UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Eaton Vance National Municipal Opportunities Trust

(Exact Name of Registrant as Specified in Charter)

Two International Place, Boston, Massachusetts 02110
(Address of Principal Executive Offices)

Maureen A. Gemma
Two International Place, Boston, Massachusetts 02110
(Name and Address of Agent for Services)

(617) 482-8260

March 31

March 31, 2012

 

 

Item 1. Reports to Stockholders

Eaton Vance National Municipal Opportunities Trust (EOT) Annual Report March 31, 2012

 

 

Fund shares are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Shares are subject to investment risks, including possible loss of principal invested.

Annual Report March 31, 2012

Eaton Vance
National Municipal Opportunities Trust

Table of Contents

Management’s Discussion of Fund Performance			2
Performance			3
Fund Profile			3
Endnotes and Additional Disclosures			4
Financial Statements			5
Report of Independent Registered Public Accounting Firm			19
Federal Tax Information			20
Notice to Shareholders			21
Annual Meeting of Shareholders			22
Dividend Reinvestment Plan			23
Management and Organization			25
Important Notices			27

Eaton Vance
National Municipal Opportunities Trust

March 31, 2012

Management’s Discussion of Fund Performance¹

Economic and Market Conditions

In the second quarter of 2011, Europe’s sovereign debt problems intensified, causing investors to worry about the potential impact on the U.S. economy and U.S. banks. Unemployment remained high, the housing market was stagnant, and Congressional wrangling over the debt ceiling led to a downgrade of U.S. Treasuries. Reacting to this turmoil, the S&P 500 Index² fell more than 15% during late July and early August of 2011 and spent the next several months clawing its way back.

Beginning in mid-December 2011, an equity market rally took hold and continued through the end of the fiscal year, fueled by stronger economic growth in the fourth quarter, falling unemployment claims, an uptick in hiring, and what the markets perceived as a successful restructuring of Greek debt. The S&P 500 Index finished the period with an 8.54% gain.

Against this backdrop, bond investors became increasingly risk-averse during the 2nd and 3rd quarters of 2011. Treasury prices rose, driving yields down significantly from April through September of 2011. By October, Treasury rates settled into a relatively stable trading range that lasted through the end of the period on March 31, 2012.

Early in the period, municipal bonds rallied along with Treasuries, but not to the same degree. As the period wore on, however, several factors caused the performance of municipals to improve compared to Treasuries. The massive municipal defaults predicted by high-profile market analysts did not materialize, while the fiscal situation for many issuers began to recover. As investors appeared more comfortable taking on risk, lower-rated municipals outperformed higher-rated issues and longer-maturity bonds outperformed those with shorter maturities.

With falling Treasury yields driven by a worldwide “flight to quality” (the perceived safety of Treasuries and other high-rated issues) and the Federal Reserve’s Operation Twist (central bank’s swapping of its short-term holdings for long-term Treasury bonds), municipal bonds during the period offered significantly higher taxable-equivalent yields than Treasuries. The ratio of 30-year AAA⁶ municipal yields to 30-year Treasury yields—which historically has averaged less than 100% because municipal yields are federally tax-exempt — began the period at 106.2% and finished at 101.5%. For the one-year period as a whole, the Fund’s primary benchmark, the Barclays Capital Long (22+) Municipal Bond Index (the Index)—an unmanaged index of municipal bonds traded in the U.S. with maturities of 22 years or more—rose 19.97%.

For the fiscal year ending March 31, 2012, Eaton Vance National Municipal Opportunities Trust (the Fund) shares at net asset value (NAV) had a total return of 18.67%, underperforming the 19.97% return of the Index.

Generally speaking, the Fund’s overall strategy is to invest primarily in bonds at the longer end of the maturity spectrum in order to capture their typically higher yields and greater tax exempt income payments. The Fund partially hedges against the greater risk of volatility at the long end of the curve, using Treasury futures to provide a degree of downside protection. While the Fund’s investments are primarily investment-grade (rated BBB and higher), as an opportunities fund it may invest across the credit quality spectrum. And while the Index includes only bonds with maturities of 22 years or more, the Fund may diversify across the yield curve and hold some securities with shorter maturities.

