Eaton Vance Municipals Trust II
For the Funds:
(bullet) EV Marathon Florida Insured Municipals Fund
(bullet) EV Marathon Hawaii Municipals Fund
(bullet) EV Marathon Kansas Municipals Fund
[LOGO]
Semi-Annual Shareholder Report
July 31, 1996
Table of Contents
Item Page
Six month results and current distribution rates 2
President's letter to shareholders 3
Management Reports:
EV Marathon Florida Insured Municipals Fund 4
EV Marathon Hawaii Municipals Fund 5
EV Marathon Kansas Municipals Fund 6
Financial Results 7
<TABLE>
<CAPTION>
Information About your mutual fund investment:
Results for the six months Dividends If your The after-tax
ending July 31, 1996 Total paid Fund's combined equivalent
Total return by Fund NAV distribution Federal & distribution
(excl. sales (during per share rate state tax rate you would
charge)* period) at 7/31/96 at 7/31/96 rate is... need is...
<S> <C> <C> <C> <C> <C> <C>
EV Marathon Florida Insured
Municipals Fund -1.7% $0.249 $10.65 4.60% 38.81% 7.46%
EV Marathon Hawaii
Municipals Fund -1.1% $0.236 $9.63 4.93 42.40% 8.49%
EV Marathon Kansas
Municipals Fund -0.9% $0.235 $9.99 4.73% 42.05% 8.15%
*Total return figures represent the percent change in net asset value with all distributions reinvested, and do not include
applicable sales charges, and distribution and/or service fees.
[GRAPHICS OMITTED IN COL 5 OF FLORIDA, HAWAII, & KANSAS]
</TABLE>
To Shareholders:
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 campaigns 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.
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.
[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 bracket 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]
EV Marathon 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.
EV Marathon Hawaii Municipals Fund
The Hawaiian economy is relatively stable, supported by two
consistent elements - tourism and the military. Tourism can be
somewhat cyclical, but not dramatically so, while the military
presence provides a predictable economic stimulus. The down side of
this stability is an inability to grow the economy from one year to
the next beyond a certain level. Indeed, according to the First
Hawaiian Bank, the forecast for Hawaii's Real Gross State Product is
a slow acceleration from 1-2% annually in 1996 to 2-3% by the end of
the decade. A positive effect of the state's consistent economic
base is that municipal bonds are generally of high quality.
To the extent that growth can occur, tourism is the driving force.
Hawaii's tourism growth has improved considerably in 1996 over 1995.
Cold weather in the U.S., and an improving Japanese economy
increased tourist arrivals 11% in January and February of this year,
with hotel occupancies of 83%, representing a five-year high. In
addition, the average number of daily visitors this past February
grew 7.5% over February of 1995. While tourism has contributed
positively to the State's economy, other factors - such as the high
cost of doing business - have hindered it. These costs consist of
taxes, labor, and energy, and have had a stronger impact in the
1990s than previously. In addition, the large State government is in
a period of fiscal restraint, which has further reduced hiring.
Portfolio Overview
[GRAPHIC OF HAWAII OMITTED]
Based on market value as of July 31, 1996
Number of issues 38
Average quality AA
Investment grade 99.3%
Effective maturity 15.70 yrs.
Largest sectors:
General Obligations 18.51%
Insured General Obligations 12.74*
Insured Transportation 12.16*
Hospitals 12.03
Housing 7.59
* Private insurance does not remove the market risk associated with
this investment.
[PHOTO OF ROBERT B. MACINTOSH OMITTED]
"The consistency of Hawaii's economic base results in high-quality
municipal bonds, which means that good yields are hard to find.
State and county bonds are rated AA. Generally, we adopt a buy-and-
hold strategy because Hawaiian municipal bonds are in short supply.
We employ the same strategies that we use in all of our funds;
namely, we manage for call protection, try to stay away from par
bonds - which are priced at $100 - and upgrade our quality when
spreads are tight, as is the case currently. Occasionally, to
increase the Fund's yield, we will use Puerto Rico and Guam
holdings, but not as much as in the other state portfolios because
of the low turnover. We have increased federal alternative minimum
tax (AMT) exposure somewhat, but again, not as much as in other
state funds. The most high-yielding bond we have added is an
American Airlines bond issued by the Puerto Rico Port Authority."
Robert B. MacIntosh - Portfolio Manager
[GRAPHIC OF AIRPLANE OMITTED]
Your investment at work
State of Hawaii
Airport System
Revenue Bonds
The Hawaii Department of Transportation operates and maintains 14
airports and one heliport at various locations within the State.
Hawaii International Airport, on the island of Oahu, is the largest
airport and the primary one for overseas flights. One other airport
on Oahu and three others on the islands of Maui, Hawaii, and Kauai also
offer flights to and from the continental U.S. The remaining nine
airports provide facilities for the military, air carriers, and general
aviation. HIA is one of the busiest airports in the world, ranking
18th globally, 13th in the U.S., and 4th in the Pacific Rim. These
bonds will finance on-going improvements to the entire Hawaiian
Airports System including new systems for security, public address,
and operations control. They have also helped pay for major construction
projects on a new, recently completed, inter-island terminal at HIA.
EV Marathon Kansas Municipals Fund
The Kansas economy has improved over the past few years after
lagging the U.S. economy in 1994. Of particular significance is an
increase in 1995 in the growth of manufactured goods to 5.2%
annually, which exceeded that of the service sector for only the
second time in 15 years. Aircraft production - an important part of
the State's economy - has begun a modest recovery after several
years in the doldrums. The improved out-look for the aircraft
industry has been aided by recent congressional legislation reducing
manufacturers' liability and an expansion in manufacturing capacity
in 1996.
Other strong-performing sectors include construction - aided by a
large state highway improvement program - transportation, public
utilities, wholesale and retail trade, and the State government.
Farming, which had been in decline since 1983, showed positive
growth for two consecutive years (1994 and 1995).
The only declining sectors were finance, insurance and real estate,
which have undergone significant restructuring as a result of bank
and savings and loan failures over the last 12 years.
The general outlook for the Kansas economy is positive, with the
above-mentioned trends supporting continued growth in their
respective sectors. The State government is fiscally very strong,
which adds to the attraction of its municipal bonds.
Portfolio Overview
[GRAPHIC OF KANSAS OMITTED]
Based on market value as of July 31, 1996
Number of issues 47
Average quality AA+
Investment grade 100%
Effective maturity 13.3 yrs.
Largest sectors:
Housing 28.84%
Insured General Obligations
(School District) 10.53*
Insured Hospitals 8.75*
General Obligations (School District) 7.63
Hospitals 7.50
* Private insurance does not remove the market risk associated with
this investment.
