<PAGE>
[LOGO OF EATON VANCE Mutual Funds [PICTURE OF STONE WALL
APPEARS HERE] WITH SIGN APPEARS HERE]
for People
Who Pay
Taxes
Semiannual Report July 31, 1998
[PICTURE OF TRAFFIC ON EATON VANCE
EXPRESSWAY APPEARS HERE]
MUNICIPALS
Florida Insured
TRUST II
Hawaii
Kansas
[PICTURE OF SUSPENSION BRIDGE APPEARS HERE]
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
LETTER TO SHAREHOLDERS
[PHOTO OF THOMAS J. FETTER
APPEARS HERE]
Thomas J. Fetter,
President
The municipal bond market has posted solid returns in 1998 in an economy
characterized by slower growth and continued low inflation. First quarter GDP
rose at a robust 5.5% annualized rate, but was followed by a more moderate 1.6%
pace in the second quarter as U.S. companies felt the effects of Asian economic
weakness. Meanwhile, the annualized inflation rate has declined to around 1%.
While there has been some pressure on wages and benefit costs, commodity prices
have continued to decline dramatically due to a slowing world economy and
slackening demand. As a consequence, the Federal Reserve has maintained a stable
interest rate policy. Against that backdrop, municipal bonds have turned in
positive returns, with the Lehman Brothers Municipal Bond Index* -- an unmanaged
index of municipal bonds -- rising 6.0% during the year ended July 31, 1998.
After a generation of deficit spending, the federal budget will register a
surplus in fiscal year 1998. Bolstered by rising tax receipts, falling interest
costs, and a renewed fiscal discipline on the part of policy makers, the federal
budget will register a surplus this year for the first time in a generation. The
surplus will likely result in lower Treasury bond issuance in coming years,
which should greatly improve the outlook for interest rates.
With refundings producing heavy municipal supply, municipal bonds now offer
unusually good value. The past twelve months have been characterized by a
continued wave of refundings, as municipal issuers have redeemed high-coupon
older bonds and replaced them with lower-coupon bonds. The surge in supply has
restrained the performance of municipals relative to Treasury bonds. As a
result, municipal yields represented 90.5% of Treasury yields at July 31,
according to Bloomberg, L.P. That ratio is very high by historical standards
and suggests that municipals may represent uncommonly good value. That is an
important consideration, especially given the recently overvalued status of some
other asset classes.
Municipal bonds yield 90% of Treasury yields
[BAR CHART APPEARS HERE]
5.17% 8.08%
30 Year AAA rated Taxable equivalent yield
General Obligation (GO) Bonds* In 36% tax bracket
5.71%
30 Year Treasury Bond
Principal and interest payments of Treasury securities are guaranteed by the
U.S. government.
*GO yields are a compilation of a representative variety of general obligations
and are not necessarily representative of the Fund's yield. Statistics as of
July 31, 1998.
Past performance is no guarantee of future results.
Source: Bloomberg, L.P.
Following an extraordinary three-year run of 20%-plus annual returns, the stock
market has entered a period of severe volatility. Moreover, the slowdown in Asia
and the economic uncertainty in emerging markets like Russia have clouded the
outlook for corporate profits while prompting many investors to diversify their
portfolios further with bond investments. Given their attractive valuations
relative to other fixed-income vehicles, municipals are receiving increased
attention. And, of course, municipal bonds remain a good way to lower one's
income tax burden. For those reasons, we believe that municipals continue to
merit strong consideration from tax-conscious investors.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter,
President
September 9, 1998
*It is not possible to invest directly in an Index.
- --------------------------------------------------------------------------------
Mutual fund shares are not insured 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.
- --------------------------------------------------------------------------------
2
<PAGE>
Eaton Vance Florida Insured Municipals Fund as of July 31, 1998
INVESTMENT UPDATE
[PHOTO OF THOMAS J.
FETTER APPEARS HERE]
Thomas J. Fetter,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. The Florida economy continued to outperform the nation and remained a
pacesetter for the Southeast region. The state had a 4.3% unemployment rate in
July, a slight improvement from a year earlier. Florida enjoyed 3% job growth,
boosted by strength in the construction sector and in business services.
. The Florida tourism and hospitality sectors remained very strong. Cruise lines
have reported the strongest advance-booking trends in their history, while
hotel and motel tax revenues have risen sharply.
. Following a long downturn, Florida's aerospace and defense sectors have
recently enjoyed a rush of new orders. For example, Lockheed Martin's Orlando-
based unit received a large U.S. Army contract for missiles.
The Fund
- --------------------------------------------------------------------------------
. During the six months ended July 31, 1998, the Fund's Class A and Class B
shares had total returns of 2.2% and 1.9%, respectively./1/ For Class A, this
return resulted from a decline in net asset value (NAV) per share to $11.34 on
July 31, 1998 from $11.37 on January 31, 1998, and the reinvestment of $0.278
per share in tax-free income./2/ For Class B, this return resulted from a
decline in NAV to $11.20 from $11.23, and the reinvestment of $0.238 per share
in tax-free income./2/
. Based on the Fund's most recent dividends and NAVs on July 31, 1998 of $11.34
per share for Class A and $11.20 for Class B, the Fund's distribution rates
were 4.94% and 4.29%, respectively./3/
. The SEC30-day yields for Class A and B shares at July 31 were 4.49% and 3.93%,
respectively./4/
Management Update
- --------------------------------------------------------------------------------
. The Portfolio featured relatively few major changes during the period,
focusing instead on structural adjustments. Water and sewer bonds, special
tax, housing, and transportation issues constituted the Portfolio's largest
sector weightings at July 31.
. Management continued its efforts to maintain ample call protection. As
interest rates have declined, more bonds have reached early redemption dates.
By improving call protection, management has increased the Portfolio's capital
appreciation potential.
. Once again, 100% of the Portfolio's holdings were insured bonds, an important
consideration for quality-conscious Florida investors.*
Your Investment at Work
- --------------------------------------------------------------------------------
Escambia County [GRAPHIC OF MEDICAL
Florida Housing Finance Authority SYMBOL APPEARS HERE]
. This bond issue helped to provide mortgage loans for homebuyers in Escambia,
Indian River, and Sarasota counties.
. The bonds provided a boost to the housing market in selected areas, giving
financing assistance to low- or moderate-income borrowers.
. In addition to their 7.0% coupon, the bonds were backed, in part, by Ginnie
Mae, and are rated Aaa/AAA by Moody's and Standard & Poor's.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1998
Performance/5/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 6.3% 5.5%
Life of Fund+ 8.3 7.4
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 1.3% 0.5%
Life of Fund+ 7.1 7.0
+Inception dates: Class A: (3/3/94); Class B: (3/2/94)
5 Largest Sectors/6/
- --------------------------------------------------------------------------------
By total investments
[BAR CHART APPEARS HERE]
Insured - Water & Sewer* 24.1%
Insured - Special Tax Revenue* 16.4%
Housing 16.0%
Insured - Housing* 14.8%
Insured - Transportation* 12.4%
Portfolio Overview/6/
- --------------------------------------------------------------------------------
Number of Issues 37
Average Rating AAA
Average Maturity 24.6 Yrs.
Average Effective Maturity 11.3 Yrs.
Average Call 7.6 Yrs.
Average Dollar Price $102.52
- --------------------------------------------------------------------------------
/1/ These returns do not include the 4.75% maximum sales charge for the Fund's
Class A shares or the applicable contingent deferred sales charges (CDSC)
for Class B shares. /2/ A portion of the Fund's income could be subject to
federal income tax and/or alternative minimum tax. /3/ The Fund's
distribution rate represents actual distributions paid to shareholders and
is calculated by dividing the last distribution per share (annualized) by
the net asset value. /4/ The Fund's SEC yield is calculated by dividing the
net investment income per share for the 30-day period by the net offering
price at the end of the period and annualizing the result. /5/ Returns are
historical and are calculated by determining the percentage change in net
asset value with all distributions reinvested. SEC returns for Class A
reflect the maximum 4.75% sales charge. SEC returns for Class B reflect
applicable CDSC based on the following schedule: 5% - 1st and 2nd years;
4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year. /6/ Sector
weightings and Portfolio Overview are as of 7/31/98 only and may not be
representative of the Portfolio's current or future investments. *Private
insurance does not decrease the risk of loss of principal associated with
this investment.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
3
<PAGE>
Eaton Vance Hawaii Municipals Fund as of July 31, 1998
INVESTMENT UPDATE
[PHOTO OF ROBERT B.
MACINTOSH APPEARS HERE]
Robert B. MacIntosh,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Hawaii's island economy has remained in a slump, hit by the recession in Asia,
a sharply falling Japanese yen, and a decline in construction activity. As a
result, Hawaii has suffered unemployment above that of the nation, as
characterized by July's 5.8% jobless rate.
. While the critical Japanese segment has fallen off sharply, the tourism
industry has enjoyed some successes. Following runway extensions in Maui and
West Hawaii, airlines have initiated direct service to those islands, a strong
incentive for travelers. Traffic from western states, meanwhile, rose a robust
9.2%.
. The outlook for construction and investment in Hawaii is uncertain. The state
has begun a construction initiative that should boost activity somewhat, but a
more sustained recovery in construction will await more optimistic signals
from the state's overall economy.
The Fund
- --------------------------------------------------------------------------------
. During the six months ended July 31, 1998, the Fund's Class A and Class B
shares had total returns of 1.5% and 1.1%, respectively./1/ For Class A, this
return resulted from a decline in net asset value (NAV) per share to $9.83 on
July 31, 1998 from $9.93 on January 31, 1998, and the reinvestment of $0.242
per share in tax-free income./2/ For Class B, this return resulted from a
decline in NAV to $10.01 from $10.13, and the reinvestment of $0.228 per share
in tax-free income./2/
. Based on the Fund's most recent dividends and NAVs on July 31, 1998 of $9.83
per share for Class A and $10.01 for Class B, the Fund's distribution rates
were 4.96% and 4.60%, respectively./3/
. The SEC 30-day yields for Class A and B shares at July 31 were 4.41% and
4.02%, respectively./4/
Management Update
- --------------------------------------------------------------------------------
. Amid a continuing favorable inflation outlook, the Portfolio was characterized
by relatively few changes. Management made some structural adjustments to
extend call protection and improve the Portfolio's upside potential.
