Eaton Vance Municipals Trust II
For the Fund:
(bullet) EV Classic Florida Insured Municipals Fund
[LOGO:HOUSE]
Semi-Annual Shareholder Report
July 31, 1996
To Shareholders
During the six months ended July 31, 1996, EV Classic Florida
Insured Municipals Fund paid its shareholders monthly income
dividends of $0.024 per share.
Based on the most recent dividend and the net asset value of $10.12
on July 31, 1996, the Fund's annualized distribution rate was 4.66%.
To equal that rate in a taxable investment, a couple in the combined
38.46% tax bracket would have to receive 7.52%.+
Following an upbeat year in 1995, the bond market encountered
difficulty in the first half of 1996, as the investment climate
changed dramatically.
The year started favorably enough, with the Federal Reserve lowering
the Federal Funds Rate - the rate banks charge each other for
overnight loans and a key short-term interest rate barometer - to
5.25%. Investors' optimism was short-lived, however, as Fed Chairman
Alan Greenspan suggested in his spring Congressional testimony that,
in light of current economic growth, the next move in rates would
likely be higher. Subsequent employment data showed that job
creation was exceeding market estimates, and that the labor market
was indeed tightening.
While job growth has cooled in recent months from the blistering
pace set early in the year, the economy has nonetheless failed to
give a clear indication of its long-term direction. Accordingly, the
Federal Reserve has effectively put its monetary policy on hold,
while maintaining a bias toward higher rates.
Despite the uncertainty in the market, there are several reasons we
believe an investment in municipal bonds continues to represent good
value for tax-conscious investors. First, while turning in somewhat
faster growth than expected, the nation's economy remains subdued.
GDP grew at a revised 4.8% rate in the second quarter - a relatively
strong showing - but one not likely to be sustained over the balance
of the year. Interestingly, recent indicators, including the Federal
Reserve's "beige book," an anecdotal regional economic survey,
suggest a possible slowdown in the second half of the year. Most
importantly, by most measures, inflation remains well under control.
Second, whatever the outcome of the various tax cut proposals that
have marked the campaign of both major political parties, it is
certain that the tax structure will remain sharply progressive. That
means that municipal bonds will retain their relative value.
[GRAPHIC OMITTED: Tax-exempt bonds yield 85% of Treasury yields
chart]
30-yr. AAA General Obligation (GO) Bonds* 5.89%
Taxable equivalent yield of investment for
couple in 36% tax braket 9.20%
30-year Treasury Bonds 6.94%
Principal and interest payments of Treasury securities are
guaranteed by the U.S. government.
*GO yield is a compilation of a representative variety of general
obligation bonds and is not necessarily represented by the Fund's
yield. Statistics as of July 31, 1996.
Past Performance is no guarantee of future results.
Source: Bloomberg, L.P.
Third, on the budget front, the deficit has been reduced
significantly. At present, the deficit as a percentage of GDP is the
smallest of all industrialized nations, alleviating near-term
borrowing needs.
Finally, and perhaps most important of all, the tax burden of our
citizens is still extraordinarily high. Municipal bonds remain the
best way for most individuals to relieve that burden and keep more
of what they work so hard to earn. We believe that, despite the
occasional market fluctuations, a steadfast, long-term outlook is
the best way to reap the advantages of tax-free investing.
Sincerely,
/S/Thomas J. Fetter
Thomas J. Fetter
President
September 10, 1996
[PHOTO OF THOMAS J. FETTER OMITTED]
+A portion of the Portfolios' income could be subject to Federal
alternative minimum tax.
Fund shares are not guaranteed by the FDIC and are not deposits
or other obligations of, or guaranteed by, any depository
institution. Shares are subject to investment risks, including
possible loss of principal invested.
EV Classic Florida Insured Municipals Fund
Florida's economy has grown steadily since 1993, led by a strong
service sector which comprises over one-third of the state's
employment and consists mainly of health and business services.
Total employment increased by 5% from 1993 to 1995, and the
unemployment rate decreased from 8.2% in 1992 to 5.3% at the end of
last year. Other strong sectors include construction and trade,
which, along with service, account for two-thirds of employment in
Florida. Tourism was hit hard by the recession in the early 1990s,
but has rebounded strongly in the past few years. The tourism
industry provides the foundation for much of the state's economy and
is expected to grow by 4.3% through fiscal 1997, according to
Standard & Poor's.