[PHOTO OF NICOLE ANDERES OMITTED]
"Kansas is a financially conservative, homogeneous market for
municipal bonds. New issues usually have ratings of A1, AA, or are
insured, and it is hard to find higher yielding issues. Housing
bonds are one of the best ways to increase yield in Kansas while
preserving credit quality. Moreover, they tend to be less volatile
in a down market, like that of the first half of 1996. I ended the
Fund's fiscal year with almost 30% in housing and increased the
federal alternative minimum tax (AMT) exposure to 12%. This
portfolio strategy worked well for the first half of 1996.
As always, we manage for call protection, which increases the
potential for price appreciation. We insist on 10-year calls on new
issue bonds, and turn over issues in which the time to call has
decreased.
Finally, we have used our research effectively to improve yield. In
a recent case, we replaced Puerto Rico bonds with Guam airport bonds
which were not only higher yielding but also offered more upside
potential."
Nicole Anderes - Portfolio Manager
[GRAPHIC OF MEDICAL SYMBOL OMITTED]
Your investment at work
Stormont-Vail
Medical Center
Topeka, KS
With 300 beds, Stormont-Vail Medical Center in Topeka is one of the
two leading health care providers in the City. St. Francis Hospital
is the other. Proceeds from this bond issue were used to refund
outstanding debt and to finance capital projects, including building
renovations and acquisitions, and the purchase of medical and
computer equipment. The bonds carry triple A ratings due to the
presence of MBIA bond insurance. Financial operations of the Medical
Center have been positive.
EV Marathon Municipals Funds
Financial Statements
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
July 31, 1996 (Unaudited)
Marathon Marathon Marathon
Florida Insured Hawaii Kansas
Fund Fund Fund
-------------- -------------- --------------
<S> <C> <C> <C>
Assets:
Investment in Portfolio --
Identified cost $ 19,247,600 $ 14,344,267 $ 10,455,142
Unrealized appreciation 481,603 782,394 235,143
------------ ------------ ------------
Total investment in Portfolio, at value (Note 1A) $ 19,729,203 $ 15,126,661 $ 10,690,285
Receivable for Fund shares sold 7,701 10,200 --
Receivable from the Administrator (Note 4) 1,519 4,103 3,674
Deferred organization expenses (Note 1D) 9,004 11,860 8,907
------------ ------------ ------------
Total assets $ 19,747,427 $ 15,152,824 $ 10,702,866
------------ ------------ ------------
Liabilities:
Dividends payable $ 39,535 $ 32,527 $ 22,632
Payable for shares redeemed 25,086 -- 71,121
Payable to affiliate --
Trustees' fees 14 14 14
Accrued expenses 10,610 10,026 8,130
------------ ----------- ------------
Total liabilities $ 75,245 $ 42,567 $ 101,897
------------ ----------- ------------
Net Assets $ 19,672,182 $ 15,110,257 $ 10,600,969
============ ============ ============
Sources of Net Assets:
Paid-in capital $ 19,153,261 $ 15,031,309 $ 10,381,200
Accumulated net realized gain (loss) on investment and
financial futures transactions (computed on the basis
of identified cost) 45,074 (687,739) (7,158)
Accumulated distributions in excess of
net investment income (7,756) (15,707) (8,216)
Unrealized appreciation of investments and
financial futures contracts from Portfolio
(computed on the basis of identified cost) 481,603 782,394 235,143
------------ ------------ ------------
Total $ 19,672,182 $ 15,110,257 $ 10,600,969
============ ============ ============
Shares of Beneficial Interest Outstanding 1,846,394 1,569,346 1,061,210
============ ============ ============
Net Asset Value, Offering Price and Redemption
Price Per Share (Note 6)
(net assets (divided by) shares of beneficial interest outstanding) $ 10.65 $ 9.63 $ 9.99
============ ============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
For the Six Months Ended July 31, 1996 (Unaudited)
Marathon Marathon Marathon
Florida Insured Hawaii Kansas
Fund Fund Fund
-------------- -------------- --------------
<S> <C> <C> <C>
Investment Income (Note 1B):
Interest income allocated from Portfolio $ 542,287 $ 443,106 $ 315,175
Expenses allocated from Portfolio -- -- --
------------ ------------ ------------
Net investment income from Portfolio $ 542,287 $ 443,106 $ 315,175
------------ ------------ ------------
Expenses --
Compensation of Trustees not members of the
Administrator's organization $ 58 $ 58 $ 58
Distribution costs (Note 5) 82,607 65,728 47,576
Legal and accounting services 8,977 7,667 7,930
Printing and postage 6,892 7,859 5,958
Transfer and dividend disbursing agent fees 4,917 4,586 3,635
Custodian fees (Note 1F) 3,041 2,104 3,000
Amortization of organization expenses (Note 1D) 1,740 2,288 1,720
Miscellaneous 4,953 4,610 2,556
------------ ------------ ------------
Total expenses $ 113,185 $ 94,900 $ 72,433
------------ ------------ ------------
Deduct --
Preliminary allocation of expenses to the Administator (Note 4) $ 1,519 $ 4,103 $ 3,674
Reduction of custodian fee (Note 1F) 3,000 771 3,000
------------ ------------ ------------
Total $ 4,519 $ 4,874 $ 6,674
------------ ------------ ------------
Net expenses $ 108,666 $ 90,026 $ 65,759
------------ ------------ ------------
Net investment income $ 433,621 $ 353,080 $ 249,416
------------ ------------ ------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) from Portfolio --
Investment transactions (identified cost basis) $ 123,942 $ (22,494) $ 10,248
Financial futures contracts 53,417 38,486 9,943
------------ ------------ ------------
Net realized gain on investments $ 177,359 $ 15,992 $ 20,191
Change in unrealized appreciation (depreciation) of investments
and financial futures contracts from Portfolio (896,788) (539,799) (369,822)
------------ ------------ ------------
Net realized and unrealized loss $ (719,429) $ (523,807) $ (349,631)
------------ ------------ ------------
Net decrease in net assets from operations $ (285,808) $ (170,727) $ (100,215)
============ ============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six Months Ended July 31, 1996 (Unaudited)
Marathon Marathon Marathon
Florida Insured Hawaii Kansas
Fund Fund Fund
-------------- -------------- --------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 433,621 $ 353,080 $ 249,416
Net realized gain on investments 177,359 15,992 20,191
Change in unrealized appreciation (depreciation) of investments (896,788) (539,799) (369,822)
------------ ------------ ------------
Net decrease in net assets from operations $ (285,808) $ (170,727) $ (100,215)
------------ ------------ ------------
Distributions to shareholders (Note 2) --
From net investment income $ (433,621) $ (353,080) $ (249,416)
In excess of net investment income (2,945) (8,752) (5,867)
------------ ------------ ------------
Total distributions to shareholders $ (436,566) $ (361,832) $ (255,283)
------------ ------------ ------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sales of shares $ 2,532,237 $ 997,359 $ 1,065,417
Net asset value of shares issued to shareholders in payment
of distributions declared 173,018 150,733 118,936
Cost of shares redeemed (701,938) (631,252) (1,010,079)
------------ ------------ ------------
Increase in net assets from Fund share transactions $ 2,003,317 $ 516,840 $ 174,274