. Supply of Hawaii bonds remained very tight, with city and county general
obligations the main source of new issuance. Insured general obligations were
the Portfolio's largest sector weighting at July 31.*
. Management reduced its commitment to premium housing bonds in order to
diversify the Portfolio further. New purchases included bonds of the Hawaii
Department of Transportation and Queen's Health System.
Your Investment at Work
- --------------------------------------------------------------------------------
Hawaii Department of Budget and Finance [GRAPHIC OF MEDICAL
Kapiolani Health System SYMBOL APPEARS HERE]
. The Kapiolani Health Care System runs acute care and specialized hospital
facilities, including Kapiolani Center for Women and Children, a facility
specializing in pediatric and obstetric care.
. These bonds were issued in 1993 to refund earlier Kapiolani debt and to
finance the cost of building additional health care facilities and equipment.
. The bonds are rated A by Moody's and Standard & Poor's and carry an attractive
6.0% coupon.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1998
Performance/5/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 5.1% 4.6%
Life of Fund+ 4.8 5.1
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 0.1% -0.4%
Life of Fund+ 3.6 4.7
+Inception dates: Class A: (3/14/94); Class B: (3/2/94)
5 Largest Sectors/6/
- --------------------------------------------------------------------------------
By total investments
[BAR CHART APPEARS HERE]
Insured - General Obligations* 16.7%
Hospitals 15.7%
Transportation 11.2%
Insured - Transportation* 9.9%
Insured - Electric Utilities* 8.9%
Portfolio Overview/6/
- --------------------------------------------------------------------------------
Number of Issues 42
Average Rating AA
Average Maturity 20.7 Yrs.
Average Effective Maturity 10.4 Yrs.
Average Call 7.6 Yrs.
Average Dollar Price $100.99
- --------------------------------------------------------------------------------
/1/ These returns do not include the 4.75% maximum sales charge for the Fund's
Class A shares or the applicable contingent deferred sales charges (CDSC)
for Class B shares. /2/ A portion of the Fund's income could be subject to
federal income tax and/or alternative minimum tax. /3/ The Fund's
distribution rate represents actual distributions paid to shareholders and
is calculated by dividing the last distribution per share (annualized) by
the net asset value. /4/ The Fund's SEC yield is calculated by dividing the
net investment income per share for the 30-day period by the net asset value
at the end of the period and annualizing the result. /5/ Returns are
historical and are calculated by determining the percentage change in net
asset value with all distributions reinvested. SEC returns for Class A
reflect the maximum 4.75% sales charge. SEC returns for Class B reflect
applicable CDSC based on the following schedule: 5% - 1st and 2nd years;
4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year. /6/ Sector
weightings and Portfolio Overview are as of 7/31/98 only and may not be
representative of the Portfolio's current or future investments. *Private
insurance does not decrease the risk of loss of principal associated with
this investment.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
4
<PAGE>
Eaton Vance Kansas Municipals Fund as of July 31, 1998
INVESTMENT UPDATE
[PHOTO OF TIMOTHY T.
BROWSE APPEARS HERE]
Timothy T. Browse,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. The Kansas economy turned in a robust showing during the past year, enjoying
job growth that surpassed trends of the previous five years. The state's
unemployment rate fell to 3.7% in July, well below the national rate, and
reflected strong growth in the construction, durable goods manufacturing, and
service sectors.
. Reflecting an increasing diversification in the Kansas economy, employment in
the durable goods manufacturing sector continued to expand. Machinery and
transportation equipment, especially aircraft, were responsible for the
employment surge.
. Kansas net farm income jumped sharply in the past year, rising to $2 billion
in 1997. The robust performance of the farm sector was the result of record
harvests of wheat, corn, and soybeans combined with relatively strong pricing.
The Fund
- --------------------------------------------------------------------------------
. During the six months ended July 31, 1998, the Fund's Class A and Class B
shares had total returns of 1.8% and 1.5%, respectively./1/ For Class A, this
return resulted from a decline in net asset value (NAV) per share to $10.39 on
July 31, 1998 from $10.46 on January 31, 1998, and the reinvestment of $0.257
per share in tax-free income.2 For Class B, this return resulted from a
decline in NAV to $10.30 from $10.38, and the reinvestment of $0.230 per share
in tax-free income./2/
. Based on the Fund's most recent dividends and NAVs on July 31, 1998 of $10.39
per share for Class A and $10.30 for Class B, the Fund's distribution rates
were 4.99% and 4.50%, respectively./3/
. The SEC30-day yields for Class A and B shares at July 31 were 4.33% and 3.77%,
respectively./4/
Management Update
- --------------------------------------------------------------------------------
. The Kansas municipal market continued to be characterized by low issuance.
Housing bonds constituted the state's largest source of new bonds and were the
Portfolio's largest sector weighting at July 31.
. Call protection remained an important structural consideration. As interest
rates have declined, more bonds have reached early redemption dates. By
improving the Portfolio's call protection, management increased its capital
appreciation potential.
. In a narrow trading range, management maintained a very stable Portfolio. This
approach helped to minimize Portfolio turnover, thus avoiding realized capital
gains.
Your Investment at Work
- --------------------------------------------------------------------------------
City of Atchison [GRAPHIC OF MEDICAL
Atchison Hospital Association SYMBOL APPEARS HERE]
. Atchison Hospital Association, a non-profit corporation, operates an acute
care hospital on a 5.5-acre site in Atchison. Established in 1912, the
facility has 74 licensed beds and offers long-term, skilled nursing care.
. The proceeds of this bond were used by the Atchison Association to finance the
renovation and the purchase of equipment for certain hospital facilities.
. The bonds, which have a 5.7% coupon and good call protection, were an
excellent opportunity in the non-rated segment of the thinly-traded Kansas
market.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1998
Performance/5/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 5.1% 4.4%
Life of Fund+ 6.0 5.8
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 0.1% -0.6%
Life of Fund+ 4.9 5.4
+Inception dates: Class A: (3/3/94); Class B: (3/2/94)
5 Largest Sectors/6/
- --------------------------------------------------------------------------------
By total investments
[BAR CHART APPEARS HERE]
Housing 27.0%
Insured - Hospitals* 13.0%
General Obligations 12.8%
Insured - GO* 9.8%
Hospitals 7.7%
Portfolio Overview/6/
- --------------------------------------------------------------------------------
Number of Issues 44
Average Rating AA
Average Maturity 21.4 Yrs.
Average Effective Maturity 12.3 Yrs.
Average Call 8.9 Yrs.
Average Dollar Price $101.20
- --------------------------------------------------------------------------------
/1/ These returns do not include the 4.75% maximum sales charge for the Fund's
Class A shares or the applicable contingent deferred sales charges (CDSC)
for Class B shares. /2/ A portion of the Fund's income could be subject to
federal income tax and/or alternative minimum tax. /3/ The Fund's
distribution rate represents actual distributions paid to shareholders and
is calculated by dividing the last distribution per share (annualized) by
the net asset value. /4/ The Fund's SEC yield is calculated by dividing the
net investment income per share for the 30-day period by the offering
price at the end of the period and annualizing the result. /5/ Returns are
historical and are calculated by determining the percentage change in net
asset value with all distributions reinvested. SEC returns for Class A
reflect the maximum 4.75% sales charge. SEC returns for Class B reflect
applicable CDSC based on the following schedule: 5% - 1st and 2nd years;
4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year. /6/ Sector
weightings and Portfolio Overview are as of 7/31/98 only and may not be
representative of the Portfolio's current or future investments. *Private
insurance does not decrease the risk of loss of principal associated with
this investment.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
5
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS (Unaudited)
Statements of Assets and Liabilities
As of July 31, 1998
<TABLE>
<CAPTION>
Florida Insured
Fund Hawaii Fund Kansas Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Investment in Portfolio --
Identified cost $ 23,486,019 $ 18,090,369 $ 11,378,445
Unrealized appreciation 1,550,804 1,173,885 495,268
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment in Portfolio, at value $ 25,036,823 $ 19,264,254 $ 11,873,713
- ----------------------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold $ 166,456 $ 1,290 $ 4,848
Deferred organization expenses 3,560 5,313 4,250
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 25,206,839 $ 19,270,857 $ 11,882,811
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends payable $ 54,288 $ 39,371 $ 26,364
Payable for Fund shares redeemed 5,001 94,424 38
Other accrued expenses 6,157 13,286 4,383
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 65,446 $ 147,081 $ 30,785
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 25,141,393 $ 19,123,776 $ 11,852,026
- ----------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ 23,575,539 $ 18,360,783 $ 11,274,689
Accumulated net realized gain (loss) from Portfolio
(computed on the basis of identified cost) (21,389) (354,223) 87,750
Accumulated undistributed (distributions in excess of)
net investment income 36,439 (56,669) (5,681)
Net unrealized appreciation from Portfolio (computed on
the basis of identified cost) 1,550,804 1,173,885 495,268
- ----------------------------------------------------------------------------------------------------------------------------------
Total $ 25,141,393 $ 19,123,776 $ 11,852,026
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Shares
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 3,312,970 $ 365,358 $ 1,237,538
Shares Outstanding 292,148 37,168 119,119
Net Asset Value and Redemption Price Per Share
(Net assets/shares of beneficial interest outstanding) $ 11.34 $ 9.83 $ 10.39
Maximum Offering Price Per Share
(100/95.25 of net assets value per share) $ 11.91 $ 10.32 $ 10.91
- ----------------------------------------------------------------------------------------------------------------------------------
Class B Shares
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 21,825,423 $ 18,758,418 $ 10,614,488
Shares Outstanding 1,949,216 1,874,242 1,031,012
Net Asset Value, Offering Price and Redemption Price Per Share
(Net assets/shares of beneficial interest outstanding) $ 11.20 $ 10.01 $ 10.30
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
On sales of $25,000 or more, the offering price of Class A shares is reduced.