Despite a strong dependency on the cyclical 6% sales and use tax,
Florida's finances are very well managed. As a result of a 1994
constitutional amendment, revenue growth is tied to personal income
growth. In addition, the State maintains a healthy working capital
reserve. Governor Chiles has proposed bond issuance totalling $1.14
billion for fiscal 1997. There are four main areas which will
benefit from the revenues raised: Public Education, Environmental
Preservation, Right-of-Way Acquisition, and Prison and Detention. As
required by law, all bond issues must be backed by a specific
revenue stream to receive the "full faith and credit" approval from
the Florida state government.
Portfolio Overview
[GRAPHIC OF FLORIDA OMITTED]
Based on market value as of July 31, 1996
Number of issues 40
Average quality AAA
Investment grade 100.0%
Effective maturity 18.22 yrs.
Largest sectors:
Insured Water & Sewer 25.45%*
Insured Special Tax 25.14*
Insured Transportation 13.45*
Housing 13.23
Insured Electric Utilities 5.69*
* Private insurance does not remove the market risk associated with
this investment.
[PHOTO OF TIMOTHY T. BROWSE OMITTED]
"I am generally bullish about the bond market over the long term.
I am positioning the portfolio to perform by including some dis-
count bonds in my purchases, and, as always, by managing for call
protection. At times, we can increase call protection without a
significant hit on the yield or net asset value because
institutional buyers like Eaton Vance often get first pick at new
bonds and can sometimes buy them at lower prices. In addition, we
have increased the weighting in federal alternative minimum tax
(AMT) bonds to 27.5% from below 20% last year, which is a way to
increase yield without increasing risk.
This portfolio is broadly diversified and maintains a triple-A
investment rating. Moreover, the Fund has significant positions in
essential services such as water & sewer, housing, and
transportation. The insurance, in addition to the good credit of
these issuers, provides investors with an extra margin of safety."
Timothy T. Browse - Portfolio Manager
[GRAPHIC OF WATER PIPE SYMBOL OMITTED]
Your investment at work:
Lee County Industrial Development Authority Utility
System Revenue Bonds
Bonita Springs Utility, a publicly regulated utility, is currently
engaged in the pumping, treatment, transmission, and distribution of
potable water to residential and commercial customers. The utility
is also responsible for the collection, treatment, and disposal of
wastewater in a 58 square mile area in southwest Lee County,
Florida. Bonita Springs, a non-profit corporation, has entered into
an exclusive franchise agreement with Lee County to provide water
and sewer services within this franchise area.
The Series 1996 bonds, maturing in November of 2020, will help
finance the acquisition, construction, expansion, improvement, and
equipping of the sewer system operated by Bonita Springs.
<TABLE>
<CAPTION>
EV Classic Florida Insured Municipals Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 1996 (Unaudited)
<S> <C>
Assets:
Investment in Florida Insured Municipals Portfolio --
Identified cost $ 1,472,736
Unrealized appreciation 86,935
------------
Total investment in Florida Insured Municipals Portfolio, at value (Note 1A) $ 1,559,671
Receivable from the Administrator (Note 4) 14,813
Deferred organization expenses (Note 1D) 2,620
------------
Total assets $ 1,577,104
------------
Liabilities:
Dividends payable $ 1,796
Accrued expenses 9,412
------------
Total liabilities $ 11,208
------------
Net Assets $ 1,565,896
============
Sources of Net Assets:
Paid-in capital $ 1,466,580
Accumulated net realized gain on investment and
financial futures transactions (computed on the basis
of identified cost) 13,669
Accumulated distributions in excess of net investment income (1,288)
Unrealized appreciation of investments and
financial futures contracts from Portfolio
(computed on the basis of identified cost) 86,935
------------
Total $ 1,565,896
============
Shares of Beneficial Interest Outstanding 154,742
============
Net Asset Value and Redemption Price Per Share (Note 7)
(net assets (divided by) shares of beneficial interest outstanding) $ 10.12
============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended July 31, 1996 (Unaudited)
<S> <C>
Investment Income (Note 1B):
Interest income allocated from Portfolio $ 42,437
Expenses allocated from Portfolio --
------------
Net investment income from Portfolio $ 42,437
------------
Expenses --
Distribution costs (Note 5) $ 6,991
Printing and postage 8,350
Legal and accounting services 4,255