------------ ------------ ------------
Net increase (decrease) in net assets $ 1,280,943 $ (15,719) $ (181,224)
Net Assets:
At beginning of period 18,391,239 15,125,976 10,782,193
------------ ------------ ------------
At end of period $ 19,672,182 $ 15,110,257 $ 10,600,969
============ ============ ============
Accumulated distributions in excess of net
investment income included in net assets at end of period $ (7,756) $ (15,707) $ (8,216)
============ ============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended January 31, 1996
Marathon Marathon Marathon
Florida Insured Hawaii Kansas
Fund Fund Fund
-------------- -------------- --------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 696,793 $ 726,888 $ 445,106
Net realized loss on investments (82,691) (214,844) (7,646)
Change in unrealized appreciation of investments 1,212,378 1,436,383 692,765
------------ ------------ ------------
Net increase in net assets from operations $ 1,826,480 $ 1,948,427 $ 1,130,225
------------ ------------ ------------
Distributions to shareholders (Note 2) --
From net investment income $ (696,793) $ (726,888) $ (445,106)
In excess of net investment income (2,569) (6,955) (1,368)
------------ ------------ ------------
Total distributions to shareholders $ (699,362) $ (733,843) $ (446,474)
------------ ------------ ------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sales of shares $ 6,295,112 $ 3,091,823 $ 2,528,787
Net asset value of shares issued to shareholders in payment
of distributions declared 255,846 319,268 224,871
Cost of shares redeemed (882,829) (2,100,409) (407,934)
------------ ------------ ------------
Increase in net assets from Fund share transactions $ 5,668,129 $ 1,310,682 $ 2,345,724
------------ ------------ ------------
Net increase in net assets $ 6,795,247 $ 2,525,266 $ 3,029,475
Net Assets:
At beginning of year 11,595,992 12,600,710 7,752,718
------------ ------------ ------------
At end of year $ 18,391,239 $ 15,125,976 $ 10,782,193
============ ============ ============
Accumulated distributions in excess of net
investment income included in net assets at end of year $ (4,811) $ (6,955) $ (2,349)
============ ============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Marathon Florida Insured Fund Marathon Hawaii Fund
------------------------------------------- ----------------------------------------------
Six Months Ended Year Ended January 31, Six Months Ended Year Ended January 31,
July 31, 1996 ------------------------ July 31, 1996 ------------------------
(Unaudited) 1996 1995** (Unaudited) 1996 1995**
-------------- ---------- ---------- ---------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.090 $10.260 $10.000 $ 9.980 $ 9.150 $10.000
-------- -------- -------- -------- -------- --------
Income (loss) from operations:
Net investment income $ 0.246 $ 0.512 $ 0.456 $ 0.230 $ 0.484 $ 0.434
Net realized and unrealized gain
(loss) on investments (0.438) 0.832 0.304 (0.344) 0.835 (0.805)
-------- -------- -------- -------- -------- --------
Total income (loss) from operations $ (0.192) $ 1.344 $ 0.760 $ (0.114) $ 1.319 $ (0.371)
-------- -------- -------- -------- -------- --------
Less distributions:
From net investment income $ (0.246) $ (0.512) $ (0.456) $ (0.230) $ (0.484) $ (0.434)
In excess of net investment income (0.002) (0.002) (0.044) (0.006) (0.005) (0.045)
-------- -------- -------- -------- -------- --------
Total distributions $ (0.248) $ (0.514) $ (0.500) $ (0.236) $ (0.489) $ (0.479)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $10.650 $11.090 $10.260 $ 9.630 $ 9.980 $ 9.150
======== ======== ======== ======== ======== ========
Total Return (2) (1.70%) 13.39% 7.10% (1.11%) 14.74% (4.01%)
Ratios/Supplemental Data*:
Net assets, end of period (000 omitted) $19,672 $18,391 $11,596 $15,110 $15,126 $12,601
Ratio of net expenses to average
daily net assets (1)(3) 1.33%+ 1.10% 0.75%+ 1.33%+ 1.05% 0.87%+
Ratio of net expenses to
average daily net assets,
after custodian fee reduction (1)(3) 1.16%+ 1.00% -- 1.23%+ 0.98% --
Ratio of net investment income to average
daily net assets 4.64%+ 4.76% 4.79%+ 4.81%+ 5.03% 5.03%+
* The operating expenses of the Funds and Portfolios may reflect a reduction of expenses by the Administrator or Investment
Adviser. Had such actions not been taken, net investment income per share and the ratios would have been as follows:
Net investment income per share $ 0.225 $ 0.470 $ 0.374 $ 0.202 $ 0.434 $ 0.387
======= ======= ======= ======= ======= =======
Ratios (As a percentage of average
daily net assets):
Expenses (1)(3) 1.73%+ 1.49% 1.62%+ 1.91%+ 1.53% 1.41%+
Expenses, after custodian
fee reduction (1)(3) 1.56%+ 1.39% -- 1.81%+ -- --
Net investment income 4.24%+ 4.37% 3.92%+ 4.23%+ 4.51% 4.49%+
** For the period from the start of business, March 2, 1994, to January 31, 1995.
+ Computed on an annualized basis.
(1) Includes each Fund's share of its corresponding 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. Total return is computed on a non-annualized basis.
(3) The expense ratios for the six months ended July 31, 1996 and the year ended January 31, 1996 have been adjusted to reflect
a change in reporting requirements. The new reporting guidelines require each 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.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Marathon Kansas Fund
------------------------------------------------
Six Months Ended Year Ended January 31,
July 31, 1996 ----------------------------
(Unaudited) 1996 1995**
------------------ -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period $10.320 $ 9.560 $10.000
-------- -------- --------
Income (loss) from operations:
Net investment income $ 0.230 $ 0.481 $ 0.435
Net realized and unrealized gain
(loss) on investments (0.325) 0.761 (0.393)
-------- -------- --------
Total income (loss) from operations $ (0.095) $ 1.242 $ 0.042
-------- -------- --------
Less distributions:
From net investment income $ (0.230) $ (0.481) $ (0.435)
In excess of net investment income (0.005) (0.001) (0.047)
-------- -------- --------
Total distributions $ (0.235) $ (0.482) $ (0.482)
-------- -------- --------
Net asset value, end of period $ 9.990 $10.320 $ 9.560
======== ======== ========
Total Return (2) (0.89%) 13.26% 0.16%
Ratios/Supplemental Data*:
Net assets, end of period (000 omitted) $10,601 $10,782 $7,753
Ratio of net expenses to average
daily net assets (1)(3) 1.46%+ 1.20% 0.75%+
Ratio of net expenses to average daily
net assets, after custodian fee reduction (1)(3) 1.22%+ 1.08% --
Ratio of net investment income to average
daily net assets 4.63%+ 4.79% 4.81%+
* The operating expenses of the Fund and Portfolio may reflect a reduction of expenses by the Administrator or Investment
Adviser. Had such actions not been taken, net investment income per share and the ratios would have been as follows:
Net investment income per share $ 0.202 $ 0.442 $ 0.397
======== ======== ========
Ratios (As a percentage of average
daily net assets):
Expenses (1)(3) 2.02%+ 1.59% 1.60%+
Expenses, after custodian fee reduction (1)(3) 1.78%+ 1.47% --
Net investment income 4.07%+ 4.40% 3.96%+
** For the period from the start of business, March 2, 1994, to January 31, 1995.
+ Computed on an annualized basis.
