Eaton Vance Municipals Trust II
For the Hawaii Portfolio
[LOGO]
Semi-Annual Shareholder Report
July 31, 1996
Investment Adviser of Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(617) 482-8260
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
Transfer Agent
First Data Investors Services Group
Attn: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
<TABLE>
<CAPTION>
Hawaii Municipals Portfolio
Portfolio of Investments - July 31, 1996 (Unaudited)
Tax-Exempt Investments - 99.95%
Ratings (Unaudited)
- -------------------- Principal
Amount
Standard (000
Moody's & Poor's Omitted) Security Value
- --------------------------------------------------------------------------------------------
Escrowed/Prerefunded - 0.70%
<S> <C> <C> <C> <C>
Baa1 AAA $ 100 Commonwealth of
Puerto Rico Aqueduct
and Sewer Authority,
Prerefunded to 7/1/98,
7.00%, 7/1/19 $ 107,531
-----------
General Obligations - 18.51%
Aa AA $ 140 State of Hawaii, 5.75%,
1/1/11 $ 143,723
Aa AA 1,000 State of Hawaii, 5.25%,
6/1/13 948,530
Aa AA 750 City and County of
Honolulu, 4.75%,
9/1/17 652,418
NR BBB 590 Government of Guam,
5.375%, 11/15/13 527,259
Baa1 A 500 Puerto Rico Public
Buildings Authority,
Public Education and
Health Facilities, 5.50%,
7/1/21 465,420
NR NR 100 Virgin Islands Public
Finance Authority,
7.25%, 10/1/18 105,713
-----------
$ 2,843,063
-----------
Hospitals - 12.03%
Aa3 AA $ 400 State of Hawaii
Department of Budget
and Finance, Kaiser
Permanente, 6.25%,
3/1/21 $ 409,260
A A 625 State of Hawaii
Department of Budget
and Finance, Kapiolani
Health System, 6.00%,
7/1/19 610,519
Aa AA 600 State of Hawaii
Department of Budget
and Finance, Queens
Health System, 5.75%,
7/1/26 574,410
NR AAA $ 250 Puerto Rico Industrial,
Tourist, Educational,
Medical and
Environmental Control
Authority, Doctor Pila
Hospital Project, (FHA),
6.25%, 8/1/32 $ 253,167
-----------
$ 1,847,356
-----------
Housing - 7.59%
Aa A $1,000 State of Hawaii
Housing Finance and
Development Single
Family Mortgage
Bonds, 5.90%, 7/1/27 $ 992,900
Aa A 175 State of Hawaii
Housing Finance and
Development Single
Family Mortgage
Bonds, (AMT), 6.00%,
7/1/26 172,594
-----------
$ 1,165,494
-----------
Industrial Development/
Pollution Control - 6.22%
A1 AA- $ 550 Puerto Rico Industrial,
Tourist, Educational,
Medical and
Environmental Control
Authority, Upjohn
Company Project,
7.50%, 12/1/23 $ 599,929
Baa3 BB+ 175 Puerto Rico Port
Authority, American
Airlines, (AMT),
6.25%, 6/1/26 174,979
Baa3 BB+ 180 Puerto Rico Port
Authority, American
Airlines, (AMT),
6.30%, 6/1/23 180,583
-----------
$ 955,491
-----------
Insured Education - 6.48%
Aaa AAA $ 500 University of Hawaii
Board of Regents,
University System,
(AMBAC), 5.65%,
10/1/12 $ 498,905
Aaa AAA $ 500 Hawaii State Housing
Development
Corporation, University
of Hawaii, (AMBAC),
5.65%, 10/1/16 $ 495,800
-----------
$ 994,705
-----------
Insured General
Obligations - 12.74%
Aaa AAA $ 700 County of Hawaii,
(FGIC), 5.55%, 5/1/10 $ 707,993
Aaa AAA 305 County of Kauai,
(MBIA), 5.90%, 2/1/14 309,865
Aaa AAA 250 County of Maui,
(FGIC), 5.75%, 1/1/13 253,590
Aaa AAA 250 County of Maui,
(FGIC), 5.125%,
12/15/13 234,793
Aaa AAA 500 Commonwealth of
Puerto Rico, (MBIA),
5.00%, 7/1/21 450,035
-----------
$ 1,956,276
-----------
Insured Hospitals - 1.35%
Aaa AAA $ 100 State of Hawaii
Department of Budget
and Finance Queen's
Medical Center, (FGIC),
6.50%, 7/1/12 $ 102,286
Aaa AAA 100 State of Hawaii
Department of Budget
and Finance St. Francis
Medical Centers, (CGIC),
6.50%, 7/1/22 104,898
-----------
$ 207,184
-----------
Insured Housing - 3.52%
Aaa AAA $ 500 Honolulu Hawaii
City & County
Mortgage Revenue
Bonds, Smith Beretania
Project, (MBIA),
7.80%, 7/1/24 $ 539,820
-----------
