Eaton Vance Municipals Trust II
For the Funds:
(bullet) EV Classic Florida Insured Municipals Fund
(bullet) EV Classic Hawaii Municipals Fund
(bullet) EV Classic Kansas Municipals Fund
[LOGO]
Annual Shareholder Report
January 31, 1996
Table of Contents
Item Page
Year-end results 2
President's letter to shareholders 3
Management Reports:
EV Classic Florida Insured Municipals Fund 4
EV Classic Hawaii Municipals Fund 5
EV Classic Kansas Municipals Fund 6
Financial Results 7
<TABLE>
<CAPTION>
Information about your mutual fund investments
Financial data Tax data
Results for the year ended
The
Dividends If your after-tax
paid Fund's Fund's combined equivalant Federal
by Fund NAV distribution Federal & yield income
(During per share rate state tax you would tax
period) at 1/31/96 at 1/31/96 rate is ... need is ... information*
<S> <C> <C> <C> <C> <C> <C>
EV Marathon Florida Insured
Municipals Fund $0.495 $10.52 4.63% 38.76% 7.46% 96.45%
Ev Marathon Hawaii
Municipals Fund $0.461 $9.76 4.41% 42.40% 7.36% 90.95%
EV Marathon Kansas
Municipals Fund Fund $0.460 $10.27 4.40% 42.05% 7.55% 98.69%
[GRAPHICS OMMITTED IN COL 5 OF FLORIDA, HAWAII & KANSAS]
* Percentages represent the amounts of the total dividends paid by the
Funds from net investment income during the year ended January 31, 1996,
that have been designated as tax-exempt interest dividends. Tax
legislation eliminated the exception to market discount rules applicable
to tax-exempt obligations. As a result, certain tax-exempt obligations
acquired by the Portfolio at market discounts may generate a small
amount of ordinary taxable income.
</TABLE>
To Shareholders
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.
On the following pages are performance charts comparing your Fund's
total return with that of a broad-based securities market index. The
lines on the charts represent the total returns of $10,000 hypothetical
investments in the 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 principally comprises
bonds from your individual state, 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 Classic 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 Classic
Florida Insured Municipals Fund (Including Sales Charge) and the
Lehman Brothers Municipal Bond Index
From June 30, 1994, through January 31, 1996
[BOX INSET IN GRAPHIC OF WORM CHART]
AVERAGE TOTAL RETURN 1 year Life of Fund*
With CDSC 12.3% 11.3%
Without CDSC 13.3% 11.3%
- -EV Classic Florida Insured Municpals Fund: $11,582
- -Lehman Brothers Municipal Bond Index: $11,742
[FIGURES BELOW MAKE UP CONTENT OF WORM CHART]
Label Date C. FL Insured Lehman 6/94
1 6/94+ 10,000 10,000
2 7/94 10,282 10,180
3 8/94 10,250 10,216
4 9/94 10,043 10,066
5 10/94 9,763 9,887
6 11/94 9,532 9,708
7 12/94 9,866 9,922
8 1/95 10,225 10,206
9 2/95 10,614 10,502
10 3/95 10,654 10,623
11 4/95 10,659 10,636
12 5/95 10,933 10,975
13 6/95 10,689 10,879
14 7/95 10,768 10,982
15 8/95 10,833 11,121
16 9/95 10,889 11,192
17 10/95 11,109 11,354
18 11/95 11,393 11,543
19 12/95 11,569 11,654
20 1/96 11,582 11,742
*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 6/15/94. + 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
EV Classic Hawaii Municipals Fund
[GRAPHIC OF ROAD CONSTRUCTION SIGN OMMITTED
Your Investment at Work
State Highway Bonds
Highway Improvements
This bond issue is being used for a variety of highway improvement
projects, most notably the construction of parts of Interstate Highway
H-3 on Maui.
Route H-3 is a 16.09-mile-long interstate highway from the H-1 Halawa
Interchange to the U.S. Marine Corps Air Station at Kaneohe. Portions of
the project were completed in 1971, with the remainder held up until
1987 by environmental concerns.
The bond issue also was to be used for several other projects, including
an interchange at the Castle Junction between Pali and Kamehamena
Highways in Kailua. The bond issue totaled $75 million.
[GRAPHIC OF HAWAIIAN ISLAND OMMITTED]
Portfolio Overview
Based on market value as of Jan. 31, 1996
Number of issues 37
Average quality AA
Investment grade 99.3%
Effective maturity (years) 12.10
Largest sectors:
General obligations 21.1%
Insured general obligations 13.3*
Insured transportation 12.5*
Hospitals 8.5
Industrial development/Pollution control 8.0
* Private insurance does not remove the market risks that are
associated with this investment.
The State of the State: Hawaii
The Hawaiian economy, which grew slowly during 1995, is expected to
continue that pattern in 1996, gaining back only a little of the ground
lost when recession hit the islands in 1992.
The state's general fund reserves have declined in recent years.
However, the state has made some progress in reducing spending in light
of the revenue reduction caused by the recession and plans to cut tax
credits to help increase revenues.
Retail prices have declined markedly during the recent recession, and
are not expected to rise sharply in the near future. As a result, the
state's rate of inflation is expected to lag behind that seen in the
rest of the U.S.
Tourism is a huge factor in the Hawaiian economy, depending heavily on
visitors from Japan. This industry was relatively strong in 1995 despite
the continued weakness of the Japanese economy. The number of Japanese
tourists has increased steadily since 1987 and was expected to reach a
new high in 1995. Ironically, although the California economy has been
recovering, Hawaii does not expect to see gains in westbound tourists
during 1996.
[GRAPHIC OF WORM CHART OMMITTED]
Comparison of Change in Value of a $10,000 Investment in EV Classic
Hawaii Municipals Fund (Including Sales Charge) and the Lehman
Brothers Municipal Bond Index
From June 30, 1994, through January 31, 1996
[BOX INSET IN GRAPHIC OF WORM CHART]
AVERAGE TOTAL RETURN 1 year Life of Fund*
With CDSC 12.3% 3.7%
Without CDSC 13.3% 3.7%
- -EV Classic Hawaii Municipals Fund: $11,389
- -Lehman Brothers Municipal Bond Index: $11,874
[FIGURES BELOW MAKE UP CONTENT OF WORM CHART]
Label Date C. HI Muni Lehman 3/94
1 3/94+ 10,000 10,000
2 4/94 10,023 10,085
3 5/94 10,101 10,172
4 6/94 9,949 10,113
5 7/94 10,134 10,295
6 8/94 10,152 10,331
7 9/94 9,968 10,180
8 10/94 9,668 9,999
9 11/94 9,394 9,818
10 12/94 9,631 10,034
11 1/95 9,926 10,321
12 2/95 10,285 10,621
13 3/95 10,413 10,743
14 4/95 10,395 10,756
15 5/95 10,689 11,099
16 6/95 10,514 11,002
17 7/95 10,606 11,106
18 8/95 10,694 11,247
19 9/95 10,785 11,318
20 10/95 10,944 11,483
21 11/95 11,159 11,673
22 12/95 11,307 11,785
23 1/96 11,389 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 3/14/94. + 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 ROBERT B. MACINTOSH OMMITTED]
"During the last year, trading activity in the Portfolio has been rather
restrained, in part because there has been a shortage of new issuance in
Hawaii, as there has been in many other states.
"The other major factor has been the fact that we have, over time,
succeeded in diversifying the Portfolio. Having achieved that goal, we
have not been inclined to do much trading except to improve the
Portfolio's overall call protection, which remains quite high. We've
also focused on maintaining the high quality of the bonds in the
Portfolio."
- - Robert B. MacIntosh
EV Classic Kansas Municipals Fund
Your Investment at Work
Shawnee County
General Obligation Bonds
These bonds were issued via competitive sale in June 1994. Relative to
other Kansas tax-exempt bonds at the time, they offered an attractive
yield and a discount coupon. Currently, the bonds trade at a
slight premium.
Shawnee County is home to Topeka, the state capitol. Predictably, its
economy is anchored by a large state and Federal government presence,
with health care and higher education also leading sectors.