For the 12-month period, the Fund’s underperformance to the Index resulted in part from the underperformance of holdings in the 5–20 year maturity range, which underperformed longer maturity bonds for the period. While holdings in the 5–20 year maturity range were positive contributors to performance, longer maturity bonds had greater total return. Another detractor was the Fund’s holding in one particular airline backed bond, which declined in value when the carrier declared bankruptcy during the fiscal year.

Hedging interest rate volatility through the use of Treasury futures, a risk management strategy, is intended to moderate performance on both the upside and the downside.

So in a period when municipal and Treasury bonds saw strong performance, the Fund’s hedge also mitigated a portion of the Fund’s positive performance—and, as intended, reduced Fund volatility during a year of rather pronounced market volatility.

In contrast, the Fund’s strategy of favoring longer-maturity, longer-duration bonds was a positive contributor to performance, as municipal bonds with 20–30 year maturities outperformed the broader municipal market. Overweighting zero coupon bonds, which performed strongly as rates declined, also helped results, as did an overweighting in lower-rated bonds such as hospital credits.

See Endnotes and Additional Disclosures in this report.

Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or market price (as applicable) with all distributions reinvested. Fund performance at market price will differ from its results at NAV due to factors such as changing perceptions about the Fund, market conditions, fluctuations in supply and demand for Fund shares, or changes in Fund distributions. Investment return and principal value will fluctuate so that shares, when sold, may be worth more or less than their original cost. Performance less than one year is cumulative. Performance is for the stated time period only; due to market volatility, current Fund performance may be lower or higher than the quoted return. For performance as of the most recent month end, please refer to www.eatonvance.com.

Eaton Vance
National Municipal Opportunities Trust

March 31, 2012

Portfolio Managers Cynthia J. Clemson and Thomas M. Metzold, CFA

Performance^2,3

										Since
% Average Annual Total Returns		Inception Date				One Year				Inception
Fund at NAV			5/29/2009				18.67	%			11.19	%
Fund at Market Price			—				23.98				11.48
Barclays Capital Long (22+) Municipal Bond Index			5/29/2009				19.97	%			9.90	%

% Premium/Discount to NAV
			0.74	%

Distributions4
Total Distributions per share for the period		$	1.163
Distribution Rate at NAV			5.18	%
Taxable-Equivalent Distribution Rate at NAV			7.97	%
Distribution Rate at Market Price			5.14	%
Taxable-Equivalent Distribution Rate at Market Price			7.91	%

% Total Leverage5
Residual Interest Bond (RIB)			11.83	%

Fund Profile

Credit Quality (% of total investments)⁶

The above chart includes the ratings of securities held by special purpose vehicles established in connection with the RIB financing.⁵ Absent such securities, the Fund’s credit quality (% of total investments) is as follows:⁶

AAA		3.5	%			BB			5.5	%
AA		26.5				B			3.4
A		29.1				CCC			1.2
BBB		26.9				Not Rated			3.9

See Endnotes and Additional Disclosures in this report.

Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or market price (as applicable) with all distributions reinvested. Fund performance at market price will differ from its results at NAV due to factors such as changing perceptions about the Fund, market conditions, fluctuations in supply and demand for Fund shares, or changes in Fund distributions. Investment return and principal value will fluctuate so that shares, when sold, may be worth more or less than their original cost. Performance less than one year is cumulative. Performance is for the stated time period only; due to market volatility, current Fund performance may be lower or higher than the quoted return. For performance as of the most recent month end, please refer to www.eatonvance.com.

Eaton Vance
National Municipal Opportunities Trust

March 31, 2012

Endnotes and Additional Disclosures

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Portfolio of Investments

 

See Notes to Financial Statements.

5

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Portfolio of Investments — continued

 

See Notes to Financial Statements.

6

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Portfolio of Investments — continued

 

See Notes to Financial Statements.

7

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Portfolio of Investments — continued

 

The percentage shown for each investment category in the Portfolio of Investments is based on net assets.

