Eaton Vance Municipals Trust II
For the Funds:
(bullet) EV Traditional Florida Insured Municipals Fund
[LOGO]
Annual Shareholder Report
January 31, 1996
To Shareholders:
In the year ending January 31, 1996, EV Traditional Florida Insured
Municipals Fund paid its shareholders monthly income dividends of $0.585
per share.
Based on the most recent dividend and the net asset value of $11.22 on
January 31, 1996, the Fund's annualized distribution rate was 5.21%. To
equal that rate in a taxable investment, a couple in the combined 38.46%
tax bracket would have to receive 8.38%.+
The municipal bond market rallied strongly throughout 1995, gaining back
most of the losses of the previous year. Twice during the year, the
Federal Reserve lowered short-term interest rates, further buoying the
market.
Realistically, it may be difficult for the market to match last year's
gains. Still, there are many reasons to be optimistic about the
municipal bond market in 1996 and to believe that an investment in
municipal bonds represents very good value and should be a part of a
wise investor's fixed-income portfolio.
The U.S. economy continues in its favorable pattern of slow growth and
low inflation, which are a good environment for the municipal bond
market. Another plus is that if the Fed decides to make further moves
during 1996, it is more likely to lower rates than
raise them.
During 1995 the municipal market underperformed the taxable market
because of concern about the possible passage of major tax reform
legislation. While such concerns are likely to continue this year, we at
Eaton Vance continue to believe there is little chance that significant
reform, in the form of a flat tax, consumption tax or value-added tax,
will be enacted during the year.
While flat tax and other reform proposals will be debated, especially
during the Presidential campaigns, they are so controversial and
sweeping that we believe the process needed to secure agreement and
subsequent passage of a plan is, at best, years away.
At the same time, the Presidential campaigns will provide significant
impetus to proposals that should prove favorable to the bond market.
There is no doubt that the campaigns will focus attention on proposals
to balance the budget and to reduce the nation's structural deficit by
cutting expenses. Any positive results in these areas are likely to
provide additional momentum to the bond market through fiscal restraint
and, therefore, lower yields.
These factors have combined to produce a significant opportunity for
municipal bond investors. To the extent that fears about tax reform
depress prices, investors can enter the market at a discount. To the
extent that budget reform measures improve the economy, investors may be
expected to reap the rewards through a strengthening bond market.
As always, achieving investment rewards depends on an investor's
willingness to adopt a long-term investment horizon. That's why we at
Eaton Vance believe patience is a key to successful investing.*
[PHOTO OF THOMAS J. FETTER OMMITTED]
Sincerely,
/S/Thomas J. Fetter
Thomas J. Fetter
President
March 19, 1996
+ A portion of the Portfolios' income could be subject to Federal
alternative minimum tax.
*As a result of recent Federal tax legislation, certain tax-exempt
obligations acquired by the Portfolio at market discounts have generated
a small amount -- 2.80% -- of ordinary taxable income. The remainder --
97.20% -- remains tax-exempt..
Included on the page that follows is a performance charts that compares
your Fund's total return with that of a broad-based securities market
index. The lines on the chart represent the total returns of $10,000
hypothetical investments in your Fund and the unmanaged Lehman Brothers
Municipal Bond Index. The solid line on the chart represents the Fund's
performance. The Fund's total return figure reflects fund expenses and
portfolio transaction costs, and assumes the reinvestment of income
dividends and capital gain distributions. The dotted line represents
the performance of the Lehman Brothers Municipal Bond Index, a broad-
based, widely recognized unmanaged index of municipal bonds. Whereas the
Fund's portfolio comprises bonds principally from Florida, the Index is
composed of bonds from all 50 states and many jurisdictions. The Index's
total return does not reflect any commissions or expenses that would be
incurred if an investor individually purchased or sold the securities
represented in the Index.
EV Traditional Florida Insured Municipals Fund
Your Investment at Work
University of Florida
Housing Revenue Bonds
[GRAPHIC OF GRADUATION CAP OMMITTED]
Proceeds of this $13.8 million, 1993 bond issue were used to finance a
portion of the cost of construction and renovation of student housing at
the University of Florida in Gainesville.
The project consisted of a six-building, single-student apartment
facility housing up to 468 students in four-person suites. The facility
also includes student government offices, laundry, study center, a
classroom and a recreation room. The bond proceeds also were used to pay
for renovations to the university's Murphree Residential Area.
[GRAPHIC OF THE STATE OF FLORIDA OMMITTED]
Portfolio Overview
Based on market value as of Jan. 31, 1996
Number of issues 40
Average quality Aaa
Investment grade 100.0%
Effective maturity (years) 14.3
Largest sectors:
Insured special tax 25.4%*
Insured water and sewer 23.0*
Housing 11.7
Insured transportation 11.1*
Insured pollution control revenue 6.1*
* Private insurance does not remove the market risks associated
with this investment.
The State of the State: Florida
The Florida economy appears to be in the mature stage of the business
cycle. According to a recent state Economic Forecasting Conference,
Florida's economy should expand at a slower rate in 1996 and 1997 than
it did in 1995, although there is no sign that the state will face a
recession. The state is predicting that the rate of employment growth
also will decline, primarily because of weakness in the government and
manufacturing sectors.
