Eaton Vance Municipals Trust II
For the Funds:
(bullet) EV Traditional Florida Insured Municipals Fund
(bullet) EV Traditional Hawaii Municipals Fund
(bullet) EV Traditional Kansas Municipals Fund
[GRAPHIC LOGO OMITTED: ARCHWAY]
Annual Shareholder Report
January 31, 1997
Table of Contents
Item Page
Year-end results and current distribution rates 2
President's letter to shareholders 3
Management Reports:
EV Traditional Florida Insured Municipals Fund 4
EV Traditional Hawaii Municipals Fund 5
EV Traditional Kansas Municipals Fund 6
Financial Results 7
<TABLE>
<CAPTION>
Information about your mutual fund investment:
Results for the year ending
January 31, 1997
Total return Dividends paid Fund's
(excl. sales by Fund NAV per share distribution
charge)* (during period) at 1/31/97 rate at 1/31/97
<S> <C> <C> <C> <C>
EV Traditional Florida Insured
Municipals Fund 2.0% $0.575 $10.85 5.25%
EV Traditional Hawaii
Municipals Fund 3.2% $0.514 $9.54 5.27%
EV Traditional Kansas
Municipals Fund 3.3% $0.539 $10.05 5.25%
<CAPTION>
If your The after-tax equivalent
combined Federal distribution rate you Federal income
Maps and state rate is... would need is... tax info*
<S> <C> <C> <C> <C>
EV Traditional Florida Insured
Municipals Fund graphic map of Florida 38.44% 8.47% 98.11%
EV Traditional Hawaii
Municipals Fund graphic map of Hawaii 42.40% 9.07% 98.13%
EV Traditional Kansas
Municipals Fund graphic map of Kansas 42.05% 8.99% 98.13%
</TABLE>
*Percentages represent the amounts of the total dividends paid by
the Funds from net investment income during the year ended January
31, 1997 that have been designated as exempt-interest dividends. Tax
legislation eliminated the exception to market discount rules
applicable to tax-exempt obligations. As a result, certain tax-
exempt obligations acquired by the Portfolio subsequent to April 30,
1993 at market discounts may generate a small amount of ordinary
taxable income.
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.
To Shareholders
The municipal bond market in 1996 was characterized by heightened
volatility as investors reacted to a seesaw interest rate
environment and a politically-charged debate over the possibility of
a flat tax. At the outset of the year, the economy seemed poised for
a slowdown, and the Federal Reserve appeared ready to revive growth
through interest rate reductions. In January, the Fed lowered the
Federal Funds Rate -- the rate banks charge each other for overnight
loans and a key short-term interest rate barometer -- to 5.25%.
However, it soon became apparent that the economy was stronger than
anticipated and that inflation, while still at a low level, would
bear further watching. Long-term bond yields climbed steadily
higher, reaching their peak in mid-June.
Investors were heartened by economic reports in the second half of
the year that showed a scenario of slow growth and low inflation. In
addition, the federal budget deficit, which had ballooned in the
1980s and had been so long the bane of fixed-income investors, fell
to just 1.5% of gross domestic product. Against that favorable
backdrop, bond yields finished the year at lower levels than at mid-
year.
According to the Public Securities Association, state and local
governments sold roughly $183 billion in securities in 1996, and
will sell approximately the same volume in 1997. That is sharply
lower than the supply levels for 1995 and earlier. With greatly
reduced supply and increasing competition for bonds, municipal bonds
should retain their value among tax-conscious investors.
We believe an investment in municipal bonds continues to represent
good value for several reasons. First, the nation's economy should
continue to grow at a fairly modest pace in 1997, which is favorable
for bonds in general. Second, due to public demand, it is
increasingly likely that Congress and the Clinton Administration
will make progress toward a balanced budget. Third, with the equity
markets having turned in two consecutive years of performances well
above historical averages, investors may look for alternatives
within the bond markets. Finally, taxes remain a burden and, for
most investors, municipal bonds are the last remaining vehicle for
tax relief. For these reasons, we believe that the municipal market
will continue to be a favored avenue for tax-conscious investors.
Eaton Vance's municipal bond department will continue to seek high,
tax-free current income for shareholders.
Sincerely,
/S/ THOMAS J. FETTER
Thomas J. Fetter
President
March 6, 1997
Tax-exempt bonds yield 82% of Treasury yields
30-yr. AAA General Obligation (GO) Bonds* 5.55%
Taxable equivalent yield of investment for
couple in 36% tax bracket 8.67%
30-year Treasury Bond 6.79%
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 January 31, 1997.
Past performance is no guarantee of future results.
Source: Bloomberg, L.P.
Included in the pages that follow are performance charts that
compare your Fund's total return with that of a broad-based
securities market index. The lines on the chart represent the total
returns of $10,000 hypothetical investments in your Fund and the
unmanaged Lehman Brothers Municipal Bond Index. The solid line on
the chart represents the Fund's performance. The Fund's total return
figure reflects fund expenses and portfolio transaction costs, and
assumes the reinvestment of income dividends and capital gain
distributions. The contingent deferred sales charge, which the
charts refer to, is deducted at redemption as follows: 5% -- 1st and
2nd years; 4% -- 3rd year; 3% -- 4th year; 2% -- 5th year; and 1% -- 6th
year. The dotted line represents the performance of the Lehman
Brothers Municipal Bond Index, a broad-based, widely recognized
unmanaged index of municipal bonds. Whereas the Fund's portfolio is
composed principally of bonds solely from your individual state, the
Index is composed of bonds from all 50 states and many
jurisdictions. The Index's total return does not reflect any
commissions or expenses that would be incurred if an investor
individually purchased or sold the securities represented in the
Index. It is not possible to invest directly in the Lehman Brothers
Municipal Bond Index.
EV Traditional Florida Insured Municipals Fund
[GRAPHIC OF HOUSE OMITTED]
Your investment at work
Escambia County, Florida
Housing Finance Authority
The proceeds from these bonds are secured by first mortgages on
single family residences in several counties in the state of
Florida. The bond issue is part of a special program to help low
income families to afford the increasing cost of buying a house.
Hence, under the program, only qualified families with incomes under
a certain level are eligible for loans.
The bonds are attractive for investors because of their yield, their
low pre-payment risk, and their GNMA backing. The latter results in
an investment-grade, AAA rating by Moody's and Standard & Poor's.
[GRAPHIC MAP OF FLORIDA OMITTED]
Portfolio Overview
Based on market value as of January 31, 1997
Number of issues 45
Average quality AAA
Investment grade 100%
Effective maturity 17.25 yrs.
Largest sectors:
Insured special tax 29.4%*
Insured water & sewer 24.6*
Housing 12.1
Insured housing 8.3*
Insured transportation 7.8*
Insured utilities 5.2*
*Private insurance does not remove the interest rate risks that are
associated with these investments.
The State of the State: Florida
Florida's economy benefits from several positive trends, including
an increasing population, significant revenue growth, and a
diversified economy with particular strength in the service and
trade sectors.
Florida's population, which has increased by 11.4% since 1990, has
expanded primarily due to net migration into the state. Migration
accounted for 79% of population growth between 1990 and 1996, while
the remaining 21% was natural growth. Florida now has the fourth
largest population in the U.S., behind California, Texas, and New
York, and is forecast to be the nation's third most populous by
2025.
Revenue growth increased an estimated 6.3% in 1996, and is expected
to jump another 4.7% in 1997. Unem-ployment stood at 4.9% in
November, 1996 -- its lowest level since August of 1988. Total non-
farm employment in Florida increased 2.8% in the 12 months ending
November 30, 1996, and almost all of this increase came from the
service sector. Within this sector, business services, in which
employment rose by 6.4%, accounted for fully half of the total job
additions.
With the tremendous growth in Florida's economy, the pressure for
improvements in infrastructure, education, and housing has mounted.
The state's low debt/personal income ratio of 3.2%, along with its
well-managed state finances, should help Florida meet these
challenges.
[GRAPHIC WORM CHART OMITTED]
Caption Reads: Comparison of Change in Value of a $10,000 Investment in
EV Traditional Florida Insured Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From March 31, 1994, through January 31, 1997
plot points:
EV Traditional Florida Insured Municipals Fund vs.