The proceeds of the bonds were used for several government purposes,
including road improvements, new county election equipment and
architectural fees for the rehabilitation of the law enforcement
building.
[GRAPHIC OF STATE OF KANSAS OMMITTED]
Portfolio Overview
Based on market value as of Jan. 31, 1996
Number of issues 48
Average quality AA
Investment grade 100.0%
Effective maturity (years) 13.35
Largest sectors:
Housing 24.9%
Insured general obligations school districts 13.5*
General obligation school districts 8.1
Hospitals 8.1
Insured hospitals 8.0*
* Private insurance does not remove the market risks that are
associated with this investment.
The State of the State: Kansas
Kansas experienced steady, moderate growth in 1995 and projects more of
the same in 1996. Unemployment continues to track the national trend,
but rates historically run about 1% lower.
Favorable product liability legislation passed in Washington, D.C. has
been a boon for the small aircraft industry, as attested to by Cessna's
plant expansion in Wichita and its new plant in Independence.
Kansas continues its planned drawdown of the state's accumulated general
fund balance to its required minimum target of 7.5% of expenditures.
Generally, its receipts are reported to be on track, with sales tax
revenues a little sluggish for the fiscal year ending June 30, 1996.
[GRAPHIC OF WORM CHART OMMITTED]
Comparison of Change in Value of a $10,000 Investment in EV Classic
Kansas 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 11.7% 6.4%
Without CDSC 12.7% 6.4%
- -Lehman Brothers Municipal Bond Index: $11,874
- -Ev Classic Kansas Municipals Fund: $11,083
[FIGURES BELOW MAKE UP CONTENT OF WORM CHART]
Label Date C. Kansas Muni Lehman bond 3/94
1 3/94+ 9,626 10,000
2 4/94 9,734 10,085
3 5/94 9,865 10,172
4 6/94 9,746 10,113
5 7/94 9,949 10,295
6 8/94 9,964 10,331
7 9/94 9,768 10,180
8 10/94 9,521 9,999
9 11/94 9,259 9,818
10 12/94 9,503 10,034
11 1/95 9,832 10,321
12 2/95 10,150 10,621
13 3/95 10,248 10,743
14 4/95 10,239 10,756
15 5/95 10,475 11,099
16 6/95 10,337 11,002
17 7/95 10,411 11,106
18 8/95 10,514 11,247
19 9/95 10,587 11,318
20 10/95 11,746 11,483
21 11/95 11,937 11,673
22 12/95 11,031 11,785
23 1/96 11,083 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 NICOLE ANDERS OMMITTED]
"While interest rates have declined a lot since last summer, the
beginning of 1996 is proving to be volatile. Through the second half of
1995, I continued the strategy of selling current-coupon bonds and
replacing them with either discount or higher-coupon bonds.
"Local single-family housing bonds in the secondary market are one area
of value in an otherwise pricey Kansas municipal market. Given the thin
issuance volume in Kansas, this portfolio continues to be positioned
somewhat more conservatively, because there are fewer opportunities to
restructure under changing interest rate environments."
- - Nicole Anderes
<TABLE>
<CAPTION>
EV Classic Municipals Funds
Financial Statements
Statements of Assets and Liabilities
January 31, 1996
- --------------------------------------------------------------------------------------------------
Assets:
Investment in Portfolio -
Identified cost
Unrealized appreciation Classic Classic Classic
Florida Insured Hawaii Kansas
Total investment in Portfolio, at value (Note 1A) ---------- ---------- ----------
<S> <C> <C> <C>
Receivable for Fund shares sold
Receivable from the Administrator (Note 4)
Deferred organization expenses (Note 1D) $1,272,367 $277,653 $723,496
157,087 24,419 28,241
Total assets ---------- ---------- ----------
$1,429,454 $302,072 $751,737
Liabilities: - - 61,116
Dividends payable 17,501 23,486 24,922
Accrued expenses 3,077 13,014 11,596
---------- ---------- ----------
Total liabilities $1,450,032 $338,572 $849,371
---------- ---------- ----------
Net Assets
$1,647 $365 $860
Sources of Net Assets: 1,429 1,191 1,318
Paid-in capital ---------- ---------- ----------
Accumulated net realized loss on investment and $3,076 $1,556 $2,178
financial futures transactions (computed on the basis ---------- ---------- ----------
of identified cost) $1,446,956 $337,016 $847,193
Accumulated distributions in excess of ========== ========== ==========
net investment income
Unrealized appreciation of investments and $1,291,862 $329,196 $826,233
financial futures contracts from Portfolio
(computed on the basis of identified cost)
(346) (16,234) (7,147)
Total
(1,647) (365) (134)
Shares of Beneficial Interest Outstanding
Net Asset Value, Offering Price and Redemption 157,087 24,419 28,241
Price Per Share (Note 7) ---------- ---------- ----------
(net assets (divided by) shares of beneficial interest $1,446,956 $337,016 $847,193
========== ========== ==========
137,497 34,522 82,489
========== ========== ==========
$10.52 $9.76 $10.27
========== ========== ==========
</TABLE>
See notes to financial statements
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended January 31, 1996
- -----------------------------------------------------------------------------------------------
Classic Classic Classic
Florida Insured Hawaii Kansas
-------- -------- --------
<S> <C> <C> <C>
Investment Income (Note 1B):
Interest income allocated from Portfolio $85,735 $15,865 $38,963
Expenses allocated from Portfolio - - -
-------- -------- --------
Net investment income from Portfolio $85,735 $15,865 $38,963
-------- -------- --------
Expenses -
Distribution costs (Note 5) $14,051 $2,774 $6,549
Custodian fees (Note 4) 3,416 3,500 3,503
Printing and postage 8,472 8,855 10,797
Legal and accounting services 5,906 5,683 6,256
Amortization of organization expenses (Note 1D) 65 4,175 3,759
Transfer and dividend disbursing agent fees 1,341 196 518
Miscellaneous 1,301 1,211 1,866
-------- -------- --------
Total expenses $34,552 $26,394 $33,248
-------- -------- --------
Deduct -
Allocation of expenses to the Administator (Note 4) $17,501 $23,486 $24,922
Reduction of Custodian fee (Note 4) 3,000 133 1,777
-------- -------- --------
Total $20,501 $23,619 $26,699
-------- -------- --------
Net expenses $14,051 $2,775 $6,549
-------- -------- --------
Net investment income $71,684 $13,090 $32,414
-------- -------- --------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) from Portfolio -
Investment transactions (identified cost basis) $33,524 $303 $4,976
Financial futures contracts (34,279) (4,554) (9,400)
-------- -------- --------
Net realized loss ($755) ($4,251) ($4,424)
Change in unrealized appreciation of investments 107,531 27,819 54,610
-------- -------- --------
Net realized and unrealized gain $106,776 $23,568 $50,186
-------- -------- --------
Net increase in net assets from operations $178,460 $36,658 $82,600
======== ======== ========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the Year Ended January 31, 1996
- ------------------------------------------------------------------------------------------------------------
Classic Classic Classic
Florida Insured Hawaii Kansas
--------------- ---------- ----------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From operations -
Net investment income $71,684 $13,090 $32,414
Net realized loss (755) (4,251) (4,424)
Change in unrealized appreciation of investments 107,531 27,819 54,610
---------- ---------- ----------
Net increase in net assets from operations $178,460 $36,658 $82,600
---------- ---------- ----------
Distributions to shareholders (Note 2) -
From net investment income ($71,684) ($13,090) ($31,831)
In excess of net investment income (876) (1,133) --
---------- ---------- ----------
Total distributions to shareholders ($72,560) ($14,223) ($31,831)
---------- ---------- ----------
Transactions in shares of beneficial interest (Note 3) -
Proceeds from sales of shares $288,098 $84,657 $380,427
Net asset value of shares issued to shareholders in payment
of distributions declared 17,268 11,893 29,148
Cost of shares redeemed (451,083) (38,793) (278,035)
---------- ---------- ----------
Increase (decrease) in net assets from Fund share transactions ($145,717) $57,757 $131,540
---------- ---------- ----------
Net increase (decrease) in net assets ($39,817) $80,192 $182,309
Net Assets:
At beginning of year 1,486,773 256,824 664,884
---------- ---------- ----------
At end of year $1,446,956 $337,016 $847,193
========== ========== ==========
Accumulated distributions in excess of net
investment income included in net assets at end of year ($1,647) ($365) ($134)
========== ========== ==========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the Year Ended January 31, 1995
Classic Classic Classic
Florida Insured* Hawaii* Kansas*