(1) Includes the Fund's share of its corresponding 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. Total return is computed on a non-annualized basis.
(3) The expense ratios for the six months ended July 31, 1996 and the 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.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(Unaudited)
(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 Marathon Florida Insured
Municipals Fund, ("Marathon Florida Insured Fund"), EV Marathon
Hawaii Municipals Fund ("Marathon Hawaii Fund") and EV Marathon
Kansas Municipals Fund ("Marathon 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 Marathon Florida Insured Fund invests
its assets in the Florida Insured Municipals Portfolio, the Marathon
Hawaii Fund invests its assets in the Hawaii Municipals Portfolio
and the Marathon 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 (85.1%, 97.1% and 91.7% at July
31, 1996 for the Marathon Florida Insured Fund, Marathon Hawaii Fund
and Marathon 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 Funds, 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
thus will reduce the amount of 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:
Marathon Florida Insured Fund $128,828 January 31, 2004
1,222 January 31, 2003
Marathon Hawaii Fund $636,278 January 31, 2004
67,778 January 31, 2003
Marathon Kansas Fund $24,445 January 31, 2004
5,910 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 intends 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. Expense Reduction - Investors Bank & Trust Company (IBT) serves
as custodian of the Funds and Portfolios. Pursuant to the respective
custodian agreements, IBT receives a fee reduced by credits which
are determined based on the average daily cash balances the Funds
and Portfolios maintain with IBT. All significant credit balances
used to reduce each Fund's custodian fees are reported as a
reduction of expenses in the statements 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 only of normal recurring adjustments, necessary for the
fair presentation of the financial statements.
(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 a 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 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 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
<TABLE>
<CAPTION>
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:
Marathon Marathon Marathon
Florida Insured Hawaii Kansas
---------------------------- -------------------------- -------------------------
Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
July 31, 1996 January 31, July 31, 1996 January 31, July 31, 1996 January 31,
(Unaudited) 1996 (Unaudited) 1996 (Unaudited) 1996
------------- ------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales 237,358 587,531 103,590 323,249 105,667 253,103
Issued to shareholders electing
to receive payments of distributions
in Fund shares 16,285 23,840 15,673 33,154 11,939 22,492
Redemptions (65,383) (83,137) (65,372) (217,500) (101,682) (40,893)
------- -------- ------- -------- -------- --------
Net increase 188,260 528,234 53,891 138,903 15,924 234,702
======= ======= ======= ======== ======== ========
</TABLE>
(4) Transactions with Affiliates
Eaton Vance Management (EVM) serves as the administrator of each
Fund, but receives no compensation. Each of the Portfolios 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 Funds for
the six months ended July 31, 1996, $1,519, $4,103 and $3,674 of
expenses related to the operation of the Marathon Florida Insured
Fund, Marathon Hawaii Fund and Marathon Kansas Fund, respectively,
were allocated, on a preliminary basis, to EVM.
Certain of the officers and Trustees of the Funds and Portfolios are
officers and directors/trustees of the above organizations (Note 5).
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 the
investment adviser fee earned by BMR.
(5) Distribution Plan
Each Fund has adopted a distribution plan (the Plans) 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) 5% 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 6) and daily
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 six
months ended July 31, 1996, Marathon Florida Insured Fund, Marathon
Hawaii Fund and Marathon Kansas Fund, paid or accrued $70,046,
$55,044, and $40,409, respectively, 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 Plans for Marathon Florida Insured Fund,
Marathon Hawaii Fund and Marathon Kansas Fund were approximately
$713,000, $630,000 and $442,000, respectively.
In addition, the Plans authorize the Funds to make payments of
service fees to the Principal Underwriter, Authorized Firms and
other persons in amounts not exceeding 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 quarterly
service fee payments to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed 0.20% of each Fund's average
daily net assets based on the value of each Funds shares sold by
such persons and remaining outstanding for at least one year. During
the six months ended July 31, 1996, Marathon Florida Insured Fund,
Marathon Hawaii Fund and Marathon Kansas Fund paid or accrued
service fees to or payable to EVD in the amount of $12,561, $10,684,
and $7,167, 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) Contingent Deferred Sales Charges
A contingent deferred sales charge (CDSC) is imposed on any
redemption of a Fund's shares made within six years of purchase.
Generally, the CDSC is based upon the lower of the net asset value
at date of redemption or date of purchase. No charge is levied on
shares acquired by reinvestment of dividends or capital gain
distributions. The CDSC is imposed at rates that begin at 5% in the
case of redemptions in the first and second year after purchase,
declining one percentage point each subsequent year. No CDSC is
levied on shares which have been sold to EVM or its affiliates or to
their respective employees or clients. CDSC charges are paid to EVD
to reduce the amount of Uncovered Distribution Charges calculated
under each Fund's Distribution Plan. CDSC charges received when no
Uncovered Distribution Charges exist will be credited to the Fund.
EVD received approximately $17,900, $22,100, and $23,500 of CDSC
paid by shareholders for the six months ended July 31, 1996 for the
Marathon Florida Insured Fund, Marathon Hawaii Fund and Marathon
Kansas Fund, respectively.
(7) Investment Transactions
<TABLE>
<CAPTION>
Increases and decreases in each Fund's investment in its corresponding Portfolio for the six months ended
July 31, 1996 were as follows:
Marathon Florida Marathon Marathon
Insured Fund Hawaii Fund Kansas Fund
------------------------ ------------------------ --------------------------
<S> <C> <C> <C>
Increases $2,590,231 $1,046,513 $1,130,124
Decreases 1,055,445 1,003,935 1,147,006
</TABLE>
<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
-----------
<CAPTION>
Put Options on Financial Futures Contracts - 0.03%
- --------------------------------------------------------------------------------------------
Contracts Security Value
- --------------------------------------------------------------------------------------------
<S> <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.