Lehman Brothers Municipal Bond Index
Date Fund at NAV Fund at Off Index
3/31/94 $10,000 $9,625 $10,000
4/30/94 $10,465 $10,072 $10,085
5/31/94 $10,604 $10,206 $10,172
6/30/94 $10,661 $10,261 $10,113
7/31/94 $10,894 $10,485 $10,295
8/31/94 $10,883 $10,475 $10,331
9/30/94 $10,687 $10,286 $10,180
10/31/94 $10,410 $10,019 $9,999
11/30/94 $10,170 $9,789 $9,818
12/31/94 $10,523 $10,128 $10,034
1/31/95 $10,918 $10,508 $10,321
2/28/95 $11,321 $10,896 $10,621
3/31/95 $11,384 $10,956 $10,743
4/30/95 $11,371 $10,944 $10,756
5/31/95 $11,657 $11,220 $11,099
6/30/95 $11,400 $10,972 $11,002
7/31/95 $11,485 $11,054 $11,106
8/31/95 $11,570 $11,136 $11,247
9/30/95 $11,633 $11,197 $11,318
10/31/95 $11,882 $11,436 $11,483
11/30/95 $12,197 $11,739 $11,673
12/31/95 $12,360 $11,896 $11,785
1/31/96 $12,393 $11,928 $11,874
2/28/96 $12,234 $11,775 $11,794
3/31/96 $12,012 $11,561 $11,644
4/30/96 $11,976 $11,527 $11,610
5/31/96 $11,987 $11,537 $11,606
6/30/96 $12,118 $11,663 $11,733
7/31/96 $12,240 $11,781 $11,839
8/31/96 $12,227 $11,768 $11,836
9/30/96 $12,429 $11,962 $12,001
10/31/96 $12,507 $12,037 $12,137
11/30/96 $12,710 $12,233 $12,359
12/31/96 $12,650 $12,175 $12,307
1/31/97 $12,637 $12,162 $12,331
INSET BOX READS:
Average 1 Life of
Annual Returns Year Fund*
With max. sls. ch. -1.9% 6.9%
W/out max. sls. ch. 2.0% 8.3%
Past performance is not indicative of future results. Investment returns
and principal will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Source: Towers Data
Systems, Bethesda, MD. *Investment operations commenced 3/3/94. +Index
information is available only at month-end; therfore, the line comparison
begins at the next month-end following the commencement of the Fund's
investment operations
From the Portfolio Manager:
"Within the market for insured bonds in Florida, our main strategy
has been to diversify among the five main insurers in the state. It
is important to keep this diversity in an insured fund.
There are more opportunities in Florida than in some other states to
swap out of bonds and pick up new issues because the municipal
market is much larger. Also, it is even easier with an insured fund
because the supply of insured bonds in the primary and secondary
markets is often bigger than that for uninsured bonds. This helps me
to diversify the portfolio, keep call protection at a maximum, and
reduce volatility by buying a combination of premium and discount
bonds."
[PHOTO OF THOMAS J. FETTER OMITTED]
- - Thomas J. Fetter
EV Traditional Hawaii Municipals Fund
[GRAPHIC OF WATER SYSTEM WORKER OMITTED]
Your investment at work
Honolulu Board of Water Supply: Water System Revenue Bonds
With an increasing demand for water within its Water System, the
Honolulu Board of Water Supply is embarking on a capital improvement
program to meet future needs. This program, scheduled to be
completed in 2001, will develop new water sources, build and improve
storage facilities, and construct and improve pipelines. Proceeds
from this bond issue will be used to help finance these
improvements.
The Water System, which the Board governs, comprises 148,417
accounts serving a population of 908,200 in a 606 square mile area.
In 1995, residential customers accounted for 60.4% of total water
use, while commercial users accounted for 38.5%.
[GRAPHIC MAP OF HAWAII OMITTED]
Portfolio Overview
Based on market value as of January 31, 1997
Number of issues 39
Average quality AA
Investment grade 99.3%
Effective maturity 13.00 yrs.
Largest sectors:
General obligations 17.7%
Hospitals 13.2
Insured general obligation 12.5*
Insured transportation 11.9*
Insured utilities 8.6*
Housing 7.4
*Private insurance does not remove the interest rate risks that are
associated with these investments.
The State of the State: Hawaii
Hawaii's economy is beginning to show some genuine signs of recovery
from the recession of the early 1990's. Tourism, a principal
stimulus accounting for over 23% of the state's economy, is once
again on the rise. Arrivals from the U.S. mainland increased 2.5%
through October, 1996 over the same period a year before, while
eastbound arrivals (from Japan and other Asian nations) increased
8.0% during the same period. The military, another main economic
contributor, maintains a strong presence in the state with 51,000
personnel and 54,000 dependants. Hawaii's unique strategic position
has mitigated the effects of downsizing that have hurt other areas
of the country, and should limit base closures in the future. While
growth in personal income in 1996 has slowed somewhat, a recent
survey by the Bank of Hawaii indicated that many businesses planned
to increase hiring in 1997. Income levels, at 111% of the U.S.
average, remain healthy.
Further signs of the state's improving economy include
a healthier financial position: the state showed an estimated $70
million general fund surplus in 1996, due to increased excise tax
revenues and improved spending control over the past two years.
[GRAPHIC WORM CHART OMITTED]
Caption Reads: Comparison of Change in Value of a $10,000 Investment in
EV Traditional Hawaii Insured Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From March 31, 1994, through January 31, 1997
plot points:
EV Traditional Hawaii Municipals Fund vs.
Lehman Brothers Municipal Bond Index
Date Fund at NAV Fund at Off Index
3/31/94 $10,000 $9,627 $10,000
4/30/94 $9,985 $9,613 $10,085
5/31/94 $10,074 $9,698 $10,172
6/30/94 $9,918 $9,549 $10,113
7/31/94 $10,081 $9,706 $10,295
8/31/94 $10,119 $9,742 $10,331
9/30/94 $9,931 $9,561 $10,180
10/31/94 $9,669 $9,308 $9,999
11/30/94 $9,423 $9,072 $9,818
12/31/94 $9,639 $9,279 $10,034
1/31/95 $9,913 $9,543 $10,321
2/28/95 $10,240 $9,859 $10,621
3/31/95 $10,357 $9,971 $10,743
4/30/95 $10,358 $9,972 $10,756
5/31/95 $10,631 $10,235 $11,099
6/30/95 $10,474 $10,084 $11,002
7/31/95 $10,565 $10,171 $11,106
8/31/95 $10,629 $10,233 $11,247
9/30/95 $10,708 $10,309 $11,318
10/31/95 $10,843 $10,439 $11,483
11/30/95 $11,035 $10,624 $11,673
12/31/95 $11,159 $10,743 $11,785
1/31/96 $11,235 $10,817 $11,874
2/28/96 $11,155 $10,740 $11,794
3/31/96 $11,019 $10,609 $11,644
4/30/96 $10,974 $10,565 $11,610
5/31/96 $10,954 $10,546 $11,606
6/30/96 $11,073 $10,660 $11,733
7/31/96 $11,182 $10,765 $11,839
8/31/96 $11,173 $10,757 $11,836
9/30/96 $11,329 $10,907 $12,001
10/31/96 $11,440 $11,013 $12,137
11/30/96 $11,633 $11,200 $12,359
12/31/96 $11,600 $11,168 $12,307
1/31/97 $11,591 $11,159 $12,331
INSET BOX READS:
Average 1 Life of
Annual Returns Year Fund*
With max. sls. ch. -0.7% 2.3%
W/out max. sls. ch. 3.2% 3.6%
Past performance is not indicative of future results. Investment returns
and principal will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Source: Towers Data
Systems, Bethesda, MD. *Investment operations commenced 3/14/94. +Index
information is available only at month-end; therfore, the line comparison
begins at the next month-end following the commencement of the Fund's
investment operations
From the Portfolio Manager:
"Hawaii is a very low-supply state for municipal bonds, so when I
find good issues, I hold them as long as they are performing well.
Where possible, I try to avoid, or get out of, par bonds and/or
bonds with unattractive calls. I also look to acquire bonds with
good call protection, as well as lower coupon bonds. Bonds are hard
to replace in Hawaii, however, so I typically hold most of my issues
to keep the Portfolio as diverse as possible.
Maintaining credit diversity is probably the most important part of
managing a municipal bond portfolio. With little activity in the
primary and secondary markets during the past six months, my main
goal has been to stay the course, making minor adjustments where I
see fit."
[PHOTO OF ROBERT B. MACINTOSH OMITTED]
- - Robert B. MacIntosh
EV Traditional Kansas Municipals Fund
[GRAPHIC OF CADUCEUS OMITTED]
Your investment at work
St. Luke's/Shawnee Mission
Health System, Inc.
St. Luke's/Shawnee Mission Health System, Inc. serves the greater
Kansas City metropolitan area and surrounding communities with an
integrated complex of hospital facilities, including St. Luke's
Hospital in Kansas City, KS, and Shawnee Mission Medical Center in
Merriam, KS., as well as 25 primary care physician offices and 18
other clinics and health facilities.
These bonds, which will help finance the construction and equipping
of a new 75-bed community hospital in Overland Park, KS, offer
shareholders several attractive features: triple-A credit quality; a
10-year call at a premium call price; and a discounted coupon, which
increases potential for price appreciation.
[GRAPHIC MAP OF KANSAS OMITTED]
Portfolio Overview
Based on market value as of January 31, 1997
Number of issues 39
Average quality AA+
Investment grade 100%
Effective maturity 14.17 yrs.
Largest sectors:
Housing 25.9%
General obligation school district 17.8
Insured hospitals 17.6*
Hospitals 5.9
Insured general obligations-school district 4.6*
Insured health care 4.5*
*Private insurance does not remove the interest rate risks that are
associated with these investments.
The State of the State: Kansas
The economy in Kansas experienced healthy growth in 1996. Gross
State Product, a key measurement of the economy, increased 6.3%
during the year. Strong sectors included aircraft manufacturing,
personal services, apparel and accessories stores, food stores, and
construction. Average monthly unemployment declined to 4.2% in 1996
from 4.4% in 1995.
