170 ---------------------------------------------------------------------------------------------- OTHER REVENUE -- 1.6% $ 1,000 Puerto Rico Infrastructure Financing Authority, Variable Rate, 10/1/34(2)(5) $ 1,371,540 ---------------------------------------------------------------------------------------------- $ 1,371,540 ---------------------------------------------------------------------------------------------- WATER AND SEWER -- 5.7% $ 1,700 Charlotte, Storm Water, 5.00%, 6/1/25 $ 1,795,999 2,975 Charlotte, Water and Sewer, 5.125%, 6/1/26 3,164,805 ---------------------------------------------------------------------------------------------- $ 4,960,804 ---------------------------------------------------------------------------------------------- TOTAL TAX-EXEMPT INVESTMENTS -- 99.2% (IDENTIFIED COST $79,206,668) $ 86,942,601 ---------------------------------------------------------------------------------------------- OTHER ASSETS, LESS LIABILITIES -- 0.8% $ 695,385 ---------------------------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 87,637,986 ----------------------------------------------------------------------------------------------
AMBAC - AMBAC Financial Group, Inc. AMT - Interest earned from these securities may be considered a tax preference item for purposes of the Federal Alternative Minimum Tax. FGIC - Financial Guaranty Insurance Company FHA - Federal Housing Authority FNMA - Federal National Mortgage Association (Fannie Mae) FSA - Financial Security Assurance, Inc. HFA - Housing Facilities Authority MBIA - Municipal Bond Insurance Association MFMR - Multi Family Mortgage Revenue XLCA - XL Capital Assurance, Inc. The Portfolio invests primarily in debt securities issued by North Carolina 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 February 29, 2004, 27.0% of the securities in the portfolio of See notes to financial statements 79 investments are backed by bond insurance of various financial institutions and financial guaranty assurance agencies. The aggregate percentage insured by an individual financial institution ranged from 1.6% to 11.1% of total investments. (1) Security has been issued as an inverse floater bond. (2) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. (3) Non-income producing security. (4) Security (or a portion thereof) has been segregated to cover margin requirements on open financial futures contracts. (5) Security has been issued as a leveraged inverse floater bond. See notes to financial statements 80 EATON VANCE MUNICIPALS PORTFOLIOS as of February 29, 2004 FINANCIAL STATEMENTS (UNAUDITED) STATEMENTS OF ASSETS AND LIABILITIES AS OF FEBRUARY 29, 2004
ALABAMA PORTFOLIO ARKANSAS PORTFOLIO GEORGIA PORTFOLIO KENTUCKY PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments -- Identified cost $ 59,153,385 $ 42,252,727 $ 51,291,056 $ 59,917,601 Unrealized appreciation 5,418,338 3,202,778 5,338,196 7,020,073 ------------------------------------------------------------------------------------------------------------------------------- INVESTMENTS, AT VALUE $ 64,571,723 $ 45,455,505 $ 56,629,252 $ 66,937,674 ------------------------------------------------------------------------------------------------------------------------------- Cash $ 432,217 $ -- $ 23,951 $ 671,494 Receivable for investments sold -- -- -- 75,000 Interest receivable 736,220 594,955 745,122 814,913 ------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 65,740,160 $ 46,050,460 $ 57,398,325 $ 68,499,081 ------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable for daily variation margin on open financial futures contracts $ 67,781 $ 60,312 $ 83,531 $ 78,094 Demand note payable -- 100,000 -- -- Payable for when-issued securities -- 1,033,380 -- -- Due to bank -- 66,956 -- -- Accrued expenses 17,316 15,883 16,734 17,565 ------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES $ 85,097 $ 1,276,531 $ 100,265 $ 95,659 ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $ 65,655,063 $ 44,773,929 $ 57,298,060 $ 68,403,422 ------------------------------------------------------------------------------------------------------------------------------- SOURCES OF NET ASSETS Net proceeds from capital contributions and withdrawals $ 60,400,110 $ 41,867,712 $ 52,306,989 $ 61,583,031 Net unrealized appreciation (computed on the basis of identified cost) 5,254,953 2,906,217 4,991,071 6,820,391 ------------------------------------------------------------------------------------------------------------------------------- TOTAL $ 65,655,063 $ 44,773,929 $ 57,298,060 $ 68,403,422 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 91
LOUISIANA PORTFOLIO MARYLAND PORTFOLIO MISSOURI PORTFOLIO NORTH CAROLINA PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments -- Identified cost $ 26,742,781 $ 72,672,445 $ 51,580,635 $ 79,206,668 Unrealized appreciation 2,246,779 2,618,672 5,595,708 7,735,933 ------------------------------------------------------------------------------------------------------------------------------- INVESTMENTS, AT VALUE $ 28,989,560 $ 75,291,117 $ 57,176,343 $ 86,942,601 ------------------------------------------------------------------------------------------------------------------------------- Cash $ -- $ -- $ 1,127,227 $ -- Receivable for investments sold 14,914 558,814 35,000 -- Interest receivable 386,063 888,284 660,955 951,194 ------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 29,390,537 $ 76,738,215 $ 58,999,525 $ 87,893,795 ------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable for daily variation margin on open financial futures contracts $ 46,406 $ 108,906 $ 81,469 $ 134,062 Demand note payable 500,000 500,000 -- 100,000 Due to bank 76,761 38,711 -- 3,542 Accrued expenses 15,906 18,859 17,500 18,205 ------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES $ 639,073 $ 666,476 $ 98,969 $ 255,809 ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $ 28,751,464 $ 76,071,739 $ 58,900,556 $ 87,637,986 ------------------------------------------------------------------------------------------------------------------------------- SOURCES OF NET ASSETS Net proceeds from capital contributions and withdrawals $ 26,686,916 $ 73,726,277 $ 53,643,403 $ 80,427,318 Net unrealized appreciation (computed on the basis of identified cost) 2,064,548 2,345,462 5,257,153 7,210,668 ------------------------------------------------------------------------------------------------------------------------------- TOTAL $ 28,751,464 $ 76,071,739 $ 58,900,556 $ 87,637,986 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 92