---------------------------------------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From operations -
Net investment income $12,538 $9,353 $24,122
Net realized gain (loss) on investments 409 (11,983) (2,723)
Unrealized appreciation (depreciation) of investments 49,556 (3,400) (26,369)
---------- ---------- ----------
Net increase (decrease) in net assets from operations $62,503 ($6,030) ($4,970)
Distributions to shareholders (Note 2) -
From net investment income ($12,538) ($9,353) ($24,122)
In excess of net investment income (2,220) (2,050) (4,680)
---------- ---------- ----------
Total distributions to shareholders ($14,758) ($11,403) ($28,802)
---------- ---------- ----------
Transactions in shares of beneficial interest (Note 3) -
Proceeds from sales of shares $1,940,001 $295,825 $1,176,813
Net asset value of shares issued to shareholders in payment
of distributions declared 9,039 11,053 25,508
Cost of shares redeemed (510,022) (32,631) (503,675)
Increase in net assets from Fund share transactions $1,439,018 $274,247 $698,646
---------- ---------- ----------
Net increase in net assets $1,486,763 $256,814 $664,874
Net assets:
At beginning of period 10 10 10
---------- ---------- ----------
At end of period $1,486,773 $256,824 $664,884
========== ========== ==========
Accumulated distributions in excess of net
investment income included in net assets at end of year ($1,493) ($869) ($1,442)
========== ========== ==========
* For the Classic Florida, Classic Hawaii, and Classic Kansas Funds, the Statement of Changes in Net Assets
is for the period from the commencement of operations, June 15, 1994, March 14, 1994,
and March 3, 1994 respectively, to January 31, 1995.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------
Classic Florida Insured Classic Hawaii Classic Kansas
--------------------------- --------------------------- --------------------------
Year Ended January 31, Year Ended January 31, Year Ended January 31,
--------------------------- --------------------------- --------------------------
1996 1995* 1996 1995* 1996 1995*
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $9.750 $10.000 $9.040 $10.000 $9.540 $10.000
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from operations:
Net investment income $0.490 $0.281 $0.424 $0.365 $0.461 $0.379
Net realized and unrealized gain
(loss) on investments 0.776 (0.200)++ 0.757 (0.880)++ 0.730 (0.386)++
---------- ---------- ---------- ---------- ---------- ----------
Total income (loss) from operations $1.266 $0.081 $1.181 ($0.515) $1.191 ($0.007)
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
From net investment income ($0.490) ($0.281) ($0.424) ($0.365) ($0.461) ($0.379)
In excess of net investment income (0.006) (0.050) (0.037) (0.080) - (0.074)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ($0.496) ($0.331) ($0.461) ($0.445) ($0.461) ($0.453)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year $10.520 $9.750 $9.760 $9.040 $10.270 $9.540
---------- ---------- ---------- ---------- ---------- ----------
Total Return (2) 13.26% 0.82% 13.34% (5.23)% 12.73% (0.11)%
Ratios/Supplemental Data**
Net assets, end of period (000 omitted) $1,447 $1,487 $337 $257 $847 $665
Ratio of net expenses to average daily
net assets (1)(3) 1.22% 0.95%+ 1.04% 1.01%+ 1.29% 0.95%+
Ratio of net investment income to
average daily net assets 4.85% 4.37%+ 4.48% 4.44%+ 4.70% 4.32%+
**For the year ended January 31, 1996, and for the period from the start of business, June 15, 1994, March 14, 1994, and March
3, 1994, respectively, to January 31, 1995, the operating expenses of the Funds and the Portfolios reflect
Net investment income (loss) per share $0.336 $0.085 ($0.362) ($0.153) $0.068 $0.139
---------- ---------- ---------- ---------- ---------- ----------
Ratios (As a percentage of average
daily net assets):
Expenses (1)(3) 2.74% 4.00%+ 9.34% 7.31%+ 5.30% 3.68%+
Net investment income (loss) 3.33% 1.32%+ (3.82%) (1.86%)+ 0.69% 1.59%+
(1) Includes the Fund's share of its corresponding Portfolio's allocated expenses
(2) Total return is calculated assuming a purchase at the net 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 a change in reporting requirements. The new reporting guidelines
require each Fund to increase their expense ratio by the effect of any
expense offset arrangements with their service providers. The expense
ratios for the period ended January 31,1995 have not been adjusted to
reflect this change.
+ Computed on an annualized basis.
++ The per share amount is not in accord with the net realized and unrealized
gain (loss) for the period because of the timing of sales of Fund shares and
the amount of per share realized and unrealized gains and losses at such
time.
* For the Classic Florida Insured, Classic Hawaii, and Classic Kansas Funds,
the Financial Highlights are for the period from the commencement of
operations, June 15, 1994, March 14, 1994, and March 3, 1994, respectively,
to January 31, 1995.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(1) Significant Accounting Policies
Eaton Vance Municipals Trust II (the Trust) is an entity of the type
commonly known as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Trust presently consists of nine non-
diversified Funds, three of which are included in these financial
statements. They include EV Classic Florida Insured Municipals Fund,
("Classic Florida Insured Fund"), EV Classic Hawaii Municipals Fund
("Classic Hawaii Fund") and EV Classic Kansas Municipals Fund ("Classic
Kansas Fund"). Each Fund invests all of its investable assets in
interests in a separate corresponding open-end management investment
company (a "Portfolio"), a New York Trust, having the same investment
objective as its corresponding Fund. The Classic Florida Insured Fund
invests its assets in the Florida Insured Municipals Portfolio, the
Classic Hawaii Fund invests its assets in the Hawaii Municipals
Portfolio and the Classic Kansas Fund invests its assets in the Kansas
Municipals Portfolio. The value of each Fund's investment in its
corresponding Portfolio reflects the Funds' proportionate interest in
the net assets of that Portfolio (6.7%, 1.9%, and 6.5% at January 31,
1996 for the Classic Florida Insured Fund, Classic Hawaii Fund and
Classic Kansas Fund, respectively.) The performance of each Fund is
directly affected by the performance of its corresponding Portfolio. The
financial statements of each Portfolio, including the portfolio of
investments, are included elsewhere in this report and should be read in
conjunction with each Fund's financial statements. 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 - Valuation of securities by the Portfolios is
discussed in Note 1 of the Portfolios' Notes to Financial Statements
which are included elsewhere in
this report.
B. Income - Each Fund's net investment income consists of each Fund's
pro rata share of the net investment income of its corresponding
Portfolio, less all actual and accrued expenses of each Fund determined
in accordance with generally accepted accounting principles.
C. Federal Taxes - Each Fund's policy is to comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies and to distribute to shareholders each year all of
its taxable and tax-exempt
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is necessary. At January 31,
1996, the Classic Florida Insured Fund, Classic Hawaii Fund and Classic
Kansas Fund, for federal income tax purposes had capital loss carryovers
which will reduce taxable income arising from future net realized gain
on investments, if any, to the extent permitted by the Internal Revenue
Code, and this will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Funds of
any liability for federal income or excise tax. The amounts and
expiration dates of the capital loss carryovers are as follows:
Classic Florida Insured Fund $4,592 January 31, 2004
216 January 31, 2003
Classic Hawaii Fund $14,198 January 31, 2004
1,941 January 31, 2003
Classic Kansas Fund $4,657 January 31, 2004
745 January 31, 2003
Dividends paid by each Fund from net interest on tax exempt municipal
bonds allocated from its corresponding Portfolio are not includable by
shareholders as gross income for federal income tax purposes because
each Fund and Portfolio intend to meet certain requirements of the
Internal Revenue Code applicable to regulated investment companies which
will enable the Funds to pay exempt-interest dividends. The portion of
such interest, if any, earned on private activity bonds issued after
August 7, 1986, may be considered a tax preference item to shareholders.