During 1995, the state continued to rely more heavily for its growth
on the service sector and less on manufacturing. In addition, the state
is expected to lose Federal civilian government jobs during the coming
year. Residential construction activity was robust during 1995, but is
expected to slow in 1996.
After seeing its important tourism industry grow by 3.2% in 1995, the
state is projecting zero growth in tourism during 1996. However, the
state projects that the rate of growth will pick up again in 1997.
[GRAPHIC OF WORM CHART OMMITTED]
Comparison of Change in Value of a $10,000 Investment in EV Traditional
Florida Insured Municipals Fund (Including Sales Charge) and the Lehman
Brothers Municipal Bond Index
From March 31, 1994, through January 31, 1996
[BOX INSET IN GRAPHIC WORM CHART]
AVERAGE TOTAL RETURN 1 year Life of Fund*
With CDSC 9.2% 9.6%
Without CDSC 13.5% 11.8%
- -EV Marathon Florida Insured Municipals Fund: $12,393
- -EV Marathon Florida Insured Municipals Fund w/max sales charge:
$11,928
- -Lehman Brothers Municipal Bond Index: $11,874
[FIGURES BELOW MAKE UP CONTENT OF WORM CHART]
Trad. FL Trad. FL Lehman
Label Date Insured w/CDSC Insured w/o CDSC Brothers 3/94
1 3/94+ 9,625 10,000 10,000
2 4/94 10,072 10,465 10,085
3 5/94 10,206 10,604 10,172
4 6/94 10,261 10,661 10,113
5 7/94 10,485 10,894 10,295
6 8/94 10,475 10,883 10,331
7 9/94 10,286 10,687 10,180
8 10/94 10,019 10,410 9,999
9 11/94 9,789 10,170 9,818
10 12/94 10,128 10,523 10,034
11 1/95 10,508 10,918 10,321
12 2/95 10,896 11,321 10,621
13 3/95 10,956 11,384 10,743
14 4/95 10,944 11,371 10,756
15 5/95 11,220 11,657 11,099
16 6/95 10,972 11,400 11,002
17 7/95 11,054 11,485 11,106
18 8/95 11,136 11,570 11,247
19 9/95 11,197 11,633 11,318
20 10/95 11,436 11,882 11,483
21 11/95 11,739 12,197 11,673
22 12/95 11,896 12,360 11,785
23 1/96 11,928 12,393 11,874
*Past performance is not indiciative of future results. Investment
returns and principal will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than theri original cost.
Source: Towers Data Systems, Bethesda, MD.* Investment operations
commenced on 3/3/94. + Index information is available only at
month-end; therefore, the line comparison begins at the next
month-end following the commencement of the Fund's investment
operations.
From the Portfolio Manager
[PHOTO OF TIMOTHY T. BROWSE OMMITTED]
"The bond market performed well in 1995, and we believe there still are
gains to be made during 1996. Prospects for passage of a flat tax are
dimming with the passage of time. This fact, combined with the Federal
Reserve's actions to ease interest rates and a continued slow economy,
add up to encouraging prospects for 1996.
"We've added some housing bonds that provide
good income. Our primary concern is with the structure of the bonds in
the Portfolio. For example, we want to maintain strong call protection.
Also, we are moving out of some bonds that already have
had a nice run and into bonds with more
upside potential."
- - Timothy T. Browse
<TABLE>
<CAPTION>
EV Traditional Municipals Funds
Financial Statements
Statement of Assets and Liabilities
January 31, 1996
- --------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investment in Florida Insured Municipals Portfolio -
Identified cost $1,364,529
Unrealized appreciation 126,269
----------
Total investment in Florida Insured Municipals Portfolio, at value (Note 1A) $1,490,798
Receivable for Fund shares sold 97,735
Receivable from the Administrator (Note 4) 17,419
Deferred organization expenses (Note 1D) 7,948
----------
Total assets $1,613,900
----------
Liabilities:
Dividends payable $5,186
Accrued expenses 1,337
----------
Total liabilities $6,523
----------
Net Assets $1,607,377
==========
Sources of Net Assets:
Paid-in capital $1,500,776
Accumulated net realized loss on investment and financial futures
transactions (computed on the basis of identified cost) (16,679)
Accumulated distributions in excess of net investment income (2,989)
Unrealized appreciation of investments and financial futures contracts
from Portfolio (computed on the basis of identified cost) 126,269
----------
Total $1,607,377
==========
Shares of Beneficial Interest Outstanding 143,231
==========
Net Asset Value and Redemption Price Per Share
(net assets (divided by) shares of beneficial interest outstanding) $11.22
==========
Computation of Offering Price
Offering price per share (100/96.25 of $11.22) $11.66
==========
On sales of $50,000 or more, the offering price is reduced.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended January 31, 1996
- -----------------------------------------------------------------------
<S> <C>
Investment Income (Note 1B):
Interest income allocated from Portfolio $81,147
Expenses allocated from Portfolio --
--------
Net investment income from Portfolio $81,147
--------
Expenses -
Service fees (Note 5) $600
Custodian fees (Note 4) 3,416
Printing and postage 14,727
Legal and accounting services 3,822
Amortization of organization expenses (Note 1D) 2,557
Transfer and dividend disbursing agent fees 1,288
Miscellaneous 1,548
--------
Total expenses $27,958
- --------
Deduct -
Allocation of expenses to the Administator (Note 4) $17,419
Reduction of custodian fee (Note 4) 2,924
--------
Total $20,343
--------
Net expenses $7,615
--------
Net investment income $73,532
- --------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) from Portfolio -
Investment transactions (identified cost basis) $20,982)
Financial futures contracts (30,108)