OREGON PORTFOLIO SOUTH CAROLINA PORTFOLIO TENNESSEE PORTFOLIO VIRGINIA PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments -- Identified cost $ 76,881,490 $ 49,217,788 $ 43,640,750 $ 102,210,337 Unrealized appreciation 5,795,489 3,852,838 4,660,273 11,636,226 ------------------------------------------------------------------------------------------------------------------------------- INVESTMENTS, AT VALUE $ 82,676,979 $ 53,070,626 $ 48,301,023 $ 113,846,563 ------------------------------------------------------------------------------------------------------------------------------- Cash 1,239,769 628,557 1,285,810 $ -- Receivable for investments sold 205,000 -- -- 2,438,800 Interest receivable 1,010,278 911,486 593,067 1,555,152 ------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 85,132,026 $ 54,610,669 $ 50,179,900 $ 117,840,515 ------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable for investments purchased $ -- $ -- $ -- $ 1,179,139 Payable for daily variation margin on open financial futures contracts 187,656 82,500 74,250 195,937 Demand note payable -- -- -- 300,000 Payable for when-issued securities -- -- 265,709 -- Due to bank -- -- -- 15,656 Accrued expenses 18,852 16,353 16,294 20,913 ------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES $ 206,508 $ 98,853 $ 356,253 $ 1,711,645 ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $ 84,925,518 $ 54,511,816 $ 49,823,647 $ 116,128,870 ------------------------------------------------------------------------------------------------------------------------------- SOURCES OF NET ASSETS Net proceeds from capital contributions and withdrawals $ 79,889,380 $ 50,971,436 $ 45,471,930 $ 105,252,237 Net unrealized appreciation (computed on the basis of identified cost) 5,036,138 3,540,380 4,351,717 10,876,633 ------------------------------------------------------------------------------------------------------------------------------- TOTAL $ 84,925,518 $ 54,511,816 $ 49,823,647 $ 116,128,870 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 93 STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2004
ALABAMA PORTFOLIO ARKANSAS PORTFOLIO GEORGIA PORTFOLIO KENTUCKY PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Interest $ 1,766,360 $ 1,238,139 $ 1,610,284 $ 1,868,916 ------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME $ 1,766,360 $ 1,238,139 $ 1,610,284 $ 1,868,916 ------------------------------------------------------------------------------------------------------------------------------- EXPENSES Investment adviser fee $ 105,120 $ 56,844 $ 84,416 $ 111,364 Trustees fees and expenses 3,354 861 3,354 3,354 Legal and accounting services 12,696 11,666 14,069 13,910 Custodian fee 19,614 14,586 17,214 19,903 Miscellaneous 3,603 3,475 3,709 3,474 ------------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES $ 144,387 $ 87,432 $ 122,762 $ 152,005 ------------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME $ 1,621,973 $ 1,150,707 $ 1,487,522 $ 1,716,911 ------------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) -- Investment transactions (identified cost basis) $ 784,387 $ 67,852 $ 241 $ 71,722 Financial futures contracts (499,908) (34,072) (370,644) (527,546) Interest rate swap contracts -- (274,450) -- -- ------------------------------------------------------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS) $ 284,479 $ (240,670) $ (370,403) $ (455,824) ------------------------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation (depreciation) -- Investments (identified cost basis) $ 2,379,173 $ 2,468,793 $ 3,567,413 $ 2,903,139 Financial futures contracts (111,539) (296,561) (357,011) (146,971) Interest rate swap contracts -- 70,930 -- -- ------------------------------------------------------------------------------------------------------------------------------- NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $ 2,267,634 $ 2,243,162 $ 3,210,402 $ 2,756,168 ------------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN $ 2,552,113 $ 2,002,492 $ 2,839,999 $ 2,300,344 ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,174,086 $ 3,153,199 $ 4,327,521 $ 4,017,255 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 94
LOUISIANA PORTFOLIO MARYLAND PORTFOLIO MISSOURI PORTFOLIO NORTH CAROLINA PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Interest $ 820,663 $ 2,151,872 $ 1,661,592 $ 2,377,938 ------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME $ 820,663 $ 2,151,872 $ 1,661,592 $ 2,377,938 ------------------------------------------------------------------------------------------------------------------------------- EXPENSES Investment adviser fee $ 29,241 $ 133,953 $ 88,275 $ 155,986 Trustees fees and expenses 871 3,354 3,354 3,354 Legal and accounting services 13,702 13,704 14,750 13,704 Custodian fee 10,701 22,711 16,763 25,361 Miscellaneous 3,097 4,237 4,308 4,496 ------------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES $ 57,612 $ 177,959 $ 127,450 $ 202,901 ------------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME $ 763,051 $ 1,973,913 $ 1,534,142 $ 2,175,037 ------------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) -- Investment transactions (identified cost basis) $ 45,018 $ 259,718 $ 82,927 $ 1,621,985 Financial futures contracts (214,734) (828,434) (350,804) (597,003) ------------------------------------------------------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS) $ (169,716) $ (568,716) $ (267,877) $ 1,024,982 ------------------------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation (depreciation) -- Investments (identified cost basis) $ 1,519,195 $ 3,441,433 $ 2,728,801 $ 2,959,412 Financial futures contracts (192,739) (193,711) (356,783) (553,924) ------------------------------------------------------------------------------------------------------------------------------- NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $ 1,326,456 $ 3,247,722 $ 2,372,018 $ 2,405,488 ------------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN $ 1,156,740 $ 2,679,006 $ 2,104,141 $ 3,430,470 ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,919,791 $ 4,652,919 $ 3,638,283 $ 5,605,507 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 95