 

 

At March 31, 2012, the concentration of the Trust’s investments in the various states, determined as a percentage of total investments, is as follows:

 

Texas			14.7%
California			12.5%
Others, representing less than 10% individually			72.8%

 

The Trust invests primarily in debt securities issued by municipalities. The ability of the issuers of the debt securities to meet their obligations may be affected by economic developments in a specific industry or municipality. In order to reduce the risk associated with such economic developments, at March 31, 2012, 11.4% of total 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 0.1% to 5.0% of total investments.

 

 

See Notes to Financial Statements.

8

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Statement of Assets and Liabilities

 

 

See Notes to Financial Statements.

9

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Statement of Operations

 

See Notes to Financial Statements.

10

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Statements of Changes in Net Assets

 

See Notes to Financial Statements.

11

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Statement of Cash Flows

 

See Notes to Financial Statements.

12

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Financial Highlights

 

 

See Notes to Financial Statements.

13

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Notes to Financial Statements

 

1 Significant Accounting Policies

 

Eaton Vance National Municipal Opportunities Trust (the Trust) is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, closed-end management investment company. The Trust’s primary investment objective is to provide current income exempt from regular federal income tax. The Trust will, as a secondary investment objective, seek to achieve capital appreciation.

 

The following is a summary of significant accounting policies of the Trust. The policies are in conformity with accounting principles generally accepted in the United States of America.

 

A Investment Valuation — Debt obligations (including short-term obligations with a remaining maturity of more than sixty days) are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices, broker/dealer quotations, prices or yields of securities with similar characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security. Short-term obligations purchased with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates market value. Financial futures contracts are valued at the closing settlement price established by the board of trade or exchange on which they are traded. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Trust in a manner that fairly reflects the security’s value, or the amount that the Trust might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the entity’s financial condition, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.

 

B Investment Transactions and Related Income — Investment transactions for financial statement purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost. Interest income is recorded on the basis of interest accrued, adjusted for amortization of premium or accretion of discount.

 

C Federal Taxes — The Trust’s policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its taxable, if any, and tax-exempt net investment income, and all or substantially all of its net realized capital gains. Accordingly, no provision for federal income or excise tax is necessary. The Trust intends to satisfy conditions which will enable it to designate distributions from the interest income generated by its investments in municipal obligations, which are exempt from regular federal income tax when received by the Trust, as exempt-interest dividends. The portion of such interest, if any, earned on private activity bonds issued after August 7, 1986, may be considered a tax preference item to shareholders.

 

At March 31, 2012, the Trust, for federal income tax purposes, had current year deferred capital losses of $8,450,273 which will reduce its taxable income arising from future net realized gains on investment transactions, if any, to the extent permitted by the Internal Revenue Code, and thus will reduce the amount of distributions to shareholders, which would otherwise be necessary to relieve the Trust of any liability for federal income or excise tax. The current year deferred capital losses are treated as arising on the first day of the Fund’s next taxable year.

 

As of March 31, 2012, the Trust had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Trust files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.

 

D Expense Reduction — State Street Bank and Trust Company (SSBT) serves as custodian of the Trust. Pursuant to the custodian agreement, SSBT receives a fee reduced by credits, which are determined based on the average daily cash balance the Trust maintains with SSBT. All credit balances, if any, used to reduce the Trust’s custodian fees are reported as a reduction of expenses in the Statement of Operations.

 

E Legal Fees — Legal fees and other related expenses incurred as part of negotiations of the terms and requirement 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.

 

F 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.

 

G Indemnifications — Under the Trust’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 Trust. Under Massachusetts law, if certain conditions prevail, shareholders of a Massachusetts business trust (such as the Trust) could be deemed to have personal liability for the obligations of the Trust. However, the Trust’s Declaration of Trust contains an express disclaimer of liability on the part of Trust shareholders and the By-laws provide that the Trust shall assume the defense on behalf of any Trust shareholders. Moreover, the By-laws also provide for indemnification out of Trust property of any shareholder held personally liable solely by

 

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Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Notes to Financial Statements — continued

reason of being or having been a shareholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Trust enters into agreements with service providers that may contain indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred.