See notes to financial statements
6
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS (Unaudited) CONT'D
Statements of Operations
For the Six Months Ended July 31, 1998
<TABLE>
<CAPTION>
Florida Insured
Fund Hawaii Fund Kansas Fund
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
Interest allocated from Portfolios $ 667,941 $ 531,563 $ 316,131
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income from Portfolios $ 667,941 $ 531,563 $ 316,131
- -----------------------------------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------------------------------
Trustees fees and expenses $ 123 $ 123 $ 121
Distribution and service fees
Class A 1,533 283 772
Class B 95,279 86,045 45,372
Legal and accounting services 1,989 1,833 4,377
Transfer and dividend disbursing agent fees 9,882 9,084 5,655
Amortization of organization expenses 2,993 4,322 3,555
Printing and postage 2,460 3,562 1,674
Custodian fee 811 1,123 1,123
Registration fees 43 855 --
Miscellaneous 2,241 2,507 1,484
- -----------------------------------------------------------------------------------------------------------------------------
Total expenses $ 117,354 $ 109,737 $ 64,133
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income $ 550,587 $ 421,826 $ 251,998
- -----------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolios
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 4,746 $ 230,277 $ 57,836
Financial futures contracts 29,757 (44,045) (20,003)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain $ 34,503 $ 186,232 $ 37,833
- -----------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $(137,444) $(407,826) $(125,349)
Financial futures contracts 12,843 12,205 4,233
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $(124,601) $(395,621) $(121,116)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss $ (90,098) $(209,389) $ (83,283)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 460,489 $ 212,437 $ 168,715
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
7
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS (Unaudited) CONT'D
Statements of Changes in Net Assets
For the Six Months Ended July 31, 1998
<TABLE>
<CAPTION>
Florida Insured
Increase (Decrease) in Net Assets Fund Hawaii Fund Kansas Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From operations --
Net investment income $ 550,587 $ 421,826 $ 251,998
Net realized gain 34,503 186,232 37,833
Net change in unrealized appreciation (depreciation) (124,601) (395,621) (121,116)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 460,489 $ 212,437 $ 168,715
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (75,820) $ (7,611) $ (29,727)
Class B (457,032) (414,073) (221,311)
In excess of net investment income
Class B -- (17,138) (6,168)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (532,852) $ (438,822) $ (257,206)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest --
Proceeds from sale of shares
Class A $ 839,192 $ 61,224 $ 179,636
Class B 1,254,868 1,025,193 644,057
Net asset value of shares issued
to shareholders in payment of
distributions declared
Class A 18,057 6,421 21,559
Class B 184,536 183,938 125,463
Cost of shares redeemed
Class A (291,246) (10) (178,910)
Class B (1,513,510) (1,628,056) (124,095)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions $ 491,897 $ (351,290) $ 667,710
- ------------------------------------------------------------------------------------------------------------------------------------
Contribution from EV Traditional Municipals Funds 2,748,790 300,865 1,223,080
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 3,168,324 $(276,810) $ 1,802,299
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of period $ 21,973,069 $ 19,400,586 $ 10,049,727
- ------------------------------------------------------------------------------------------------------------------------------------
At end of period $ 25,141,393 $ 19,123,776 $ 11,852,026
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of) net investment
income included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of period $ 36,439 $ (56,669) $ (5,681)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
8
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended January 31, 1998
<TABLE>
<CAPTION>
Florida Insured
Increase (Decrease) in Net Assets Fund Hawaii Fund Kansas Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From operations --
Net investment income $ 945,505 $ 789,252 $ 457,124
Net realized gain 281,348 261,432 78,752
Net change in unrealized appreciation (depreciation) 716,394 503,020 338,048
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 1,943,247 $ 1,553,704 $ 873,924
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income $ (927,338) $ (789,252) $ (461,231)
In excess of net investment income -- (32,067) (473)
From net realized gain on investments -- -- (105,309)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (927,338) $ (821,319) $ (567,013)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest --
Proceeds from sale of shares $ 4,059,139 $ 4,672,367 $ 1,127,364
Net asset value of shares issued
to shareholders in payment of
distributions declared 380,352 338,412 318,497
Cost of shares redeemed (5,198,944) (1,894,316) (2,195,014)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions $ (759,453) $ 3,116,463 $ (749,153)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 256,456 $ 3,848,848 $ (442,242)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 21,716,613 $ 15,551,738 $ 10,491,969
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 21,973,069 $ 19,400,586 $ 10,049,727
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of) net investment
income included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 23,427 $ (38,550) $ (473)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
9
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Florida Insured Fund
---------------------------------------------------------------------------------
Six Months Ended Year Ended January 31,
July 31, 1998 ------------------------------------------------------
(Unaudited) 1998 1997 1996 1995*
----------------------- ------------------------------------------------------
Class A Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of period $11.370 $11.230 $10.710 $11.090 $10.260 $10.000
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.295 $ 0.245 $ 0.488 $ 0.499 $ 0.512 $ 0.456
Net realized and unrealized gain (loss) (0.047) (0.037) 0.511 (0.385) 0.832 0.304
- ------------------------------------------------------------------------------------------------------------------------------
Total income from operations $ 0.248 $ 0.208 $ 0.999 $ 0.114 $ 1.344 $ 0.760
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.278) $(0.238) $(0.479) $(0.494) $(0.512) $(0.456)
In excess of net investment income -- -- -- -- (0.002) (0.044)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.278) $(0.238) $(0.479) $(0.494) $(0.514) $(0.500)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of period $11.340 $11.200 $11.230 $10.710 $11.090 $10.260
- ------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 2.21% 1.87% 9.57% 1.14% 13.39% 7.10%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data +
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $3,313 $21,825 $21,973 $21,717 $18,391 $11,596
Ratios (As a percentage of daily net assets)
Net expenses/(2)(3)/ 0.34%+ 1.14%+ 1.23% 1.21% 1.10% 0.75%+
Net expenses after custodian
fee reduction/(2)/ 0.26%+ 1.06%+ 1.16% 1.12% 1.00% --
Net investment income 5.19%+ 4.42%+ 4.50% 4.67% 4.76% 4.79%+
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
+ The operating expenses of the Fund and the Portfolio may reflect a reduction of the Investment Adviser fee, an allocation
of expenses to the Investment Adviser, or both. Had such actions not been taken, the ratios and net investment income per
share would have been as follows:
<S>
Ratios (As a percentage of average
daily net assets)
Expenses/(2)(3)/ 0.56%+ 1.36%+ 1.65% 1.51% 1.49% 1.62%+
Expenses after custodian fee
reduction/(2)/ 0.48%+ 1.28%+ 1.58% 1.42% 1.39% --
Net investment income 4.97%+ 4.20%+ 4.08% 4.37% 4.37% 3.92%+
Net investment income per share $0.282 $ 0.233 $ 0.443 $ 0.467 $ 0.470 $ 0.374
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, March 2, 1994, to January 31,
1995.
/(1)/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
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its Portfolio's allocated expenses.
/(3)/The expense ratios for the year ended January 31, 1996 and periods
thereafter 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 ratios 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
10
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Hawaii Fund
---------------------------------------------------------------------------
Six Months Ended Year Ended January 31,
July 31, 1998 --------------------------------------------------
(Unaudited) 1998 1997 1996 1995*
------------------- --------------------------------------------------
Class A Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of period $ 9.930 $ 10.130 $ 9.730 $ 9.980 $ 9.150 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.253 $ 0.219 $ 0.441 $ 0.466 $ 0.484 $ 0.434
Net realized and unrealized gain (loss) (0.111) (0.111) 0.418 (0.241) 0.835 (0.805)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.142 $ 0.108 $ 0.859 $ 0.225 $ 1.319 $ (0.371)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.242) $ (0.219) $ (0.441) $ (0.466) $ (0.484) $ (0.434)
In excess of net investment income -- (0.009) (0.018) (0.009) (0.005) (0.045)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.242) $ (0.228) $ (0.459) $ (0.475) $ (0.489) $ (0.479)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of period $ 9.830 $ 10.010 $ 10.130 $ 9.730 $ 9.980 $ 9.150
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 1.45% 1.08% 9.08% 2.40% 14.74% (4.01)%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data +
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 365 $ 18,758 $ 19,401 $ 15,552 $ 15,126 $ 12,601
Ratios (As a percentage of average daily net assets)
Net expenses/(2)(3)/ 0.46%+ 1.20%+ 1.27% 1.20% 1.05% 0.87%+
Net expenses after custodian fee reduction/(2)/ 0.42%+ 1.16%+ 1.24% 1.15% 0.98% --
Net investment income 5.02%+ 4.40%+ 4.47% 4.81% 5.03% 5.03%+
- ------------------------------------------------------------------------------------------------------------------------------------
+ The operating expenses of the Fund and the Portfolio may reflect a reduction of the Investment Adviser fee, an allocation of
expenses to the Investment Adviser, or both. Had such actions not been taken, the ratios and net investment income per share
would have been as follows:
Ratios (As a percentage of average daily net assets)
Expenses/(2)(3)/ 0.68%+ 1.42%+ 1.70% 1.61% 1.53% 1.41%+
Expenses after custodian fee reduction/(2)/ 0.64%+ 1.38%+ 1.67% 1.56% 1.46% --
Net investment income 4.80%+ 4.18%+ 4.04% 4.40% 4.51% 4.49%+
Net investment income per share $ 0.242 $ 0.208 $ 0.399 $ 0.426 $ 0.434 $ 0.387
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, March 2, 1994, to January 31,
1995.
/(1)/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
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its Portfolio's allocated expenses.