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>
<TABLE>
<CAPTION>
Hawaii Municipals Portfolio
Portfolio of Investments - July 31, 1996 (Unaudited)
Tax-Exempt Investments - 99.95%
Ratings (Unaudited)
- -------------------- Principal
Amount
Standard (000
Moody's & Poor's Omitted) Security Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed/Prerefunded - 0.70%
Baa1 AAA $ 100 Commonwealth of
Puerto Rico Aqueduct
and Sewer Authority,
Prerefunded to 7/1/98,
7.00%, 7/1/19 $ 107,531
-----------
General Obligations - 18.51%
Aa AA $ 140 State of Hawaii, 5.75%,
1/1/11 $ 143,723
Aa AA 1,000 State of Hawaii, 5.25%,
6/1/13 948,530
Aa AA 750 City and County of
Honolulu, 4.75%,
9/1/17 652,418
NR BBB 590 Government of Guam,
5.375%, 11/15/13 527,259
Baa1 A 500 Puerto Rico Public
Buildings Authority,
Public Education and
Health Facilities, 5.50%,
7/1/21 465,420
NR NR 100 Virgin Islands Public
Finance Authority,
7.25%, 10/1/18 105,713
-----------
$ 2,843,063
-----------
Hospitals - 12.03%
Aa3 AA $ 400 State of Hawaii
Department of Budget
and Finance, Kaiser
Permanente, 6.25%,
3/1/21 $ 409,260
A A 625 State of Hawaii
Department of Budget
and Finance, Kapiolani
Health System, 6.00%,
7/1/19 610,519
Aa AA 600 State of Hawaii
Department of Budget
and Finance, Queens
Health System, 5.75%,
7/1/26 574,410
NR AAA $ 250 Puerto Rico Industrial,
Tourist, Educational,
Medical and
Environmental Control
Authority, Doctor Pila
Hospital Project, (FHA),
6.25%, 8/1/32 $ 253,167
-----------
$ 1,847,356
-----------
Housing - 7.59%
Aa A $1,000 State of Hawaii
Housing Finance and
Development Single
Family Mortgage
Bonds, 5.90%, 7/1/27 $ 992,900
Aa A 175 State of Hawaii
Housing Finance and
Development Single
Family Mortgage
Bonds, (AMT), 6.00%,
7/1/26 172,594
-----------
$ 1,165,494
-----------
Industrial Development/
Pollution Control - 6.22%
A1 AA- $ 550 Puerto Rico Industrial,
Tourist, Educational,
Medical and
Environmental Control
Authority, Upjohn
Company Project,
7.50%, 12/1/23 $ 599,929
Baa3 BB+ 175 Puerto Rico Port
Authority, American
Airlines, (AMT),
6.25%, 6/1/26 174,979
Baa3 BB+ 180 Puerto Rico Port
Authority, American
Airlines, (AMT),
6.30%, 6/1/23 180,583
-----------
$ 955,491
-----------
Insured Education - 6.48%
Aaa AAA $ 500 University of Hawaii
Board of Regents,
University System,
(AMBAC), 5.65%,
10/1/12 $ 498,905
Aaa AAA $ 500 Hawaii State Housing
Development
Corporation, University
of Hawaii, (AMBAC),
5.65%, 10/1/16 $ 495,800
-----------
$ 994,705
-----------
Insured General
Obligations - 12.74%
Aaa AAA $ 700 County of Hawaii,
(FGIC), 5.55%, 5/1/10 $ 707,993
Aaa AAA 305 County of Kauai,
(MBIA), 5.90%, 2/1/14 309,865
Aaa AAA 250 County of Maui,
(FGIC), 5.75%, 1/1/13 253,590
Aaa AAA 250 County of Maui,
(FGIC), 5.125%,
12/15/13 234,793
Aaa AAA 500 Commonwealth of
Puerto Rico, (MBIA),
5.00%, 7/1/21 450,035
-----------
$ 1,956,276
-----------
Insured Hospitals - 1.35%
Aaa AAA $ 100 State of Hawaii
Department of Budget
and Finance Queen's
Medical Center, (FGIC),
6.50%, 7/1/12 $ 102,286
Aaa AAA 100 State of Hawaii
Department of Budget
and Finance St. Francis
Medical Centers, (CGIC),
6.50%, 7/1/22 104,898
-----------
$ 207,184
-----------
Insured Housing - 3.52%
Aaa AAA $ 500 Honolulu Hawaii
City & County
Mortgage Revenue
Bonds, Smith Beretania
Project, (MBIA),
7.80%, 7/1/24 $ 539,820
-----------
Insured Transportation - 12.16%
Aaa AAA $ 500 State of Hawaii Airports
System, (AMT), (FGIC),
7.50%, 7/1/20 $ 548,880
Aaa AAA 100 State of Hawaii Airports
System, (AMT), (MBIA),
6.90%, 7/1/12 112,771
Aaa AAA $ 245 State of Hawaii Airports
System, (AMT), (MBIA),
7.00%, 7/1/18 $ 265,232
Aaa AAA 250 State of Hawaii Harbor
Revenue, (AMT), (MBIA),
7.00%, 7/1/17 269,150
Aaa AAA 650 State of Hawaii Harbor
Revenue, (AMT), (FGIC),
6.375%, 7/1/24 671,879
----------
$ 1,867,912
-----------
Insured Utilities - 7.44%
Aaa AAA $ 500 State of Hawaii
Department of Budget
and Finance, Hawaii
Electric Company, Inc.,
(AMT), (MBIA),
6.60%, 1/1/25 $ 524,215
Aaa AAA 500 State of Hawaii
Department of Budget
and Finance, Hawaii
Electric Company, Inc.,
(AMT), (MBIA),
6.20%, 5/1/26 508,960
Aaa AAA 100 Puerto Rico Electric
Power Authority
"Stripes", (FSA),
Variable, 7/1/03 (1) 109,240
-----------
$ 1,142,415
-----------
Special Tax - 1.66%
Baa1 A $ 275 Puerto Rico Highway
and Transportation
Authority, 5.50%,
7/1/36 $ 255,400
-----------
Transportation - 5.64%
Aa AA $ 715 State of Hawaii
Highway Revenue,
5.00%, 7/1/12 $ 663,070
NR BBB 200 Guam Airport
Authority, (AMT),
6.70%, 10/1/23 203,116
-----------
$ 866,186
-----------
Water and Sewer - 3.91%
Aa AA $ 600 Honolulu City and
County Water Supply
System, 5.80%, 7/1/16 $ 599,958
-----------
Total Tax-Exempt Investments
(identified cost, $14,524,940) $15,348,791
-----------
<CAPTION>
- --------------------------------------------------------------------------------------------
Put Option on Financial Futures Contracts - 0.05%
- --------------------------------------------------------------------------------------------
Contracts Security Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
25 30-year U.S. Treasury
Bond, American,
expiration 9/19/96,
Strike Price $106.00
(identified
cost, $17,742) $ 8,203
-----------
Total Investments
(identified cost, $14,542,682) $15,356,994
===========
(1) The above designated securities have been issued as inverse floater bonds.