Custodian fees (Note 1F) 3,000
Amortization of organization expenses (Note 1D) 457
Transfer and dividend disbursing agent fees 460
Registration costs 66
Miscellaneous 1,364
------------
Total expenses $ 24,943
------------
Deduct --
Preliminary allocation of expenses to the Administrator (Note 4) $ 14,813
Reduction of custodian fee (Note 1F) 3,000
------------
Total $ 17,813
------------
Net expenses $ 7,130
------------
Net investment income $ 35,307
------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) from Portfolio --
Investment transactions (identified cost basis) $ 9,807
Financial futures contracts 4,208
------------
Net realized gain on investments $ 14,015
Change in unrealized appreciation (depreciation) of investments
and financial futures contracts (70,152)
------------
Net realized and unrealized loss on investments $ (56,137)
------------
Net decrease in net assets from operations $ (20,830)
============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Six Months Year
Ended Ended
July 31, 1996 January 31,
(Unaudited) 1996
------------------ --------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 35,307 $ 71,684
Net realized gain (loss) on investments 14,015 (755)
Change in unrealized appreciation (depreciation) of investments (70,152) 107,531
------------ ------------
Net increase (decrease) in net assets from operations $ (20,830) $ 178,460
------------ ------------
Distributions to shareholders (Note 2) --
From net investment income $ (34,948) $ (71,684)
In excess of net investment income -- (876)
------------ ------------
Total distributions to shareholders $ (34,948) $ (72,560)
------------ ------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sales of shares $ 169,814 $ 288,098
Net asset value of shares issued to shareholders in payment
of distributions declared 6,220 17,268
Cost of shares redeemed (1,316) (451,083)
------------ ------------
Increase (decrease) in net assets from Fund share transactions $ 174,718 $ (145,717)
------------ ------------
Net increase (decrease) in net assets
$ 118,940 $ (39,817)
Net Assets:
At beginning of period 1,446,956 1,486,773
------------ ------------
At end of period $ 1,565,896 $ 1,446,956
============ ============
Accumulated distributions in excess of net investment
income included in net assets at end of period $ (1,288) $ (1,647)
============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Six Months Ended Year Ended January 31,
July 31, 1996 --------------------------
(Unaudited) 1996 1995*
-------------------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.520 $ 9.750 $ 10.000
-------- -------- --------
Income (loss) from operations:
Net investment income $ 0.243 $ 0.490 $ 0.281
Net realized and unrealized gain (loss) on investments (0.404) 0.776 (0.200)++
-------- -------- --------
Total income (loss) from operations $ (0.161) $ 1.266 $ 0.081
-------- -------- --------
Less distributions:
From net investment income $ (0.239) $ (0.490) $ (0.281)
In excess of net investment income -- (0.006) (0.050)
-------- -------- --------
Total distributions $ (0.239) $ (0.496) $ (0.331)
-------- -------- --------
Net asset value, end of period $ 10.120 $ 10.520 $ 9.750
======== ======== ========
Total Return (2) (1.50%) 13.26% 0.82%
Ratios/Supplemental Data**:
Net assets, end of period (000 omitted) $ 1,566 $ 1,447 $ 1,487
Ratio of net expenses to average daily net assets (1)(3) 1.51%+ 1.22% 0.95%+
Ratio of net expenses to average daily net assets
after custodian fee reduction (1)(3) 0.97%+ 0.95% --
Ratio of net investment income to average daily net assets 4.80%+ 4.85% 4.37%+
**The operating expenses of the Fund and the Portfolio reflect a reduction of expenses by the Administrator and/or Investment
Advisor. Had such actions not been taken, net investment income per share and the ratios would have been as follows:
Net investment income per share $ 0.122 $ 0.336 $ 0.085
======== ======== ========
Ratios (As a percentage of average daily net assets):
Expenses (1)(3) 3.90%+ 2.74% 4.00%+
Expenses after custodian fee reduction (1)(3) 3.36%+ 2.47% --
Net investment income 2.41%+ 3.33% 1.32%+
(1) Includes the Fund's share of its 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 six months ended July 31, 1996 and year ended January 31, 1996 have been adjusted to reflect a
change in reporting requirements. The new reporting guidelines require the Fund, as well as its corresponding portfolio, 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. The expense ratios, after custodian fee
reductions, for the year ended January 31, 1996 are unaudited.