OREGON PORTFOLIO SOUTH CAROLINA PORTFOLIO TENNESSEE PORTFOLIO VIRGINIA PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Interest $ 2,485,332 $ 1,593,954 $ 1,323,978 $ 3,158,330 ------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME $ 2,485,332 $ 1,593,954 $ 1,323,978 $ 3,158,330 ------------------------------------------------------------------------------------------------------------------------------- EXPENSES Investment adviser fee $ 151,235 $ 79,388 $ 66,945 $ 219,138 Trustees fees and expenses 3,355 3,354 870 4,399 Legal and accounting services 15,813 11,840 13,602 14,853 Custodian fee 22,995 15,943 14,093 29,184 Miscellaneous 5,202 4,523 3,946 6,013 ------------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES $ 198,600 $ 115,048 $ 99,456 $ 273,587 ------------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME $ 2,286,732 $ 1,478,906 $ 1,224,522 $ 2,884,743 ------------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) -- Investment transactions (identified cost basis) $ 425,870 $ 392,996 $ 36,087 $ 280,167 Financial futures contracts (23,588) (251,961) (312,273) (835,804) Interest rate swap contracts (748,500) -- -- -- ------------------------------------------------------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS) $ (346,218) $ 141,035 $ (276,186) $ (555,637) ------------------------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation (depreciation) -- Investments (identified cost basis) $ 4,554,098 $ 3,031,440 $ 2,467,726 $ 6,907,986 Financial futures contracts (759,351) (306,285) (323,366) (799,716) Interest rate swap contracts 193,446 -- -- -- ------------------------------------------------------------------------------------------------------------------------------- NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $ 3,988,193 $ 2,725,155 $ 2,144,360 $ 6,108,270 ------------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN $ 3,641,975 $ 2,866,190 $ 1,868,174 $ 5,552,633 ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 5,928,707 $ 4,345,096 $ 3,092,696 $ 8,437,376 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 96 STATEMENTS OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2004
INCREASE (DECREASE) IN NET ASSETS ALABAMA PORTFOLIO ARKANSAS PORTFOLIO GEORGIA PORTFOLIO KENTUCKY PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- From operations -- Net investment income $ 1,621,973 $ 1,150,707 $ 1,487,522 $ 1,716,911 Net realized gain (loss) 284,479 (240,670) (370,403) (455,824) Net change in unrealized appreciation (depreciation) 2,267,634 2,243,162 3,210,402 2,756,168 ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,174,086 $ 3,153,199 $ 4,327,521 $ 4,017,255 ------------------------------------------------------------------------------------------------------------------------------- Capital transactions -- Contributions $ 1,978,327 $ 1,308,958 $ 2,221,100 $ 1,441,305 Withdrawals (5,213,690) (3,386,896) (3,365,346) (4,630,430) ------------------------------------------------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (3,235,363) $ (2,077,938) $ (1,144,246) $ (3,189,125) ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS $ 938,723 $ 1,075,261 $ 3,183,275 $ 828,130 ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS At beginning of period $ 64,716,340 $ 43,698,668 $ 54,114,785 $ 67,575,292 ------------------------------------------------------------------------------------------------------------------------------- AT END OF PERIOD $ 65,655,063 $ 44,773,929 $ 57,298,060 $ 68,403,422 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 97
INCREASE (DECREASE) IN NET ASSETS LOUISIANA PORTFOLIO MARYLAND PORTFOLIO MISSOURI PORTFOLIO NORTH CAROLINA PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- From operations -- Net investment income $ 763,051 $ 1,973,913 $ 1,534,142 $ 2,175,037 Net realized gain (loss) (169,716) (568,716) (267,877) 1,024,982 Net change in unrealized appreciation (depreciation) 1,326,456 3,247,722 2,372,018 2,405,488 ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,919,791 $ 4,652,919 $ 3,638,283 $ 5,605,507 ------------------------------------------------------------------------------------------------------------------------------- Capital transactions -- Contributions $ 653,016 $ 2,295,867 $ 2,628,283 $ 1,561,563 Withdrawals (2,323,083) (9,555,427) (4,683,585) (9,073,503) ------------------------------------------------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (1,670,067) $ (7,259,560) $ (2,055,302) $ (7,511,940) ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS $ 249,724 $ (2,606,641) $ 1,582,981 $ (1,906,433) ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS At beginning of period $ 28,501,740 $ 78,678,380 $ 57,317,575 $ 89,544,419 ------------------------------------------------------------------------------------------------------------------------------- AT END OF PERIOD $ 28,751,464 $ 76,071,739 $ 58,900,556 $ 87,637,986 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 98
INCREASE (DECREASE) IN NET ASSETS OREGON PORTFOLIO SOUTH CAROLINA PORTFOLIO TENNESSEE PORTFOLIO VIRGINIA PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- From operations -- Net investment income $ 2,286,732 $ 1,478,906 $ 1,224,522 $ 2,884,743 Net realized gain (loss) (346,218) 141,035 (276,186) (555,637) Net change in unrealized appreciation (depreciation) 3,988,193 2,725,155 2,144,360 6,108,270 ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 5,928,707 $ 4,345,096 $ 3,092,696 $ 8,437,376 ------------------------------------------------------------------------------------------------------------------------------- Capital transactions -- Contributions $ 2,684,238 $ 3,687,696 $ 2,876,013 $ 3,793,427 Withdrawals (6,403,137) (4,734,722) (4,605,642) (9,579,545) ------------------------------------------------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (3,718,899) $ (1,047,026) $ (1,729,629) $ (5,786,118) ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS $ 2,209,808 $ 3,298,070 $ 1,363,067 $ 2,651,258 ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS At beginning of period $ 82,715,710 $ 51,213,746 $ 48,460,580 $ 113,477,612 ------------------------------------------------------------------------------------------------------------------------------- AT END OF PERIOD $ 84,925,518 $ 54,511,816 $ 49,823,647 $ 116,128,870 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 99 FOR THE YEAR ENDED AUGUST 31, 2003