Employment in aircraft manufacturing, a key component of Kansas'
economy, grew by an impressive 14.7%, as manufacturers experienced
significant increases in orders. Boeing, a dominant employer in the
state, consolidated its position as the industry leader with its
acquisition of McDonnell Douglas Corp. and expects to add 1,000 new
jobs in 1997. Raytheon, another large employer, plans to build a $9
billion facility for its Joint Primary Aircraft Training System.
Learjet Corp., with the help of an $86 million industrial revenue bond
issue, expects to add 300 full-time jobs in the coming year.
Kansas' state finances are conservatively managed, with ample cash
reserves and a low overall debt level. Although it has the
constitutional authority to issue general obligation (GO) debt,
Kansas has not done so since 1919. Instead, most capital projects
are financed through the Kansas Development Finance Authority
(KDFA), which secures funding through a variety of dedicated revenue
sources.
[GRAPHIC WORM CHART OMITTED]
Caption Reads: Comparison of Change in Value of a $10,000 Investment in
EV Traditional Kansas Insured Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From March 31, 1994, through January 31, 1997
plot points:
EV Traditional Kansas Municipals Fund vs.
Lehman Brothers Municipal Bond Index
Date Fund at NAV Fund at Off Index
3/31/94 $10,000 $9,626 $10,000
4/30/94 $10,112 $9,734 $10,085
5/31/94 $10,248 $9,865 $10,172
6/30/94 $10,124 $9,746 $10,113
7/31/94 $10,336 $9,949 $10,295
8/31/94 $10,352 $9,964 $10,331
9/30/94 $10,147 $9,768 $10,180
10/31/94 $9,891 $9,521 $9,999
11/30/94 $9,619 $9,259 $9,818
12/31/94 $9,872 $9,503 $10,034
1/31/95 $10,214 $9,832 $10,321
2/28/95 $10,544 $10,150 $10,621
3/31/95 $10,647 $10,248 $10,743
4/30/95 $10,637 $10,239 $10,756
5/31/95 $10,882 $10,475 $11,099
6/30/95 $10,739 $10,337 $11,002
7/31/95 $10,816 $10,411 $11,106
8/31/95 $10,922 $10,514 $11,247
9/30/95 $10,999 $10,587 $11,318
10/31/95 $11,164 $10,746 $11,483
11/30/95 $11,361 $10,937 $11,673
12/31/95 $11,460 $11,031 $11,785
1/31/96 $11,514 $11,083 $11,874
2/28/96 $11,427 $11,000 $11,794
3/31/96 $11,286 $10,864 $11,644
4/30/96 $11,256 $10,835 $11,610
5/31/96 $11,273 $10,851 $11,606
6/30/96 $11,368 $10,942 $11,733
7/31/96 $11,488 $11,058 $11,839
8/31/96 $11,505 $11,074 $11,836
9/30/96 $11,682 $11,245 $12,001
10/31/96 $11,792 $11,351 $12,137
11/30/96 $11,995 $11,546 $12,359
12/31/96 $11,918 $11,472 $12,307
1/31/97 $11,888 $11,444 $12,331
INSET BOX READS
Average 1 Life of
Annual Returns Year Fund*
With max. sls. ch. -0.6% 3.9%
W/out max. sls. ch. 3.3% 5.3%
Past performance is not indicative of future results. Investment returns
and principal will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Source: Towers Data
Systems, Bethesda, MD. *Investment operations commenced 3/3/94. *Index
information is available only at month-end; therfore, the line comparison
begins at the next month-end following the commencement of the Fund's
investment operations.
From the Portfolio Manager:
"I was very pleased to acquire a significant new holding in
December, 1996 - the St. Luke's/Shawnee Mission Health System. These
bonds offer a combination of features which is somewhat rare in
today's low-supply Kansas market: an attractive 10-year call at a
premium price, and a discounted coupon, which increases the
potential for price appreciation. In addition, these carry MBIA
insurance, which increases their marketability and indicates sound
credit.
"In general, most market activity in Kansas is 'plain vanilla.' As
opportunities have presented themselves, I have managed the Fund to
increase call protection and yield while limiting volatility."
[PHOTO OF NICOLE ANDERES OMITTED]
- - Nicole Anderes
EV Traditional Municipals Funds
Financial statements
Statements of Assets and Liabilities
January 31, 1997
<TABLE>
<CAPTION>
Traditional Traditional Traditional
Florida Insured Hawaii Kansas
--------------- ----------- -----------
<S> <C> <C> <C>
Assets:
Investment in Portfolio --
Identified cost $2,229,757 $296,367 $1,068,018
Unrealized appreciation 70,122 19,631 9,133
---------- -------- ----------
Total investment in Portfolio, at value (Note 1A) $2,299,879 $315,998 $1,077,151
Receivable from the Administrator (Note 4) 16,351 22,076 18,662
Deferred organization expenses (Note 1D) 5,414 8,827 7,884
---------- -------- ----------
Total assets $2,321,644 $346,901 $1,103,697
========== ======== ==========
Liabilities:
Dividends payable $6,793 $509 $664
Accrued expenses 3,339 2,020 2,309
---------- -------- ----------
Total liabilities $10,132 $2,529 $2,973
---------- -------- ----------
Net Assets $2,311,512 $344,372 $1,100,724
========== ======== ==========
Sources of Net Assets:
Paid-in capital $2,264,999 $343,935 $1,098,615
Accumulated net realized loss from Portfolio
(computed on the basis of identified cost) (20,288) (18,343) (6,962)
Accumulated distributions in excess of
net investment income (3,321) (851) (62)
Unrealized appreciation from Portfolio
(computed on the basis of identified cost) 70,122 19,631 9,133
---------- -------- ----------
Total $2,311,512 $344,372 $1,100,724
========== ======== ==========
Shares of Beneficial Interest Outstanding 213,007 36,108 109,495
========== ======== ==========
Net Asset Value and Redemption Price Per Share
(net assets (divided by) shares of beneficial interest outstanding) $10.85 $9.54 $10.05
========== ======== ==========
Computation of Offering Price Per Share
(100/96.25 of net asset value per share) $11.27 $9.91 $10.44
========== ======== ==========
On sales of $50,000 or more, the offering price is reduced.
See notes to financial statements
</TABLE>
Statements of Operations
For the Year Ended January 31, 1997
<TABLE>
<CAPTION>
Traditional Traditional Traditional
Florida Insured Hawaii Kansas
--------------- ----------- -----------
<S> <C> <C> <C>
Investment Income (Note 1B):
Interest income allocated from Portfolio $102,393 $19,511 $55,528
xpenses allocated from Portfolio (262) -- --
-------- ------- -------
Net investment income from Portfolio $102,131 $19,511 $55,528
-------- ------- -------
Expenses --
Service fees (Note 5) $1,961 $703 $1,516
Printing and postage 11,017 9,030 8,836
Legal and accounting services 4,265 4,084 3,178
Custodian fees (Note 1F) 3,418 3,000 3,012
Amortization of organization expenses (Note 1D) 2,587 4,187 3,770
Transfer and dividend disbursing agent fees 2,405 1,109 1,202
Miscellaneous 1,542 1,448 3,095
-------- ------- -------
Total expenses $27,195 $23,561 $24,609
-------- ------- -------
Deduct --
Allocation of expenses to the Administrator (Note $16,351 $22,076 $18,662
Reduction of Custodian fee (Note 1F) 3,000 61 928
-------- ------- -------
Total $19,351 $22,137 $19,590
-------- ------- -------
Net expenses $7,844 $1,424 $5,019
-------- ------- -------
Net investment income $94,287 $18,087 $50,509
-------- ------- -------
Realized and Unrealized Gain (Loss) from Portfolio:
Net realized gain (loss) --
Investment transactions (identified cost basis) $11,447 (790) $1,888
Financial futures contracts (15,056) (1,319) (1,703)
-------- ------- -------
Net realized gain (loss) (3,609) (2,109) $185
Change in unrealized appreciation (56,147) (4,788) (19,108)
-------- ------- -------
Net realized and unrealized loss $(59,756) $(6,897) $(18,923)
-------- ------- -------
Net increase in net assets from operations $34,531 $11,190 $31,586
======== ======= =======
See notes to financial statements
</TABLE>
Statements of Changes in Net Assets
For the Year Ended January 31, 1997
<TABLE>
<CAPTION>
Traditional Traditional Traditional
Florida Insured Hawaii Kansas
--------------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $94,287 $18,087 $50,509
Net realized gain (loss) (3,609) (2,109) 185
Change in unrealized appreciation (56,147) (4,788) (19,108)
--------- ------- -------
Net increase in net assets from operations $34,531 $11,190 $31,586
--------- ------- -------
Distributions to shareholders (Note 2) --
From net investment income ($94,287) ($18,087) ($50,437)
In excess of net investment income (332) (486) --
--------- ------- -------
Total distributions to shareholders ($94,619) ($18,573) ($50,437)
--------- ------- -------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sales of shares $962,010 $52,153 $303,597
Net asset value of shares issued to shareholders in payment
of distributions declared 29,418 13,602 44,800
Cost of shares redeemed (227,205) (51,016) (76,015)
------- ------- -------
Increase in net assets from Fund share transactions $764,223 $14,739 $272,382
--------- ------- -------
Net increase in net assets $704,135 $7,356 $253,531
Net Assets:
At beginning of year 1,607,377 337,016 847,193
--------- ------- -------
At end of year $2,311,512 $344,372 $1,100,724
========== ======== ==========
Accumulated distributions in excess of net investment income
included in net assets at end of year ($3,321) ($851) ($62)
========== ======== ==========
Statements of Changes in Net Assets
For the Year Ended January 31, 1997
Traditional Traditional Traditional
Florida Insured Hawaii Kansas
--------------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $73,532 $13,090 $32,414