+ 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 period from the start of business, June 15, 1994, to January 31, 1995.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(Unaudited)
(1) Significant Accounting Policies
EV Classic 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 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 Funds' proportionate
interest in the net assets of the Portfolio (6.7% at July 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 - Valuation 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 its corresponding
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
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 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 carryovers will expire on January 31,
2004 ($4,592) and January 31, 2003 ($216).
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. Expense Reduction - Investors Bank & Trust Company (IBT), serves
as custodian to the Fund and the Portfolio. 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 credit
balances used to reduce the Fund's custodian fee are reflected as a
reduction of operating expenses on the statement of operations.
G. Other - Investment transactions are accounted for on a trade date
basis.
H. Interim Financial Information - The interim financial statements
relating to July 31, 1996 and for the six month period then ended
have not been audited by independent certified public accountants,
but in the opinion of the Fund's management, reflect all
adjustments, consisting of normal recurring adjustments, necessary
for the fair presentation of the financial statements.
(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 from net income are
paid in the form of additional shares or, at the election of the
shareholder, in cash.
The Fund distinguishes 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 statement
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.
The tax treatment of distributions for the calendar year will be
reported to shareholders prior to February 1, 1997 and will be based
on tax accounting methods which may differ from amounts determined
for financial statement purposes.
(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:
<TABLE>
<CAPTION>
Six Months
Ended Year
July 31, Ended
1996 January 31,
(unaudited) 1996
---------------- ----------------
<S> <C> <C>
Sales 16,761 28,089
Issued to shareholders electing to receive
payments of distributions in Fund shares 616 1,706
Redemptions (132) (44,849)
------ -------
Net increase (decrease) 17,245 (15,054)
====== =======
</TABLE>
(4) Transactions with Affiliates
Eaton Vance Management (EVM) serves as the administrator of the
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 Portfolios' Notes to
Financial Statements which are included elsewhere in this report. To
enhance the net income of the Fund for the six months ended July 31,
1996, $14,813 of expenses related to the operation of the Fund, were
allocated, on a preliminary basis, 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 the investment adviser fee earned by
BMR. Certain of the officers and Trustees of the Fund and Portfolio
are officers and directors/trustees of the above organizations (Note
5).
(5) Distribution Plan
The Fund has adopted a distribution plan (the plan) pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Plan requires
the Fund to pay the principal underwriter, Eaton Vance Distributors,
Inc. (EVD), amounts equal to 1/365 of 0.75% of the Fund's daily net
assets for providing ongoing distribution services and facilities to
the Fund. The 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 the aggregate amount of
contingent deferred sales charges (note 7) and amounts theretofore
paid to EVD. The amount payable to EVD with respect to each day is
accrued on such day as a liability of the Fund and, accordingly,
reduces the Fund's net assets. For the six months ended July 31,
1996, the Fund, paid or accrued $5,519 to or payable to EVD
representing 0.75% (annualized) of average daily net assets. At July
31, 1996, the amount of Uncovered Distribution Charges of EVD
calculated under the Plan for the Fund was approximately $126,000.
In addition, the Plan permits the Fund to make monthly payments of
service fees to the Principal Underwriter, in amounts not
expected to exceed 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 monthly service fee payments to the
Principal Underwriter in amounts not expected to exceed 0.20% of the
Fund's average daily net assets for any fiscal year. For the six
months ended July 31, 1996, the Fund paid or accrued service fees to
EVD in the amount of $1,472. During the first year after a purchase
of Fund shares, EVD will retain the service fee as reimbursement for
the service fee payment made to the Authorized Firm at the time of
sale. Thereafter, EVD is expected to make monthly service fee
payments to Authorized Firms equal to 0.20% per annum of the Fund's
average daily net assets based on the value of the Fund's shares
sold by such authorized firm and remaining outstanding for at least
one year. 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 the 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 Fund are officers or
directors of EVD.
(6) Investment Transactions
Increases and decreases in the Fund's investment in its
corresponding Portfolio for the six months ended July 31, 1996 were
$191,383 and $47,464, respectively.