--------
Net realized loss ($9,126)
Change in unrealized appreciation of investments 117,760
--------
Net realized and unrealized gain $108,634
--------
Net increase in net assets from operations $182,166
========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------
For the Year Ended January 31,
-------------------------
1996 1995*
-------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations -
Net investment income $73,532 $32,082
Net realized loss on investments (9,126) (7,553)
Change in unrealized appreciation of investments 117,760 8,509
---------- ----------
Net increase in net assets from operations $182,166 $33,038
---------- ----------
Distributions to shareholders (Note 2) -
From net investment income ($73,532) ($32,082)
In excess of net investment income (2,683) (306)
---------- ----------
Total distributions to shareholders ($76,215) ($32,388)
---------- ----------
Transactions in shares of beneficial interest (Note 3) -
Proceeds from sales of shares $871,777 $1,247,667
Net asset value of shares issued to shareholders in payment
of distributions declared 15,828 5,083
Cost of shares redeemed (599,576) (40,013)
---------- ----------
Increase in net assets from Fund share transactions $288,029 $1,212,737
---------- ----------
Net increase in net assets $393,980 $1,213,387
Net Assets:
At beginning of year 1,213,397 10
---------- ----------
At end of year $1,607,377 $1,213,397
========== ==========
Accumulated distributions in excess of net investment
income included in net assets at end of year ($2,989) ($306)
========== ==========
* For the period from the start of business,
March 3, 1994, to January 31, 1995
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
- ----------------------------------------------------------------------------------
Year Ended January 31,
-------------------
1996 1995*
-------------------
<S> <C> <C>
Net asset value, beginning of year $10.430 $10.000
-------- --------
Income from operations:
Net investment income $0.564 $0.509
Net realized and unrealized gain on investments $0.811 $0.435
-------- --------
Total income from operations $1.375 $0.944
-------- --------
Less distributions:
From net investment income ($0.564) ($0.509)
In excess of net investment income ($0.021) ($0.005)
-------- --------
Total distributions ($0.585) ($0.514)
-------- --------
Net asset value, end of year $11.220 $10.430
======= =======
Total Return (2) 13.51% 9.18%
Ratios/Supplemental Data**:
Net assets, end of period (000 omitted) $1,607 $1,213
Ratio of net expenses to average daily net assets (1)(3) 0.82% 0.01%+
Ratio of net investment income to average daily net assets 5.20% 5.37%+
**For the year ended January 31, 1996 and for the period from the start of business,
March 3, 1994 to January 31, 1995, the operating expenses of the Fund and the Portfolio
reflect a reduction of expenses by the Administrator and/or Investment Adviser. Had such
actions not been taken net investment income per share and the ratios would have been
as follows:
Net investment income per share $0.401 $0.226
====== ======
Ratios (As a percentage of average daily net assets):
Expenses (1)(3) 2.32% 3.00%+
Net investment income 3.70% 2.38%+
+ Computed on an annualized basis.
(1) Includes the Fund's share of its Florida Insured Portfolio's allocated expenses.
(2) Total return is calculated assuming a purchase at the net asset value on the first
day and a sale at the net asset value on the last day of each period reported.
Dividends and distributions, if any, are assumed to be reinvested at the net asset
value on the payable date, computed on a non-annualized basis.
(3) The expense ratios for the year ended January 31, 1996 have been adjusted to reflect
a change in reporting requirements. The new reporting guidelines require the Fund to
increase its expense ratio by the effect of any expense offset arrangements with its
service providers. The expense ratios for the period ended January 31, 1995 have not
been adjusted to reflect this change.
* For the period from the start of operations, March 3, 1994, to January 31, 1995.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(1) Significant Accounting Policies
EV Traditional Florida Insured Municipals Fund (the Fund) is a non-
diversified series of Eaton Vance Municipal Trust II (the Trust). The
Trust is an entity of the type commonly known as a Massachusetts
business trust and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Fund
invests all of its investable assets in interests in the Florida Insured
Municipals Portfolio (the Portfolio), a New York Trust, having the same
investment objective as the Fund. The value of the Fund's investment in
the Portfolio reflects the Fund's proportionate interest in the net
assets of the Portfolio (7.0% at January 31, 1996).The performance of
the Fund is directly affected by the performance of the Portfolio. The
financial statements of the Portfolio, including the portfolio of
investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. The following is a
summary of significant accounting policies consistently followed by the
Trust in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles.
A. Investment Valuations - Valuations of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report.
B. Income - The Fund's net investment income consists of the Fund's pro
rata share of the net investment income of the Portfolio, less all
actual and accrued expenses of the Fund determined in accordance with
generally accepted accounting principles.