Net realized loss (9,126) (4,251) (4,424)
Change in unrealized appreciation 117,760 27,819 54,610
--------- ------- -------
Net increase in net assets from operations $182,166 $36,658 $82,600
--------- ------- -------
Distributions to shareholders (Note 2) --
From net investment income ($73,532) ($13,090) ($31,831)
In excess of net investment income (2,683) (1,133) --
--------- ------- -------
Total distributions to shareholders ($76,215) ($14,223) ($31,831)
--------- ------- -------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sales of shares $871,777 $84,657 $380,427
Net asset value of shares issued to shareholders in payment
of distributions declared 15,828 11,893 29,148
Cost of shares redeemed (599,576) (38,793) (278,035)
--------- ------- -------
Increase in net assets from Fund share transactions $288,029 $57,757 $131,540
--------- ------- -------
Net increase in net assets $393,980 $80,192 $182,309
Net Assets:
At beginning of year 1,213,397 256,824 664,884
--------- ------- -------
At end of year $1,607,377 $337,016 $847,193
========== ========== ==========
Accumulated distributions in excess of net investment income
included in net assets at end of year ($2,989) ($365) ($134)
========== ========== ==========
</TABLE>
Financial Highlights
<TABLE>
<CAPTION>
Traditional Florida Insured Traditional Hawaii
-------------------------------- -----------------------------
Year Ended January 31, Year Ended January 31,
-------------------------------- -----------------------------
1997 1996 1995* 1997 1996 1995*
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.220 $10.430 $10.000 $9.760 $9.040 $10.000
--------- --------- --------- --------- --------- ---------
Income (loss) from operations:
Net investment income $0.573 $0.564 $0.509 $0.490 $0.424 $0.365
Net realized and unrealized gain (loss) (0.368) 0.811 0.435 (0.207) 0.757 (0.880)++
--------- --------- --------- --------- --------- ---------
Total income (loss) from operations $0.205 $1.375 $0.944 $0.283 $1.181 ($0.515)
--------- --------- --------- --------- --------- ---------
Less distributions:
From net investment income ($0.573) ($0.564) ($0.509) ($0.490) ($0.424) ($0.365)
In excess of net investment income (0.002) (0.021) (0.005) (0.013) (0.037) (0.080)
--------- --------- --------- --------- --------- ---------
Total distributions ($0.575) ($0.585) ($0.514) ($0.503) ($0.461) ($0.445)
--------- --------- --------- --------- --------- ---------
Net asset value, end of year $10.850 $11.220 $10.430 $9.540 $9.760 $9.040
========= ========= ========= ========= ========= =========
Total Return (2) 1.97% 13.51% 9.18% 3.17% 13.34% (5.23%)
Ratios/Supplemental Data**:
Net assets, end of year (000 omitted) $2,312 $1,607 $1,213 $344 $337 $257
Ratio of net expenses to average
daily net assets (1)(3) 0.69% 0.82% 0.01%+ 0.46% 1.04% 1.01%+
Ratio of net expenses to average daily net
assets after custodian fee reduction (1) 0.45% 0.54% -- 0.40% 0.95% --
Ratio of net investment income to average
daily net assets 5.25% 5.20% 5.37%+ 5.14% 4.48% 4.44%+
**For the years ended January 31, 1997 and 1996 and for the period from the start of business, March 3, 1994
and March 14, 1994, respectively, to January 31, 1995, the operating expenses of the Funds and the Portfolios may
reflect a reduction of expenses by the Administrator and/or Investment Advisor. Had such action not been taken, net
investment income per share and the ratios would have been as follows:
$0.441 $0.401 $0.226 ($0.124) ($0.362) ($0.153)
========= ========= ========= ========= ========= =========
Ratios (As a percentage of average
daily net assets):
Expenses (1)(3) 1.90% 2.32% 3.00%+ 7.10% 9.34% 7.31%+
Expenses after custodian fee reduction (1) 1.66% 2.04% -- 7.04% 9.25% --
Net investment income (loss) 4.04% 3.70% 2.38%+ (1.50%) (3.82%) (1.86%)+
Financial Highlights (continued)
Traditional Kansas
---------------------------
Year Ended January 31,
---------------------------
1997 1996 1995*
----- ----- -----
<S> <C> <C> <C>
Net asset value, beginning of year $10.270 $9.540 $10.000
--------- ------- -------
Income (loss) from operations:
Net investment income $0.529 $0.461 $0.379
Net realized and unrealized gain (loss) (0.221) 0.730 (0.386)++
--------- --------- -------
Total income (loss) from operations $0.308 $1.191 ($0.007)
--------- --------- -------
Less distributions:
From net investment income ($0.528) ($0.461) ($0.379)
In excess of net investment income -- -- ($0.074)
--------- --------- -------
Total distributions ($0.528) ($0.461) ($0.453)
--------- --------- -------
Net asset value, end of year $10.050 $10.270 $9.540
========= ========= =======
Total Return (2) 3.26% 12.73% (0.11%)
Ratios/Supplemental Data**:
Net assets, end of year (000 omitted) $1,101 $847 $665
Ratio of net expenses to average daily net assets (1)(3) 0.70% 1.29% 0.95%+
Ratio of net expenses to average daily net assets
after custodian fee reduction (1) 0.52% 0.95% --
Ratio of net investment income to average daily net assets 5.27% 4.70% 4.32%+
Net investment income per share $0.294 $0.068 $0.139
========= ========= =======
Ratios (As a percentage of average daily net assets):
Expenses (1)(3) 3.04% 5.30% 3.68%+
Expenses after custodian fee reduction (1) 2.86% 4.96% --
Net investment income 2.93% 0.69% 1.59%+
(1) Includes the Fund's share of its corresponding Portfolio's allocated expenses.
(2) Total return is calculated assuming a purchase at the net 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 years ended January 31, 1997 and 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.
+ 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 commencement of operations, March 3, 1994 and March 14, 1994, to January 31, 1995.
See notes to financial statments
</TABLE>
Notes to Financial Statements
(1) Significant Accounting Policies
Eaton Vance Municipals Trust II (the Trust) is an entity of the type
commonly known as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Trust presently consists of nine
non-diversified Funds, three of which are included in these financial
statements. They include EV Traditional Florida Insured Municipals
Fund, ("Traditional Florida Insured Fund"), EV Traditional Hawaii
Municipals Fund ("Traditional Hawaii Fund") and EV Traditional Kansas
Municipals Fund ("Traditional 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
Traditional Florida Insured Fund invests its assets in the Florida
Insured Municipals Portfolio, the Traditional Hawaii Fund invests its
assets in the Hawaii Municipals Portfolio and the Traditional Kansas
Fund invests its assets in the Kansas Municipals Portfolio. The value
of each Fund's investment in its corresponding Portfolio reflects the
Fund's proportionate interest in the net assets of that Portfolio
(9.5%, 2.0%, and 9.2% at January 31, 1997 for the Traditional Florida
Insured Fund, Traditional Hawaii Fund and Traditional 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 Valuation - 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, 1997, the Traditional Florida Insured
Fund, Traditional Hawaii Fund and Traditional Kansas Fund, for federal
income tax purposes, had capital loss carryovers which will reduce
taxable income arising from future net realized gain on investments,
if any, to the extent permitted by the Internal Revenue Code, and 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:
Fund Amount Expires
- ------ -------- ---------
Traditional Florida Insured Fund $7,112 January 31, 2004
Traditional Hawaii Fund $799 January 31, 2005
14,198 January 31, 2004
1,941 January 31, 2003
Traditional Kansas Fund $1,586 January 31, 2004
Additionally, at January 31, 1997, net capital losses of $12,485 for
the Traditional Florida Insured Fund attributable to security
transactions incurred after October 31, 1996, are treated as arising
on the first day of the Fund's next taxable year.
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 a 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.
(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 distribution 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, 1998 and a 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:
Traditional Traditional Traditional
Florida Insured Hawaii Kansas
-------------------- -------------------- --------------------
Year Ended Year Ended Year Ended
January 31, January 31, January 31,
-------------------- -------------------- --------------------
1997 1996 1997 1996 1997 1996
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales 88,077 80,298 5,491 8,969 30,120 38,101
Issued to shareholders electing to receive
payments of distributions in Fund shares 2,715 1,454 1,433 1,257 4,467 2,922
Redemptions (21,016) (54,892) (5,338) (4,120) (7,581) (28,246)
-------- ---------- -------- ---------- -------- ----------
Net increase 69,776 26,860 1,586 6,106 27,006 12,777
======== ========== ======== ========== ======== ==========
</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 year ended January 31,
1997, $16,351, $22,076, and $18,662 of expenses related to the
operation of the Traditional Florida Insured Fund, Traditional Hawaii
Fund and Traditional Kansas Fund, respectively, were allocated to EVM.