(7) Contingent Deferred Sales Charges
A contingent deferred sales charge (CDSC) of 1% is 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 Fund's Distribution Plan.
CDSC received when no Uncovered Distribution Charges exist will be
credited to the Fund. For the six months ended July 31, 1996, EVD
received no CDSC.
<TABLE>
<CAPTION>
Florida Insured Municipals Portfolio
Portfolio of Investments - July 31, 1996 (Unaudited)
Tax-Exempt Investments -- 99.97%
Ratings (Unaudited)
- -------------------- Principal
Amount
Standard (000
Moody's & Poor's Omitted) Security Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed -- 2.79%
Aaa AAA $500 Gainsville, Florida
Utility, 8.125%,
10/1/14 (4) $ 629,385
-----------
Housing -- 13.23%
Aaa NR $365 Duval, Florida HFA
SFMR (GNMA) (AMT),
6.70%, 10/1/26 $ 379,954
Aaa AAA 750 Escambia, Florida HFA
SFMR (GNMA) (AMT),
7.00%, 4/1/28 759,442
Aaa NR 750 Manatee, Florida HFA
SFMR (GNMA) (AMT),
6.875%, 11/1/26 802,860
NR AAA 1000 Pinellas, Florida HFA
SFMR (GNMA) (AMT),
6.70%, 2/1/28 1,038,910
-----------
$ 2,981,166
-----------
Insured Education -- 3.89%
Aaa AAA $500 Florida A&M University
(MBIA), 5.625%,
7/1/25 $ 490,520
Aaa AAA 400 University of Florida
(MBIA), 5.50%, 7/1/23 386,368
-----------
$ 876,888
-----------
Insured Electric
Utilities -- 5.69%
Aaa AAA $445 Citrus, Florida PCR FL
Power (MBIA), 6.35%,
2/1/22 $ 463,641
Aaa AAA 895 Florida State Municipal
Power Agency, Stanton II
Project (AMBAC), 4.50%,
10/1/27 709,807
Aaa AAA 50 Key West, Florida Utility
Board Electric Revenue
(AMBAC), 6.75%,
10/1/13 54,134
Aaa AAA 50 Puerto Rico Electric Power
Authority, STRIPES
(FSA), Variable,
7/1/02 (1) 54,078
-----------
$ 1,281,660
-----------
Insured General
Obligation -- 4.31%
Aaa AAA $1,000 Florida Board of
Education (MBIA),
5.60%, 6/1/25 $ 972,060
-----------
Insured Hospitals -- 1.02%
Aaa AAA $200 Dade, Jackson Memorial
Hospital (MBIA),
4.875%, 6/1/15 $ 178,538
Aaa AAA 50 Hillsborough, Tampa
General Hospital (FSA),
6.375%, 10/1/13 52,139
-----------
$ 230,677
-----------
Insured Housing -- 4.55%
Aaa AAA $500 Florida HFA, Maitland
Club Apartments
(AMBAC) (AMT),
6.875%, 8/1/26 $ 521,430
Aaa AAA 500 Florida HFA, Spinnaker
Cove Apartments
(AMBAC) (AMT),
6.50%, 7/1/36 504,080
-----------
$ 1,025,510
-----------
Insured Solid Waste -- 0.45%
Aaa AAA $100 Broward, Florida Solid
Waste (MBIA) (AMT),
6.00%, 7/1/13 $ 101,298
-----------
Insured Special Tax -- 25.14%
Aaa AAA $1,500 Bradenton, Florida
Special Revenue Sub
Lien (FGIC), 5.00%,
10/1/15 $ 1,373,535
Aaa AAA 500 Dade, Florida Convention
Center Special Tax
(AMBAC), 5.00%,
10/1/35 436,965
Aaa AAA 1,225 Florida State Finance
Department, Environmental
Preservation (MBIA),
4.75%, 7/1/09 1,147,285
Aaa AAA 1,000 Jacksonville, Florida
Excise Taxes Revenue