C. Federal Taxes - The Fund's policy is to comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies
and to distribute to shareholders each year all of its taxable and tax-
exempt income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is necessary.
At January 31, 1996, the Fund, for federal income tax purposes had a
capital loss carryover of $15,028, which will reduce the taxable income
arising from future net realized gains on investments, if any, to the
extent permitted by the Internal Revenue Code, and thus will reduce the
amount of the distributions to shareholders which would otherwise be
necessary to relieve the Fund of any liability for federal income or
excise tax. Such capital loss carryover will expire on January 31, 2004
($14,510) and January 31, 2003 ($518). Dividends paid by the Fund from
net interest on tax-exempt municipal bonds allocated from the Portfolio
are not includable by shareholders as gross income for federal income
tax purposes because the Fund and Portfolio intend to meet certain
requirements of the Internal Revenue Code applicable to regulated
investment companies which will enable the Fund to pay exempt-interest
dividends. The portion of such interest, if any, earned on private
activity bonds issued after August 7, 1986, may be considered a tax
preference item to shareholders.
D. Deferred Organization Expenses - Costs incurred by the Fund in
connection with its organization, including registration costs, are
being amortized on the straight-line basis over five years.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.
F. Other - Investment transactions are accounted for on a trade date
basis.
(2) Distributions to Shareholders
The net income of the Fund is determined daily and substantially all of
the net income so determined is declared as a dividend to shareholders
of record at the time of declaration. Distributions are paid monthly.
Distributions of allocated realized capital gains, if any, are made at
least annually. Shareholders may reinvest capital gain distributions in
additional shares of the Fund at the net asset value as of the ex-
dividend date. Distributions are paid in the form of additional shares
or, at the election of the shareholder, in cash. The Fund distinguishes
between distributions of a tax basis and a financial reporting basis.
Generally, accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in
the financial statements as a return of capital. Differences in the
recognition or classification of income between the financial statements
and tax earnings and profits which result in temporary over
distributions for financial statements purposes are classified as
distributions in excess of net investment income or accumulated net
realized gains. Permanent differences between book and tax accounting
relating to distributions are reclassified to paid-in capital.
(3) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
Year Ended
January 31,
-----------------------
1996 1995*
--------- --------
Sales 80,298 119,622
Issued to shareholders electing
to receive payments of
distributions in
Fund shares 1,454 496
Redemptions (54,892) (3,747)
--------- --------
Net increase 26,859 116,371
========= ========
*The Fund share activity is for the period from the start of business,
March 3, 1994, to January 31, 1995.
(4) Transactions with Affiliates
Eaton Vance Management (EVM) serves as the administrator of Fund, but
receives no compensation. The Portfolio has engaged Boston Management
and Research (BMR), a subsidiary of EVM, to render investment advisory
services. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report. To enhance the net income
of the Fund for the year ended January 31, 1996, $17,419 of expenses
related to the operation of the Fund were allocated, to EVM. Except as
to Trustees of the Fund and the Portfolio who are not members of EVM's
or BMR's organization, officers and Trustees receive remuneration for
their services to the Fund out of such investment adviser fee.
Investors Bank & Trust Company (IBT), serves as custodian to the Fund
and the Portfolio. Prior to November 10, 1995, IBT was an affiliate of
EVM. Pursuant to the respective custodian agreements, IBT receives a fee
reduced by credits which are determined based on the average cash
balances the Fund or the Portfolio maintains with IBT. All significant
credits used to reduce the Fund's custody fees are reported as a
reduction of expenses in the Statement of Operations. Certain of the
officers and Trustees of the Fund and of the Portfolio are officers and
directors/trustees of the above organizations
(Note 5).
(5) Service Plan
The Fund has adopted a Service Plan designed to meet the requirements of
Rule 12b-1 under the Investment Company Act of 1940 and the service fee
requirements of the revised sales charge rule of The National
Association of Securities Dealers, Inc. The Service Plan provides that
the Fund may make service fee payments to the Principal Underwriter,
Eaton Vance Distributors, Inc. (EVD), a subsidiary of Eaton Vance
Management, Authorized Firms or other persons in amounts not exceeding
0.25% of the Fund's average daily net assets for any fiscal year. The
Trustees have initially implemented the Plan by authorizing the Fund to
make quarterly service fee payments to the Principal Underwriter and
Authorized Firms in amounts not exceeding 0.20% of the Fund's average
daily net assets for any fiscal year which is attributable to shares of
the Fund sold by such persons and remaining outstanding for at least one
year. Service fee payments are made for personal services and/or the
maintenance of shareholder accounts. During the year ended January 31,
1996, the Fund paid or accrued service fees to or payable to EVD in the
amount of $600.
Certain of the officers and Trustees of the Funds are officers or
directors of EVD.
(6) Investment Transactions
Increases and decreases in the Fund's investment in the Portfolio for
the year ended January 31, 1996 aggregated $794,728 and $692,763,
respectively.