/(3)/The expense ratios for the year ended January 31, 1996 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Portfolio to
increase its expense ratio by the effect of any expense offset arrangements
with its service providers. The expense ratios for the prior period have
not been adjusted to reflect this change.
See notes to financial statements
11
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Kansas Fund
--------------------------------------------------------------------------------
Six Months Ended Year Ended January 31,
July 31, 1998 ----------------------------------------------------
(Unaudited) 1998 1997 1996 1995*
--------------------- ----------------------------------------------------
Class A Class B Class B Class B Class B Class B
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value--Beginning of period $10.460 $10.380 $10.080 $10.320 $ 9.560 $10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.265 $ 0.224 $ 0.458 $ 0.479 $ 0.481 $ 0.435
Net realized and unrealized gain (loss) (0.078) (0.074) 0.414 (0.238) 0.761 (0.393)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income from operations $ 0.187 $ 0.150 $ 0.872 $ 0.241 $ 1.242 $ 0.042
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.257) $(0.224) $(0.462) $(0.473) $(0.481) $(0.435)
In excess of net investment income -- (0.006) --** -- (0.001) (0.047)
From net realized gain -- -- (0.110) (0.008) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.257) $(0.230) $(0.572) $(0.481) $(0.482) $(0.482)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value--End of period $10.390 $10.300 $10.380 $10.080 $10.320 $ 9.560
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 1.81% 1.46% 8.87% 2.46% 13.26% 0.16%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data +
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $1,238 $10,614 $10,050 $10,492 $10,782 $ 7,753
Ratios (As a percentage of average daily
net assets)
Net expenses/(2)(3)/ 0.51%+ 1.28%+ 1.38% 1.25% 1.20% 0.75%+
Net expenses after custodian fee
reduction/(2)/ 0.44%+ 1.21%+ 1.33% 1.15% 1.08% --
Net investment income 5.13%+ 4.36%+ 4.48% 4.77% 4.79% 4.81%+
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The operating expenses of the Fund and the Portfolio may reflect a
reduction of the Investment Adviser fee, an allocation of expenses to the
Investment Adviser, or both. Had such actions not been taken, the ratios
and net investment income per share would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ratios (As a percentage of average daily
net assets)
Expenses/(2)(3)/ 0.83%+ 1.60%+ 1.90% 1.68% 1.59% 1.60%+
Expenses after custodian fee reduction/(2)/ 0.76%+ 1.53%+ 1.85% 1.58% 1.47% --
Net investment income 4.81%+ 4.04%+ 3.96% 4.34% 4.40% 3.96%+
Net investment income per share $0.249 $0.208 $0.405 $0.436 $0.442 $0.397
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, March 2, 1994, to January 31,
1995.
** Distributions in excess of net investment income are less than $0.001 per
share.
/(1)/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
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its Portfolio's allocated expenses.
/(3)/The expense ratios for the year ended January 31, 1996 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Portfolio to
increase its expense ratio by the effect of any expense offset arrangements
with its service providers. The expense ratios for the prior period have
not been adjusted to reflect this change.
See notes to financial statements
12
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
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 four non-diversified
Funds, three of which are included in these financial statements. They
include Eaton Vance Florida Insured Municipals Fund ("Florida Insured
Fund"), Eaton Vance Hawaii Municipals Fund ("Hawaii Fund") and Eaton Vance
Kansas Municipals Fund ("Kansas Fund"). The Funds offer two classes of
shares. Class A shares are sold subject to a sales charge imposed at the
time of purchase. Class B shares are sold at net asset value and are
subject to a declining contingent deferred sales charge (See Note 6). All
classes of shares have equal rights to assets and voting privileges.
Realized and unrealized gains and losses and net investment income, other
than class specific expenses, are allocated daily to each class of shares
based on the relative net assets of each class to the total net assets of
the Fund. Each class of shares differs in its distribution plan and certain
other class specific expenses. 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 Florida Insured Fund
invests its assets in the Florida Insured Municipals Portfolio, the Hawaii
Fund invests its assets in the Hawaii Municipals Portfolio and the 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 (99.3%, 99.3%
and 98.9% at July 31, 1998 for Eaton Vance Florida Insured Fund, Eaton
Vance Hawaii Fund and Eaton Vance Kansas Fund). 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 1A 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,
1998, the Florida Insured Fund and the Hawaii 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
---------------------------------------------------------------------------
Florida Insured Fund $ 65,345 January 31, 2005
1,820 January 31, 2004
Hawaii Fund $ 26,381 January 31, 2005
526,606 January 31, 2004
Dividends paid by each Fund from net interest on tax-exempt municipal bonds
allocated from its corresponding Portfolio are not includable by
shareholders as gross income for federal income tax purposes because each
Fund and Portfolio intend to meet certain requirements of the Internal
Revenue Code applicable to regulated investment companies which will enable
the Funds to pay exempt-interest dividends. The portion of such interest,
if any, earned on private activity bonds issued after August 7, 1986 may be
considered a tax preference item to shareholders.
D Deferred Organization Expenses -- Costs incurred by each 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
13
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates.
F Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Funds and the Portfolios. Pursuant to the respective
custodian agreements, IBT receives a fee reduced by credits which
are determined based on the average 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 operating expenses on
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, 1998 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 the Fund at the net asset value as of the ex-dividend
date. Distributions are paid in the form of additional shares or, at the
election of the shareholder, in cash.
The Funds distinguish between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in
the financial statements as a return of capital. Differences in the
recognition or classification of income between the financial statements
and tax earnings and profits which result in temporary over distributions
for financial 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.
3 Shares of Beneficial Interest
---------------------------------------------------------------------------
The Funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
Florida Insured Fund
-----------------------------------
Six Months Ended Year Ended
July 31, 1998 January 31,
(Unaudited) 1998
-------------------- -----------
Class A Class B Class B
--------------------------------------------------------------------------
Sales 74,464 112,169 370,922
Issued to shareholders electing
to receive payments of
distributions in Fund shares 1,597 16,475 34,868
Redemptions (25,738) (135,537) (477,263)
Issued to EV Traditional
Florida Insured Fund
shareholders 241,825 -- --
--------------------------------------------------------------------------
Net increase (decrease) 292,148 (6,893) (71,473)
--------------------------------------------------------------------------
Hawaii Fund
-----------------------------------
Six Months Ended Year Ended
July 31, 1998 January 31,
(Unaudited) 1998
-------------------- -----------
Class A Class B Class B
--------------------------------------------------------------------------
Sales 6,224 102,287 475,254
Issued to shareholders electing
to receive payments of
distributions in Fund shares 653 18,303 34,260
Redemptions (1) (162,081) (192,930)
Issued to EV Traditional
Hawaii Fund shareholders 30,292 -- --
--------------------------------------------------------------------------
Net increase (decrease) 37,168 (41,491) 316,584
--------------------------------------------------------------------------
Kansas Fund
-----------------------------------
Six Months Ended Year Ended
July 31, 1998 January 31,
(Unaudited) 1998
-------------------- -----------
Class A Class B Class B
--------------------------------------------------------------------------
Sales 17,277 62,500 110,259
Issued to shareholders electing
to receive payments of
distributions in Fund shares 2,075 12,149 30,986
Redemptions (17,188) (12,027) (213,928)
Issued to EV Traditional
Kansas Fund shareholders 116,955 -- --
--------------------------------------------------------------------------
Net increase (decrease) 119,119 62,622 (72,683)
--------------------------------------------------------------------------
14
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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. Except as to
Trustees of the Funds and 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. Eaton Vance
Distributors, Inc. (EVD), a subsidiary of EVM and the Fund's principal
underwriter, received $2,147 as its portion of the sales charge on sales of
Class A shares from Florida Insured Fund for the six months ended July 31,
1998.
Certain of the officers and Trustees of the Funds and Portfolios are
officers and directors/trustees of the above organizations.
5 Distribution and Service Plans
---------------------------------------------------------------------------
Each Fund has adopted a distribution plan (Class B Plan) pursuant to Rule
12b-1 under the Investment Company Act of 1940, and a service plan (Class A
Plan, the Plans). The Plans require the Class B shares to pay the principal
underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal to 0.75%
of each Fund's Class B average daily net assets, for providing ongoing
distribution services and facilities to the respective Fund. A Fund's Class
B shares 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 Class B 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 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 Class B and, accordingly,
reduces the Class B's net assets. For the six months ended July 31, 1998,
the Class B shares of the Florida Insured Fund, Hawaii Fund and Kansas Fund
paid $79,399, $70,145 and $37,810, respectively, to EVD, representing 0.75%
of each Fund's Class B average daily net assets. For the six months ended
July 31, 1998, the amount of Uncovered Distribution Charges of EVD
calculated under the Class B Plans for Florida Insured Fund, Hawaii Fund
and Kansas Fund were approximately $664,000, $694,000 and $367,000,
respectively.
In addition, the Plans also authorize each class to make payments of
service fees to EVD, Authorized Firms and other persons in amounts not
exceeding 0.25% of each Fund's average daily net assets attributable to
Class A and Class B shares for any fiscal year. The Trustees have initially
implemented the Plans by authorizing each class to make quarterly payments
of service fees to EVD and Authorized Firms in amounts not expected to
exceed 0.20% per annum of each Fund's average daily net assets attributable
to both Class A and Class B shares based on the value of Fund shares sold
by such persons and remaining outstanding for at least one year. For the
six months ended July 31, 1998, Florida Insured Fund, Hawaii Fund and
Kansas Fund paid or accrued service fees to or payable to EVD in the amount
of $1,533, $283 and $772, respectively for Class A shares, and $15,880,
$15,900 and $7,562, respectively, for Class B shares. Service fee payments
will be made for personal services and/or the 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 each
Fund to EVD, and as such are not subject to automatic discontinuance when
there are no outstanding Uncovered Distribution Charges of EVD.