INCREASE (DECREASE) IN NET ASSETS ALABAMA PORTFOLIO ARKANSAS PORTFOLIO GEORGIA PORTFOLIO KENTUCKY PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- From operations -- Net investment income $ 3,313,142 $ 2,300,813 $ 3,017,352 $ 3,496,419 Net realized gain (loss) 134,430 527,436 (333,635) (2,678,901) Net change in unrealized appreciation (depreciation) (1,468,945) (1,636,116) (612,968) 1,374,471 ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,978,627 $ 1,192,133 $ 2,070,749 $ 2,191,989 ------------------------------------------------------------------------------------------------------------------------------- Capital transactions -- Contributions $ 7,826,188 $ 4,263,125 $ 6,128,727 $ 6,168,539 Withdrawals (9,563,241) (5,016,611) (10,414,983) (10,294,305) ------------------------------------------------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (1,737,053) $ (753,486) $ (4,286,256) $ (4,125,766) ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS $ 241,574 $ 438,647 $ (2,215,507) $ (1,933,777) ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS At beginning of year $ 64,474,766 $ 43,260,021 $ 56,330,292 $ 69,509,069 ------------------------------------------------------------------------------------------------------------------------------- AT END OF YEAR $ 64,716,340 $ 43,698,668 $ 54,114,785 $ 67,575,292 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 100
INCREASE (DECREASE) IN NET ASSETS LOUISIANA PORTFOLIO MARYLAND PORTFOLIO MISSOURI PORTFOLIO NORTH CAROLINA PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- From operations -- Net investment income $ 1,570,788 $ 4,158,293 $ 3,185,742 $ 4,690,094 Net realized gain (loss) 234,944 437,591 375,821 (833,851) Net change in unrealized appreciation (depreciation) (896,513) (2,115,611) (1,480,015) (1,726,154) ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 909,219 $ 2,480,273 $ 2,081,548 $ 2,130,089 ------------------------------------------------------------------------------------------------------------------------------- Capital transactions -- Contributions $ 2,630,038 $ 8,575,652 $ 5,893,727 $ 7,117,679 Withdrawals (4,426,484) (17,793,080) (9,406,029) (15,522,233) ------------------------------------------------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (1,796,446) $ (9,217,428) $ (3,512,302) $ (8,404,554) ------------------------------------------------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS $ (887,227) $ (6,737,155) $ (1,430,754) $ (6,274,465) ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS At beginning of year $ 29,388,967 $ 85,415,535 $ 58,748,329 $ 95,818,884 ------------------------------------------------------------------------------------------------------------------------------- AT END OF YEAR $ 28,501,740 $ 78,678,380 $ 57,317,575 $ 89,544,419 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 101
INCREASE (DECREASE) IN NET ASSETS OREGON PORTFOLIO SOUTH CAROLINA PORTFOLIO TENNESSEE PORTFOLIO VIRGINIA PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------- From operations -- Net investment income $ 4,649,972 $ 2,630,849 $ 2,480,931 $ 6,057,000 Net realized gain (loss) 53,387 444,288 132,379 (166,417) Net change in unrealized appreciation (depreciation) (2,528,160) (1,603,577) (763,780) (2,469,255) ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,175,199 $ 1,471,560 $ 1,849,530 $ 3,421,328 ------------------------------------------------------------------------------------------------------------------------------- Capital transactions -- Contributions $ 9,291,990 $ 10,958,295 $ 8,308,589 $ 7,960,993 Withdrawals (12,365,559) (7,921,651) (9,554,586) (17,554,176) ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (3,073,569) $ 3,036,644 $ (1,245,997) $ (9,593,183) ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS $ (898,370) $ 4,508,204 $ 603,533 $ (6,171,855) ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS At beginning of year $ 83,614,080 $ 46,705,542 $ 47,857,047 $ 119,649,467 ------------------------------------------------------------------------------------------------------------------------------- AT END OF YEAR $ 82,715,710 $ 51,213,746 $ 48,460,580 $ 113,477,612 -------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements 102 SUPPLEMENTARY DATA
ALABAMA PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.44%(2) 0.46% 0.45% 0.46% 0.49% 0.46% Expenses after custodian fee reduction 0.44%(2) 0.44% 0.44% 0.44% 0.48% 0.45% Net investment income 4.95%(2) 5.08% 5.21% 5.31% 5.57% 5.18% Portfolio Turnover 14% 10% 25% 14% 8% 23% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 6.59% 3.09% 4.86% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 65,655 $ 64,716 $ 64,475 $ 64,271 $ 66,653 $ 82,141 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets from 5.20% to 5.21%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 103
ARKANSAS PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.40%(2) 0.41% 0.40% 0.39% 0.46% 0.45% Expenses after custodian fee reduction 0.40%(2) 0.39% 0.39% 0.37% 0.45% 0.43% Net investment income 5.20%(2) 5.22% 5.38% 5.48% 5.65% 5.25% Portfolio Turnover 7% 25% 23% 9% 14% 24% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 7.45% 2.81% 5.83% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 44,774 $ 43,699 $ 43,260 $ 42,662 $ 42,233 $ 50,491 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets from 5.37% to 5.38%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 104
GEORGIA PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.44%(2) 0.46% 0.46% 0.45% 0.49% 0.46% Expenses after custodian fee reduction 0.44%(2) 0.44% 0.45% 0.42% 0.47% 0.42% Net investment income 5.35%(2) 5.38% 5.55% 5.47% 5.69% 5.31% Portfolio Turnover 2% 16% 18% 8% 13% 38% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 8.07% 3.82% 4.82% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 57,298 $ 54,115 $ 56,330 $ 63,673 $ 63,067 $ 71,220 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets from 5.54% to 5.55%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 105
KENTUCKY PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.45%(2) 0.46% 0.45% 0.48% 0.52% 0.49% Expenses after custodian fee reduction 0.45%(2) 0.44% 0.44% 0.44% 0.50% 0.47% Net investment income 5.06%(2) 5.05% 5.25% 5.17% 5.75% 5.36% Portfolio Turnover 2% 10% 5% 15% 11% 11% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 6.15% 3.22% 4.39% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 68,403 $ 67,575 $ 69,509 $ 79,821 $ 81,708 $ 97,762 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets from 5.23% to 5.25%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 106
LOUISIANA PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.40%(2) 0.40% 0.40% 0.43% 0.39% 0.37% Expenses after custodian fee reduction 0.40%(2) 0.38% 0.38% 0.40% 0.35% 0.34% Net investment income 5.32%(2) 5.33% 5.43% 5.28% 5.63% 5.16% Portfolio Turnover 3% 21% 25% 14% 14% 20% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 6.97% 3.16% 5.02% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 28,751 $ 28,502 $ 29,389 $ 29,155 $ 28,441 $ 32,668 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets from 5.28% to 5.43%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 107