D. Deferred Organization Expenses - Costs incurred
by a 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 each Fund is determined daily and substantially all of
the net income so determined is declared as a dividend to shareholders
of record at the time of declaration. Distributions are paid monthly.
Distributions 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 Funds distinguish
between distributions on a tax basis and a financial reporting basis.
Generally accepted accounting principles require that only distributions
in excess of tax basis earnings and profits be reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax
earnings and profits which result in temporary over distributions for
financial 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 Funds' Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest
(without par value). Transactions in Fund shares were as follows:
During the year ended January 31, 1996, the following reclassifications
were made due to permanent differences between book and tax accounting
for distribution costs, and certain distributions related to capital
gains:
Classic Classic Classic
Florida Insured Hawaii Kansas
Increase/decrease Fund Fund Fund
- -----------------------------------------------------------------------
Accumulated distributions in
excess of net investment income $ 722 $ 1,637 $ 725
Paid-in capital (722) (1,637) (725)
<TABLE>
<CAPTION>
Classic Classic Classic
Florida Insured Hawaii Kansas
------------------------------------------------------------
Year Ended Year Ended Year Ended
January 31, January 31, January 31,
1996 1995* 1996 1995* 1996 1995*
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales 28,089 203,693 8,969 30,797 38,101 119,503
Issued to shareholders electing to receive
payments of distributions in Fund Shares 1,706 942 1,257 1,210 2,922 2,666
Redemptions (44,849) (52,085) (4,120) (3,592) (28,246) (52,458)
-------- -------- -------- -------- -------- --------
Net Increase (15,054) 152,550 6,106 28,415 12,777 69,711
======== ======== ======== ======== ======== ========
*For the Classic Florida Insured, Classic Hawaii and Classic Kansas
Funds, the Fund share activity is for the period from the start of
business, June 15, 1994, March 14, 1994 and March 3, 1994, respectively,
to January 31, 1995.
</TABLE>
(4) Transactions with Affiliates
Eaton Vance Management (EVM) serves as the administrator of each Fund,
but receives no compensation. Each of the Portfolios have engaged Boston
Management and Research (BMR), a subsidiary of EVM, to render investment
advisory services. See Note 2 of the Portfolios' Notes to Financial
Statements which are included elsewhere in this report. To enhance the
net income of the Funds for the year ended January 31, 1996, $17,501,
$23,486 and $24,922 of expenses related to the operation of the Classic
Florida Insured Fund, Classic Hawaii Fund and Classic Kansas Fund,
respectively, were allocated, to EVM. Except as to Trustees of the Funds
and the Portfolios who are not members of EVM's or BMR's organization,
officers and Trustees receive remuneration for their services to each
Fund out of such investment adviser fee. Investors Bank & Trust Company
(IBT), serves as custodian to the Funds and the Portfolios. 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 Funds or the
Portfolios maintains with IBT. All significant credit balances used to
reduce the Funds' custody fees are reflected as a reduction of operating
expenses on the statement of operations.Certain of the officers and
Trustees of the Funds and Portfolios are officers and directors/trustees
of the above organization (Note 5).
(5) Distribution Plan
Each Fund has adopted a distribution plan (the plan) pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Plans require each
of the Funds to pay the principal underwriter, Eaton Vance Distributors,
Inc. (EVD), amounts equal to 1/365 of 0.75% of a Funds daily net assets
for providing ongoing distribution services and facilities to a Fund. A
Fund will automatically discontinue payments to EVD during any period in
which there are no outstanding Uncovered Distribution Charges, which are
equivalent to the sum of (i) 6.25% of the aggregate amount received by
the Fund for shares sold plus (ii) distribution fees calculated by
applying the rate of 1% over the prevailing prime rate to the
outstanding balance of Uncovered Distribution Charges of EVD, reduced by
amounts theretofore paid to EVD. The amount payable to EVD with respect
to each day is accrued on such day as a liability of each Fund and,
accordingly, reduces the Fund's net assets. For the year ended January
31, 1996, Classic Florida Insured Fund, Classic Hawaii Fund and Classic
Kansas Fund, paid or accrued $11,093, $2,193, and $5,170, respectively,
to or payable to EVD representing 0.75% (annualized) of average daily
net assets. At January 31, 1996, the amount of Uncovered Distribution
Charges of EVD calculated under the Plans for Classic Florida Insured
Fund, Classic Hawaii Fund and Classic Kansas Fund were approximately
$116,000, $23,000, and $99,000 respectively. In addition, the Plans
permit the Funds to make monthly payments of service fees to the
Principal Underwriter, in amounts not expected to exceed 0.25% of
each Fund's average daily net assets for any fiscal year. The
Trustees have initially implemented the Plans by authorizing the
Funds to make monthly service fee payments to the Principal Underwriter
in amount not expected to exceed 0.20% of each Fund's average daily net
assets for any fiscal year. For the year ended January 31, 1996,
Classic Florida Insured Fund, Classic Hawaii Fund and Classic Kansas
Fund paid or accrued service fees to EVD in the amount of $2,958,
$581 and $1,379, respectively. Service fee payments are made for
personal services and/or maintenance of shareholder accounts.
Service fees paid to EVD and Authorized Firms are separate and
distinct from the sales commissions and distribution fees
payable by a Fund to EVD, and as such are not subject to automatic
discontinuance when there are no outstanding Uncovered Distribution
Charges of EVD.
Certain of the officers and Trustees of the Funds are officers or
directors of EVD.
(6) Investment Transactions
Increases and decreases in each Fund's investment in its corresponding
Portfolio for the year ended January 31, 1996 were
as follows:
Classic Florida Classic Classic
Insured Fund Hawaii Fund Kansas Fund
---------------- ----------- -----------
Increases $300,500 $97,828 $754,136
Decreases 549,538 91,385 732,839
(7) Contingent Deferred Sales Charges
For shares purchases on or after January 31, 1995, a contingent deferred
sales charge (CDSC) is 1% of imposed on any redemption of Fund shares
made within one year of purchase. Generally the CDSC is based upon the
lower of net asset value at date of redemption or date of purchase No
charge is levied on shares acquired by reinvestment of dividends or
capital gains distributions. No CDSC is levied on shares which have been
sold to EVD or its affiliates or to their respective employees or
clients. CDSC charges are paid to EVD to reduce the amount of Uncovered
Distributions Charges calculated under the Funds' Distributions Plans.
CDSC received when no Uncovered Distribution Charges exist will be
credited to the Funds. For the year ended January 31, 1996, EVD received
no CDSC.
(8) Subsequent Event
Effective February 1, 1996, Classic Hawaii Fund and Classic Kansas Fund
changed their names to EV Traditional Hawaii Municipals Fund and EV
Traditional Kansas Municipals Fund. In addition, the Funds will
discontinue the payment of sales commissions and distribution fees to
the principal underwriter pursuant to a Distribution Plan (see Note 5).
The Funds will make quarterly service fee payments to the principal
underwriter and authorized firms in amounts that will not exceed 0.25%
of each Funds average daily net assets based on the value of Fund shares
sold and remaining outstanding for specific periods of time. Purchases
of Fund shares on or after February 1, 1996 will be subject to a Maximum
Initial Sales Charge of 3.75% on amounts up to $50,000 and declining
rates on purchases in excess of such amount.
(9) Special Meetings of Shareholders (Unaudited)
On December 8, 1995 and December 15, special meetings of the
shareholders of the Classic Florida Insured Fund (December 8), the
Classic Hawaii Fund (December 15) and the Classic Kansas Fund (December
15) were held for the purpose of voting on the following matter:
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, it seeks
to avoid.