6 Contingent Deferred Sales Charge
---------------------------------------------------------------------------
A contingent deferred sales charge (CDSC) is imposed on any redemption of
Class B 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 Class B shares acquired by reinvestment
of dividends or capital gains distributions. The CDSC is imposed at
declining 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 Class B 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 Class B Distribution Plan. CDSC
charges received when no Uncovered Distribution Charges exist will be
credited to the Fund. EVD received approximately $23,000, $36,000 and
$3,000 of CDSC paid by Class B shareholders of Florida Insured Fund, Hawaii
Fund and Kansas Fund, respectively, for the six months ended July 31, 1998.
15
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
7 Investment Transactions
---------------------------------------------------------------------------
Increases and decreases in each Fund's investment in its corresponding
Portfolio for the six months ended July 31, 1998 were as follows:
Florida Insured Fund
---------------------------------------------------------------------------
Increases $ 2,072,110
Decreases (2,322,672)
Hawaii Fund
---------------------------------------------------------------------------
Increases $ 1,124,326
Decreases (1,919,192)
Kansas Fund
---------------------------------------------------------------------------
Increases $ 852,247
Decreases (498,190)
8 Transfer of Net Assets
---------------------------------------------------------------------------
On February 1, 1998, Eaton Vance Marathon Florida Insured Fund, Eaton Vance
Marathon Hawaii Fund, and Eaton Vance Marathon Kansas Fund acquired the net
assets of the EV Traditional Florida Insured Fund, Eaton Vance Traditional
Hawaii Fund, and Eaton Vance Traditional Kansas Fund, respectively,
pursuant to an Agreement and Plan of Reorganization dated June 23, 1997. In
accordance with the agreement, the Funds, at the closing, issued Class A
shares as follows:
Class A shares Aggregate value Net asset value
Fund issued of shares issued per share
---------------------------------------------------------------------------
Florida Insured Fund 241,825 $2,748,790 $11.37
Hawaii Fund 30,292 300,865 9.93
Kansas Fund 116,955 1,223,080 10.46
The transaction was structured for tax purposes to qualify as a tax free
reorganization under the Internal Revenue Code. The net assets acquired,
including unrealized appreciation at the date of the transaction were as
follows:
Fund Acquired net assets Unrealized appreciation
---------------------------------------------------------------------------
Florida Insured Fund $2,748,790 $160,660
Hawaii Fund 300,865 27,372
Kansas Fund 1,223,080 49,919
Directly after the merger, the combined net assets of the Funds and the net
asset value of Class A shares and Class B shares were as follows:
Class A net Class B net
asset value asset value
Fund Combined net assets per share per share
---------------------------------------------------------------------------
Florida Insured Fund $24,721,859 $11.37 $11.23
Hawaii Fund 19,701,451 9.93 10.13
Kansas Fund 11,272,807 10.46 10.38
9 Name Change
---------------------------------------------------------------------------
Effective February 1, 1998, EV Marathon Florida Insured Fund, EV Marathon
Hawaii Fund and EV Marathon Kansas Fund changed their names to Eaton Vance
Florida Insured Fund, Eaton Vance Hawaii Fund and Eaton Vance Kansas Fund,
respectively.
16
<PAGE>
Florida Insured Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------------------
Escrowed / Prerefunded -- 1.7%
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa AAA $ 1,160 Dade County, Professional Sports
Franchise, (MBIA), 0.00%, 10/1/19 $ 396,210
- ---------------------------------------------------------------------------------------
$ 396,210
- ---------------------------------------------------------------------------------------
Housing -- 16.0%
- ---------------------------------------------------------------------------------------
Aaa NR $ 360 Duval County HFA, SFMR, (GNMA),
(AMT), 6.70%, 10/1/26 $ 385,495
Aaa AAA 750 Escambia County HFA, SFMR,
(GNMA), (AMT), 7.00%, 4/1/28 825,105
Aaa NR 715 Manatee County, HFA, SFMR,
(GNMA), (AMT), 6.875%, 11/1/26 798,441
Aaa NR 1,000 Pinellas County HFA, SFMR, (AMT),
5.80%, 3/1/29 1,025,390
NR AAA 795 Pinellas County HFA, SFMR,
(GNMA), (AMT), 6.70%, 2/1/28 852,304
- ---------------------------------------------------------------------------------------
$ 3,886,735
- ---------------------------------------------------------------------------------------
Insured-Education -- 2.2%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 500 Florida A&M University, (Student
Apartment Facilties), (MBIA),
5.625%, 7/1/25 $ 521,690
- ---------------------------------------------------------------------------------------
$ 521,690
- ---------------------------------------------------------------------------------------
Insured-Electric Utilities -- 9.5%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 445 Citrus County, PCR, (MBIA),
6.35%, 2/1/22 $ 483,132
Aaa AAA 895 Florida State Municipal Power
Agency, (Stanton), (AMBAC),
4.50%, 10/1/27 802,036
Aaa AAA 1,000 Puerto Rico Electric Power
Authority, (MBIA), 5.50%, 7/1/25 1,028,010
- ---------------------------------------------------------------------------------------
$ 2,313,178
- ---------------------------------------------------------------------------------------
Insured-Hospitals -- 0.8%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 200 Dade, Public Facilities Revenue,
(Jackson Memorial Hospital),
(MBIA), 4.875%, 6/1/15 $ 195,052
- ---------------------------------------------------------------------------------------
$ 195,052
- ---------------------------------------------------------------------------------------
Insured-Housing -- 14.8%
- ---------------------------------------------------------------------------------------
NR A $ 375 Clearwater HFA, (Hamptons at
Clearwater), (ACA), 5.30%, 5/1/18 $ 377,261
NR A 500 Clearwater HFA, (Hamptons at
Clearwater), (ACA), 5.35%, 5/1/24 503,000
Aaa AAA 500 Florida HFA, (Maitland Club
Apartments), (AMBAC), (AMT),
6.875%, 8/1/26 549,655
Aaa AAA 1,000 Florida HFA, (Mariner Club
Apartments), (AMBAC), (AMT),
6.375%, 9/1/36 1,078,220
Aaa AAA 500 Florida HFA, (MBIA), (AMT),
5.90%, 7/1/29 522,910
Aaa AAA 500 Florida HFA, (Spinnaker Cove
Apartments), (AMBAC), (AMT),
6.50%, 7/1/36 542,930
- ---------------------------------------------------------------------------------------
$ 3,573,976
- ---------------------------------------------------------------------------------------
Insured-Industrial Development Revenue -- 2.1%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 500 Dade County Resources Recovery
Facilities, (AMBAC), (AMT),
5.50%, 10/1/13 $ 517,885
- ---------------------------------------------------------------------------------------
$ 517,885
- ---------------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 16.4%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 500 Bradenton, Special Revenue
Sub-Lien, (FGIC), 5.00%, 10/1/15 $ 499,680
Aaa AAA 1,000 Jacksonville, Excise Taxes
Revenue, (FGIC), 5.00%, 10/1/16 993,440
Aaa AAA 1,000 Jacksonville, Excise Taxes
Revenue, (FGIC), (AMT), 5.70%,
10/1/09 1,048,010
Aaa AAA 250 Orange, Tourist Development Tax,
(MBIA), 6.00%, 10/1/24 272,013
Aaa AAA 505 St. Petersburg Excise Tax,
(FGIC), 5.00%, 10/1/16 501,096
Aaa AAA 340 Sunrise Public Facilities,
(MBIA), 0.00%, 10/1/15 144,673
Aaa AAA 500 Tampa, Occupational License Tax
Revenue, (FGIC), 5.50%, 10/1/27 519,095
- ---------------------------------------------------------------------------------------
$ 3,978,007
- ---------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
17
<PAGE>
Florida Insured Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- --------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------------
Insured-Transportation -- 12.4%
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa AAA $ 1,000 Dade County Aviation Facilities,
(Miami International Airport),
(FSA), (AMT), 5.125%, 10/1/22 $ 982,250
Aaa AAA 1,000 Dade County, Seaport Revenue,
(MBIA), 5.125%, 10/1/16 1,002,290
Aaa AAA 1,000 Florida Ports Financing
Commission, (State Transportation
Trust Fund), (MBIA), (AMT), 1,012,210
5.375%, 6/1/27
- --------------------------------------------------------------------------------------
$ 2,996,750
- --------------------------------------------------------------------------------------
Insured-Water and Sewer -- 24.1%
- --------------------------------------------------------------------------------------
Aaa AAA $ 500 Dade County, Water And Sewer
System, (FGIC), 5.25%, 10/1/26 $ 502,270
Aaa AAA 325 Dade County, Water and Sewer
System, (FGIC), 5.375%, 10/1/16 333,769
Aaa AAA 735 Enterprise Community Development
District, (MBIA), 6.125%, 5/1/24 799,967
Aaa AAA 1,000 Jacksonville, (AMBAC), (AMT),
6.35%, 8/1/25 1,095,869
Aaa AAA 1,000 Lee County IDA, (Bonita Springs),
(MBIA), (AMT), 6.05%, 11/1/20 1,074,230
Aaa AAA 70 North Port, Utility Revenue,
(FGIC), 6.25%, 10/1/17 77,016
Aaa AAA 500 North Port, Utility Revenue,
(FGIC), 6.25%, 10/1/22 550,115
Aaa AAA 400 Titisville, (MBIA), 6.00%, 10/1/24 435,220
Aaa AAA 1,000 Vero Beach, (FGIC),
5.00%, 12/1/21 977,700
- --------------------------------------------------------------------------------------
$ 5,846,156
- --------------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $22,530,409) $ 24,225,639
- --------------------------------------------------------------------------------------
</TABLE>
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, 1998, 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, 1998, the Portfolio's insured
securities by financial institution are as follows:
% of
Market Value Market Value
- --------------------------------------------------------------------------------
American Capital Access (ACA) $ 880,261 3.6%
American Municipal Bond Assurance
Corp. (AMBAC) 4,586,595 18.9
Financial Guaranty Insurance Corp. (FGIC) 6,002,191 24.8
Financial Security Assurance (FSA) 982,250 4.1
Municipal Bond Insurance Assoc. (MBIA) 7,887,607 32.6
- --------------------------------------------------------------------------------
Total $20,338,904 84.0%
- --------------------------------------------------------------------------------
See notes to financial statements
18
<PAGE>
Hawaii Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Tax-Exempt Investments -- 100.0%
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Electric Utilities -- 3.0%
- --------------------------------------------------------------------------------
Baa1 BBB+ $1,500 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 $ 576,450
- --------------------------------------------------------------------------------