(7) Special Meeting of Shareholders (Unaudited)
On December 8, 1995, a special meeting of the shareholders of the Fund
was held for the purpose of voting on the following matters:
1. To consider and act on a proposal to amend the Fund's investment
policy to provide that the Fund may invest without limit in municipal
obligations the interest on which is exempt from regular federal income
tax (but which may be a tax preference item for purposes of alternative
minimum tax) and from the State taxes that, in accordance with the
Fund's investment objective, the Fund seeks to avoid.
The results of the vote on Proposal 1 were as follows:
% of
Outstanding % of shares
Vote No. of Shares Shares Voted
- ------ ------------- ----------- -----------
Affirmative 71,631 50.64% 93.05%
Against 0 0.00 0.00
Abstain 5,353 3.78 6.95
------ ----- ------
Total 76,984 54.42% 100.00%
====== ===== ======
Independent Auditors' Report
To the Trustees and Investors of
Eaton Vance Municipals Trust II:
We have audited the accompanying statement of assets and liabilities of
EV Traditional Florida Insured Municipals Fund (one of the series
constituting Eaton Vance Municipals Trust II) as of January 31, 1996,
and the related statement of operations for the year then ended and, the
statements of changes in net assets and the financial highlights for the
year ended January 31, 1996 and the period from the start of business,
March 3, 1994, to January 31, 1995. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the
EV Traditional Florida Insured Municipals Fund at January 31, 1996, the
results of its operations and, the changes in its net assets and its
financial highlights for the respective stated periods, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 1, 1996
<TABLE>
<CAPTION>
Florida Insured Municipals Portfolio
Portfolio of Investments - January 31, 1996
Tax-Exempt Investments - 100%
- --------------------------------------------------------------------------------------
Ratings (Unaudited) Principal
- -------------------- Amount
Standard (000
Moody's & Poor's Omitted) Security Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed - 3.3%
Aaa AAA $500 Gainesville Florida
Utility System, 8.125%,
10/1/14 $662,430
-----------
Housing - 11.7%
Aaa AAA $500 Duval County Florida
HFA SFMR (GNMA),
6.70%, 10/1/26 (AMT) $528,420
Aaa NR 750 Escambia Florida HFA
SFMR (GNMA),
7.00%, 4/1/28 (AMT) 781,755
NR AAA 1,000 Pinellas County Florida
HFA SFMR (GNMA),
6.70%, 2/1/28 (AMT) 1,054,900
-----------
$2,365,075
-----------
Insured Education - 2.0%
Aaa AAA $400 University of Florida
(MBIA), 5.50%
7/1/23 $402,648
-----------
Insured General
Obligations - 5.0%
Aaa AAA $1,000 Florida Board of Education
Cap Outlay (MBIA),
5.60%, 6/1/25 $1,015,580
-----------
Insured Hospital - 3.5%
Aaa AAA $200 Dade Florida Public
Facilities, Jackson
Memorial Hospital,
(MBIA), 4.875%,
6/1/15 $188,630
Aaa AAA 450 Dade Florida Public
Facilities, Jackson
Memorial Hospital,
(MBIA), 5.625%,
6/1/18 457,299
Aaa AAA 50 Hillsborough County
Florida, Tampa General
Hospital (FSA), 6.375%,
10/1/13 53,683
-----------
$699,612
-----------
Insured Housing - 2.6%
Aaa AAA $500 FL HFA Maitland Club
Apartments Project
(AMBAC), 6.875%,
8/1/26 (AMT) $531,930
-----------
Insured Pollution
Control Revenue - 6.1%
Aaa AAA $445 Citrus County -
Florida Power & Light
(MBIA), 6.35%
2/1/22 $480,275
Aaa AAA 750 Escambia County
Florida - Gulf
Power (MBIA), 5.80%,
6/1/23 762,803
-----------
$1,243,078
-----------
Insured Solid Waste - 0.5%
Aaa AAA $100 Broward County Florida
Solid Waste System
(MBIA), 6.00%,
7/1/13 (AMT) $104,749
-----------
Insured Special Tax
Revenues - 25.4%
Aaa AAA $1,500 Bradenton Florida Special
Revenue (FGIC),
5.00%, 10/1/15 $1,448,895
Aaa AAA 450 Escambia County Florida
(FGIC), 5.80%, 1/1/15 465,782
Aaa AAA 150 Florida State Department
of Natural Resources
(FSA), 5.80%, 7/1/13 155,025
Aaa AAA 1,225 Florida State Department
of Environmental
Preservation (MBIA),
4.75%, 7/1/09 1,188,298
Aaa AAA 745 Jacksonville Florida Sales
Tax, River City Project
(FGIC), 5.375%, 10/1/18 746,438
Aaa AAA 250 Orange County Florida
Tourist Development
(MBIA), 6.00%, 10/1/24 263,048
Insured Special Tax
Aaa AAA 795 St. Petersburg Florida
Excise Tax (FGIC),
5.00%, 10/1/16 765,211
Aaa AAA 340 Sunrise Florida Public
Facilities (MBIA), 0%,
10/1/15 117,035
-----------
$5,149,732
-----------
Insured
Transportation - 11.1%
Aaa AAA $1,200 Florida State Turnpike
Authority (FGIC),
5.00%, 7/1/19 $1,144,248
Aaa AAA 1,000 Florida State Turnpike
Authority (FGIC),
5.50%, 7/1/21 1,007,820
Aaa AAA 50 Greater Orlando Florida
Aviation Authority
(FGIC), 6.375%,
10/1/21 (AMT) 53,474
Aaa AAA 50 Orlando & Orange
County Florida Expressway
Authority Junior Lien
(FGIC), 5.125%,
7/1/20 48,474
-----------
$2,254,016
-----------
Insured Utilities - 5.8%
Aaa AAA $895 FL Municipal Power
Authority, Stanton II
Project (AMBAC),
4.50%, 10/1/27 $773,387
Aaa AAA 50 Key West Florida Utility
(AMBAC), 6.75%,
10/1/13 55,461
Aaa AAA 305 New Smyrna Beach
Florida Utility System
(FGIC), 5.00%, 10/1/19 290,747
Aaa AAA 50 Puerto Rico Electric
Power Authority Revenue