 

H Floating Rate Notes Issued in Conjunction with Securities Held — The Trust may invest in residual interest bonds, also referred to as inverse floating rate securities, whereby the Trust may sell a variable or fixed rate bond to a broker for cash. At the same time, the Trust buys a residual interest in the assets and cash flows of a Special-Purpose Vehicle (the SPV), (which is generally organized as a trust), set up by the broker. The broker deposits a bond into the SPV with the same CUSIP number as the bond sold to the broker by the Trust, and which may have been, but is not required to be, the bond purchased from the Trust (the Bond). The SPV also issues floating rate notes (Floating Rate Notes) which are sold to third-parties. The residual interest bond held by the Trust gives the Trust the right (1) to cause the holders of the Floating Rate Notes to generally tender their notes at par, and (2) to have the broker transfer the Bond held by the SPV to the Trust, thereby terminating the SPV. Should the Trust exercise such right, it would generally pay the broker the par amount due on the Floating Rate Notes and exchange the residual interest bond for the underlying Bond. Pursuant to generally accepted accounting principles for transfers and servicing of financial assets and extinguishment of liabilities, the Trust accounts for the transaction described above as a secured borrowing by including the Bond in its Portfolio of Investments and the Floating Rate Notes as a liability under the caption “Payable for floating rate notes issued” in its Statement of Assets and Liabilities. The Floating Rate Notes have interest rates that generally reset weekly and their holders have the option to tender their notes to the broker for redemption at par at each reset date. Accordingly, the fair value of the payable for floating rate notes issued approximates its carrying value. Interest expense related to the Trust’s liability with respect to Floating Rate Notes is recorded as incurred. The SPV may be terminated by the Trust, as noted above, or by the broker upon the occurrence of certain termination events as defined in the trust agreement, such as a downgrade in the credit quality of the underlying Bond, bankruptcy of or payment failure by the issuer of the underlying Bond, the inability to remarket Floating Rate Notes that have been tendered due to insufficient buyers in the market, or the failure by the SPV to obtain renewal of the liquidity agreement under which liquidity support is provided for the Floating Rate Notes up to one year. At March 31, 2012, the amount of the Trust’s Floating Rate Notes outstanding and the related collateral were $44,430,000 and $72,533,154, respectively. The range of interest rates on the Floating Rate Notes outstanding at March 31, 2012 was 0.19% to 0.35%. For the year ended March 31, 2012, the Trust’s average Floating Rate Notes outstanding and the average interest rate including fees were $44,430,000 and 0.79%, respectively.

 

The Trust may enter into shortfall and forbearance agreements with the broker by which the Trust agrees to reimburse the broker, in certain circumstances, for the difference between the liquidation value of the Bond held by the SPV and the liquidation value of the Floating Rate Notes, as well as any shortfalls in interest cash flows. The Trust had no shortfalls as of March 31, 2012.

 

The Trust may also purchase residual interest bonds from brokers in a secondary market transaction without first owning the underlying bond. Such transactions are not required to be treated as secured borrowings. Shortfall agreements, if any, related to residual interest bonds purchased in a secondary market transaction are disclosed in the Portfolio of Investments.

 

The Trust’s investment policies and restrictions expressly permit investments in residual interest bonds. Such bonds typically offer the potential for yields exceeding the yields available on fixed rate bonds with comparable credit quality and maturity. These securities tend to underperform the market for fixed rate bonds in a rising long-term interest rate environment, but tend to outperform the market for fixed rate bonds when long-term interest rates decline. The value and income of residual interest bonds are generally more volatile than that of a fixed rate bond. The Trust’s investment policies do not allow the Trust to borrow money except as permitted by the 1940 Act. Management believes that the Trust’s restrictions on borrowing money and issuing senior securities (other than as specifically permitted) do not apply to Floating Rate Notes issued by the SPV and included as a liability in the Trust’s Statement of Assets and Liabilities. As secured indebtedness issued by an SPV, Floating Rate Notes are distinct from the borrowings and senior securities to which the Trust’s restrictions apply. Residual interest bonds held by the Trust are securities exempt from registration under Rule 144A of the Securities Act of 1933.