Certain of the officers and Trustees of the Funds and Portfolios are
officers and directors/trustees of the above organizations. 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) Service Plan
Each Fund has adopted a Service Plan designed to meet the service fee
requirements of the sales charge rule of The National Association of
Securities Dealers, Inc. The Service Plans provide that each Fund may
make service fee payments to Eaton Vance Distributors, Inc. (EVD),
Authorized Firms or 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 each Plan by authorizing each Fund to make
quarterly service fee payments to the Principal Underwriter and
Authorized Firms in amounts not exceeding 0.20% of each Fund's average
daily net assets for any fiscal year which is attributable to shares
of a Fund sold by such persons and remaining outstanding for at least
one year. Service fee payments are made for personal services and/or
the maintenance of shareholder accounts. For the year ended January
31, 1997, Traditional Florida Insured Fund, Traditional Hawaii Fund
and Traditional Kansas Fund paid or accrued service fees of $1,961,
$703, and $1,516, respectively.
Certain of the officers and Trustees of the Funds are officers or
directors of EVD.
(6) Investment Transactions
Increases and decreases in each Fund's investment in its corresponding
Portfolio for the year ended January 31, 1997 were as follows:
<TABLE>
<CAPTION>
Traditional Traditional Traditional
Florida Insured Hawaii Kansas
------------------- -------------------- --------------------
<S> <C> <C> <C>
Increases $1,080,467 $77,129 $390,518
Decreases 313,761 75,817 101,709
</TABLE>
Independent Auditors' Report
To the Trustees and Shareholders of
Eaton Vance Municipals Trust II:
We have audited the accompanying statements of assets and liabilities
of EV Traditional Florida Insured Municipals Fund, EV Traditional
Hawaii Municipals Fund and EV Traditional Kansas Municipals Fund
(certain of the series constituting Eaton Vance Municipals Trust II)
as of January 31, 1997, the related statements of operations for the
year then ended, and the statements of changes in net assets for the
years ended January 31, 1997 and 1996 and the financial highlights for
the years ended January 31, 1997 and 1996 and the period from the
start of business to January 31, 1995. These financial statements and
financial highlights are the responsibility of the Trust's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the aforementioned funds of Eaton Vance
Municipals Trust II at January 31, 1997, and the results of their
operations, the changes in their net assets and their financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 7, 1997
<TABLE>
<CAPTION>
Florida Insured Municipals Portfolio
Portfolio of Investments - January 31, 1997
Tax-Exempt Investments - 100%
Ratings (Unaudited)
- ------------------ Principal
Amount
Standard (000
Moody's & Poor's Omitted) Security Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed - 2.5%
Aaa AAA $500 Gainsville, Florida
Utility, 8.125%,
10/1/14(2) $633,065
-----------
Housing - 12.1%
Aaa NR $365 Duval, Florida HFA
SFMR (GNMA)
(AMT), 6.70%, 10/1/26 $378,618
Aaa AAA 750 Escambia, Florida
HFA SFMR (GNMA)
(AMT), 7.00%, 4/1/28 794,663
Aaa NR 740 Manatee, Florida
HFA SFMR (GNMA)
(AMT), 6.875%,
11/1/26 786,716
NR AAA 1,000 Pinellas, Florida
HFA SFMR (GNMA)
(AMT), 6.70%, 2/1/28 1,038,360
-----------
$2,998,357
-----------
Insured Education - 3.5%
Aaa AAA $500 Florida A&M
University (MBIA),
5.625%, 7/1/25 $494,380
Aaa AAA 400 University of Florida
(MBIA), 5.50%, 7/1/23 384,120
-----------
$878,500
-----------
Insured Electric Utilities - 5.2%
Aaa AAA $445 Citrus, Florida PCR
FL Power (MBIA),
6.35%, 2/1/22 $470,369
Aaa AAA 895 Florida State Municipal
Power Agency -
Stanton II Project
(AMBAC), 4.50%,
10/1/27 722,023
Aaa AAA 50 Key West, Florida
Utility Board Electric
Revenue (AMBAC),
6.75%, 10/1/13 54,710
Aaa AAA 50 Puerto Rico Electric
Power Authority -
Stripes (FSA),
Variable, 7/1/02 (1) 54,438
-----------
$1,301,540
-----------
Insured General
Obligation - 3.7%
Aaa AAA $1,000 Massachusetts Turnpike
Authority Revenue
(FGIC), 5.125%, 1/1/23 $916,890
-----------
Insured Hospitals - 0.9%
Aaa AAA $200 Dade, Florida - Jackson
Memorial Hospital
(MBIA), 4.875%, 6/1/15 $180,210
Aaa AAA 50 Hillsborough, Florida -
Tampa General Hospital
(FSA), 6.375%, 10/1/13 52,718
-----------
$232,928
-----------
Insured Housing - 8.3%
Aaa AAA $500 Florida HFA - Maitland
Club Apartments
(AMBAC) (AMT),
6.875%, 8/1/26 $526,780
Aaa AAA 500 Florida HFA -
Spinnaker Cove
Apartments (AMBAC)
(AMT), 6.50%, 7/1/36 512,520
Aaa AAA 1,000 Florida HFA -
Mariner Club
Apartments (AMBAC),
6.375%, 9/1/36 1,015,900
-----------
$2,055,200
-----------
Insured Industrial
Development Revenue - 2.0%
Aaa AAA $500 Dade Florida Resource
Recovery (AMBAC)
(AMT), 5.50%, 10/1/13 $491,930
-----------
Insured Special Tax - 29.4%
Aaa AAA $1,000 Bradenton, Florida
Special Revenue Sub
Lien (FGIC), 5.00%,
10/1/15 $940,370
Aaa AAA 500 Broward, Florida
Professional Sports
Facilities (MBIA),
5.625%, 9/1/28 493,425
Aaa AAA $500 Dade, Florida
Convention Center
Special Tax (AMBAC),
5.00%, 10/1/35 $447,320
Aaa AAA 1,225 Florida State Finance
Department -
Environmental
Preservation (MBIA),
4.75%, 7/1/09 1,152,002
Aaa AAA 1,000 Jacksonville, Florida
Excise Taxes Revenue
(FGIC), 5.00%, 10/1/16 931,760
Aaa AAA 1,000 Jacksonville, Florida
Sales Tax River City
(FGIC) (AMT), 5.70%,
10/1/09 1,023,320
Aaa AAA 745 Jacksonville, Florida
Sales Tax River City
(FGIC), 5.375%,
10/1/18 719,067
Aaa AAA 250 Orange, Florida Tourist
Development Tax
(MBIA), 6.00%,
10/1/24 256,895
Aaa AAA 795 St. Petersburg, Florida
Excise Tax (FGIC),
5.00%, 10/1/16 736,273
Aaa AAA 340 Sunrise, Florida Public
Facilities Capital
Appreciation (MBIA),
0%, 10/1/15 119,952
Aaa AAA 500 Tampa Florida
Occupational - License
Tax (FGIC), 5.50%,
10/1/27 482,805
-----------
$7,303,189
-----------
Insured Transportation - 7.8%
Aaa AAA $1,000 Dade, Florida Seaport
Revenue (MBIA),
5.125%, 10/1/16 $946,580
Aaa AAA 500 Florida State Turnpike
Authority (FGIC),
5.00%, 7/1/19 455,110
Aaa AAA 500 Florida State Turnpike
Authority (FGIC),
5.50%, 7/1/21 487,840
Aaa AAA 50 Greater Orlando,
Florida Aviation
Authority (FGIC)
(AMT), 6.375%, 10/1/21 52,463
-----------
$1,941,993
-----------
Insured Water & Sewer - 24.6%
Aaa AAA $130 Charlotte, Florida
Utility Revenue
(FGIC), 5.625%,
10/1/21 $128,621
Aaa AAA 75 Cocoa, Florida
Water & Sewer
(AMBAC), 5.00%,
10/1/23 (2) 67,228
Aaa AAA 750 Dade, Florida
Water & Sewer System
(FGIC), 5.50%, 10/1/25 726,300
Aaa AAA 325 Dade, Florida
Water & Sewer System
(FGIC), 5.375%,
10/1/16 317,648
Aaa AAA 735 Enterprise, Florida
Community District
Water & Sewer
(MBIA), 6.125%, 5/1/24 758,424
Aaa AAA 1,000 Jacksonville, Florida
Water & Sewer
(AMBAC), 6.35%,
8/1/25 1,050,430
Aaa AAA 1,000 Lee, Florida Utility -
Bonita Springs Project
(MBIA) (AMT), 6.05%,
11/1/20 1,021,690
Aaa AAA 70 North Port, Florida
Utility (FGIC), 6.25%,
10/1/17 73,443
Aaa AAA 500 North Port, Florida
Utility (FGIC), 6.25%,
10/1/22 523,635
Aaa AAA 155 Sanford, Florida
Water & Sewer
(AMBAC), 4.50%,
10/1/21 127,934
Aaa AAA 400 Titisville, Florida
Water & Sewer
(MBIA), 6.00%, 10/1/24 411,032
Aaa AAA 1,000 Vero Beach, Florida
Water & Sewer
(FGIC), 5.00%, 12/1/21 899,580
-----------
$6,105,965
-----------
Total Tax-Exempt Investments
(Identified cost, $23,841,427) $24,859,557
-----------
(1) Security has been issued as an inverse floater bond.