MARYLAND PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.46%(2) 0.47% 0.48% 0.47% 0.51% 0.49% Expenses after custodian fee reduction 0.46%(2) 0.45% 0.46% 0.42% 0.49% 0.46% Net investment income 5.10%(2) 4.96% 5.12% 5.30% 5.18% 5.05% Portfolio Turnover 6% 28% 25% 18% 9% 31% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 6.22% 2.90% 5.17% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 76,072 $ 78,678 $ 85,416 $ 82,797 $ 81,676 $ 95,223 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets by less than 0.01%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 108
MISSOURI PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.45%(2) 0.45% 0.44% 0.45% 0.49% 0.46% Expenses after custodian fee reduction 0.45%(2) 0.43% 0.43% 0.43% 0.48% 0.44% Net investment income 5.36%(2) 5.39% 5.60% 5.65% 5.80% 5.28% Portfolio Turnover 4% 20% 8% 8% 8% 21% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 6.58% 3.65% 5.24% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 58,901 $ 57,318 $ 58,748 $ 57,548 $ 58,927 $ 68,264 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets from 5.59% to 5.60%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 109
NORTH CAROLINA PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.46%(2) 0.48% 0.48% 0.49% 0.52% 0.50% Expenses after custodian fee reduction 0.46%(2) 0.46% 0.48% 0.46% 0.49% 0.49% Net investment income 4.97%(2) 4.99% 5.28% 5.34% 5.66% 5.24% Portfolio Turnover 16% 21% 21% 28% 17% 3% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 6.61% 2.29% 4.43% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 87,638 $ 89,544 $ 95,819 $ 101,025 $ 110,493 $ 129,330 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets from 5.27% to 5.28%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 110
OREGON PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.48%(2) 0.49% 0.46% 0.48% 0.51% 0.48% Expenses after custodian fee reduction 0.48%(2) 0.47% 0.45% 0.47% 0.50% 0.47% Net investment income 5.49%(2) 5.50% 5.46% 5.45% 5.63% 5.27% Portfolio Turnover 2% 16% 21% 13% 25% 35% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 7.45% 2.58% 5.28% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 84,926 $ 82,716 $ 83,614 $ 83,951 $ 83,712 $ 94,317 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets from 5.43% to 5.46%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 111
SOUTH CAROLINA PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.43%(2) 0.43% 0.40% 0.39% 0.44% 0.43% Expenses after custodian fee reduction 0.43%(2) 0.41% 0.38% 0.34% 0.42% 0.40% Net investment income 5.58%(2) 5.36% 5.49% 5.56% 5.77% 5.33% Portfolio Turnover 33% 37% 15% 21% 12% 26% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 8.55% 3.15% 5.07% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 54,512 $ 51,214 $ 46,706 $ 39,821 $ 35,070 $ 44,833 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets from 5.46% to 5.49%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 112
TENNESSEE PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.41%(2) 0.42% 0.40% 0.41% 0.44% 0.42% Expenses after custodian fee reduction 0.41%(2) 0.39% 0.38% 0.37% 0.42% 0.41% Net investment income 5.01%(2) 5.05% 5.27% 5.39% 5.61% 5.23% Portfolio Turnover 7% 17% 19% 11% 9% 13% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 6.56% 3.90% 5.38% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 49,824 $ 48,461 $ 47,857 $ 47,369 $ 45,015 $ 49,407 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets by less than 0.01%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 113
VIRGINIA PORTFOLIO ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2004 --------------------------------------------------------- (UNAUDITED) 2003 2002(1) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratios (As a percentage of average daily net assets): Expenses 0.48%(2) 0.50% 0.49% 0.49% 0.54% 0.50% Expenses after custodian fee reduction 0.48%(2) 0.49% 0.49% 0.47% 0.53% 0.48% Net investment income 5.05%(2) 5.13% 5.31% 5.28% 5.61% 5.26% Portfolio Turnover 10% 20% 33% 39% 23% 17% ---------------------------------------------------------------------------------------------------------------------------------- Total Return(3) 7.61% 2.89% 4.25% -- -- -- ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (000'S OMITTED) $ 116,129 $ 113,478 $ 119,649 $ 122,103 $ 115,776 $ 137,624 ----------------------------------------------------------------------------------------------------------------------------------
(1) The Portfolio has adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies and began using the interest method to amortize premiums on fixed-income securities. The effect of this change for the year ended August 31, 2002 was to increase the ratio of net investment income to average net assets from 5.30% to 5.31%. Ratios for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. (2) Annualized. (3) Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See notes to financial statements 114 EATON VANCE MUNICIPALS PORTFOLIOS as of February 29, 2004 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1 SIGNIFICANT ACCOUNTING POLICIES Alabama Municipals Portfolio (Alabama Portfolio), Arkansas Municipals Portfolio (Arkansas Portfolio), Georgia Municipals Portfolio (Georgia Portfolio), Kentucky Municipals Portfolio (Kentucky Portfolio), Louisiana Municipals Portfolio (Louisiana Portfolio), Maryland Municipals Portfolio (Maryland Portfolio), Missouri Municipals Portfolio (Missouri Portfolio), North Carolina Municipals Portfolio (North Carolina Portfolio), Oregon Municipals Portfolio (Oregon Portfolio), South Carolina Municipals Portfolio (South Carolina Portfolio), Tennessee Municipals Portfolio (Tennessee Portfolio) and Virginia Municipals Portfolio (Virginia Portfolio), collectively the Portfolios, are registered under the Investment Company Act of 1940, as amended, as non-diversified open-end management investment companies. The Portfolios, which were organized as trusts under the laws of the State of New York on May 1, 1992, seek to achieve current income exempt from regular federal income tax and from particular state or local income or other taxes. The Declarations of Trust permit the Trustees to issue interests in the Portfolios. At February 29, 2004, Eaton Vance Alabama Municipals Fund, Eaton Vance Arkansas Municipals Fund, Eaton Vance Georgia Municipals Fund, Eaton Vance Kentucky Municipals Fund, Eaton Vance Louisiana Municipals Fund, Eaton Vance Maryland Municipals Fund, Eaton Vance Missouri Municipals Fund, Eaton Vance North Carolina Municipals Fund, Eaton Vance Oregon Municipals Fund, Eaton Vance South Carolina Municipals Fund, Eaton Vance Tennessee Municipals Fund and Eaton Vance Virginia Municipals Fund each held an approximate 99.9% interest in its corresponding Portfolio. The following is a summary of significant accounting policies of the Portfolios. The policies are in conformity with accounting principles generally accepted in the United States of America. 