Bonds-Stripes, (FSA),
Variable, 7/1/02 (1) 57,596
-----------
$1,177,191
-----------
Insured Water
& Sewer - 23.0%
Aaa AAA $50 Broward County Florida
Water & Sewer Utility
(AMBAC), 5.00%,
10/1/18 $48,032
Aaa AAA 75 Cocoa Florida Water &
Sewer System (AMBAC),
5.00%, 10/1/23 71,226
Aaa AAA 500 Dade County Florida
Water & Sewer System
(FGIC), 5.50%, 10/1/25 501,240
Aaa AAA 735 Enterprise Florida
Community Water &
Sewer (MBIA), 6.125%,
5/1/24 776,020
Aaa AAA 1,000 Jacksonville Florida Water
& Sewer (AMBAC),
6.35%, 8/1/25, (AMT) 1,076,090
Aaa AAA 75 Key West Florida Sewer
(FGIC), 5.70%, 10/1/26 76,500
Aaa AAA 70 North Port Florida
Utility System (FGIC),
6.25%, 10/1/17 75,065
Aaa AAA 500 North Port Florida
Utility System (FGIC),
6.25%, 10/1/22 534,380
Aaa AAA 155 Sanford Florida Water
& Sewer (AMBAC),
4.50%, 10/1/21 136,717
Aaa AAA 400 Titusville Florida Water
& Sewer (MBIA),
6.00%, 10/1/24 422,540
Aaa AAA 1,000 Vero Beach Florida
Water & Sewer (FGIC),
5.00%, 12/1/21 951,230
-----------
$4,669,041
-----------
Total tax-exempt investments
(identified cost $18,599,568) $20,275,081
===========
(1) The above designated securities have been issued as inverse floater bonds.
(AMT) - Interest earned from these securities may be considered
a tax preference item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Florida 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 January 31, 1996,
85.0% of the securities in the portfolio of investments are backed by bond insurance
of various financial institutions and financial guaranty assurance agencies. At January
31, 1996, the Portfolio's insured investments by financial institiution, as a percentage
of total investments, were as follows:
American Municipal Bond Assurance Corp. (AMBAC) 13.30%
Financial Guaranty Insurance Corp. (FGIC) 40.00%
Financial Security Insurance Inc. (FSA) 1.20%
Municipal Bond Investors Assurance Corp. (MBIA) 30.50%
-----------
85.00%
===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Florida Insured Municipals Portfolio
Financial Statements
Statement of Assets and Liabilities
January 31, 1996
- ----------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments -
Identified cost $18,599,568
Unrealized appreciation 1,675,513
-----------
Total investments, at value (Note 1A) $20,275,081
Cash 1,759,142
Receivable from the Investment Adviser (Note 2) 28,813
Interest receivable 323,987
Deferred organization expenses (Note 1D) 7,478
-----------
Total assets $22,394,501
-----------
Liabilities:
Payable for investments purchased $976,030
Payable to affiliate -
Trustee fees 38
Accrued expenses 2,633
-----------
Total liabilities $978,701
-----------
Net Assets applicable to investors' interest in Portfolio $21,415,800
===========
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $19,740,287
Unrealized appreciation of investments and financial futures contracts
(computed on the basis of identified cost) 1,675,513
-----------
Total $21,415,800
===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended January 31, 1996
- ----------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest income $1,016,847
----------
Expenses:
Investment adviser fee (Note 2) 27,933
Compensation of Trustees not members of the
Investment Adviser's organization 188
Custodian fees (Note 2) 14,160
Legal and accounting services 17,433
Bond pricing 5,255
Amortization of organization expenses (Note 1D) 2,424
Miscellaneous 2,263
----------
Total expenses $69,656
----------
Deduct:
Reduction of investment adviser fee (Note 2) $27,933
Allocation of expenses to the Investment Adviser (Note 2) 28,813
Reduction of custodian fee (Note 2) 12,910
----------
Total $69,656
----------
Net expenses $ --
----------
Net investment income $1,016,847
----------
Realized and Unrealized Gain (Loss):
Net realized gain (loss) -
Investment transactions (identified cost basis) $289,520
Financial futures contracts (382,756)
----------
Net realized loss ($93,236)
Change in unrealized appreciation of investments 1,447,272
----------
Net realized and unrealized gain $1,354,036
----------
Net increase in net assets from operations $2,370,883
==========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------
For the Year Ended January 31,
---------------------------------
1996 1995*
-------------- --------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations -
Net investment income $1,016,847 $307,971
Net realized loss (93,236) (57,512)
Change in unrealized appreciation of investments 1,447,272 228,241
---------- ----------
Net increase in net assets from operations $2,370,883 $478,700
---------- ----------
Capital transactions -
Contributions $7,413,811 $16,016,246
Withdrawals (2,768,845) (2,195,015)
---------- ----------
Increase in net assets resulting from capital transactions $4,644,966 $13,821,231
---------- ----------
Total increase in net assets $7,015,849 $14,299,931
Net Assets:
At beginning of year 14,399,951 100,020
---------- ----------
At end of year $21,415,800 $14,399,951
=========== ===========
* For the period from the start of business, March 2, 1994, to January 31, 1995
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Supplementary Data