(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 Florida municipalities. The ability
of the issuers of the debt securities to meet their obligations may be affected by economic
developments in a specific industry or municipality. In order to reduce the risk associated
with such economic developments, at January 31, 1997, 85.4% of the securities in the portfolio
of investments are backed by bond insurance of various financial institutions and financial
guaranty assurance agencies. At January 31, 1997, the Portfolio's insured securities by financial
institution are as follows:
% of
Market Value Market Value
------------- ------------
American Municipal Bond
Assurance Corp. (AMBAC) $ 5,016,775 20.2%
Financial Guaranty Assurance
Assoc. (FGIC) 9,415,126 37.9
Financial Security
Assurance (FSA) 107,156 0.4
Municipal Bond Insurance
Assoc. (MBIA) 6,689,079 26.9
----------- ----
Total $21,228,136 85.4%
=========== ====
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Hawaii Municipals Portfolio
Portfolio of Investments - January 31, 1997
Tax-Exempt Investments - 100%
Ratings (Unaudited)
- ------------------ Principal
Amount
Standard (000
Moody's & Poor's Omitted) Security Value
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Obligations - 17.7%
Aa AA $140 State of Hawaii, 5.75%,
1/1/11 $146,632
Aa AA 1,000 State of Hawaii, 5.25%,
6/1/13 975,830
Aa AA 750 City and County of
Honolulu, Hawaii,
4.75%, 9/1/17 663,863
NR BBB 590 Government of Guam,
5.375%, 11/15/13 548,612
Baa1 A 500 Puerto Rico Public
Buildings Authority,
Public Education and
Health Facilities,
5.50%, 7/1/21 474,580
------------
$2,809,517
------------
Hospitals - 13.2%
Aa3 AA $400 State of Hawaii
Department of Budget
and Finance,
Kaiser Permanente,
6.25%, 3/1/21 $411,667
A A 625 State of Hawaii
Department of Budget
and Finance,
Kapiolani Health
System, 6.00%, 7/1/19 626,394
Aa3 AA 800 State of Hawaii
Department of Budget
and Finance, Queens
Health System, 5.75%,
7/1/26 788,232
NR AAA 250 Puerto Rico Industrial,
Tourist, Educational,
Medical and
Environmental Control
Authority, Doctor Pila
Hospital Project, (FHA),
6.25%, 8/1/32 262,218
------------
$2,088,511
------------
Housing - 7.4%
Aa A $1,000 State of Hawaii
Housing Finance and
Development SFMB,
5.90%, 7/1/27 (2) $999,940
Aa A 175 State of Hawaii
Housing Finance and
Development SFMB,
(AMT), 6.00%, 7/1/26 173,556
------------
$1,173,496
------------
Industrial Development/Pollution
Control - 5.3%
A1 AA- $550 Puerto Rico Industrial,
Tourist, Educational,
Medical and
Environmental Control
Authority, Upjohn
Company Project,
7.50%, 12/1/23 $597,008
Baa3 BB+ 50 Puerto Rico Port
Authority, American
Airlines, (AMT),
6.25%, 6/1/26 51,348
Baa3 BB+ 180 Puerto Rico Port
Authority, American
Airlines, (AMT),
6.30%, 6/1/23 183,848
------------
$832,204
------------
Insured Education - 6.4%
Aaa AAA $500 University of Hawaii
Board of Regents,
University System,
(AMBAC), 5.65%,
10/1/12 $506,625
Aaa AAA 500 Hawaii State Housing
Development
Corporation,
University of Hawaii,
(AMBAC), 5.65%,
10/1/16 500,550
------------
$1,007,175
------------
Insured General
Obligations - 12.5%
Aaa AAA $700 County of Hawaii,
Hawaii, (FGIC), 5.55%,
5/1/10 $721,357
Aaa AAA 305 County of Kauai,
Hawaii, (MBIA), 5.90%,
2/1/14 313,503
Aaa AAA 250 County of Maui, Hawaii,
(FGIC), 5.75%, 1/1/13 253,170
Aaa AAA 250 County of Maui, Hawaii,
(FGIC), 5.125%,
12/15/13 240,693
Aaa AAA 500 Commonwealth of
Puerto Rico, (MBIA),
5.00%, 7/1/21 455,670
------------
$1,984,393
------------
Insured Hospitals - 1.3%
Aaa AAA $100 State of Hawaii
Department of Budget
and Finance Queen's
Medical Center, (FGIC),
6.50%, 7/1/12 $103,609
Aaa AAA 100 State of Hawaii
Department of Budget
and Finance St. Francis
Medical Centers,
(CGIC), 6.50%, 7/1/22 107,161
------------
$210,770
------------
Insured Housing - 3.4%
Aaa AAA $495 Honolulu Hawaii City
& County Mortgage
Revenue Bonds, Smith
Beretania Project,
(MBIA), 7.80%, 7/1/24 $532,407
------------
Insured Transportation - 11.9%
Aaa AAA $500 State of Hawaii Airports
System, (AMT), (FGIC),
7.50%, 7/1/20 $548,140
Aaa AAA 100 State of Hawaii Airports
System, (AMT), (MBIA),
6.90%, 7/1/12 114,656
Aaa AAA 245 State of Hawaii Airports
System, (AMT), (MBIA),
7.00%, 7/1/18 268,694
Aaa AAA 250 State of Hawaii Harbor
Revenue, (AMT),
(MBIA), 7.00%, 7/1/17 270,188
Aaa AAA 650 State of Hawaii Harbor
Revenue, (AMT),
(FGIC), 6.375%, 7/1/24 681,350
------------
$1,883,028
------------
Insured Utilities - 8.6%
Aaa AAA $500 State of Hawaii
Department of Budget
and Finance, Hawaii
Electric Company, Inc.,
(AMT), (MBIA), 6.60%,
1/1/25 $539,645
Aaa AAA 500 State of Hawaii
Department of Budget
and Finance, Hawaii
Electric Company, Inc.,
(AMT), (MBIA), 6.20%,
5/1/26 517,345
Aaa AAA 200 State of Hawaii
Department of Budget
and Finance, Hawaii
Electric Company, Inc.,
(MBIA), 5.875%,
12/1/26 198,588
Aaa AAA 100 Puerto Rico Electric
Power Authority
Stripes, (FSA),
Variable, 7/1/03 (1) 110,375
------------
$1,365,953
------------
Special Tax - 2.9%
Baa1 A $250 Puerto Rico Highway
and Transportation
Authority, 5.50%,
7/1/36 $239,345
Baa1 A 125 Puerto Rico Highway
and Transportation
Authority, 5.00%,
7/1/22 110,350
NR NR 100 Virgin Islands Public
Finance Authority,
7.25%, 10/1/18 106,628
------------
$456,323
------------
Transportation - 5.6%
Aa AA $715 State of Hawaii Highway
Revenue, 5.00%,
7/1/12 $684,934
NR BBB 200 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 206,266
------------
$891,200
------------
Water and Sewer - 3.8%
Aa AA $600 Honolulu City and
County Water Supply
System, 5.80%, 7/1/16 $607,212
------------
Total Tax-Exempt Investments
(Identified cost, $14,793,835) $ 15,842,189
------------
<CAPTION>
- ----------------------------------------------------------------------------------
Put Options on Financial Futures Contracts - 0%
- ----------------------------------------------------------------------------------
Contracts
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
10 30 year U.S. Treasury
Bond, American,
Expiration 2/22/97,
Strike Price $108
(identified
cost, $4,896) $ 1,719
------------
Total Investments
(Identified cost, $14,798,731) $ 15,843,908
============
(1) Security has been issued as an inverse floater bond.
(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 Hawaii municipalities.
The ability of the issuers of the debt securities to meet their obligations may be
affected economic developments in a specific industry or municipality. In order to
reduce the risk associated with such economic developments, at January 31, 1997,
44.1% 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 20.3% of total investments.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Kansas Municipals Portfolio
Portfolio of Investments - January 31, 1997
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 - 2.5%
Aa1 NR $300 City of Leawood,
5.00%, 9/1/15 $285,513
-----------
General Obligation
School District - 17.8%
Aa NR $400 Douglas County,
(Lawrence), USD No.