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. Financial futures contracts and options on financial 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. Interest rate swaps are normally valued on the basis of valuations furnished by a broker. 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. C FEDERAL 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 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 for both hedging against anticipated future changes in interest rates and investment purposes. Should interest rates move unexpectedly, a Portfolio may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. 115 E 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, a 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 put options is limited to the premium originally paid. F LEGAL FEES -- Legal fees and other related expenses incurred as part of negotiations of the terms and requirements of capital infusions, or that are expected to result in the restructuring of or a plan of reorganization for an investment are recorded as realized losses. Ongoing expenditures to protect or enhance an investment are treated as operating expenses. G WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Portfolios may engage in when-issued and delayed delivery transactions. The Portfolios record when-issued securities on trade date and maintain security positions such that sufficient liquid assets will be available to make payments for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked-to-market daily and begin earning interest on settlement date. H INTEREST RATE SWAPS -- A Portfolio may enter into interest rate swap agreements to enhance return, to hedge against fluctuations in securities prices or interest rates or as substitution for the purchase or sale of securities. Pursuant to these agreements, the Portfolios make semi-annual payments at a fixed interest rate. In exchange, a Portfolio receives payments based on the interest rate of a benchmark industry index. During the term of the outstanding swap agreement, changes in the underlying value of the swap are recorded as unrealized gains and losses. The value of the swap is determined by changes in the relationship between two rates of interest. The Portfolio is exposed to credit loss in the event of non-performance by the swap counterparty. However, the Portfolio does not anticipate non-performance by the counterparty. Risk may also arise from the unanticipated movements in value of interest rates. I OTHER -- Investment transactions are accounted for on a trade date basis. Realized gains and losses are computed based on the specific identification of the securities sold. J EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT) serves as custodian of the Portfolios. Pursuant to the respective custodian agreements, IBT receives a fee reduced by credits which are determined based on the average daily cash balances each Portfolio maintains with IBT. All significant credit balances used to reduce the Portfolios' custodian fees are reported as a reduction of total expenses in the Statements of Operations. K USE OF ESTIMATES -- The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America 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 income and expense during the reporting period. Actual results could differ from those estimates. L INDEMNIFICATIONS -- Under a Portfolio's organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Portfolio. Interestholders in the Portfolio are jointly and severally liable for the liabilities and obligations of the Portfolio in the event that the Portfolio fails to satisfy such liabilities and obligations; provided, however, that, to the extent assets are available in the Portfolio, the Portfolio may, under certain circumstances, indemnify interestholders from and against any claim or liability to which such holder may become subject by reason of being or having been an interestholder in the Portfolio. Additionally, in the normal course of business, the Portfolio enters into agreements with service providers that may contain indemnification clauses. The Portfolio's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Portfolio that have not yet occurred. M INTERIM FINANCIAL STATEMENTS -- The interim financial statements relating to February 29, 2004 and for the six months then ended have not been audited by independent certified public accountants, but in the opinion of the Portfolios' management reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial statements. 116 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 six months ended February 29, 2004, the Portfolios paid advisory fees as follows:
PORTFOLIO AMOUNT EFFECTIVE RATE* ------------------------------------------------------------- Alabama $ 105,120 0.32% Arkansas 56,844 0.26% Georgia 84,416 0.30% Kentucky 111,364 0.33% Louisiana 29,241 0.20% Maryland 133,953 0.35% Missouri 88,275 0.31% North Carolina 155,986 0.36% Oregon 151,235 0.36% South Carolina 79,388 0.30% Tennessee 66,945 0.27% Virginia 219,138 0.38%
* As a percentage of average daily net assets (annualized). 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 six months ended February 29, 2004, no significant amounts have been deferred. Certain officers and Trustees of the Portfolios are officers of the above organizations. During the six months ended February 29, 2004, certain Portfolios engaged in purchase and sale transactions with other Portfolios that also utilize BMR as an investment adviser. These purchase and sale transactions complied with Rule 17a-7 under the Investment Company Act of 1940 and amounted to:
PORTFOLIO PURCHASES SALES -------------------------------------------------------------- Arkansas $ 507,980 $ 1,327,058 Georgia 306,603 -- Tennessee -- 109,163