The results of the vote on Proposal 1 were as follows:
% of
Classic Florida Insured Fund Outstanding % of shares
Vote No. of Shares Shares Voted
- ------ ------------- ------------ -----------
Affirmative 107,182 79.31% 100.00%
Against 0 0.00 0.00
Abstain 0 0.00 0.00
------------- ------------ -----------
Total 107,182 79.31% 100.00%
============= ============ ===========
% of
Classic Hawaii Fund Outstanding % of shares
Vote No. of Shares Shares Voted
- ------ ------------- ------------ -----------
Affirmative 24,084 72.60% 91.62%
Against 0 0.00 0.00
Abstain 2,204 6.64 8.38
------------- ------------ -----------
Total 26,288 79.24% 100.00%
============= ============ ===========
% of
Classic Kansas Fund Outstanding % of shares
Vote No. of Shares Shares Voted
- ------ ------------- ------------ -----------
Affirmative 45,424 57.25% 97.90%
Against 0 0.00 0.00
Abstain 973 1.23 2.10
------------- ------------ -----------
Total 46,397 58.48% 100.00%
============= ============ ===========
Independent Auditors' Report
To the Trustees and Shareholders of
Eaton Vance Municipals Trust II:
We have audited the accompanying statements of assets and liabilities of
EV Classic Florida Insured Municipals Fund, EV Classic Hawaii Municipals
Fund and EV Classic Kansas Municipals Fund (certain of the series
constituting Eaton Vance Municipals Trust II) as of January 31, 1996,
and the related statements 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 to January 31, 1995. 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 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 audits provide 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
aforementioned funds of Eaton Vance Municipals Trust II at January 31,
1996 and the results of their operations, the changes in their net
assets and their financial highlights for the respective stated periods,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
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 Hospitals - 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 PCR-
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 1,188,299
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
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%, 10/1/21 136,718
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 maybe consolidated 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 institution, as a percentage of total tax-exempt investments, were as follows:
American Municipal Bond Assurance Corp. (AMBAC) 13.3%
Financial Guaranty Insurance Corp. (FGIC) 40.0%
Financial Security Insurance Inc. (FSA) 1.2%
Municipal Bond Investors Assurance Corp. (MBIA) 30.5%
-------------
85.0%
=============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Hawaii 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>
Education - 3.4%
NR BBB- $ 500 Puerto Rico Industrial, Tourist,
Educational, Medical and
Environmental Control
Authority, Polytechnic
University, 6.50%,
8/1/24 $ 519,640
---------------
Escrowed/Prefunded - 0.7%
Baa1 A $ 100 Commonwealth of Puerto
Rico Aqueduct and Sewer
Authority, 7.00%,
Prerefunded to 7/1/98,
7/1/19 $ 109,355
---------------
General Obligations - 21.1%
Aa AA $ 140 State of Hawaii, 5.75%,
1/1/11 $149,413
Aa AA 1,000 State of Hawaii, 5.25%,
6/1/13 994,290
Aa AA 750 City and County of
Honolulu, Hawaii,
4.75%, 9/1/17 701,895
NR BBB 590 Government of Guam,
5.375%, 11/15/13 557,975
Baa1 A 250 Commonwealth of
Puerto Rico, 5.40%,
7/1/25 243,168
Baa1 A 500 Puerto Rico Public
Buildings Authority,
Public Education and
Health Facilities,
5.50%, 7/1/21 492,570
NR NR 100 Virgin Islands Public
Finance Authority,
7.25%, 10/1/18 107,542
---------------
$ 3,246,853
---------------
Hospitals - 8.5%
Aa3 AA $ 400 State of Hawaii Department
of Budget and Finance,
Kaiser Permanente,
6.25%, 3/1/21 $ 419,744
A A 625 State of Hawaii Department
of Budget and Finance
Kapiolani Health System,
6.00%, 7/1/19 632,112
NR AAA 250 Puerto Rico Industrial,
Tourist, Educational, Medical
and Environmental Control
Authority, Doctor Pila
Hospital Project, (FHA),
6.25%, 8/1/32 262,118
---------------
$ 1,313,974
---------------
Housing - 7.8%
Aa A $1,000 State of Hawaii Housing
Finance and Development
Single Family Mortgage
Bonds, 5.90%,
7/1/27 $ 1,026,520
Aa A 175 State of Hawaii Housing
Finance and Development
Single Family Mortgage
Bonds, (AMT), 6.00%,
7/1/26 176,064
---------------
$ 1,202,584
---------------
Industrial Development/
Pollution Control - 8.0%
A1 AA- $ 550 Puerto Rico Industrial,
Tourist, Educational, Medical
and Environmental Control
Authority, Upjohn Company Project, 7.50%, 12/1/23 $ 606,221
Aa3 AA- 400 Puerto Rico Industrial, Tourist,
Educational, Medical and Environmental Control
Authority, Motorola Inc.
Project, 6.75%, 1/1/14 436,156
Baa3 BB+ 180 Puerto Rico Port Authority, American Airlines, (AM
6.30%, 6/1/23 184,308
---------------
$ 1,226,685
---------------
Insured Education - 6.6%
Aaa AAA $500 University of Hawaii Board
of Regents, University
System, (AMBAC),
5.65%, 10/1/12 $ 511,980
Aaa AAA 500 Hawaii State Housing
Development Corporation, University of Hawaii,
(AMBAC), 5.70%,
10/1/25 512,805
---------------
$1,024,785
---------------
Insured General
Obligations - 13.3%
Aaa AAA $700 County of Hawaii,
Hawaii, (FGIC), 5.55%,
5/1/10 $ 741,020
Aaa AAA 305 County of Kauai, Hawaii,
(MBIA), 5.90%, 2/1/14 320,497
Aaa AAA 250 County of Maui, Hawaii,
(FGIC), 5.75%, 1/1/13 257,440
Aaa AAA 250 County of Maui, Hawaii,
(FGIC), 5.125%,
12/15/13 247,245
Aaa AAA 500 Commonwealth of Puerto
Rico, (MBIA), 5.00%,
7/1/21 485,275
---------------
$2,051,477
---------------
Insured Hospitals - 1.4%
Aaa AAA $100 State of Hawaii Department
of Budget and Finance
Queen's Medical Center,
(FGIC), 6.50%, 7/1/12 $ 103,928
Aaa AAA 100 State of Hawaii Department
of Budget and Finance
St. Francis Medical Centers, (CGIC), 6.50%, 7/1/22 108,724
---------------
$ 212,652
---------------
Insured Housing - 3.6%
Aaa AAA $500 Honolulu Hawaii City &
County Mortgage Revenue
Bonds, Smith Beretania
Project, (MBIA), 7.80%,
7/1/24 $ 548,465
---------------
Insured
Transportation - 12.5%
Aaa AAA $500 State of Hawaii Airports
System, (AMT), (FGIC),
7.50%, 7/1/20 $ 562,180
Aaa AAA 100 State of Hawaii Airports
System, (AMT), (MBIA),
6.90%, 7/1/12 116,780
Aaa AAA 250 State of Hawaii Harbor
Revenue, (AMT), (MBIA),
7.00%, 7/1/17 275,122
Aaa AAA 245 State of Hawaii Airports
System, (AMT), (MBIA),
7.00%, 7/1/18 273,550
Aaa AAA 650 State of Hawaii Harbor
Revenue, (AMT), (FGIC),
6.375%, 7/1/24 702,592
---------------
$ 1,930,224
---------------
Insured Utilities - 4.3%
Aaa AAA $500 State of Hawaii Department
of Budget and Finance,
Electric Company, Inc.,
(AMT), (MBIA), 6.60%,
1/1/25 $ 550,645
Aaa AAA 100 Puerto Rico Electric Power Authority "Stripes", (F
Variable, 7/1/03 (1) 117,165
---------------
$ 667,810
---------------
Special Tax - 1.4%
Baa1 A $200 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
6.625%, 7/1/18 $ 221,076
---------------
Transportation - 7.4%
Aa AA $965 State of Hawaii Highway
Revenue, 5.00%, 7/1/12 $935,539
NR BBB 200 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 206,136
---------------
$ 1,141,675
---------------
Total tax-exempt investments
(identified cost $14,061,760) $15,417,255
===============
(1) The above designated securities have been issued as inverse floater bonds
(AMT) - Interest earned from these securities maybe considered a tax preference item for purposes of the Federal
Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Hawaii 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,
41.8% of the securities in the portfolio of investments are backed by bond insurance of various financial
institutions and financial guaranty assurance agencies. The aggregate percentage by financial institution ranged
from 0.7% to 17.2% of total investments.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Kansas 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>
General Obligations
Local - 2.7%
Aa NR $150 Shawnee County, 5.75%,
9/1/13 $ 155,011
Aa AA 170 City of Witchita, 4.00%,
9/1/09 153,077
---------------
$ 308,088
---------------
General Obligation
School District - 8.1%
Aa NR $400 Douglas County, (Lawrence),
USD No. 497, 6.00%,
9/1/15 $ 420,564
Aa NR 500 Johnson/Miami Cos.