- ----------------------------------------------------------------------------------------------------------
For the Year Ended January 31,
---------------------------------
1996 1995*
-------------- ---------------
<S> <C> <C>
Ratios (As a percentage of average daily net assets):*
Net expenses (1) 0.07% 0.01%+
Net investment income 5.82% 5.73%+
Portfolio Turnover 32% 33%
*The operating expenses of the Portfolios reflects a reduction of the investment adviser fee and/or
allocation Investment Adviser. Had such actions not been taken, the ratios would have been as follows:
Ratios (As a percentage of average daily net assets):
Expenses (1) 0.39% 0.41%+
Net investment income 5.50% 5.33%+
+ Annualized.
** For the period from the start of business, March 2, 1994, to January 31, 1995
(1) The expense ratios for the year ended January 31,1996 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Portfolio to increase it's expense ratio by the effect
of any expense offsewt arrangements with it's service providers. The expense ratios for the period ended January
31, 1995 have not been adjusted for this change.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(1) Significant Accounting Policies
Florida Insured Municipals Portfolio ("Florida Insured Portfolio") is
registered under the Investment Company Act of 1940 as a non-diversified
open-end management investment company which was organized as a trust
under the laws of the State of New York on October 25, 1993. The
Declaration of Trust permits the Trustees to issue interest in the
Portfolio. The following is a summary of significant accounting policies
of the Portfolio. The policies are in conformity with generally accepted
accounting principles.
A. Investment Valuations - Municipal bonds are normally valued on the
basis of valuations furnished by a pricing service. Taxable obligations,
if any, for which price quotations are readily available are normally
valued at the mean between the latest bid and asked prices. Futures
contracts listed on commodity exchanges are valued at closing settlement
prices. Short-term obligations, maturing in sixty days or less, are
valued at amortized cost, which approximates value. Investments for
which valuations or market quotations are unavailable are valued at fair
value using methods determined in good faith by or at the direction of
the Trustees.
B. Income - Interest income is determined on the basis of interest
accrued, adjusted for amortization of premium or discount when required
for federal income tax purposes.
C. Income Taxes - The Portfolio is treated as a partnership for Federal
tax purposes. No provision is made by the Portfolio for federal or state
taxes on any taxable income of the Portfolio because each investor in
the Portfolio is ultimately responsible for the payment of any taxes.
Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of
income and diversification requirements (under the Internal Revenue
Code) in order for their respective investors to satisfy them. The
Portfolio will allocate at least annually among its respective investors
each investor's distributive share of the Portfolio's net taxable (if
any) and tax-exempt investment income, net realized capital gains, and
any other items of income, gain, loss, deductions or credit. Interest
income received by the Portfolio on investments in municipal bonds,
which is excludable from gross income under the Internal Revenue Code,
will retain its status as income exempt from federal income tax when
allocated to the Portfolio's investors. The portion of such interest, if
any, earned on private activity bonds issued after August 7, 1986, may
be considered a tax preference item for investors.
D. Deferred Organization Expenses - Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-
line basis over five years.
E. Financial Futures Contracts - Upon the entering of a financial
futures contract, the Portfolio is required to deposit ("initial
margin") either in cash or securities an amount equal to a certain
percentage of the purchase price indicated in the financial futures
contract. Subsequent payments are made or received by the Portfolio
("margin maintenance") each day, dependent on the daily fluctuations in
the value of the underlying security, and are recorded for book purposes
as unrealized gains or losses by the Portfolio. The Portfolio's
investment in financial futures contracts is designed only to hedge
against anticipated future changes in interest rates. Should interest
rates move unexpectedly, the Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
F. When-issued and Delayed Delivery Transactions - The Portfolio may
engage in when-issued and delayed delivery transactions. The Portfolio
records when-issued securities on trade date and maintains security
positions such that sufficient liquid assets will be available to make
payments for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
accruing interest on settlement date.
G. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.
H. Other - Investment transactions are accounted for on a trade date
basis.