 

I Financial Futures Contracts — Upon entering into a financial futures contract, the Trust is required to deposit with the broker, either in cash or securities, an amount equal to a certain percentage of the purchase price (initial margin). Subsequent payments, known as variation margin, are made or received by the Trust each business day, depending on the daily fluctuations in the value of the underlying security, and are recorded as unrealized gains or losses by the Trust. Gains (losses) are realized upon the expiration or closing of the financial futures contracts. Should market conditions change unexpectedly, the Trust may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. Futures contracts have minimal counterparty risk as they are exchange traded and the clearinghouse for the exchange is substituted as the counterparty, guaranteeing counterparty performance.

 

J When-Issued Securities and Delayed Delivery Transactions — The Trust may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. At the time the transaction is negotiated, the price of the security that will be delivered is fixed. The Trust maintains security positions for these commitments such that sufficient liquid assets will be available to make payments upon settlement. Securities purchased on a delayed delivery or when-issued basis are marked-to-market daily and begin earning interest on settlement date. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.

 

K Statement of Cash Flows — The cash amount shown in the Statement of Cash Flows of the Trust is the amount included in the Trust’s Statement of Assets and Liabilities and represents the cash on hand at its custodian and does not include any short-term investments.

 

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Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Notes to Financial Statements — continued

 

2 Distributions to Shareholders

 

The Trust intends to make monthly distributions of net investment income to shareholders. In addition, at least annually, the Trust intends to distribute all or substantially all of its net realized capital gains. Distributions are recorded on the ex-dividend date. The Trust distinguishes between distributions on a tax basis and a financial reporting basis. Accounting principles generally accepted in the United States of America require that only distributions in excess of tax basis earnings and profits be reported in the financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions from short-term capital gains are considered to be from ordinary income.

 

The tax character of distributions declared for the years ended March 31, 2012 and March 31, 2011 was as follows:

 

 

During the year ended March 31, 2012, accumulated net realized loss was decreased by $459,899 and accumulated undistributed net investment income was decreased by $459,899 due to differences between book and tax accounting, primarily for accretion of market discount. These reclassifications had no effect on the net assets or net asset value per share of the Trust.

 

As of March 31, 2012, the components of distributable earnings (accumulated losses) and unrealized appreciation (depreciation) on a tax basis were as follows:

 

 

The differences between components of distributable earnings (accumulated losses) on a tax basis and the amounts reflected in the Statement of Assets and Liabilities are primarily due to futures contracts, accretion of market discount and residual interest bonds.

 

3 Investment Adviser and Administration Fee and Other Transactions with Affiliates

 

The investment adviser and administration fee is earned by EVM as compensation for investment advisory and administrative services rendered to the Trust. The fee is computed at an annual rate of 0.60% of the Trust’s average daily gross assets up to $1.5 billion and 0.59% of average daily gross assets of $1.5 billion or more, and is payable monthly. Average daily gross assets include the principal amount of any indebtedness for money borrowed, including debt securities issued by the Trust. Average daily gross assets are calculated by adding to net assets the amount payable by the Trust to floating rate note holders. For the year ended March 31, 2012, the investment adviser and administration fee incurred by the Trust and the effective annual rate, as a percentage of average daily gross assets, were $2,164,659 and 0.60%, respectively.

 

Except for Trustees of the Trust who are not members of EVM’s organization, officers and Trustees receive remuneration for their services to the Trust out of the investment adviser and administration fee. Trustees of the Trust who 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 March 31, 2012, no significant amounts have been deferred. Certain officers and Trustees of the Trust are officers of EVM.

 

4 Purchases and Sales of Investments

 

Purchases and sales of investments, other than short-term obligations, aggregated $35,974,283 and $47,881,476, respectively, for the year ended March 31, 2012.

 

5 Common Shares of Beneficial Interest

 

Common shares issued pursuant to the Trust’s dividend reinvestment plan for the years ended March 31, 2012 and March 31, 2011 were 14,816 and 16,822, respectively.