USD 229, 5.00%,
10/1/14 492,810
---------------
$ 913,374
---------------
Hospitals - 8.1%
A NR $250 City of Lawrence,
(Lawrence Memorial),
Hospital Revenue
Bonds, 6.20%, 7/1/19 $260,270
Aa NR 705 Shawnee County, (Sisters
of Charity), Revenue
Bonds, 5.00%, 12/1/23 647,507
---------------
$ 907,777
---------------
Housing - 24.9%
Aaa AAA $230 City of Kansas City,
Multifamily Housing
Revenue Bonds (MFHRB)
(FHA Insured-Rainbow
Towers), 6.70%, 7/1/23 $ 239,039
Aaa NR 85 City of Kansas City,
Single Family Housing
(SFH) (GNMA) 5.30%,
5/1/07 85,064
Aaa NR 85 City of Kansas City,
(SFH) (GNMA) 5.30%,
11/1/07 85,065
Aaa NR 200 City of Kansas City,
(SFH) (GNMA) 5.90%,
11/1/27 200,150
NR AAA 250 City of Olathe, Kansas,
MFHRB (FNMA Program Deerfield Apartments),
6.45%, 6/1/19 258,730
Aaa NR 215 Cities of Olathe and of
Labette, Collateralized
Single Family Mortgage
Revenue Bonds (CSFMRB) (GNMA), 8.10%, 8/1/23 240,660
Aa NR 100 Kansas Development
Auth. (SFH) (FHA)
(Martin Creek), 6.60%,
8/31/34 103,489
Aaa NR 45 Sedgwick County
(SFH) (GNMA)
Ser 94 B 8.20%, 5/1/14 49,908
Aaa AAA 190 Sedgwick and Shawnee
Counties, CSFMRB
(GNMA), 7.50%,
12/1/09 199,696
Aaa AAA 130 Sedgwick and Shawnee
Counties, CSFMRB
(GNMA), 7.50%,
12/1/10 136,634
Aaa NR 235 Sedgwick and Shawnee
Counties, CSFMRB
(GNMA), 7.75%,
11/1/24 (2) 271,260
Aaa NR 475 Sedgwick and Shawnee
Counties, CSFMRB
(GNMA), 8.00%,
5/1/25 549,770
NR AA 250 Puerto Rico Housing
Finance Corporation,
MFMRB 7.50%,
4/1/22 265,690
NR AA 100 Puerto Rico Housing
Finance Corporation,
(Sec. AMBAC) 7.50%,
10/1/11 104,760
---------------
$ 2,789,915
---------------
Industrial Development
Revenue - 2.7%
A2 NR $100 Puerto Rico I.M.E.
(American Home Products),
5.10%, 12/1/18 $ 94,952
Baa3 BB+ 200 Puerto Rico Port Authority,
(American Airlines),
6.30%, 6/1/23 204,788
---------------
$ 299,740
---------------
Insured College and
University - 4.4%
Aaa AAA $500 University of Puerto Rico
(MBIA), 5.25%, 6/1/25 $ 497,735
---------------
Insured Utilities - 4.5%
Aaa AAA $345 City of Burlington, PCR
(Kansas Gas & Electric Co.) (MBIA), 7.00%,
6/1/31 (2) $ 389,953
Aaa AAA 100 Puerto Rico Electric
Power Authority,
Power Revenue Bonds
(FSA), Residual Interest
Bonds, Variable Rate,
7/1/02 (1) 115,191
---------------
$ 505,144
---------------
Insured General
Obligations - 6.6%
Aaa AAA $200 City of Emporia, Water
Revenue Bonds
(AMBAC) 5.875%,
12/1/14 $207,420
Aaa AAA 150 City of Garnett, Combined
Utility Revenue Bonds
(MBIA), 6.00%,
10/1/17 156,251
Aaa AAA 200 City of Kansas City,
Utility System Revenue
Bonds (FGIC), 6.375%,
9/1/23 220,116
Aaa AAA 150 Kansas Development
Finance Authority, Revenue
Bonds (MBIA), 5.90%,
10/1/09 159,488
---------------
$ 743,275
---------------
Insured General
Obligations School
District - 13.5%
Aaa AAA $150 Atchison County, USD
No. 409, (CGIC),
5.375%, 9/1/15 $ 152,100
Aaa AAA 350 Johnson County, (Olathe),
USD No. 233 (AMBAC),
5.625%, 9/1/11 364,094
Aaa AAA 235 McPherson County,
(McPherson), USD
No. 418, (CGIC), 6.00%,
9/1/11 249,192
Aaa AAA 250 Sedgwick County, USD
No. 267, (AMBAC),
6.15%, 11/1/09 273,543
Aaa AAA 230 Sedgwick County, USD
No. 267, (AMBAC),
6.15%, 11/1/10 250,730
Aaa AAA 165 Shawnee County, (Seaman),
USD No. 345, (MBIA),
5.75%, 9/1/11 172,364
Aaa AAA 50 Shawnee County, USD
No. 345, (MBIA),
5.50%, 9/1/13 51,059
---------------
$ 1,513,082
---------------
Insured General
Obligations
Territory - 2.2%
Aaa AAA $250 Puerto Rico Public
Building Auth. (AMBAC),
5.50%, 7/1/25 $ 251,670
---------------
Insured Hospitals - 8.0%
Aaa AAA $200 City of Olathe, Health
Facilities Revenue Bonds,
(Olathe Medical Ctr)
(AMBAC), 6.00%,
9/1/11 $ 204,948
Aaa AAA 200 City of Olathe, Health
Facilities Revenue Bonds, (Evangelical Lutheran
Good Samaritan Society) (AMBAC), 6.00%,
5/1/19 211,420
Insured Hospitals - (continued)
Aaa AAA 500 Shawnee County, Health
Facilities Revenue
Bonds, (Menninger
Foundation) (CGIC),
5.00%, 8/15/16 481,360
---------------
$ 897,728
---------------
Insured Water and
Sewer - 2.4%
Aaa AAA $270 Junction City Kansas
Water & Sewer (MBIA)
5.20%, 9/1/10 $ 271,296
---------------
Tranportation - 7.8%
NR BBB $100 Guam Airport Authority
General Revenue Bonds,
6.50%, 10/1/23 $102,363
Aa AA 480 State of Kansas Department
of Transportation Highway
Revenue Bonds, 5.375%,
3/1/13 483,576
Baa1 A 250 Puerto Rico Highway
and Transportation Authority, Highway Revenue Bonds,
5.25%, 7/1/20 239,380
Baa1 A 50 Puero Rico Highway and Transportation Authority,
Highway Revenue Bonds,
5.25%, 7/1/21 47,836
---------------
$ 873,155
---------------
Utility - 2.2%
NR BBB $100 Guam Power Authority
Revenue Bonds, 5.25%,
10/1/13 $ 92,405
NR BBB 150 Guam Power Authority
Revenue Bonds, 6.625%,
10/1/14 157,285
---------------
$ 249,690
---------------
Water and Sewer - 1.9%
Aa AA+ $200 Water District No. 1 of
Johnson County, Water
Revenue Bonds, 5.75%,
12/1/19 $ 208,404
---------------
Total tax-exempt investments
(identified cost $10,590,910) $11,230,072
===============
(1) The above designated securities have been issued as inverse floater bonds.
(2) Security has been segregated to cover margin requirements on open financial futures contracts.