$ 576,450
- --------------------------------------------------------------------------------
General Obligations -- 5.2%
- --------------------------------------------------------------------------------
A1 A+ $ 140 Hawaii State, 5.75%, 1/1/11 $ 153,082
Aa2 AA 750 Honolulu, 4.75%, 9/1/17 720,398
Baa1 A 285 Puerto Rico, Public
Improvement, 0.00%, 7/1/15 120,777
- --------------------------------------------------------------------------------
$ 994,257
- --------------------------------------------------------------------------------
Hospitals -- 15.7%
- --------------------------------------------------------------------------------
A A $ 635 Hawaii State Department of
Budget and Finance, (Kapiolani
Health System), 6.00%, 7/1/19 $ 670,763
Aa3 AA 870 Hawaii State Department of
Budget and Finance, (Queens
Health System), 5.75%, 7/1/26 912,507
NR BB 750 Hawaii State Department of
Budget and Finance, (Wahiawa
General Hospital), 7.50%, 7/1/12 816,120
NR BBB+ 300 Hawaii State Department of
Budget and Finance, (Wilcox
Memorial Hospital), 5.35%, 7/1/18 297,087
NR BBB+ 300 Hawaii State Department of
Budget and Finance, (Wilcox
Memorial Hospital), 5.50%, 7/1/28 298,674
- --------------------------------------------------------------------------------
$ 2,995,151
- --------------------------------------------------------------------------------
Housing -- 7.5%
- --------------------------------------------------------------------------------
NR AAA $ 200 Guam Housing Corp., Single
Family, 5.75%, 9/1/31 $ 212,660
Aa1 AA 1,000 Hawaii State Housing Finance
and Development, Single Family,
5.90%, 7/1/27 1,039,639
Aa1 AA 175 Hawaii State Housing Finance
and Development, Single Family,
(AMT), 6.00%, 7/1/26 181,227
- --------------------------------------------------------------------------------
$ 1,433,526
- --------------------------------------------------------------------------------
Industrial Development Revenue /
Pollution Control Revenue -- 6.0%
- --------------------------------------------------------------------------------
Ba2 BB- $ 370 Hawaii State Department of
Transportation, (Continental
Airlines, Inc.), (AMT),
5.625%, 11/15/27 $ 369,963
A1 AA- 550 Puerto Rico Industrial,
Tourist, Educational,
Medical and Environmental
Control Authority, (Upjohn
Co.), 7.50%, 12/1/23 572,545
Baa3 BBB- 180 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.30%, 6/1/23 191,041
- --------------------------------------------------------------------------------
$ 1,133,549
- --------------------------------------------------------------------------------
Insured-Education -- 5.5%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Hawaii State Housing
Development Corp.,
(University of Hawaii),
(AMBAC), 5.65%, 10/1/16 $ 523,370
Aaa AAA 500 University of Hawaii Board
of Regents, University
System, (AMBAC), 5.65%, 10/1/12 525,850
- --------------------------------------------------------------------------------
$ 1,049,220
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 8.9%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Hawaii State Department of
Budget and Finance, (Hawaiian
Electric Co.), (MBIA), (AMT),
5.65%, 10/1/27 $ 1,038,729
Aaa AAA 500 Hawaii State Department of Budget
and Finance, (Hawaiian Electric
Co., Inc.), (AMT), (MBIA), 550,825
6.60%, 1/1/25
Aaa AAA 100 Puerto Rico Electric Power
Authority, "STRIPES", (FSA),
Variable Rate, 7/1/03/(1)/ 113,125
- --------------------------------------------------------------------------------
$ 1,702,679
- --------------------------------------------------------------------------------
Insured-General Obligations -- 16.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 350 Hawaii County, (FGIC),
5.55%, 5/1/10 $ 377,748
Aaa AAA 400 Hawaii State, (FGIC),
5.00%, 10/1/17 393,436
Aaa AAA 250 Honolulu, (FGIC), 5.00%, 11/1/16 247,473
Aaa AAA 305 Kauai County, (MBIA), 5.90%, 2/1/14 325,151
Aaa AAA 910 Maui County, (FGIC), 5.00%, 9/1/17 895,131
See notes to financial statements
19
<PAGE>
Hawaii Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Insured-General Obligations (continued)
- --------------------------------------------------------------------------------
Aaa AAA $ 250 Maui County, (FGIC),
5.25%, 3/1/18 $ 252,475
Aaa AAA 420 Maui County, (FGIC),
5.30%, 9/1/14 430,135
Aaa AAA 250 Maui County, (FGIC),
5.75%, 1/1/13 262,275
- --------------------------------------------------------------------------------
$ 3,183,824
- --------------------------------------------------------------------------------
Insured-Hospitals -- 3.1%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Hawaii State Department of Budget
and Finance, (Queens Health
System), (MBIA), 5.00%, 7/1/28 $ 478,675
Aaa AAA 100 Hawaii State Department of Budget
and Finance, (St. Francis Medical
Center), (CGIC), 6.50%, 7/1/22 108,596
- --------------------------------------------------------------------------------
$ 587,271
- --------------------------------------------------------------------------------
Insured-Housing -- 2.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 485 Honolulu, Mortgage Revenue Bonds,
(Smith Beretania), (FHA Insured)
(MBIA), 7.80%, 7/1/24 $ 518,785
- --------------------------------------------------------------------------------
$ 518,785
- --------------------------------------------------------------------------------
Insured-Transportation -- 9.9%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Hawaii State Airports System,
(AMT), (FGIC), 7.50%, 7/1/20 $ 537,125
Aaa AAA 100 Hawaii State Airports System,
(AMT), (MBIA), 6.90%, 7/1/12 119,049
Aaa AAA 245 Hawaii State Airports System,
(AMT), (MBIA), 7.00%, 7/1/18 265,578
Aaa AAA 650 Hawaii State Harbor Revenue,
(AMT), (FGIC), 6.375%, 7/1/24 706,186
Aaa AAA 250 Hawaii State Harbor Revenue,
(AMT), (MBIA), 7.00%, 7/1/17 266,290
- --------------------------------------------------------------------------------
$ 1,894,228
- --------------------------------------------------------------------------------
Special Tax Revenue -- 1.3%
- --------------------------------------------------------------------------------
NR BBB- $ 250 Virgin Islands PFA,
5.625%, 10/1/25 $ 254,213
- --------------------------------------------------------------------------------
$ 254,213
- --------------------------------------------------------------------------------
Transportation -- 11.2%
- --------------------------------------------------------------------------------
NR BBB $ 200 Guam Airport Authority, (AMT),
6.70%, 10/1/23 $ 218,730
Aa3 AA 715 Hawaii State Highway Revenue,
5.00%, 7/1/12 715,179
Aa3 AA 250 Hawaii State Highway Revenue,
5.50%, 7/1/18 264,663
Baa1 A 1,000 Puerto Rico Highway and
Transportation Authority,
4.75%, 7/1/38 938,099
- --------------------------------------------------------------------------------
$ 2,136,671
- --------------------------------------------------------------------------------
Water and Sewer -- 3.3%
- --------------------------------------------------------------------------------
Aa3 AA $ 600 Honolulu, Water Supply System,
5.80%, 7/1/16 $ 638,130
- --------------------------------------------------------------------------------
$ 638,130
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $17,916,593) $19,097,954
- --------------------------------------------------------------------------------
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 Hawaii
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1998, 46.8% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 0.6% to 21.5% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
See notes to financial statements
20
<PAGE>
Kansas Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Tax-Exempt Investments -- 100.0%
Ratings (Unaudited)
- --------------------
Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Electric Utilities -- 1.4%
- --------------------------------------------------------------------------------
NR BBB $ 150 Guam Power Authority,
6.625%, 10/1/14 $ 166,053
- --------------------------------------------------------------------------------
$ 166,053
- --------------------------------------------------------------------------------
Escrowed/Prerefunded -- 3.6%
- --------------------------------------------------------------------------------
Aaa NR $1,000 Saline County, SFMR, 1983
Series A, 0.00%, 12/1/15 $ 419,850
- --------------------------------------------------------------------------------
$ 419,850
- --------------------------------------------------------------------------------
General Obligations -- 12.8%
- --------------------------------------------------------------------------------
Aa3 NR $ 400 Douglas County, USD #497,
6.00%, 9/1/15 $ 429,416
Aa1 AA 890 Johnson County, USD #229,
5.00%, 10/1/16 887,311
Baa1 A 500 Puerto Rico, 0.00%, 7/1/18 180,560
- --------------------------------------------------------------------------------
$ 1,497,287
- --------------------------------------------------------------------------------
Hospitals -- 7.7%
- --------------------------------------------------------------------------------
NR NR $ 225 Atchison, (Atchison Hospital
Assn.), 5.70%, 11/15/18 $ 226,195
A3 NR 250 Lawrence, (Lawrence
Memorial Hospital), 6.20%, 7/1/19 265,388
NR BBB- 400 Newton, (Newton Healthcare
Corp.), 5.75%, 11/15/24 402,180
- --------------------------------------------------------------------------------
$ 893,763
- --------------------------------------------------------------------------------
Housing -- 27.0%
- --------------------------------------------------------------------------------
Aaa NR $ 65 Kansas City, Mortgage
Revenue, (AMT), (GNMA),
5.30%, 5/1/07 $ 67,009
Aaa NR 70 Kansas City, Mortgage
Revenue, (AMT), (GNMA),
5.30%, 11/1/07 72,262
Aaa NR 155 Kansas City, Mortgage
Revenue, (AMT), (GNMA),
5.90%, 11/1/27 160,563
NR AAA 360 Kansas City, Mortgage
Revenue, (AMT), (GNMA),
7.00%, 12/1/11 380,966
NR AAA 220 Kansas City, Multifamily,
(FHA), 6.70%, 7/1/23 228,510
Aa NR 100 Kansas Development Authority,
Single Family, (FHA),
(Martin Creek), 6.60%, 8/1/34 104,998
Aaa A- 415 Labette County, SFMR,
0.00%, 12/1/14 184,650
Aaa NR 130 Olathe and Labette County, SFMR,
(AMT), (GNMA), 8.10%, 8/1/23 145,919
NR AAA 195 Olathe, Mortgage Revenue,
(AMT), (GNMA), 7.60%, 3/1/07 205,559
NR AAA 250 Olathe, Multifamily,
(FNMA), 6.45%, 6/1/19 265,580
NR AA 210 Puerto Rico Housing Finance
Corp., 7.50%, 4/1/22 221,726
Aaa NR 225 Sedgwick and Shawnee
County, SFMR, (GNMA),
7.75%, 11/1/24/(1)/ 258,563
Aaa NR 390 Sedgwick County, SFMR,
(GNMA), 8.00%, 5/1/25 439,764
Aaa NR 40 Sedgwick County, SFMR,
(GNMA), 8.20%, 5/1/14 45,018
NR AAA 350 Wichita, Multifamily,
(Broadmoor Chelsea
Apartments), (AMT), (FNMA),
5.65%, 7/1/16 360,605
- --------------------------------------------------------------------------------
$ 3,141,692
- --------------------------------------------------------------------------------