(FGIC), 5.00%, 10/1/16 914,430
Aaa AAA 745 Jacksonville, Florida Sales
Tax River City (FGIC),
5.375%, 10/1/18 716,496
Aaa AAA 250 Orange, Florida Tourist
Development Tax (MBIA),
6.00%, 10/1/24 254,540
Aaa AAA 795 St. Petersburg, Florida
Excise Tax (FGIC),
5.00%, 10/1/16 711,231
Aaa AAA 340 Sunrise, Florida Public
Facilities Capital
Appreciation (MBIA),
0%, 10/1/15 111,411
-----------
$ 5,665,893
-----------
Insured Transportation -- 13.45%
Aaa AAA $1,000 Dade, Florida Seaport
Revenue (MBIA),
5.125%, 10/1/16 $ 928,150
Aaa AAA 1,200 Florida State Turnpike
Authority (FGIC),
5.00%, 7/1/19 (3) 1,081,896
Aaa AAA 1,000 Florida State Turnpike
Authority (FGIC),
5.50%, 7/1/21 968,340
Aaa AAA 50 Greater Orlando, Florida
Aviation Authority
(FGIC) (AMT), 6.375%,
10/1/21 51,744
-----------
$ 3,030,130
-----------
Insured Water &
Sewer -- 25.45%
Aaa AAA $130 Charlotte, Florida
Utility Revenue (FGIC),
5.625%, 10/1/21 (2) $ 127,502
Aaa AAA 75 Cocoa, Florida Water &
Sewer (FGIC), 5.00%,
10/1/23 (4) 66,840
Aaa AAA 750 Dade, Florida Water &
Sewer System (FGIC),
5.50%, 10/1/25 718,463
Aaa AAA 735 Enterprise, Florida
Community District
Water & Sewer (MBIA),
6.125%, 5/1/24 (3) 753,140
Aaa AAA 1,000 Jacksonville, Florida
Water & Sewer (AMBAC),
6.35%, 8/1/25 1,034,360
Aaa AAA 1,000 Lee, Florida Utility,
Bonita Springs Project
(MBIA) (AMT), 6.05%,
11/1/20 1,011,260
Aaa AAA 70 North Port, Florida
Utility (FGIC), 6.25%,
10/1/17 72,893
Aaa AAA 500 North Port, Florida
Utility (FGIC), 6.25%,
10/1/22 519,010
Aaa AAA 155 Sanford, Florida Water &
Sewer (AMBAC), 4.50%,
10/1/21 128,492
Aaa AAA 400 Titisville, Florida Water
& Sewer (MBIA), 6.00%,
10/1/24 408,808
Aaa AAA 1,000 Vero Beach, Florida Water
& Sewer (FGIC), 5.00%,
12/1/21 894,410
-----------
$ 5,735,178
-----------
Total Tax-Exempt Investments
(identified cost, $21,836,812) $22,529,845
-----------
</TABLE>
<TABLE>
<CAPTION>
Put Options on Financial Futures Contracts -- 0.03%
Contracts Security Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
16 30 year-U.S. Treasury
Bond, American,
expiration 9/19/96,
Strike price $104.00 $ 1,500
19 30 year-U.S. Treasury
Bond, American,
expiration 9/19/96,
Strike price $106.00 $ 6,235
-----------
Total Put Options on Financial Futures
Contracts (identified cost, $28,201) $7,735
-----------
Total Investments
(identified cost $21,865,013) $22,537,580
===========
(1)The above designated securities have been issued as inverse
floater bonds.
(2)When-issued security.
(3)Security has been segregated to cover when--issued securities.
(4)Security has been segregated to cover margin requirements for
open financial futures contracts.
AMT -- Interest earned from these securities may be considered a tax
preference item for purposes of the Federal Alternative
Minimum Tax.