AMT - Interest earned from these securities may be considered a tax preference item for
purposes of the Federal Alternative Minimum Tax.
The Portfolio primarily invests 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 July 31, 1996, 43.7% of the securities in the
portfolio of investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The percentage by financial institution ranged from
0.7% to 19.4% of total investments.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Kansas Municipals Portfolio
Portfolio of Investments - July 31, 1996 (Unaudited)
Tax-Exempt Investments - 100%
Ratings (Unaudited)
- -------------------- Principal
Amount
Standard (000
Moody's & Poor's Omitted) Security Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Obligation
Local - 3.65%
Aa1 NR $300 City of Leawood,
5.00%, 9/1/15 $ 278,058
Aa AA 170 City of Witchita,
4.00%, 9/1/09 145,727
-----------
$ 423,785
-----------
General Obligation
(School Districts) - 7.63%
Aa NR $400 Douglas County,
(Lawrence), USD No.
497, 6.00%, 9/1/15 $ 419,920
Aa NR 500 Johnson/Miami Cos.
KS USD #229, 5.00%,
10/1/14 466,585
-----------
$ 886,505
-----------
General Obligation
(Territory) - 1.88%
Baa1 A $250 Puerto Rico Aqueduct
& Sewer Authority,
Revenue Bonds
5.00%, 7/1/19 $ 218,513
-----------
Hospitals - 7.50%
A NR $250 City of Lawrence,
(Lawrence Memorial),
Hospital RevenueBonds,
6.20%, 7/1/19 $ 252,467
Aa NR 705 Shawnee County,
(Sisters of Charity),
Revenue Bonds, 5.00%,
12/1/23 619,357
-----------
$ 871,824
-----------
Housing - 28.84%
Aaa AAA $230 City of Kansas City,
Multifamily Housing
Revenue Bonds
(MFHRB) (FHA
Insured-Rainbow
Towers), 6.70%, 7/1/23 $ 236,541
NR AAA 440 City of Kansas City,
Single Family Housing
(SFH) (GNMA),
7.00%, 12/1/11 440,525
Aaa NR $ 85 City of Kansas City,
SFH (GNMA)
5.30%, 5/1/07 $ 83,492
Aaa NR 85 City of Kansas City,
SFH (GNMA)
5.30%, 11/1/07 83,441
Aaa NR 200 City of Kansas City,
SFH (GNMA)
5.90%, 11/1/27 196,892
NR AAA 240 City of Olathe, Kansas,
SFH (AMT), (GNMA)
7.60%, 3/1/07 253,786
NR AAA 250 City of Olathe, Kansas,
MFHRB (FNMA
Program Deerfield
Apartments), 6.45%,
6/1/19 254,150
Aaa NR 210 Cities of Olathe and
of Labette, Collateralized
Single Family Mortgage
Revenue Bonds
(CSFMRB) (GNMA),
8.10%, 8/1/23 231,500
Aa NR 100 Kansas Development
Authority SFH FHA
(Martin Creek), 6.60%,
8/1/34 102,145
Aaa NR 45 Sedgwick County SFH
(GNMA) Ser 94 B
8.20%, 5/1/14 49,424
Aaa AAA 240 Sedgwick and Shawnee
Counties, CSFMRB
(GNMA), 7.50%,
12/1/09 242,105
Aaa AAA 130 Sedgwick and Shawnee
Counties, CSFMRB
(GNMA), 7.50%,
12/1/10 126,019
Aaa NR 235 Sedgwick and Shawnee
Counties, CSFMRB
(GNMA), 7.75%,
11/1/24 (2) 265,085
Aaa NR $475 Sedgwick and Shawnee
Counties, CSFMRB
(GNMA), 8.00%,
5/1/25 $ 522,744
NR AA 250 Puerto Rico Housing
Finance Corporation,
MFMRB 7.50%,
4/1/22 262,485
-----------
$ 3,350,334
-----------
Industrial Development Revenue - 2.50%
A2 NR $100 Puerto Rico I.M.E.
(American Home
Products), 5.10%,
12/1/18 $ 90,020
Baa3 BB+ 200 Puerto Rico Port
Authority, (American
Airlines), 6.30%, 6/1/23 200,648
-----------
$ 290,668
-----------
Insured Health Care - 4.35%
Aaa AAA $500 Kansas Development
Finance, Health
Facilities, (Stormont-
Vail), (MBIA)
5.80%, 11/15/11 $ 504,960
-----------
Insured Housing - 0.89%
NR AA $100 Puerto Rico Housing
Finance Corp. ,
MFHRB, (AMBAC)
7.50%, 10/1/11 $ 103,457
-----------
Insured Utilities - 4.18%
Aaa AAA $345 City of Burlington,
PCR (Kansas Gas &
Electric Co.) (MBIA),
7.00%, 6/1/31 (2) $ 377,623
Aaa AAA 100 Puerto Rico Electric
Power Authority, Power
Revenue Bonds (FSA),
Residual Interest Bonds,
Variable Rate, 7/1/02 (1) 108,155
-----------
$ 485,778
-----------
Insured General
Obligations- 4.44%
Aaa AAA $150 City of Garnett,
Combined Utility
Revenue Bonds
(MBIA), 6.00%,
10/1/17 $ 153,129
Aaa AAA 200 City of Kansas City,
Utility System
Revenue Bonds (FGIC),
6.375%, 9/1/23 208,978
Aaa AAA 150 Kansas Development
Finance Authority,
Revenue Bonds (MBIA),
5.90%, 10/1/09 153,985
-----------
$ 516,092
-----------
Insured General
Obligations (School
District) - 10.53%
Aaa AAA $150 Atchison County, USD
No. 409, (FSA),
5.375%, 9/1/15 $ 142,860
Aaa AAA 350 Johnson County, Olathe,
USD No. 233
(AMBAC), 5.625%,
9/1/11 353,483
Aaa AAA 250 Sedgwick County,
USD No. 267,
(AMBAC), 6.15%,
11/1/09 266,280
Aaa AAA 230 Sedgwick County,
USD No. 267,
(AMBAC), 6.15%,
11/1/10 244,113
Aaa AAA 165 Shawnee County,
Seaman, USD No. 345,
(MBIA), 5.75%, 9/1/11 167,330
Aaa AAA 50 Shawnee County, USD
No. 345, (MBIA),
5.50%, 9/1/13 49,669
-----------
$ 1,223,735
-----------
Insured Hospitals - 8.75%
Aaa AAA $200 City of Olathe, Health
Facilities Revenue
Bonds, Evangelical
Lutheran Good
Samaritan Society,
(AMBAC), 6.00%,
5/1/19 $ 205,016
Aaa AAA 895 Shawnee County,
Health Facilities
Revenue Bonds,
Menninger Foundation,
(FSA), 5.00%, 8/15/16 811,792
-----------
$ 1,016,808
-----------
Insured Water and
Sewer - 4.85%
Aaa AAA $270 Junction City Kansas
Water & Sewer
(MBIA) 5.20%, 9/1/10 $ 261,865
Aaa AAA 300 Haysville Kansas Water
& Waste Water Utility,
(FSA) 5.70%, 10/1/11 301,581
-----------
$ 563,446
-----------
Transportation - 7.49%
NR BBB $100 Guam Airport
Authority General
Revenue Bonds,
6.50%, 10/1/23 $ 100,880
NR BBB 300 Guam Airport
Authority General
Revenue Bonds,
(AMT), 6.70%, 10/1/23 304,674
Aa AA 480 State of Kansas
Department of
Transportation
Highway Revenue
Bonds, 5.375%, 3/1/13 464,390
-----------
$ 869,944
-----------
Utilities - 2.09%
NR BBB $100 Guam Power Authority
Revenue Bonds,
5.25%, 10/1/13 $ 88,882
NR BBB 150 Guam Power Authority
Revenue Bonds,
6.625%, 10/1/14 153,373
-----------
$ 242,255
-----------
Water and Sewer - 0.43%
Aa AA+ $ 50 Water District No. 1
of Johnson County,
Water Revenue Bonds,
5.75%, 12/1/19 $ 49,489
-----------
Total Tax-Exempt Investments
(identified cost, $11,375,782) $11,617,593
===========
(1) The above designated securities have been issued as inverse floater bonds.