Industrial Development Revenue /
Pollution Control Revenue -- 3.7%
- --------------------------------------------------------------------------------
Baa3 BBB- $ 250 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.25%, 6/1/26 $ 270,288
NR NR 160 Topeka IDA, (Resers Fine Foods,
Inc.), (AMT), 5.40%, 4/1/05 158,061
- --------------------------------------------------------------------------------
$ 428,349
- --------------------------------------------------------------------------------
Insured-Education -- 2.1%
- --------------------------------------------------------------------------------
Aaa AAA $ 250 Johnson County Community
College, (Student Commons
And Parking Systems),
(MBIA), 5.05%, 11/15/21 $ 247,448
- --------------------------------------------------------------------------------
$ 247,448
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 7.6%
- --------------------------------------------------------------------------------
Aaa AAA $ 345 Burlington PCR, (Kansas Gas
& Electric Co.), (MBIA),
7.00%, 6/1/31(1) $ 374,818
Aaa AAA 100 Puerto Rico Electric Power
Authority, "STRIPES",
(FSA), Variable Rate, 7/1/02/(2)/ 110,250
See notes to financial statements
21
<PAGE>
Kansas Municipals Portfolio as of July 31, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited)
- --------------------
Principal
Standard Amount
& (000's
Moody's Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Insured-Electric Utilities (continued)
- --------------------------------------------------------------------------------
Aaa AAA $ 400 Wellington Electric Waterworks
And Authority Revenue, (AMBAC),
5.20%, 5/1/23 $ 400,724
- --------------------------------------------------------------------------------
$ 885,792
- --------------------------------------------------------------------------------
Insured-General Obligations -- 9.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 200 County of Johnson Unified School
District, (FGIC), 6.00%, 10/1/16 $ 225,214
Aaa AAA 150 Garnett, Combined Utility
Revenue Bonds, (MBIA),
6.00%, 10/1/17 160,316
Aaa AAA 200 Kansas City, Utility Systems,
(FGIC), 6.375%, 9/1/23 222,806
Aaa AAA 250 Sedgwick County, USD #267,
(AMBAC), 6.15%, 11/1/09 275,728
Aaa AAA 230 Sedgwick County, USD #267,
(AMBAC), 6.15%, 11/1/10 253,161
- --------------------------------------------------------------------------------
$ 1,137,225
- --------------------------------------------------------------------------------
Insured-Hospitals -- 13.0%
- --------------------------------------------------------------------------------
Aaa NR $ 250 Kansas State DFA, (Medical Center
Inc.), (MBIA), 5.50%, 11/15/22 $ 257,398
Aaa AAA 500 Kansas State DFA, (St. Luke's),
(MBIA), 5.375%, 11/15/26 509,055
Aaa AAA 500 Kansas State DFA, (Stormont-Vail)
(MBIA), 5.80%, 11/15/11 536,259
Aaa AAA 200 Olathe, Health Facilities,
(Evangelical Lutheran Good
Samaritan Society), (AMBAC),
6.00%, 5/1/19 214,388
- --------------------------------------------------------------------------------
$ 1,517,100
- --------------------------------------------------------------------------------
Insured-Housing -- 3.4%
- --------------------------------------------------------------------------------
NR AA $ 100 Puerto Rico Housing Finance
Corp., (AMBAC), 7.50%, 10/1/11 $ 103,326
Aaa AAA 180 Sedgwick County, Mortgage
Loan Revenue, (MBIA),
(AMT), (GNMA), 7.50%, 12/1/09 187,947
Aaa AAA 95 Sedgwick County, Mortgage
Loan Revenue, (MBIA), (AMT),
(GNMA), 7.50%, 12/1/10 99,194
- --------------------------------------------------------------------------------
$ 390,467
- --------------------------------------------------------------------------------
Insured-Life Care -- 4.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Kansas State DFA, (Sisters
Of Charity Leavenworth),
(MBIA), 5.00%, 12/1/25 $ 485,815
- --------------------------------------------------------------------------------
$ 485,815
- --------------------------------------------------------------------------------
Transportation -- 3.7%
- --------------------------------------------------------------------------------
NR BBB $ 100 Guam Airport Authority,
6.50%, 10/1/23 $ 108,846
NR BBB 300 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 328,095
- --------------------------------------------------------------------------------
$ 436,941
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $11,145,539) $11,647,782
- --------------------------------------------------------------------------------
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 July 31, 1998, 40.1% of the securities in
the portfolio of investments are backed by bond insurance of various
financial institutions and financial guaranty assurance agencies. The
aggregate percentage by financial institution ranged from 1.0% to 24.5% of total
investments.
/(1)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(2)/ Security has been issued as an inverse floater bond.
See notes to financial statements
22
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS (Unaudited)
Statements of Assets and Liabilities
As of July 31, 1998
<TABLE>
<CAPTION>
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Investments --
Identified cost $ 22,530,409 $ 17,916,593 $ 11,145,539
Unrealized appreciation 1,695,230 1,181,361 502,243
- ------------------------------------------------------------------------------------------------------------------------------------
Investments, at value $ 24,225,639 $ 19,097,954 $ 11,647,782
- ------------------------------------------------------------------------------------------------------------------------------------
Cash $ 550,112 $ 102,777 $ 171,334
Receivable for investments sold -- -- 15,200
Interest receivable 405,094 186,869 165,127
Receivable from the Investment Adviser 4,598 6,085 9,145
Deferred organization expenses 1,423 1,448 1,288
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 25,186,866 $ 19,395,133 $ 12,009,876
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable for daily variation margin on open financial futures contracts $ -- $ -- $ 62
Payable to affiliate for Trustees' fees 16 2 2
Other accrued expenses 6,166 1,554 1,581
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 6,182 $ 1,556 $ 1,645
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $ 25,180,684 $ 19,393,577 $ 12,008,231
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $ 23,485,454 $ 18,212,216 $ 11,508,031
Net unrealized appreciation (computed on the basis of identified cost) 1,695,230 1,181,361 500,200
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 25,180,684 $ 19,393,577 $ 12,008,231
</TABLE>
See notes to financial statements
23
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS (Unaudited) CONT'D
Statement of Operations
For the Six Months Ended July 31, 1998
<TABLE>
<CAPTION>
Florida Hawaii Kansas
Insured Portfolio Portfolio
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------------
Interest $ 671,784 $ 535,079 $ 319,800
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 671,784 $ 535,079 $ 319,800
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Adviser fee $ 22,784 $ 15,085 $ 9,045
Trustees fees and expenses 562 122 122
Custodian fee 9,429 5,492 5,199
Legal and accounting services -- -- 3,359
Amortization of organization expenses 1,208 961 1,092
Miscellaneous 2,828 3,051 3,252
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 36,811 $ 24,711 $ 22,069
- ------------------------------------------------------------------------------------------------------------------------------------
Deduct --
Preliminary reduction of Investment Adviser fee $ 22,784 $ 15,085 $ 9,045
Preliminary allocation of expenses to the Investment Adviser 4,598 6,085 9,145
Reduction of custodian fee 9,429 3,541 3,879
- ------------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 36,811 $ 24,711 $ 22,069
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 671,784 $ 535,079 $ 319,800
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 4,774 $ 231,795 $ 58,514
Financial futures contracts 29,927 (44,338) (20,235)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain $ 34,701 $ 187,457 $ 38,279
- ------------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $(138,295) $(410,525) $(126,855)
Financial futures contracts 12,983 12,298 4,326
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $(125,312) $(398,227) $(122,529)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss $ (90,611) $(210,770) $ (84,250)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 581,173 $ 324,309 $ 235,550
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
24
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS (Unaudited) CONT'D
Statements of Changes in Net Assets
For the Six Months Ended July 31, 1998
<TABLE>
<CAPTION>
Florida Insured Hawaii Kansas
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From operations --
Net investment income $ 671,784 $ 535,079 $ 319,800
Net realized gain 34,701 187,457 38,279
Net change in unrealized appreciation (depreciation) (125,312) (398,227) (122,529)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 581,173 $ 324,309 $ 235,550
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 2,072,110 $ 1,124,326 $ 852,247
Withdrawals (2,322,672) (1,919,192) (498,190)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital transactions $ (250,562) $ (794,866) $ 354,057
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 330,611 $ (470,557) $ 589,607
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of period $24,850,073 $ 19,864,134 $11,418,624
- ------------------------------------------------------------------------------------------------------------------------------------
At end of period $25,180,684 $ 19,393,577 $12,008,231
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
25
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended January 31, 1998
<TABLE>
<CAPTION>
Florida Insured Hawaii Kansas
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From operations --
Net investment income $ 1,337,092 $ 1,031,743 $ 666,134
Net realized gain 301,794 269,040 86,194
Net change in unrealized appreciation (depreciation) 811,156 513,990 382,975
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 2,450,042 $ 1,814,773 $ 1,135,303
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 5,342,239 $ 4,723,447 $ 1,495,952
Withdrawals (7,146,067) (2,688,011) (2,948,351)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital transactions $ (1,803,828) $ 2,035,436 $ (1,452,399)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 646,214 $ 3,850,209 $ (317,096)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 24,203,859 $ 16,013,925 $ 11,735,720
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 24,850,073 $ 19,864,134 $ 11,418,624
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
26
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Florida Insured Portfolio Hawaii Portfolio