</TABLE>
The Portfolio primarily invests 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 July 31, 1996, 84.0%
of the securities in the portfolio of investments are backed by bond
insurance of various financial institutions and financial guaranty
assurance agencies. At July 31, 1996, the Portfolio's insured
securities by financial institution are as follows:
Percentage
of Total
Investments Value
------------ --------
American Municipal Bond
Assurance Corp. (AMBAC) 15.0% $ 3,380,637
Financial Guaranty
Insurance Corp. (FGIC) 36.5% 8,226,216
Financial Security
Insurance Inc. (FSA) 0.5% 112,688
Municipal Bond Investors
Assurance Corp. (MBIA) 32.0% 7,212,025
---- -----------
84.0% $18,931,566
==== ===========
See notes to financial statements
<TABLE>
<CAPTION>
Florida Insured Municipals Portfolio
Finanical Statements
Statement of Assets and Liabilities
July 31, 1996 (Unaudited)
Assets:
<S> <C>
Investments --
Identified cost $ 21,865,013
Unrealized appreciation 672,567
------------
Total investments, at value (Note 1A) $ 22,537,580
Cash 369,103
Receivable from the Investment Adviser (Note 2) 22,937
Interest receivable 385,498
Deferred organization expenses (Note 1D) 6,269
------------
Total assets $ 23,321,387
------------
Liabilities:
Payable for when-issued securities (Note 1G) $ 126,767
Payable for daily variation margin on open
financial futures contracts (Note 1E) 17,188
Payable to affiliate --
Trustees' fees 14
Accrued expenses 2,395
------------
Total liabilities $ 146,364
------------
Net Assets applicable to investors' interest in Portfolio $ 23,175,023
============
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $ 22,552,130
Unrealized appreciation of investments and financial
futures contracts (computed on the basis of identified cost) 622,893
------------
Total $ 23,175,023
============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended July 31, 1996 (Unaudited)
<S> <C>
Investment Income:
Interest income $ 635,898
------------
Expenses --
Investment adviser fee (Note 2) $ 18,958
Compensation of Trustees not members of the
Investment Adviser's organization 58
Custodian fees (Note 1H) 15,614
Legal and accounting services 17,649
Bond pricing 3,486
Amortization of organization expenses (Note 1D) 1,208
Miscellaneous 536
------------
Total expenses $ 57,509
------------
Deduct --
Preliminary reduction of investment adviser fee (Note 2) $ 18,958
Preliminary allocation of expenses to the Investment Adviser (Note 2) 22,937
Reduction of custodian fee (Note 1H) 15,614
------------
Total $ 57,509
------------
Net expenses $ --
------------
Net investment income $ 635,898
------------
Realized and Unrealized Gain:
Net realized gain --
Investment transactions (identified cost basis) $ 145,608
Financial futures contracts 62,720
------------
Net realized gain $ 208,328
------------
Change in unrealized appreciation (depreciation) --
Investments $ (1,002,946)
Financial futures contracts (49,674)
------------
Net unrealized depreciation $ (1,052,620)
------------
Net realized and unrealized loss $ (844,292)
------------
Net decrease in net assets from operations $ (208,394)
============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Six Months Year
Ended Ended
July 31, 1996 January 31,
(Unaudited) 1996
------------ ------------
Increase (Decrease) in Net Assets:
From operations --
<S> <C> <C>
Net investment income $ 635,898 $ 1,016,847
Net realized gain (loss) 208,328 (93,236)
Change in unrealized appreciation (depreciation) (1,052,620) 1,447,272
------------ ------------
Net increase (decrease) in net assets from operations $ (208,394) $ 2,370,883
------------ ------------
Capital transactions --
Contributions $ 3,152,766 $ 7,413,811
Withdrawals (1,185,149) (2,768,845)
------------ ------------
Increase in net assets resulting from capital transactions $ 1,967,617 $ 4,644,966
------------ ------------
Total increase in net assets $ 1,759,223 $ 7,015,849
Net Assets:
At beginning of period 21,415,800 14,399,951
------------ ------------
At end of period $ 23,175,023 $ 21,415,800
============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Supplementary Data
Florida Insured Portfolio
----------------------------------------------------------------
Six Months Ended Year ended January 31,
July 31, 1996 -----------------------
(Unaudited) 1996 1995*
---------------- ---------- ---------
<S> <C> <C> <C>
Ratios (As a percentage of average daily net assets)**:
Net expenses (1) 0.14%+ 0.07% 0.01%+
Expenses after custodian fee reduction 0.00%+ 0.00% --
Net investment income 5.80%+ 5.82% 5.73%+
Portfolio Turnover 23% 32% 33%
**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) 0.52%+ 0.39% 0.41%+
Expenses after custodian fee reduction 0.38%+ 0.32% --
Net investment income 5.42%+ 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 six months ended July 31, 1996 and year ended January 31, 1996 have been adjusted to reflect a
change in reporting requirements. The new reporting guidelines require the Portfolio 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. The expense ratios, after custodian fee reductions, for the year ended
January 31, 1996 are unaudited.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(Unaudited)
(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 interests in the Portfolio. The following is a summary of
significant accounting policies consistently followed by the
Portfolio in the preparation of its financial statements. 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 and options on financial futures
contracts listed on commodity exchanges are valued at closing
settlement prices. Over the counter options on financial futures
contracts are normally valued at the mean between the latest bid and
asked prices. 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 its
respective investors to satisfy them. The Portfolio will allocate at
least annually among their 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. Options on Financial Futures Contracts - Upon the purchase of a
put option on a financial futures contract by the Portfolio, the
premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, a Portfolio
will realize a loss in the amount of the cost of the option. When
the Portfolio enters into a closing sales transaction, the Portfolio
will realize a gain or loss depending on whether the sales proceeds
from the closing sales transaction are greater or less than the cost
of the option. When the Portfolio exercises a put option, settlement
is made in cash. The risk associated with purchasing options is
limited to the premium originally paid.