3 INVESTMENTS Purchases and sales of investments, other than U.S. Government securities, purchased options and short-term obligations, for the six months ended February 29, 2004, were as follows: ALABAMA PORTFOLIO Purchases $ 8,761,221 Sales 11,446,817 ARKANSAS PORTFOLIO Purchases $ 3,087,755 Sales 3,183,859 GEORGIA PORTFOLIO Purchases $ 1,061,471 Sales 1,357,325 KENTUCKY PORTFOLIO Purchases $ 1,007,880 Sales 3,704,675 LOUISIANA PORTFOLIO Purchases $ 886,356 Sales 1,708,062 MARYLAND PORTFOLIO Purchases $ 4,377,118 Sales 9,628,318 MISSOURI PORTFOLIO Purchases $ 2,032,165 Sales 3,924,203
117 NORTH CAROLINA PORTFOLIO Purchases $ 13,705,302 Sales 20,072,074 OREGON PORTFOLIO Purchases $ 1,602,059 Sales 5,695,965 SOUTH CAROLINA PORTFOLIO Purchases $ 17,371,249 Sales 19,575,704 TENNESSEE PORTFOLIO Purchases $ 3,497,110 Sales 3,586,428 VIRGINIA PORTFOLIO Purchases $ 10,788,410 Sales 15,599,868
4 FEDERAL INCOME TAX BASIS OF UNREALIZED APPRECIATION (DEPRECIATION) The cost and unrealized appreciation (depreciation) in value of the investments owned by each Portfolio at February 29, 2004, as computed on a federal income tax basis, are as follows: ALABAMA PORTFOLIO AGGREGATE COST $ 59,142,895 -------------------------------------------------------------- Gross unrealized appreciation $ 5,661,343 Gross unrealized depreciation (232,515) -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 5,428,828 -------------------------------------------------------------- ARKANSAS PORTFOLIO AGGREGATE COST $ 42,244,771 -------------------------------------------------------------- Gross unrealized appreciation $ 3,469,192 Gross unrealized depreciation (258,458) -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 3,210,734 -------------------------------------------------------------- GEORGIA PORTFOLIO AGGREGATE COST $ 51,212,773 -------------------------------------------------------------- Gross unrealized appreciation $ 6,561,073 Gross unrealized depreciation (1,144,594) -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 5,416,479 -------------------------------------------------------------- KENTUCKY PORTFOLIO AGGREGATE COST $ 59,860,592 -------------------------------------------------------------- Gross unrealized appreciation $ 7,096,136 Gross unrealized depreciation (19,054) -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 7,077,082 -------------------------------------------------------------- LOUISIANA PORTFOLIO AGGREGATE COST $ 26,507,251 -------------------------------------------------------------- Gross unrealized appreciation $ 2,582,758 Gross unrealized depreciation (100,449) -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 2,482,309 -------------------------------------------------------------- MARYLAND PORTFOLIO AGGREGATE COST $ 72,647,254 -------------------------------------------------------------- Gross unrealized appreciation $ 5,966,186 Gross unrealized depreciation (3,322,323) -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 2,643,863 -------------------------------------------------------------- MISSOURI PORTFOLIO AGGREGATE COST $ 51,549,120 -------------------------------------------------------------- Gross unrealized appreciation $ 5,914,809 Gross unrealized depreciation (287,586) -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 5,627,223 -------------------------------------------------------------- NORTH CAROLINA PORTFOLIO AGGREGATE COST $ 79,124,752 -------------------------------------------------------------- Gross unrealized appreciation $ 8,678,535 Gross unrealized depreciation (860,686) -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 7,817,849 --------------------------------------------------------------
118 OREGON PORTFOLIO AGGREGATE COST $ 76,803,882 -------------------------------------------------------------- Gross unrealized appreciation $ 6,115,428 Gross unrealized depreciation (242,331) -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 5,873,097 -------------------------------------------------------------- SOUTH CAROLINA PORTFOLIO AGGREGATE COST $ 49,207,319 -------------------------------------------------------------- Gross unrealized appreciation $ 3,898,361 Gross unrealized depreciation (35,054) -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 3,863,307 -------------------------------------------------------------- TENNESSEE PORTFOLIO AGGREGATE COST $ 43,636,066 -------------------------------------------------------------- Gross unrealized appreciation $ 4,664,957 Gross unrealized depreciation -- -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 4,664,957 -------------------------------------------------------------- VIRGINIA PORTFOLIO AGGREGATE COST $ 102,153,950 -------------------------------------------------------------- Gross unrealized appreciation $ 11,699,341 Gross unrealized depreciation (6,728) -------------------------------------------------------------- NET UNREALIZED APPRECIATION $ 11,692,613 --------------------------------------------------------------
5 LINE OF CREDIT The Portfolios participate with other portfolios and funds managed by BMR and EVM and its affiliates in a $150 million unsecured line of credit agreement with a group of banks. Borrowings will be made by the Portfolios 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 an amount above either the Eurodollar rate or federal funds rate. In addition, a fee computed at an annual rate of 0.10% on the daily unused portion of the line of credit is allocated among the participating portfolios and funds at the end of each quarter. At February 29, 2004, the Arkansas Portfolio, the Louisiana Portfolio, the Maryland Portfolio, the North Carolina Portfolio, and the Virginia Portfolio had balances outstanding pursuant to this line of credit of $100,000, $500,000, $500,000, $100,000 and $300,000, respectively. The Portfolios did not have any significant borrowings or allocated fees during the six months ended February 29, 2004. 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 interest rate swaps 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 held under these financial instruments at February 29, 2004, is as follows: FUTURES CONTRACTS