 

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Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Notes to Financial Statements — continued

 

6 Federal Income Tax Basis of Investments

 

The cost and unrealized appreciation (depreciation) of investments of the Trust at March 31, 2012, as determined on a federal income tax basis, were as follows:

 

 

7 Financial Instruments

 

The Trust may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities. These financial instruments may include financial 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 Trust 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 March 31, 2012 is as follows:

 

 

At March 31, 2012, the Trust had sufficient cash and/or securities to cover commitments under these contracts.

 

The Trust is subject to interest rate risk in the normal course of pursuing its investment objectives. Because the Trust holds fixed-rate bonds, the value of these bonds may decrease if interest rates rise. The Trust purchases and sells U.S. Treasury futures contracts to hedge against changes in interest rates.

 

The fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) and whose primary underlying risk exposure is interest rate risk at March 31, 2012 was as follows:

 

 

 

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Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Notes to Financial Statements — continued

 

The effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) on the Statement of Operations and whose primary underlying risk exposure is interest rate risk for the year ended March 31, 2012 was as follows:

 

 

 

The average notional amount of futures contracts outstanding during the year ended March 31, 2012, which is indicative of the volume of this derivative type, was approximately $36,154,000.

 

8 Fair Value Measurements

 

Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

 

 

In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

At March 31, 2012, the hierarchy of inputs used in valuing the Trust’s investments and open derivative instruments, which are carried at value, were as follows:

 

 

The Trust held no investments or other financial instruments as of March 31, 2011 whose fair value was determined using Level 3 inputs. At March 31, 2012, the value of investments transferred between Level 1 and Level 2, if any, during the year then ended was not significant.

 

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Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Report of Independent Registered Public Accounting Firm

 

To the Trustees and Shareholders of Eaton Vance National Municipal Opportunities Trust:

 

We have audited the accompanying statement of assets and liabilities of Eaton Vance National Municipal Opportunities Trust (the “Trust”), including the portfolio of investments, as of March 31, 2012, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the two years in the period then ended and the period from the start of business, May 29, 2009, to March 31, 2010. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2012, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Eaton Vance National Municipal Opportunities Trust as of March 31, 2012, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the two years in the period then ended and the period from the start of business, May 29, 2009, to March 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

 

DELOITTE & TOUCHE LLP

Boston, Massachusetts

May 15, 2012

 

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Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Federal Tax Information (Unaudited)

 

The Form 1099-DIV you receive in January 2013 will show the tax status of all distributions paid to your account in calendar 2012. Shareholders are advised to consult their own tax adviser with respect to the tax consequences of their investment in the Trust. As required by the Internal Revenue Code and/or regulations, shareholders must be notified regarding exempt-interest dividends.

 

Exempt-Interest Dividends. The Trust designates 99.43% of dividends from net investment income as an exempt-interest dividend.

 

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Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Notice to Shareholders

 

At the August 8, 2011 Board Meeting, the Trustees approved the following defensive investing policy: “During unusual market conditions, the Trust may invest up to 100% of its assets in cash or cash equivalents temporarily, which may be inconsistent with its investment objective(s) and other policies.”

 

21

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Annual Meeting of Shareholders

 

The Trust held its Annual Meeting of Shareholders on January 27, 2012. The following action was taken by the shareholders:

 

Item 1: The election of Helen Frame Peters, Lynn A. Stout and Ralph F. Verni as Class III Trustees of the Trust for a three-year term expiring in 2015, Scott E. Eston as Class I Trustee of the Trust for a one-year term expiring in 2013 and Harriett Tee Taggart as Class II Trustee of the Trust for a two-year term expiring in 2014.

 

 

22

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Dividend Reinvestment Plan

 

The Trust offers a dividend reinvestment plan (Plan) pursuant to which shareholders automatically have distributions reinvested in common shares (Shares) of the Trust unless they elect otherwise through their investment dealer. On the distribution payment date, if the NAV per Share is equal to or less than the market price per Share plus estimated brokerage commissions, then new Shares will be issued. The number of Shares shall be determined by the greater of the NAV per Share or 95% of the market price. Otherwise, Shares generally will be purchased on the open market by American Stock Transfer & Trust Company, the Plan agent (Agent). Distributions subject to income tax (if any) are taxable whether or not Shares are reinvested.