(2) 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.
The Portfolio primarily invests 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
associated with such economic developments, at July 31, 1996, 38.0% 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 1.2% to 14.4% of total investments.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Municipals Portfolios
Financial Statements
Statements of Assets and Liabilities
July 31, 1996 (Unaudited)
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
------------------ -------------- --------------
<S> <C> <C> <C>
Assets:
Investments --
Identified cost $ 21,865,013 $ 14,542,682 $ 11,375,782
Unrealized appreciation 672,567 814,312 241,811
------------ ------------ ------------
Total investments, at value (Note 1A) $ 22,537,580 $ 15,356,994 $ 11,617,593
Cash 369,103 41,458 32
Receivable from the Investment Adviser (Note 2) 22,937 27,897 19,494
Interest receivable 385,498 157,398 204,651
Deferred organization expenses (Note 1D) 6,269 5,737 5,668
------------ ------------ ------------
Total assets $ 23,321,387 $ 15,589,484 $ 11,847,438
------------ ------------ ------------
Liabilities:
Payable for when-issued securities (Note 1G) $ 126,767 $ -- $ --
Payable for daily variation margin on open
financial futures contracts (Note 1E) 17,188 10,406 3,438
Demand note payable (Note 5) -- -- 189,000
Payable to affiliate --
Trustees' fees 14 14 14
Accrued expenses 2,395 3,879 2,479
------------ ------------ ------------
Total liabilities $ 146,364 $ 14,299 $ 194,931
------------ ------------ ------------
Net Assets applicable to investors' interest in Portfolio $ 23,175,023 $ 15,575,185 $ 11,652,507
============ ============ ============
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $ 22,552,130 $ 14,774,331 $ 11,414,665
Unrealized appreciation of investments and financial
futures contracts (computed on the basis of identified cost) 622,893 800,854 237,842
------------ ------------ ------------
Total $ 23,175,023 $ 15,575,185 $ 11,652,507
============ ============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
For the Six Months Ended July 31, 1996 (Unaudited)
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
------------------ -------------- --------------
<S> <C> <C> <C>
Investment Income:
Interest income $ 635,898 $ 456,177 $ 342,635
------------ ------------ ------------
Expenses --
Investment adviser fee (Note 2) $ 18,958 $ 12,123 $ 9,288
Compensation of Trustees not members of the
Investment Adviser's organization 58 58 58
Custodian fees (Note 1H) 15,614 11,083 10,474
Legal and accounting services 17,649 17,649 14,549
Bond pricing 3,486 3,116 3,590
Amortization of organization expenses (Note 1D) 1,208 1,103 1,092
Miscellaneous 536 1,379 205
------------ ------------ ------------
Total expenses $ 57,509 $ 46,511 $ 39,256
------------ ------------ ------------
Deduct --
Preliminary reduction of investment adviser fee (Note 2) $ 18,958 $ 12,123 $ 9,288
Preliminary allocation of expenses to the Investment Adviser (Note 2) 22,937 27,897 19,494
Reduction of custodian fee (Note 1H) 15,614 6,491 10,474
------------ ------------ ------------
Total $ 57,509 $ 46,511 $ 39,256
------------ ------------ ------------
Net expenses $ -- $ -- $ --
------------ ------------ ------------
Net investment income $ 635,898 $ 456,177 $ 342,635
------------ ------------ ------------
Realized and Unrealized Gain (Loss):
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 145,608 $ (23,229) $ 11,139
Financial futures contracts 62,720 39,643 10,787
------------ ------------ ------------
Net realized gain $ 208,328 $ 16,414 $ 21,926
------------ ------------ ------------
Change in unrealized appreciation (depreciation) --
Investments $ (1,002,946) $ (541,183) $ (397,352)
Financial futures contracts (49,674) (13,458) (3,143)
------------ ------------ ------------
Net unrealized depreciation $ (1,052,620) $ (554,641) $ (400,495)
------------ ------------ ------------
Net realized and unrealized loss $ (844,292) $ (538,227) $ (378,569)
------------ ------------ ------------
Net decrease in net assets from operations $ (208,394) $ (82,050) $ (35,934)
============ ============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six Months Ended July 31, 1996 (Unaudited)
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
------------------ -------------- --------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 635,898 $ 456,177 $ 342,635
Net realized gain 208,328 16,414 21,926
Change in unrealized appreciation (depreciation) (1,052,620) (554,641) (400,495)
------------ ------------ ------------
Net decrease in net assets from operations $ (208,394) $ (82,050) $ (35,934)
------------ ------------ ------------
Capital transactions --
Contributions $ 3,152,766 $ 1,093,748 $ 1,257,392
Withdrawals (1,185,149) (1,014,590) (1,177,592)
------------ ------------ ------------
Increase in net assets resulting from capital transactions $ 1,967,617 $ 79,158 $ 79,800
------------ ------------ ------------
Total increase (decrease) in net assets $ 1,759,223 $ (2,892) $ 43,866
Net Assets:
At beginning of period 21,415,800 15,578,077 11,608,641
------------ ------------ ------------
At end of period $ 23,175,023 $ 15,575,185 $ 11,652,507
============ ============ ============
- ---------------------------------------------------------------------------------------------------------------------------
For the Year Ended January 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
---------------- -------------- ------------
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 1,016,847 $ 890,336 $ 590,562
Net realized loss (93,236) (221,382) (12,613)
Change in unrealized appreciation 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 --
Contribtutions $ 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
============ ============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Supplementary Data
Florida Insured Portfolio Hawaii Portfolio
------------------------------------ --------------------------------------
Six Months Ended Year Ended January 31, Six Months Ended Year Ended January 31,
July 31, 1996 ----------------------- July 31, 1996 -------------------
(Unaudited) 1996 1995* (Unaudited) 1996 1995*
--------------- ---------- ---------- --------------- ---------- ---------
Ratios (As a percentage of average
daily net assets)**:
<S> <C> <C> <C> <C> <C> <C>
Net expenses (1) 0.14%+ 0.07% 0.01%+ 0.09%+ 0.06% 0.06%+
Net expenses, after custodian fee reduction (1) 0.00%+ 0.00% -- 0.00%+ 0.00% --
Net investment income 5.80%+ 5.82% 5.73%+ 6.03%+ 6.01% 6.03%+
Portfolio Turnover 23% 32% 33% 19% 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 percentage of average
daily net assets):
Expenses (1) 0.52%+ 0.39% 0.41%+ 0.62%+ 0.41% 0.38%+
Expenses after custodian fee reduction (1) 0.38%+ 0.32% -- 0.53%+ 0.35% --
Net investment income 5.42%+ 5.50% 5.33%+ 5.50%+ 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 six months ended July 31, 1996 and year ended January 31, 1996 have been adjusted to reflect a
change in reporting requirements. The reporting guidelines require each 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.