EXPIRATION NET UNREALIZED PORTFOLIO DATE CONTRACTS POSITION DEPRECIATION ---------------------------------------------------------------------------------- Alabama 3/04 57 U.S. Treasury Bond Short $ (148,722) 6/04 9 U.S. Treasury Bond Short (14,663) ---------------------------------------------------------------------------------- Arkansas 3/04 50 U.S. Treasury Bond Short (230,876) 3/04 20 U.S. Treasury Note Short (65,685) ---------------------------------------------------------------------------------- Georgia 3/04 81 U.S. Treasury Bond Short (347,125) ---------------------------------------------------------------------------------- Kentucky 3/04 67 U.S. Treasury Bond Short (185,019) 6/04 9 U.S. Treasury Bond Short (14,663) ---------------------------------------------------------------------------------- Louisiana 3/04 45 U.S. Treasury Bond Short (182,231) ---------------------------------------------------------------------------------- Maryland 3/04 93 U.S. Treasury Bond Short (252,030) 6/04 13 U.S. Treasury Bond Short (21,180) ---------------------------------------------------------------------------------- Missouri 3/04 79 U.S. Treasury Bond Short (338,555) ---------------------------------------------------------------------------------- North Carolina 3/04 130 U.S. Treasury Bond Short (525,265) ---------------------------------------------------------------------------------- Oregon 3/04 165 U.S. Treasury Bond Short (627,983) 3/04 40 U.S. Treasury Note Short (131,368) ---------------------------------------------------------------------------------- South Carolina 3/04 80 U.S. Treasury Bond Short (312,458) ---------------------------------------------------------------------------------- Tennessee 3/04 72 U.S. Treasury Bond Short (308,556) ---------------------------------------------------------------------------------- Virginia 3/04 190 U.S. Treasury Bond Short (759,593)
At February 29, 2004, the Portfolios had sufficient cash and/or securities to cover margin requirements on open futures contracts. 119 7 INTERESTHOLDER MEETING Each Portfolio held a Special Meeting of Interestholders on February 20, 2004. At the Special Meeting, shareholders voted to change each Portfolio's diversification status from diversified to non-diversified. The results of the vote were as follows. Results are rounded to the nearest whole number:
ALABAMA FUND ARKANSAS FUND GEORGIA FUND KENTUCKY FUND LOUISIANA FUND MARYLAND FUND --------------------------------------------------------------------------------------------------------------------------- Affirmative 89% 89% 88% 85% 91% 87% Against 4% 4% 8% 10% 7% 8% Abstain 7% 7% 4% 5% 2% 5% MISSOURI FUND NORTH CAROLINA FUND OREGON FUND SOUTH CAROLINA FUND TENNESSEE FUND VIRGINIA FUND --------------------------------------------------------------------------------------------------------------------------- Affirmative 83% 85% 82% 90% 84% 88% Against 10% 8% 8% 6% 6% 8% Abstain 7% 7% 10% 4% 10% 4%
120 INVESTMENT MANAGEMENT MUNICIPALS PORTFOLIOS OFFICERS Thomas J. Fetter President and Portfolio Manager of South Carolina Municipals Portfolio James B. Hawkes Vice President and Trustee William H. Ahern, Jr. Vice President and Portfolio Manager of Alabama, Kentucky, and Maryland Municipals Portfolios Cynthia J. Clemson Vice President and Portfolio Manager of Georgia, Missouri, and Tennessee Municipals Portfolios Robert B. MacIntosh Vice President and Portfolio Manager of Louisiana and Virginia Municipals Portfolios Thomas M. Metzold Vice President and Portfolio Manager of Arkansas, North Carolina and Oregon Municipals Portfolios Kristin S. Anagnost Treasurer of Louisiana, Missouri, Oregon and Tennessee Municipals Portfolios Barbara E. Campbell Treasurer of Alabama, Arkansas, Georgia, Kentucky, Maryland, North Carolina, South Carolina and Virginia Municipals Portfolios Alan R. Dynner Secretary TRUSTEES Samuel L. Hayes, III William H. Park Ronald A. Pearlman Norton H. Reamer Lynn A. Stout 121 ITEM 2. CODE OF ETHICS The registrant has adopted a code of ethics applicable to its Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer. The registrant undertakes to provide a copy of such code of ethics to any person upon request, without charge, by calling 1-800-262-1122. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT The registrant's Board has designated William H. Park, Samuel L. Hayes, III and Norton H. Reamer, each an independent trustee, as its audit committee financial experts. Mr. Park is a certified public accountant who is the President and Chief Executive Officer of Prizm Capital Management, LLC (a fixed income investment management firm). Previously, he served as Executive Vice President and Chief Financial Officer of United Asset Management Corporation ("UAM") (a holding company owning institutional investment management firms). Mr. Hayes is the Jacob H. Schiff Professor of Investment Banking Emeritus of the Harvard University Graduate School of Business Administration. Mr. Reamer is the President, Chief Executive Officer and a Director of Asset Management Finance Corp. (a specialty finance company serving the investment management industry) and is President of Unicorn Corporation (an investment and financial advisory services company). Formerly, Mr. Reamer was Chairman of Hellman, Jordan Management Co., Inc. (an investment management company) and Advisory Director of Berkshire Capital Corporation (an investment banking firm), Chairman of the Board of UAM and Chairman, President and Director of the UAM Funds (mutual funds). ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Not required in this filing. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not required in this filing. ITEM 6. SCHEDULE OF INVESTMENTS Not required in this filing ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES Not required in this filing. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not required in this filing. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable ITEM 10. CONTROLS AND PROCEDURES (a) It is the conclusion of the registrant's principal executive officer and principal financial officer that the effectiveness of the registrant's current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission's rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant's principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure. (b) There have been no changes in the registrant's internal controls over financial reporting during the period that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting. ITEM 11. EXHIBITS (a)(1) Registrant's Code of Ethics - Not applicable (please see Item 2). (a)(2)(i) Treasurer's Section 302 certification. (a)(2)(ii) President's Section 302 certification. (b) Combined Section 906 certification. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NORTH CAROLINA MUNICIPALS PORTFOLIO By: /s/ Thomas J. Fetter --------------------------------- Thomas J. Fetter President Date: April 20, 2004 -------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Barbara E. Campbell --------------------------------- Barbara E. Campbell Treasurer Date: April 20, 2004 -------------- By: /s/ Thomas J. Fetter --------------------------------- Thomas J. Fetter President Date: April 20, 2004 --------------