 

If your Shares are in the name of a brokerage firm, bank, or other nominee, you can ask the firm or nominee to participate in the Plan on your behalf. If the nominee does not offer the Plan, you will need to request that the Fund’s transfer agent re-register your Shares in your name or you will not be able to participate.

 

The Agent’s service fee for handling distributions will be paid by the Trust. Plan participants will be charged their pro rata share of brokerage commissions on all open-market purchases.

 

Plan participants may withdraw from the Plan at any time by writing to the Agent at the address noted on the following page. If you withdraw, you will receive Shares in your name for all Shares credited to your account under the Plan. If a participant elects by written notice to the Agent to sell part or all of his or her Shares and remit the proceeds, the Agent is authorized to deduct a $5.00 fee plus brokerage commissions from the proceeds.

 

If you wish to participate in the Plan and your Shares are held in your own name, you may complete the form on the following page and deliver it to the Agent. Any inquiries regarding the Plan can be directed to the Agent at 1-866-439-6787.

 

23

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Application for Participation in Dividend Reinvestment Plan

 

 

 

The following authorization and appointment is given with the understanding that I may terminate it at any time by terminating my participation in the Plan as provided in the terms and conditions of the Plan.

 

Please print exact name on account

Shareholder signature                                  Date

Shareholder signature                                  Date

 

Please sign exactly as your common shares are registered. All persons whose names appear on the share certificate must sign.

 

YOU SHOULD NOT RETURN THIS FORM IF YOU WISH TO RECEIVE YOUR DISTRIBUTIONS IN CASH. THIS IS NOT A PROXY.

 

This authorization form, when signed, should be mailed to the following address:

 

Eaton Vance National Municipal Opportunities Trust

c/o American Stock Transfer & Trust Company

P.O. Box 922

Wall Street Station

New York, NY 10269-0560

 

Number of Employees

The Trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as a closed-end, management investment company and has no employees.

 

Number of Shareholders

As of March 31, 2012, our records indicate that there are 8 registered shareholders and approximately 8,243 shareholders owning the Trust shares in street name, such as through brokers, banks, and financial intermediaries.

 

If you are a street name shareholder and wish to receive Trust reports directly, which contain important information about the Trust, please write or call:

 

Eaton Vance Distributors, Inc.

Two International Place

Boston, MA 02110

1-800-262-1122

 

New York Stock Exchange Symbol

 

The New York Stock Exchange symbol is EOT.

 

24

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Management and Organization

 

Fund Management. The Trustees of Eaton Vance National Municipal Opportunities Trust (the Trust) are responsible for the overall management and supervision of the Trust’s affairs. The Trustees and officers of the Trust are listed below. Except as indicated, each individual has held the office shown or other offices in the same company for the last five years. The “Noninterested Trustees” consist of those Trustees who are not “interested persons” of the Trust, as that term is defined under the 1940 Act. The business address of each Trustee and officer is Two International Place, Boston, Massachusetts 02110. As used below, “EVC” refers to Eaton Vance Corp., “EV” refers to Eaton Vance, Inc., “EVM” refers to Eaton Vance Management, “BMR” refers to Boston Management and Research and “EVD” refers to Eaton Vance Distributors, Inc. EVC and EV are the corporate parent and trustee, respectively, of EVM and BMR. EVD is a wholly-owned subsidiary of EVC. Each officer affiliated with Eaton Vance may hold a position with other Eaton Vance affiliates that is comparable to his or her position with EVM listed below. Each Trustee oversees 180 portfolios in the Eaton Vance Complex (including all master and feeder funds in a master feeder structure). Each officer serves as an officer of certain other Eaton Vance funds. Each Trustee serves for a three year term. Each officer serves until his or her successor is elected.

 

 

25

 

Eaton Vance

National Municipal Opportunities Trust

 

March 31, 2012

 

 

Management and Organization — continued