</TABLE>
<TABLE>
<CAPTION>
Supplementary Data
Kansas 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) 0.18%+ 0.09% 0.01%+
Net expenses, after custodian fee reduction (1) 0.00%+ 0.00% --
Net investment income 5.84%+ 5.93% 5.68%+
Portfolio Turnover 17% 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) 0.67%+ 0.50% 0.43%+
Expenses, after custodian fee reduction (1) 0.49%+ 0.41% --
Net investment income 5.35%+ 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 six months ended July 31, 1996 and year ended January 31, 1996 have been adjusted
to reflect a change in reporting requirements. The 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"),
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
consistently followed by the Portfolios in the preparation of their
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 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. Options on Financial Futures Contracts - Upon the purchase of a
put option on a financial futures contract by a Portfolio, the
premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, a Portfolio
will realize a loss in the amount of the cost of the option. When a
Portfolio enters into a closing sales transaction, the Portfolio
will realize a gain or loss depending on whether the sales proceeds
from the closing sales transaction is greater or less than the cost
of the option. When a Portfolio exercises a put option, settlement
is made in cash. The risk associated with purchasing options is
limited to the premium originally paid.
G. When-issued and Delayed Delivery Transactions - The Portfolios
may engage in when-issued and delayed delivery transactions. The
Portfolios record when-issued securities on trade date and maintain
security positions such that sufficient liquid assets will be
available to make payments for the securities purchased. Securities
purchased on a when-issued or delayed delivery basis are marked-to-
market daily and begin accruing interest on settlement date.
H. Expense Reduction - Investors Bank & Trust Company (IBT) serves
as custodian of the Portfolios. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are
determined based on the average daily cash balances each Portfolio
maintains with IBT. All significant credit balances used to reduce
the Portfolios' custodian fees are reported as a reduction of
expenses in the statements 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 only 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 each Portfolio. The fee is based upon a
percentage of average daily net assets plus a percentage of gross
income (i.e., income other than gains from the sale of securities).
For the six months ended July 31, 1996, the fee for the Florida
Insured Portfolio, Hawaii Portfolio and Kansas Portfolio was
equivalent to 0.16% of each Portfolio's average net assets and
amounted to $18,958, $12,123 and $9,288 respectively. To enhance the
net income of the Florida Insured Portfolio, Hawaii Portfolio and
Kansas Portfolio, BMR made a preliminary reduction of its fee in the
amount of $18,958, $12,123 and $9,288, respectively, and $22,937,
$27,897 and $19,494, respectively, of expenses related to the
operation of the Portfolios were allocated, on a preliminary basis,
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.
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 six months ended July 31, 1996,
no significant amounts have been deferred.
(3) Investments
Purchases and sales of investments, other than U.S. Government
securities, put option transactions and short-term obligations, for
the six months ended July 31, 1996 were as follows:
<TABLE>
<CAPTION>
Florida Hawaii Kansas
Insured Portfolio Portfolio Portfolio
------------------ ------------------- --------------------
<S> <C> <C> <C>
Purchases $8,051,725 $3,333,000 $2,722,686
Sales 4,960,581 2,846,489 1,949,049
</TABLE>
<TABLE>
<CAPTION>
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the investments owned by each Portfolio at
July 31, 1996, as computed on a federal income tax basis, are as follows:
Florida Hawaii Kansas
Insured Portfolio Portfolio Portfolio
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Aggregate Cost $ 21,865,013 $ 14,542,682 $ 11,375,782
============ ============ ============
Gross unrealized appreciation $ 731,624 $ 832,310 $ 322,169
Gross unrealized depreciation 59,057 17,998 80,358
------------ ------------ ------------
Net unrealized appreciation $ 672,567 $ 814,312 $ 241,811
============ ============ ============
</TABLE>
(5) Line of Credit
The Portfolios participate 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. 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 is allocated
among the participating funds and portfolios at the end of each
quarter. At July 31, 1996, the Kansas Portfolio had a balance
outstanding pursuant to this line of credit of $189,000. The Florida
Insured Portfolio, Hawaii Portfolio and the Kansas Portfolio did not
have any significant borrowings or allocated fees during the six
months ended July 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 statement purposes.
The notional or contractual amounts of these instruments represent
the investment a Portfolio has in particular classes of financial
instruments and does not necessarily represent the amounts
potentially subject to risk. The measurement of the risks associated
with these instruments is meaningful only when all related and
offsetting transactions are considered.
<TABLE>
<CAPTION>
A summary of obligations under these financial instruments at July
31, 1996 is as follows:
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)
Hawaii 9/96 15 U.S. Treasury Bond Short (13,458)
Kansas 9/96 5 U.S. Treasury Bond Short (3,969)
At July 31, 1996, the Portfolios had sufficient cash and/or securities segregated to cover margin
requirements on open futures contracts.
</TABLE>
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 Portfolios
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
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.
Eaton Vance Municipals Trust II
24 Federal Street
Boston, MA 02110
T-MCSRC-9/96