(2) Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Boston Management and Research
(BMR), a wholly-owned subsidiary of Eaton Vance Management(EVM), as
compensation for management and investment advisory services rendered to
the Portfolio. The fee is based upon a percentage of average daily net
assets plus a percentage of gross income (i.e., income other than gains
from the sale of securities).For the year ended January 31, 1996, the
fee for the Florida Insured Portfolio was equivalent to 0.16% of the
Portfolio's average net assets and amounted to $27,933. To enhance the
net income of the Florida Insured Portfolio, BMR made a reduction of its
fee in the amount of $27,933 and $28,813 of expenses related to the
operation of the Portfolio were allocated to BMR. Except as to Trustees
of the Portfolio who are not members of EVM's or BMR's organization,
officers and Trustees receive remuneration for their services to the
Portfolio out of such investment adviser fee. Investors Bank & Trust
Company (IBT), serves as custodian of the Portfolio. Prior to November
10, 1995, IBT was an affiliate of EVM and BMR. Pursuant to custodian
agreement, IBT receives a fee reduced by credits which are determined
based on the average daily cash balances the Portfolio maintains with
IBT. All significant credit balances used to reduce the Portfolio's
custody fees are reflected as a reduction of expenses on the Statement
of Operations. Certain of the officers and Trustees of the Portfolio are
officers and directors/trustees of the above organizations. Trustees of
the Portfolio that are not affiliated with the Investment Adviser may
elect to defer receipt of all or a portion of their annual fees in
accordance with the terms of the Trustees Deferred Compensation Plan.
For the year ended January 31, 1996, no significant amounts have
been deferred.
(3) Investments
For the year ended January 31, 1996, purchases and sales of investments,
other than U.S. Government securities and short-term obligations,
aggregated $9,760,902 and $5,429,272, respectively.
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the
investments owned by the Portfolio at January 31, 1996, as computed on a
federal income tax basis, are as follows:
Cost $18,599,568
==========
Gross unrealized appreciation $ 1,681,498
Gross unrealized depreciation 5,985
----------
Net unrealized appreciation $ 1,675,513
==========
(5) Line of Credit
The Portfolio participates with other portfolios and funds managed by
BMR and EVM in a $120 million unsecured line of credit agreement with a
bank. The line of credit consists of a $20 million committed facility
and a $100 million discretionary facility. The Portfolio may temporarily
borrow up to 5% of its total assets to satisfy redemption requests or
settle securities transactions. Interest is charged to each portfolio or
fund based on its borrowings at an amount above either the bank's
adjusted certificate of deposit rate, a variable adjusted certificate of
deposit rate, or a federal funds effective rate. In addition, a fee
computed at an annual rate of 1/4 of 1% on the $20 million committed
facility and on the daily unused portion of the $100 million
discretionary facility is allocated among the participating funds and
portfolios at the end of each quarter. The Florida Insured Portfolio
didn't have any significant borrowings or allocated fees during the
period.
(6) Financial Instruments
The Portfolio regularly trades in financial instruments with off-balance
sheet risk in the normal course of its investing activities to assist in
managing exposure to various market risks. These financial instruments
include written options and futures contracts and may involve, to a
varying degree, elements of risk in excess of the amounts recognized for
financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial
instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting
transactions are considered.
The Portfolio had no such obligations open at January 31, 1996.
Independent Auditors' Report
To the Trustees and Investors of
Florida Insured Municipals Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Florida Insured Municipals
Portfolio as of January 31, 1996, and the related statement of
operations for the year then ended, the statements of changes in net
assets and supplementary data for year ended January 31, 1996 and the
period from the start of business, March 2, 1994, to January 31, 1995.
These financial statements and supplementary data are the responsibility
of the Fund's management. Our responsibility is to express an opinion on
these financial statements and supplementary data based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
supplementary data are free of material misstatement. An audit includes
examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at January 31, 1996, by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and supplementary data present
fairly, in all material respects, the financial position of Florida
Insured Municipals Portfolio at January 31, 1996, the results of its
operations, the changes in its net assets and its supplementary data for
the respective stated periods, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 1, 1996
Investment Management
EV Traditional Florida Insured Municipals Fund
24 Federal Street
Boston, MA 02110
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President, Trustee
Robert B. MacIntosh
Vice President
James L. O'Connor
Treasurer
Thomas Otis
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspaper of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking, Harvard University
Graduate School of Business Administration
Norton H. Reamer
President and Director, United Asset Management Corporation
John L. Thorndike
Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Florida
Insured Municipals Portfolio
24 Federal Street
Boston, MA 02110
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President, Trustee
Robert B. MacIntosh
Vice President
Timothy T. Browse
Vice President and Portfolio Manager of Florida Insured Municipals
Portfolio
James L. O'Connor
Treasurer
Thomas Otis
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspaper of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking, Harvard University
Graduate School of Business Administration
Norton H. Reamer
President and Director, United Asset Management Corporation
John L. Thorndike
Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Portfolio Investment Adviser
Boston Management and Research
24 Federal Street
Boston, MA 02110
Fund Administrator
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
Transfer Agent
First Data Investor Services Group, Inc..
BOS725
P.O. Box 1559
Boston, MA 02104
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
This report must be preceded or accompanied by a current prospectus
which contains more complete information on the Funds, including
distribution plan, sales charges and expenses. Please read the
prospectus carefully before you invest or send money.
EV Traditional Florida Insured Municipals Fund
24 Federal Street
Boston, MA 02110
T-FLISRC-3/96