(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 Kansas 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 assiciated with such economic developments, at January 31, 1996,
41.6% of the securities in the portfolio of investments are backed by bond insurance of various financial
institutions and financial guaranty assurance agencies. The aggregate percentage by financial institution
ranged from 1.0% to 32.9% of total investments.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Municipals Portfolios
Financial Statements
Statements of Assets and Liabilities
January 31, 1996
- -------------------------------------------------------------------------------------------------------------
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Investments -
Identified cost $18,599,568 $14,061,760 $10,590,910
Unrealized appreciation 1,675,513 1,355,495 639,163
----------- ----------- -----------
Total investments, at value (Note 1A) $20,275,081 $15,417,255 $11,230,073
Cash 1,759,142 209,784 905,260
Receivable from the Investment Adviser (Note 2) 28,813 29,013 25,353
Interest receivable 323,987 158,694 200,620
Deferred organization expenses (Note 1D) 7,478 6,840 6,760
----------- ----------- -----------
Total assets $22,394,501 $15,821,586 $12,368,066
----------- ----------- -----------
Liabilities:
Payable for investments purchased $976,030 $240,473 $756,308
Payable for daily variation margin on open
financial futures contracts (Note 1E) -- -- 250
Payable to affiliate -
Trustee fees 38 38 38
Accrued expenses 2,633 2,998 2,829
----------- ----------- -----------
Total liabilities $978,701 $243,509 $759,425
----------- ----------- -----------
Net Assets applicable to investors' interest in Portfolio $21,415,800 $15,578,077 $11,608,641
=========== =========== ===========
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $19,740,287 $14,222,582 $10,970,304
Unrealized appreciation of investments and financial
futures contracts (computed on the basis of identified cost) 1,675,513 1,355,495 638,337
----------- ----------- -----------
Total $21,415,800 $15,578,077 $11,608,641
=========== =========== ===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended January 31, 1996
- -------------------------------------------------------------------------------------------------------
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
---------- ---------- ----------
<S> <C> <C> <C>
Investment Income:
Interest income $1,016,847 $890,336 $590,562
Expenses - ---------- ---------- ----------
Investment adviser fee (Note 2) $27,933 $23,715 $15,929
Compensation of Trustees not members of the
Investment Adviser's organization 188 188 188
Custodian fees (Note 2) 14,160 12,916 10,541
Legal and accounting services 17,433 16,433 16,255
Bond pricing 5,255 4,621 5,470
Amortization of organization expenses (Note 1D) 2,424 2,216 2,190
Miscellaneous 2,263 975 --
---------- ---------- ----------
Total expenses $69,656 $61,064 $50,573
---------- ---------- ----------
Deduct -
Reduction of investment adviser fee (Note 2) $27,933 $23,715 $15,929
Allocation of expenses to the Investment Adviser (Note 2) 28,813 29,013 25,353
Reduction of custodian fee (Note 2) 12,910 8,336 9,291
---------- ---------- ----------
Total $69,656 $61,064 $50,573
---------- ---------- ----------
Net expenses $ -- $ -- $ --
---------- ---------- ----------
Net investment income $1,016,847 $890,336 $590,562
---------- ---------- ----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) -
Investment transactions (identified cost basis) $289,520 $36,138 $120,124
Financial futures contracts (382,756) (257,520) (132,737)
---------- ---------- ----------
Net realized loss on investments ($93,236) ($221,382) ($12,613)
---------- ---------- ----------
Change in unrealized appreciation -
Investments $1,447,272 $1,460,122 $749,278
Financial futures contracts -- 15,351 6,787
---------- ---------- ----------
Net unrealized appreciation of investments $1,447,272 $1,475,473 $756,065
---------- ---------- ----------
Net realized and unrealized gain on investments $1,354,036 $1,254,091 $743,452
---------- ---------- ----------
Net increase in net assets from operations $2,370,883 $2,144,427 $1,334,014
========== ========== ==========
See notes to financial statements
</TABLE>
<TABLE>
<OPTION>
Statements of Changes in Net Assets
For the Year Ended January 31, 1996
- --------------------------------------------------------------------------------------------------------
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
----------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From operations -
Net investment income $1,016,847 $890,336 $590,562
Net realized loss on investment transactions (93,236) (221,382) (12,613)
Change in unrealized appreciation of investments 1,447,272 1,475,473 756,065
----------- ----------- -----------
Net increase in net assets from operations $2,370,883 $2,144,427 $1,334,014
----------- ----------- -----------
Capital transactions -
Contributions $7,413,811 $3,305,491 $3,013,009
Withdrawals (2,768,845) (2,736,380) (1,044,410)
----------- ----------- -----------
Increase in net assets resulting from capital transactions $4,644,966 $569,111 $1,968,599
----------- ----------- -----------
Total increase in net assets $7,015,849 $2,713,538 $3,302,613
Net Assets:
At beginning of year 14,399,951 12,864,539 8,306,028
----------- ----------- -----------
At end of year $21,415,800 $15,578,077 $11,608,641
=========== =========== ===========
- --------------------------------------------------------------------------------------------------------
For the period from the start of business, March 2, 1994, to January 31, 1995
- --------------------------------------------------------------------------------------------------------
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
----------- ----------- -----------
Increase (Decrease) in Net Assets:
From operations -
Net investment income $307,971 $497,012 $275,220
Net realized loss on investment transactions (57,512) (507,442) (22,782)
Unrealized appreciation (depreciation) of investments 228,241 (119,978) (117,728)
----------- ----------- -----------
Net increase (decrease) in net assets from operations $478,700 ($130,408) $134,710
----------- ----------- -----------
Capital transactions -
Contributions $16,016,246 $13,464,081 $9,002,789
Withdrawals (2,195,015) (569,154) (931,491)
----------- ----------- -----------
Increase in net assets resulting from capital transactions $13,821,231 $12,894,927 $8,071,298
----------- ----------- -----------
Total increase in net assets $14,299,931 $12,764,519 $8,206,008
Net Assets:
At beginning of period 100,020 100,020 100,020
----------- ----------- -----------
At end of period $14,399,951 $12,864,539 $8,306,028
=========== =========== ===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Supplementary Data
- ---------------------------------------------------------------------------------------------------------------------------
Florida Insured Portfolio Hawaii Portfolio
-------------------------------- --------------------------------
Year Ended January 31, Year Ended January 31,
-------------------------------- --------------------------------
1996 1995* 1996 1995*
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Ratios (As a percentage of average daily net assets)**:
Net expenses(1) 0.07% 0.01%+ 0.06% 0.06%+
Net investment income 5.82% 5.73%+ 6.01% 6.03%+
Portfolio Turnover 32% 33% 19% 66%
**The operating expenses of the Portfolios reflect a reduction of the investment adviser fee and/or allocation of expenses
to the Investment Adviser. Had such actions not been taken, the ratios would have been as follows:
Ratios (As a percentageof average daily net assets)*:
Expenses(1) 0.39% 0.41%+ 0.41% 0.38%+
Net investment income 5.50% 5.33%+ 5.66% 5.70%+
+ 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 each Porfolio to increase their expense ratio by the effect of any expense offset
arrangements with their service providers. The expense ratios for the period ended Janurary 31, 1995 have no been adjusted
to reflect this change.
Kansas Portfolio
---------------------------------
Year Ended January 31,
---------------------------------
1996 1995*
-------- ---------
Ratios (As a percentage of average daily net assets)*:
Net expenses(1) 0.09% 0.01%+
Net investment income 5.93% 5.68%+
Portfolio Turnover 21% 12%
**The operating expenses of the Portfolio reflect a reduction of the investment adviser fee and/or allocation of expenses to
the 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) 0.50% 0.43%+
Net investment income 5.52% 5.26%+
+ 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 each Portfolio to increase their expense ratio by the effect of any expense offset
arrangements with their service providers. The expense ratios for the period ended Janurary 31, 1995 have not been
adjusted to reflect this change.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(1) Significant Accounting Policies
Florida Insured Municipals Portfolio ("Florida Insured Portfolio"),
Hawaii Municipals Portfolio ("Hawaii Portfolio") and Kansas Municipals
Portfolio ("Kansas Portfolio"), collectively the Portfolios, are
registered under the Investment Company Act of 1940 as non-diversified
open-end management investment companies which were organized as trusts
under the laws of the State of New York on May 1, 1992 for the Hawaii
Portfolio and October 25, 1993 for the Florida Insured Portfolio and
Kansas Portfolio. The Declarations of Trust permit the Trustees to issue
interests in the Portfolios. The following is a summary of significant
accounting policies of the Portfolios. The policies are in conformity
with generally accepted accounting principles.