---------------------------------------------------- -----------------------------------------------------
Six Months Ended Year Ended January 31, Six Months Ended Year Ended January 31,
July 31, 1998 --------------------------------- July 31, 1998 ----------------------------------
(Unaudited) 1998 1997 1996 1995* (Unaudited) 1998 1997 1996 1995*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets+
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses/(1)/ 0.08%+ 0.07% 0.09% 0.07% 0.01%+ 0.04%+ 0.03% 0.04% 0.06% 0.06%+
Net expenses after
custodian fee
reduction 0.00%+ 0.00% 0.02% 0.00% -- 0.00%+ 0.00% 0.00% 0.00% --
Net investment income 5.47%+ 5.63% 5.76% 5.82% 5.73%+ 5.55%+ 5.70% 5.96% 6.01% 6.03%+
Portfolio Turnover 2% 34% 36% 32% 33% 16% 27% 21% 19% 66%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of
period (000's
omitted) $25,181 $24,850 $24,204 $21,416 $14,400 $19,394 $19,864 $16,014 $15,578 $12,865
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The operating expenses of the Portfolios may reflect a reduction of the
Investment Adviser fee, an allocation of expenses to the Investment Adviser,
or both. Had such actions not been taken, the ratios would have been as
follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses/(1)/ 0.30%+ 0.48% 0.39% 0.39% 0.41%+ 0.26%+ 0.46% 0.43% 0.41% 0.38%+
Expenses after custodian fee
reduction 0.22%+ 0.41% 0.32% 0.32% -- 0.22%+ 0.43% 0.39% 0.35% --
Net investment income 5.25%+ 5.22% 5.46% 5.50% 5.33%+ 5.33%+ 5.27% 5.57% 5.66% 5.70%+
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, March 2, 1994, to January 31,
1995.
/(1)/ The expense ratios for the year ended January 31, 1996 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Portfolios to
increase their expense ratios by the effect of any expense offset
arrangements with its service providers. The expense ratios for each of
the prior periods have not been adjusted to reflect this change.
See notes to financial statements
27
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Kansas Portfolio
---------------------------------------------------------
Six Months Ended Year Ended January 31,
July 31, 1998 ----------------------------------------
(Unaudited) 1998 1997 1996 1995*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average daily net assets:+
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses/(1)/ 0.07%+ 0.05% 0.08% 0.09% 0.01%+
Net expenses after custodian fee reduction 0.00%+ 0.00% 0.00% 0.00% --
Net investment income 5.57%+ 5.79% 5.91% 5.93% 5.68%+
Portfolio Turnover 23% 17% 49% 21% 12%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 12,008 $ 11,419 $11,736 $11,609 $ 8,306
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The operating expenses of the Portfolio may reflect a reduction of the
Investment Adviser fee, an allocation of expenses to the Investment Adviser,
or both. Had such actions not been taken, the ratios would have been as
follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses /(1)/ 0.39%+ 0.57% 0.48% 0.50% 0.43%+
Expenses after custodian fee reduction 0.32%+ 0.52% 0.40% 0.41% --
Net investment income 5.25%+ 5.27% 5.51% 5.52% 5.26%+
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, March 2, 1994, to January 31,
1995.
/(1)/ The expense ratios for the year ended January 31, 1996 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Portfolio to
increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratios for the prior
period have not been adjusted to reflect this change.
See notes to financial statements
28
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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 amended, as non-diversified open-end
management investment companies. The Portfolios 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 the
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 partner- ships 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, deduction 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 contracts 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, the Portfolio will realize a loss in the
amount of 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 sale transaction are 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 or 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
29
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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 reflected as a reduction of expenses on the Statement of Operations.
I Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
J Other -- Investment transactions are accounted for on a trade date basis.
K Interim Financial Statements -- The interim financial statements relating
to July, 31, 1998 and for the six months 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 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, 1998, each
Portfolio incurred advisory fees as follows:
Portfolio Amount Effective Rate*
-----------------------------------------------------------------------------
Florida Insured $22,784 0.19%
Hawaii 15,085 0.16%
Kansas 9,045 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
$22,784, $15,085 and $9,045, respectively, and $4,598, $6,085 and $9,145,
respectively, of expenses related to the operation of the Portfolios were
allocated to BMR. Except as to Trustees of the Portfolio who are not members
of EVM's or BMR's organization, officers and Trustees receive remuneration
for their services to the 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, 1998, 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, 1998, were as follows:
Florida Insured Portfolio
----------------------------------------------------------------------------
Purchases $ 397,822
Sales 506,940
Hawaii Portfolio
----------------------------------------------------------------------------
Purchases $3,117,994
Sales 3,201,605
Kansas Portfolio
----------------------------------------------------------------------------
Purchases $2,837,022
Sales 2,611,636
30
<PAGE>
Eaton Vance Municipals Portfolios as of July 31, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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, 1998, as computed on a
federal income tax basis, are as follows:
Florida Insured Portfolio
----------------------------------------------------------------------------
Aggregate Cost $ 22,530,409
----------------------------------------------------------------------------
Gross unrealized appreciation $ 1,709,749
Gross unrealized depreciation (14,519)
----------------------------------------------------------------------------
Net unrealized appreciation $ 1,695,230
----------------------------------------------------------------------------
Hawaii Portfolio
----------------------------------------------------------------------------
Aggregate Cost $ 17,916,593
----------------------------------------------------------------------------
Gross unrealized appreciation $ 1,189,369
Gross unrealized depreciation (8,008)
----------------------------------------------------------------------------
Net unrealized appreciation $ 1,181,361
----------------------------------------------------------------------------
Kansas Portfolio
----------------------------------------------------------------------------
Aggregate Cost $ 11,145,539
----------------------------------------------------------------------------
Gross unrealized appreciation $ 515,748
Gross unrealized depreciation (13,505)
----------------------------------------------------------------------------
Net unrealized appreciation $ 502,243
----------------------------------------------------------------------------
5 Line of Credit
----------------------------------------------------------------------------
The Portfolios participate with other portfolios and funds managed by BMR
and EVM and its affiliates in a $100 million unsecured line of credit
agreement with a group of banks. 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 fund or portfolio based on
its borrowings at the bank's base rate or at an amount above either the
bank's adjusted certificate of deposit rate, Eurodollar rate or federal
funds effective rate. In addition, a fee computed at an annual rate of 0.10%
on the daily unused portion of the facility is allocated among the
participating portfolios and funds at the end of each quarter. The Florida
Insured Portfolio, the Hawaii Portfolio and the Kansas Portfolio did not
have any significant borrowings or allocated fees during the period ended
July 31, 1998.
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.
A summary of obligations under these financial instruments at July 31, 1998,
is as follows:
Futures
Contracts
Expiration Net Unrealized
Portfolio Date Contracts Positions Depreciation
---------------------------------------------------------------------------
Kansas 9/98 2 U.S. Treasury Bond Short $2,043
---------------------------------------------------------------------------
At July 31, 1998, the Portfolio had sufficient cash and/or securities to
cover margin requirements on open futures contracts.
31
<PAGE>
Eaton Vance Municipals Funds as of July 31, 1998
INVESTMENT MANAGEMENT
<TABLE>
<CAPTION>
Eaton Vance Municipals Funds
<S> <C>
Officers Independent Trustees
Thomas J. Fetter Donald R. Dwight
President President, Dwight Partners, Inc.
James B. Hawkes Samuel L. Hayes, III
Vice President and Trustee Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
Robert B. MacIntosh Business Administration
Vice President
Norton H. Reamer
James L. O'Connor Chairman and Chief Executive Officer,
Treasurer United Asset Management Corporation
Alan R. Dynner John L. Thorndike
Secretary Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
<CAPTION>
Municipals Portfolios
<S> <C>
Officers Independent Trustees
Thomas J. Fetter Donald R. Dwight
President and Portfolio Manager President, Dwight Partners, Inc.
of Florida Insured Municipals
Portfolio
Samuel L. Hayes, III
James B. Hawkes Jacob H. Schiff Professor of Investment
Vice President and Trustee Banking, Harvard University Graduate School of
Business Administration
Robert B. MacIntosh
Vice President and Portfolio Norton H. Reamer
Manager of Hawaii Municipals Chairman and Chief Executive Officer,
Portfolio United Asset Management Corporation
Timothy T. Browse John L. Thorndike
Vice President and Portfolio Formerly Director, Fiduciary Company Incorporated
Manager of Kansas
Municipals Portfolio Jack L. Treynor
Investment Adviser and Consultant
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
</TABLE>
32
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
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
200 Clarendon Street, 16th Floor
Boston, MA 02116
Transfer Agent
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Eaton Vance Municipals Trust II
24 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
3CSRC-9/98