497, 6.00%, 9/1/15 $414,360
Aa AA 300 Johnson Co. KS USD
#229, 5.00%, 10/1/14 285,603
Aa AA 890 Johnson Co. KS USD
#229, 5.00%, 10/1/16 834,322
Aa1 AA 500 Johnson Co. KS USD
#512, 5.125%, 10/1/16 475,005
-----------
$2,009,290
-----------
General Obligation
Territory - 2.0%
Baa1 A $250 Puerto Rico Aqueduct
& Sewer Authority,
Revenue Bonds,
5.00%, 7/1/19 $226,382
-----------
Hospitals - 5.9%
A3 NR $250 City of Lawrence,
(Lawrence Memorial),
Hospital Revenue
Bonds, 6.20%, 7/1/19 $255,265
Aa3 AA 455 Shawnee County,
(Sisters of Charity),
Revenue Bonds,
5.00%, 12/1/23 412,903
-----------
$668,168
-----------
Housing - 25.9%
NR AAA $230 City of Kansas City,
Multifamily Housing
Revenue Bonds
(MFHRB), (FHA
Insured-Rainbow
Towers), 6.70%, 7/1/23 $234,724
NR AAA 405 City of Kansas City,
SFH (GNMA), 7.00%,
12/1/11 419,932
Aaa NR 85 City of Kansas City,
SFH (GNMA), 5.30%,
5/1/07 84,357
Aaa NR 85 City of Kansas City,
SFH (GNMA), 5.30%,
11/1/07 $84,334
Aaa NR 200 City of Kansas City,
SFH (GNMA), 5.90%,
11/1/27 198,018
NR AAA 225 City of Olathe, Kansas,
SFH (AMT),(GNMA),
7.60%, 3/1/07 235,620
NR AAA 250 City of Olathe, Kansas,
MFHRB (FNMA)
(Deerfield Apartments),
6.45%, 6/1/19 257,205
Aaa NR 200 Cities of Olathe and of
Labette, Collateralized
Single Family Mortgage
Revenue Bonds,
(CSFMRB) (GNMA),
8.10%, 8/1/23 222,108
Aa NR 100 Kansas Development
Authority SFH
FHA, (Martin
Creek), 6.60%, 08/1/34 102,177
Aaa NR 45 Sedgwick County SFH,
(GNMA), Ser 94 B
8.20%, 05/1/14 49,841
Aaa NR 235 Sedgwick and Shawnee
Counties, CSFMRB
(GNMA), 7.75%,
11/1/24 265,421
Aaa NR 455 Sedgwick and Shawnee
Counties, CSFMRB
(GNMA), 8.00%, 5/1/25 504,181
NR AA 250 Puerto Rico Housing
Finance Corporation,
MFMRB 7.50%,
4/1/22 263,895
-----------
$2,921,813
-----------
Industrial Development
Revenue - 2.6%
A2 NR $100 Puerto Rico I.M.E.
(American Home
Products), 5.10%,
12/1/18 $91,560
Baa3 BB+ $200 Puerto Rico Port
Authority, (American
Airlines), 6.30%, 6/1/23 204,276
-----------
$295,836
-----------
Insured Health Care - 4.5%
Aaa AAA $500 Kansas Dev. Finance
Auth., Health Facilities,
(Stormont-Vail), (MBIA),
5.80%, 11/15/11 $513,745
-----------
Insured Housing - 4.0%
Aaa AAA $215 Sedgwick County
Mortgage Lein Ser 89 A,
(GNMA), (MBIA),
7.50%, 12/1/09 $227,614
Aaa AAA 115 Sedgwick County
Mortgage Lein Ser 89 A,
(GNMA), (MBIA),
7.50%, 12/1/10 (2) 121,618
Aaa AAA 100 Puerto Rico Housing
Finance Corp.,
MFHRB, (AMBAC),
7.50%, 10/1/11 104,636
-----------
$453,868
-----------
Insured Utilities - 4.3%
Aaa AAA $345 City of Burlington,
PCR, (Kansas Gas &
Electric Co.) (MBIA),
7.00%, 06/1/31 (2) $380,180
Aaa AAA 100 Puerto Rico Electric
Power Authority, Power
Revenue Bonds, (FSA),
Residual Interest Bonds,
Variable 7/1/02 (1) 108,875
-----------
$489,055
-----------
Insured General
Obligations - 3.3%
Aaa AAA $150 City of Garnett,
Combined Utility
Revenue Bonds,
(MBIA),
6.00%, 10/1/17 $153,831
Aaa AAA 200 City of Kansas City,
Utility System Revenue
Bonds, (FGIC),
6.375%, 9/1/23 213,580
-----------
$367,411
-----------
Insured General Obligations
School District - 4.6%
Aaa AAA $250 Sedgwick County, USD
No. 267, (AMBAC),
6.15%, 11/1/09 $269,507
Aaa AAA 230 Sedgwick County, USD
No. 267, (AMBAC),
6.15%, 11/1/10 246,268
-----------
$515,775
-----------
Insured Hospitals - 17.6%
Aaa AAA $1,000 Kansas Dev. Finance
Authority, Health Facilities
Revenue Bonds, (HFRB)
(St. Lukes / Shawnee
Mission), (MBIA),
5.375%, 11/15/26 $959,800
Aaa AAA 200 City of Olathe, HFRB
(Evangelical Lutheran
Good Samaritan Society)
(AMBAC), 6.00%,
5/1/19 203,456
Aaa AAA 895 Shawnee County,
HFRB (Menninger
Foundation) (FSA),
5.00%, 8/15/16 823,203
-----------
$1,986,459
-----------
Transportation - 3.6%
NR BBB $100 Guam Airport Authority
General Revenue Bonds,
6.50%, 10/1/23 $102,482
NR BBB 300 Guam Airport Authority
General Revenue Bonds,
(AMT), 6.70%,
10/1/23 309,399
-----------
$411,881
-----------
Utility - 1.4%
NR BBB $150 Guam Power Authority
Revenue Bonds, 6.625%,
10/1/14 $155,838
-----------
Total Tax-Exempt Investments $11,301,034
(identified cost $11,067,069) ===========
(1) Security has been issued as an inverse floater bond.
(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 invests primarily in debt securities issued by Kansas municipalities. The ability of
the issuers of the debt securities to meet their obligations may be affected by economic developments
in a specific industry or municipality. In order to reduce the risk associated with such economic
developments, at January 31, 1997, 38.3% 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 1.9% to 20.9% of total
investments.
See notes to financial statements
</TABLE>
Municipals Portfolios
Financial Statements
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
January 31, 1997
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Investments --
Identified cost $23,841,427 $14,798,731 $11,067,069
Unrealized appreciation 1,018,130 1,045,177 233,965
----------- ----------- -----------
Total investments, at value (Note 1A) $24,859,557 $15,843,908 $11,301,034
Cash 858 908 185,908
Receivable from the Investment
Adviser (Note 2) 28,072 35,083 28,114
Interest receivable 430,064 157,824 222,930
Deferred organization expenses (Note 1D) 5,048 4,619 4,564
----------- ----------- -----------
Total assets $25,323,599 $16,042,342 $11,742,550
----------- ----------- -----------
Liabilities:
Payable for investments purchased $ 922,208 $ -- $ --
Payable for daily variation margin on
open financial futures contracts
(Note 1E) 8,744 11,375 3,132
Demand note payable (Note 5) 186,000 13,000 --
Payable to affiliate --
Trustee fees 13 13 13
Accrued expenses 2,775 4,029 3,685
----------- ----------- -----------
Total liabilities $ 1,119,740 $ 28,417 $ 6,830
----------- ----------- -----------
Net Assets applicable to investors'
interest in Portfolio $24,203,859 $16,013,925 $11,735,720
=========== =========== ===========
Sources of Net Assets:
Net proceeds from capital contributions
and withdrawals $23,194,473 $14,948,327 $11,495,966
Unrealized appreciation of investments
and financial futures contracts
(computed on the basis of
identified cost) 1,009,386 1,065,598 239,754
----------- ----------- -----------
Total $24,203,859 $16,013,925 $11,735,720
=========== =========== ===========
See notes to financial statements
</TABLE>
<TABLE>
Statements of Operations
For the Year Ended January 31, 1997
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
----------- ----------- -----------
<S> <C> <C> <C>
Investment Income:
Interest income $1,332,951 $ 924,536 $ 696,638
---------- --------- ---------
Expenses --
Investment adviser fee (Note 2) $ 41,276 $ 24,762 $ 18,746
Compensation of Trustees not members of
the Investment Adviser's organization 139 139 139
Legal and accounting services 18,615 18,597 15,466
Custodian fees (Note 1H) 17,879 13,062 11,584
Bond pricing 5,427 5,684 6,591
Amortization of organization expenses
(Note 1D) 2,430 2,221 2,196
Miscellaneous 4,919 2,169 1,534
---------- --------- ---------
Total expenses $ 90,685 $ 66,634 $ 56,256
---------- --------- ---------
Deduct --
Reduction of investment adviser fee
(Note 2) $ 41,276 $ 24,762 $ 18,746
Allocation of expenses to the investment
adviser (Note 2) 28,072 35,083 28,114
Reduction of custodian fee (Note 1H) 17,461 6,789 9,396
---------- --------- ---------
Total $ 86,809 $ 66,634 $ 56,256
---------- --------- ---------
Net expenses $ 3,876 $ -- $ --
---------- --------- ---------
Net investment income $1,329,075 $ 924,536 $ 696,638
---------- --------- ---------
Realized and Unrealized Gain (Loss):
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 135,300 $ (28,255) $ 135,431
Financial futures contracts (201,480) (59,990) (18,658)
---------- --------- ---------
Net realized gain (loss) $ (66,180) $ (88,245) $ 116,773
---------- --------- ---------
Change in unrealized appreciation
(depreciation) --
Investments $ (657,383) $(310,319) $(405,198)
Financial futures contracts (8,744) 20,422 6,615
---------- --------- ---------
Net unrealized depreciation $ (666,127) $(289,897) $(398,583)
---------- --------- ---------
Net realized and unrealized loss $ (732,307) $(378,142) $(281,810)
---------- --------- ---------
Net increase in net assets from operations $ 596,768 $ 546,394 $ 414,828
========== ========= =========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended January 31, 1997
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
----------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 1,329,075 $ 924,536 $ 696,638
Net realized gain (loss) (66,180) (88,245) 116,773
Change in unrealized appreciation (666,127) (289,897) (398,583)
----------- ----------- -----------
Net increase in net assets from operations $ 596,768 $ 546,394 $ 414,828
----------- ----------- -----------
Capital transactions --
Contributions $ 7,574,982 $ 2,082,938 $ 2,234,921
Withdrawals (5,383,691) (2,193,484) (2,522,670)
----------- ----------- -----------
Increase (decrease) in net assets
resulting from capital transactions $ 2,191,291 $ (110,546) $ (287,749)
----------- ----------- -----------
Total increase in net assets $ 2,788,059 $ 435,848 $ 127,079
Net Assets:
At beginning of year 21,415,800 15,578,077 11,608,641
----------- ----------- -----------
At end of year $24,203,859 $16,013,925 $11,735,720
=========== =========== ===========
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 --
Contributions $ 7,413,811 $ 3,305,491 $ 3,013,009
Withdrawals (2,768,845) (2,736,380) (1,044,410)
----------- ----------- -----------
Increase in net assets resulting
from capital transactions $ 4,644,966 $ 569,111 $ 1,968,599
----------- ----------- -----------
Total increase in net assets $ 7,015,849 $ 2,713,538 $ 3,302,613
Net Assets:
At beginning of year 14,399,951 12,864,539 8,306,028
----------- ----------- -----------
At end of year $21,415,800 $15,578,077 $11,608,641
=========== =========== ===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Supplementary Data
Florida Insured Portfolio Hawaii Portfolio
------------------------------ --------------------------------
Year Ended January 31, Year Ended January 31,
------------------------------ --------------------------------
1997 1996 1995* 1997 1996 1995*
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ratios (As a percentage of average daily net assets):**
Net expenses (1) 0.09% 0.07% 0.01%+ 0.04% 0.06% 0.06%+
Expenses after custodian fee reduction 0.02% 0.00% -- 0.00% 0.00% --
Net investment income 5.76% 5.82% 5.73%+ 5.96% 6.01% 6.03%+
Portfolio Turnover 36% 32% 33% 21% 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) 0.39% 0.39% 0.41%+ 0.43% 0.41% 0.38%+
Expenses after custodian fee reduction 0.32% 0.32% -- 0.39% 0.35% --
Net investment income 5.46% 5.50% 5.33%+ 5.57% 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 years ended January 31, 1997 and 1996 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Portfolio to increase their expense ratio by the effect of any
expense offset arrangements with its service providers. The expense ratios for the period ended January 31, 1995 have not
been adjusted to reflect this change.