A. Investment Valuations - Municipal bonds are normally valued on the
basis of valuations furnished by a pricing service. Taxable obligations,
if any, for which price quotations are readily available are normally
valued at the mean between the latest bid and asked prices. Futures
contracts 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 Portfolios are treated as partnerships for Federal
tax purposes. No provision is made by the Portfolios for federal or
state taxes on any taxable income of the Portfolios because each
investor in the Portfolios is ultimately responsible for the payment of
any taxes. Since some of the Portfolios' investors are regulated
investment companies that invest all or substantially all of their
assets in the Portfolios, the Portfolios normally must satisfy the
applicable source of income and diversification requirements (under the
Internal Revenue Code) in order for their respective investors to
satisfy them. The Portfolios will allocate at least annually among their
respective investors each investor's distributive share of the
Portfolios' net taxable (if any) and tax-exempt investment income, net
realized capital gains, and any other items of income, gain, loss,
deductions or credit. Interest income received by the Portfolios on
investments in municipal bonds which is excludable from gross income
under the Internal Revenue Code, will retain its status as income exempt
from federal income tax when allocated to each Portfolio's investors.
The portion of such interest, if any, earned on private activity bonds
issued after August 7, 1986, may be considered a tax preference item for
investors.
D. Deferred Organization Expenses - Costs incurred by a Portfolio in
connection with its organization are being amortized on the straight-
line basis over five years.
E. Financial Futures Contracts - Upon the entering of a financial
futures contract, a Portfolio is required to deposit ("initial margin")
either in cash or securities an amount equal to a certain percentage of
the purchase price indicated in the financial futures contract.
Subsequent payments are made or received by a Portfolio ("margin
maintenance") each day, dependent on the daily fluctuations in the value
of the underlying security, and are recorded for book purposes as
unrealized gains or losses by a Portfolio. A Portfolio's investment in
financial futures contract is designed only to hedge against anticipated
future changes in interest rates. Should interest rates move
unexpectedly, a Portfolio may not achieve the anticipated benefits of
the financial futures contracts and may realize a loss.
F. 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
each Portfolio. The fee is based upon a percentage of average daily net
assets plus a percentage of gross income (i.e., income other than gains
from the sale of securities). For the year ended January 31, 1996, the
fee for the Florida Insured Portfolio, Hawaii Portfolio and Kansas
Portfolio was equivalent to 0.16%, 0.16% and 0.16% (annualized),
respectively, of each Portfolio's average net assets for the year and
amounted to $27,933, $23,715, and $15,929, respectively. To enhance the
net income of the Florida Insured Portfolio, Hawaii Portfolio and Kansas
Portfolio, BMR made a reduction of its fee in the amount of $27,933,
$23,715, and $15,929, respectively, and $28,813, $29,013, $25,353,
respectively, of expenses related to the operation of the Portfolios
were. allocated to BMR. Except as to Trustees of the Portfolios who are
not members of EVM's or BMR's organization, officers and Trustees
receive remuneration for their services to the Portfolios out of such
investment adviser fee.
Investors Bank & Trust Company (IBT) serves as custodian of the
Portfolios. Prior to November 10, 1995, IBT was an affiliate of EVM and
BMR. Pursuant to the respective custodian agreements, IBT receives a fee
reduced by credits which are determined based on the average daily cash
balances each Portfolio maintains with IBT. All significant credit
balances used to reduce each portfolio's custody fees are reported as a
reduction of expenses on their statement of operations. Certain of the
officers and Trustees of the Portfolios are officers and
directors/trustees of the above organizations.
Trustees of the Portfolios that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their
annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the year ended January 31, 1996, no significant
amounts have been deferred.
(3) Investments
Purchases and sales of investments, other than U.S. Government
securities and short-term obligations, for the year ended January 31,
1996 were as follows:
Florida Hawaii Kansas
Insured Portfolio Portfolio Portfolio
----------------- ---------------- ---------------
Purchases $9,760,902 $4,059,664 $4,116,599
Sales 5,429,272 2,761,709 2,021,186
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the
investments owned by each Portfolio at January 31, 1996, as computed on
a federal income tax basis, are as follows:
Florida Hawaii Kansas
Insured Portfolio Portfolio Portfolio
----------------- ---------------- ---------------
Aggregate Cost $ 18,599,568 $ 14,061,760 $ 10,590,910
================= ================ ===============
Gross
unrealized
appreciation $ 1,681,498 $ 1,358,664 $ 641,037
Gross
unrealized
depreciation 5,985 3,169 1,874
-------------- -------------- --------------
Net unrealized
appreciation $ 1,675,513 $ 1,355,495 $ 639,163
================= ================ ===============
(5) Line of Credit
The portfolios participate with other portfolios and funds managed by
BMW 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. Each 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 in allocated among the participating
funds and portfolios at the end of each quarter. The Florida Insured
Portfolio, Hawaii Portfolio and the Kansas Portfolio did not have any
significant borrowings or allocated fees during the year ended January
31, 1996.
(6) Financial Instruments
The Portfolios regularly trade in financial instruments with off-balance
sheet risk in the normal course of their investing activities to assist
in managing exposure to various market risks. These financial
instruments include written options and futures contracts and may
involve, to a varying degree, elements of risk in excess of the amounts
recognized for financial statements purposes.
The notional or contractual amounts of these instruments represent the
investment a Portfolio has in particular classes of financial
instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting
transactions are considered.
A summary of obligations under these financial instruments at January
31, 1996 is as follows:
Futures
Contracts Net Unrealized
Expiration Date Contracts Position Depreciation
--------------- --------- ------------ -----------------
Kansas 3/96 5 U.S. Short
Treasury $ (826)
==========
At January 31, 1996, the Kansas Portfolio had sufficient cash and/or
securities segregated to cover margin requirements on open futures
contracts. The Florida Insured and Hawaii Portfolios did not have any
open financial futures contracts at January 31, 1996.
Independent Auditors' Report
To the Trustees and Investors of
Florida Insured Municipals Portfolio
Hawaii Municipals Portfolio
Kansas Municipals Portfolio:
We have audited the accompanying statements of assets and liabilities
including the portfolio of investments of Florida Insured Municipals
Portfolio, Hawaii Municipals Portfolio and Kansas Municipals Portfolio
as of January 31, 1996, and the related statements of operations for the
year then ended and, the statements of changes in net assets and
supplementary data for the 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
each Portfolio's management. Our responsibility is to express an opinion
on these financial statements and supplementary data based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
and supplementary data are free of material misstatement. Our procedures
included confirmation of securities owned at January 31, 1996 by
correspondence with the custodian and brokers. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such financial statements and supplementary data present
fairly, in all material respects, the financial position of the Florida
Insured Municipals Portfolio, Hawaii Municipals Portfolio, and Kansas
Municipals Portfolio at January 31, 1996, the results of their
operations for the year then ended and, the changes in their net assets,
and their supplementary data for the year ended January 31, 1996 and the
period from the start of business, March 2, 1994, to January 31, 1995 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE, LLP
Boston, Massachusetts
March 1, 1996
Investment Management
Funds
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
Portfolios
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President, Trustee
Robert B. MacIntosh
Vice President of Florida Insured,
Hawaii and Kansas Municipals Portfolio
and Portfolio Manager of Hawaii
Municipals Portfolio
Nicole Anderes
Vice President and Portfolio Manager
of Kansas Municipals Portfolio
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.
Eaton Vance Municipals Trust II
24 Federal Street
Boston, MA 020110
C-CSRC-3/96