G. When-issued and Delayed Delivery Transactions - The Portfolio may
engage in when-issued and delayed delivery transactions. The
Portfolio records when-issued securities on trade date and maintains
security positions such that sufficient liquid assets will be
available to make payments for the securities purchased. Securities
purchased on a when-issued or delayed delivery basis are marked to
market daily and begin accruing interest on settlement date.
H. Expense Reduction - Investors Bank & Trust Company (IBT), serves
as custodian to the Portfolio. Pursuant to the custodian agreement,
IBT receives a fee reduced by credits which are determined based on
the average cash balance the Portfolio maintains with IBT. All
significant credit balances used to reduce the Portfolio's custodian
fees are reflected as a reduction of operating expenses on the
statement of operations.
I. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expense
during the reporting period. Actual results could differ from
those estimates.
J. Other - Investment transactions are accounted for on a trade date
basis.
K. Interim Financial Information - The interim financial statements
relating to July 31, 1996 and for the six month period then ended
have not been audited by independent certified public accountants,
but in the opinion of the Portfolio's management, reflect all
adjustments, consisting of normal recurring adjustments, necessary
for the fair presentation of the financial statements.
(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 six months ended July 31, 1996, the fee for the Portfolio
was equivalent to 0.16%, of the Portfolio's average net assets and
amounted to $18,958. To enhance the net income of the Portfolio for
the six months ended July 31, 1996, BMR made a preliminary reduction
of its fee in the amount of $18,958 and $22,937, of expenses related
to the operation of the Portfolio were allocated, on a preliminary
basis, 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.
Trustees of the Portfolio that are not affiliated with the
Investment Adviser may elect to defer receipt of all or a percentage
of their annual fees in accordance with the terms of the Trustees
Deferred Compensation Plan. For the six months ended July 31, 1996,
no significant amounts have been deferred.
Certain of the officers and Trustees of the Portfolio are officers
or directors of EVD.
(3) Investments
Purchases and sales of investments, other than U.S. Government
securities, purchased option transactions and short-term
obligations, for the six months ended July 31, 1996 were $8,051,725
and $4,960,581, respectively.
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the
investments owned by the Portfolio at July 31, 1996, as computed on
a federal income tax basis, are as follows:
Aggregate Cost $ 21,865,013
============
Gross unrealized appreciation $ 731,624
Gross unrealized depreciation 59,057
------------
Net unrealized appreciation $ 672,567
============
(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 investment transactions. Interest is
charged to the 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 Portfolio did not have any significant borrowings or
allocated fees during the six months ended July 31, 1996.
(6) Financial Instruments
The Portfolio regularly trades 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 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.
A summary of obligations under these financial instruments at July
31, 1996 is as follows:
<TABLE>
<CAPTION>
Futures
Contracts Net Unrealized
Portfolio Expiration Date Contracts Position Depreciation
- ---------- -------------------- ------------ ---------- ----------------
<S> <C> <C> <C> <C>
Florida Insured 9/96 25 U.S. Treasury Bond Short $ 49,674
========
At July 31, 1996, the Portfolio had sufficient cash and/or securities segregated to cover margin requirements on
open futures contracts.
</TABLE>
Investment Management
EV Classic
Florida Insured
Municipals Fund
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
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 Investors Services Group
Attn: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
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 Classic Florida Insured Municipals Fund
24 Federal Street
Boston, MA 02110
C-CSRC-9/96