Kansas Portfolio
---------------------------------
Year Ended January 31,
---------------------------------
1997 1996 1995*
-------- -------- --------
Ratios (As a percentage of average daily net assets):**
Net expenses (1) 0.08% 0.09% 0.01%+
Expenses after custodian fee reduction 0.00% 0.00% --
Net investment income 5.91% 5.93% 5.68%+
Portfolio Turnover 49% 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):
Net expenses (1) 0.48% 0.50% 0.43%+
Expenses after custodian fee reduction 0.40% 0.41% --
Net investment income 5.51% 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 years ended January 31, 1996 and 1997 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Portfolio to increase their expense ratio by the effect of any
expense offset arrangements with its service providers. The expense ratios for the period ended January 31, 1995 have not
been adjusted to reflect this change.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(1) Significant Accounting Policies
Florida Insured Municipals Portfolio ("Florida Insured Portfolio"),
Hawaii Municipals Portfolio ("Hawaii Portfolio") and Kansas Municipals
Portfolio ("Kansas Portfolio"), collectively the Portfolios, are
registered under the Investment Company Act of 1940 as non-diversified
open-end management investment companies which were organized as
trusts under the laws of the State of New York on May 1, 1992 for the
Hawaii Portfolio and October 25, 1993 for the Florida Insured
Portfolio and Kansas Portfolio. The Declarations of Trust permit the
Trustees to issue interest 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 Portfolio's 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 investor. 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 a straight-
line basis over five years.
E. Financial Futures Contracts - Upon the entering of 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 a financial futures contract is designed only to hedge
against anticipated futures 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.
(2) Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Boston Management and Research
(BMR), a wholly-owned subsidiary of Eaton Vance Management (EVM), as
compensation for management and investment advisory services rendered
to each Portfolio. The fee is based upon a percentage of average daily
net assets plus a percentage of gross income (i.e., income other than
gains from the sale of securities). For the year ended January 31,
1997, each Portfolio incurred advisory fees as follows:
Amount Effective Rate*
---------- --------------
Florida Insured $41,276 0.18%
Hawaii 24,762 0.16%
Kansas 18,746 0.16%
* as a percentage of average daily net assets
To enhance the net income of the Florida Insured Portfolio, Hawaii
Portfolio and Kansas Portfolio, BMR made a reduction of its fee in the
amount of $41,276, $24,762, and $18,746, respectively, and $28,072,
$35,083 and $28,114, respectively, of expenses related to the
operation of the Portfolios were allocated to BMR. Except as to
Trustees of the Portfolios who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their
services to the Portfolios out of such investment adviser fee.
Certain of the officers and Trustees of the Portfolios are officers
and directors/trustees of the above organizations.
Trustees of the Portfolios that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their
annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the year ended January 31, 1997, 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 year ended January 31, 1997 were as follows:
Florida Hawaii Kansas
Insured Portfolio Portfolio Portfolio
-------------- ------------ ------------
Purchases $13,217,658 $3,937,228 $6,008,107
Sales 8,158,981 3,202,989 5,675,976
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the
investments owned by each Portfolio at January 31, 1997, as
computed on a federal income tax basis, are as follows:
Florida Hawaii Kansas
Insured Portfolio Portfolio Portfolio
-------------- ------------- -------------
Aggregate cost $ 23,841,427 $ 14,798,731 $ 11,067,069
============ ============= =============
Gross unrealized
appreciation $ 1,067,357 $ 1,056,008 $ 290,709
Gross unrealized
depreciation 49,227 10,831 56,744
------------ ------------- -------------
Net unrealized
appreciation $ 1,018,130 $ 1,045,177 $ 233,965
============ ============= =============
(5) Line of Credit
The Portfolios participate with other portfolios and funds managed by
BMR and EVM and its affiliates in a $120 million unsecured line of
credit with a bank. Borrowings will be made by the Portfolios solely
to facilitate the handling of unusual and/or unanticipated short-term
cash requirements. Interest is charged to each participating portfolio
or fund based on its borrowings at the bank's base rate or at an
amount above either the banks' adjusted certificate of deposit rate, a
Eurodollar rate or federal funds effective rate.
In addition, a fee computed at an annual rate of 0.15% on the daily
unused portion of the facility is allocated among the participating
portfolios and funds at the end of each quarter. At January 31, 1997,
the Florida Insured Portfolio and the Hawaii Portfolio had a balance
outstanding pursuant to this line of credit of $186,000 and $13,000,
respectively. The Florida Insured Portfolio, Hawaii Portfolio, and
Kansas Portfolio did not have any significant borrowings or allocated
fees during the year ended.
(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 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 January
31, 1997 is as follows:
Futures Net Unrealized
Contracts Appreciation/
Portfolio Expiration Date Contracts Position (Depreciation)
- ---------- -------------- ------------- ---------- ----------------
<S> <C> <C> <C> <C>
Florida Insured 3/97 25 U.S. Treasury Bond Short $(8,744)
Hawaii 3/97 13 U.S. Treasury Bond Short 20,421
Kansas 3/97 4 U.S. Treasury Bond Short 5,789
At January 31, 1997, the Portfolios had sufficient cash and/or securities segregated
to cover margin requirements on open futures contracts.
</TABLE>
Independent Auditors' Report
To the Trustees and Investors of
Florida Insured Municipals Portfolio
Hawaii Municipals Portfolio
Kansas Municipals Portfolio:
We have audited the accompanying statements of assets and liabilities
including the portfolio of investments of Florida Insured Municipals
Portfolio, Hawaii Municipals Portfolio and Kansas Municipals Portfolio
as of January 31, 1997, the related statements of operations for the
year then ended, the statements of changes in net assets for the years
ended January 31, 1997 and 1996 and supplementary data for the years
ended January 31, 1997 and 1996 and for the period from the start of
business, March 2, 1994, to January 31, 1995. These financial
statements and supplementary data are the responsibility of each
Portfolio's management. Our responsibility is to express an opinion on
these financial statements and supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and supplementary data are free of material misstatement. Our
procedures included confirmation of securities owned at January 31,
1997 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other audit procedures.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and supplementary data
referred to above present fairly, in all material respects, the
financial position of the Florida Insured Municipals Portfolio, Hawaii
Municipals Portfolio, and Kansas Municipals Portfolio at January 31,
1997 and the results of their operations, the changes in their net
assets, and their supplementary data for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 7, 1997
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
Thomas J. Fetter
President and Portfolio Manager of
Florida Insured Municipals Portfolio
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
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, Inc.
Attn: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
This report must be preceded or accompanied by a current prospectus
which contains more complete information on the Funds, including
distribution plan, sales charges and expenses. Please read the
prospectus carefully before you invest or send money.
Eaton Vance Municipals Trust II
24 Federal Street
Boston, MA 02110 C-CSRC-3/97