Insured Transportation - 12.16%
Aaa AAA $ 500 State of Hawaii Airports
System, (AMT), (FGIC),
7.50%, 7/1/20 $ 548,880
Aaa AAA 100 State of Hawaii Airports
System, (AMT), (MBIA),
6.90%, 7/1/12 112,771
Aaa AAA $ 245 State of Hawaii Airports
System, (AMT), (MBIA),
7.00%, 7/1/18 265,232
Aaa AAA 250 State of Hawaii Harbor
Revenue, (AMT), (MBIA),
7.00%, 7/1/17 269,150
Aaa AAA 650 State of Hawaii Harbor
Revenue, (AMT), (FGIC),
6.375%, 7/1/24 671,879
----------
$ 1,867,912
-----------
Insured Utilities - 7.44%
Aaa AAA $ 500 State of Hawaii
Department of Budget
and Finance, Hawaii
Electric Company, Inc.,
(AMT), (MBIA),
6.60%, 1/1/25 $ 524,215
Aaa AAA 500 State of Hawaii
Department of Budget
and Finance, Hawaii
Electric Company, Inc.,
(AMT), (MBIA),
6.20%, 5/1/26 508,960
Aaa AAA 100 Puerto Rico Electric
Power Authority
"Stripes", (FSA),
Variable, 7/1/03 (1) 109,240
-----------
$ 1,142,415
-----------
Special Tax - 1.66%
Baa1 A $ 275 Puerto Rico Highway
and Transportation
Authority, 5.50%,
7/1/36 $ 255,400
-----------
Transportation - 5.64%
Aa AA $ 715 State of Hawaii
Highway Revenue,
5.00%, 7/1/12 $ 663,070
NR BBB 200 Guam Airport
Authority, (AMT),
6.70%, 10/1/23 203,116
-----------
$ 866,186
-----------
Water and Sewer - 3.91%
Aa AA $ 600 Honolulu City and
County Water Supply
System, 5.80%, 7/1/16 $ 599,958
-----------
Total Tax-Exempt Investments
(identified cost, $14,524,940) $15,348,791
-----------
<CAPTION>
- --------------------------------------------------------------------------------------------
Put Option on Financial Futures Contracts - 0.05%
- --------------------------------------------------------------------------------------------
Contracts Security Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
25 30-year U.S. Treasury
Bond, American,
expiration 9/19/96,
Strike Price $106.00
(identified
cost, $17,742) $ 8,203
-----------
Total Investments
(identified cost, $14,542,682) $15,356,994
===========
(1) The above designated securities have been issued as inverse floater bonds.
AMT - Interest earned from these securities may be considered a tax preference item for
purposes of the Federal Alternative Minimum Tax.
The Portfolio primarily invests in debt securities issued by Hawaii municipalities. The
ability of the issuers of the debt securities to meet their obligations may be affected by
economic developments in a specific industry or municipality. In order to reduce the risk
associated with such economic developments, at July 31, 1996, 43.7% of the securities in the
portfolio of investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The percentage by financial institution ranged from
0.7% to 19.4% of total investments.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Municipals Portfolios
Financial Statements
Statements of Assets and Liabilities
July 31, 1996 (Unaudited)
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
------------------ -------------- --------------
Assets:
Investments --
<S> <C> <C> <C>
Identified cost $ 21,865,013 $ 14,542,682 $ 11,375,782
Unrealized appreciation 672,567 814,312 241,811
------------ ------------ ------------
Total investments, at value (Note 1A) $ 22,537,580 $ 15,356,994 $ 11,617,593
Cash 369,103 41,458 32
Receivable from the Investment Adviser (Note 2) 22,937 27,897 19,494
Interest receivable 385,498 157,398 204,651
Deferred organization expenses (Note 1D) 6,269 5,737 5,668
------------ ------------ ------------
Total assets $ 23,321,387 $ 15,589,484 $ 11,847,438
------------ ------------ ------------
Liabilities:
Payable for when-issued securities (Note 1G) $ 126,767 $ -- $ --
Payable for daily variation margin on open
financial futures contracts (Note 1E) 17,188 10,406 3,438
Demand note payable (Note 5) -- -- 189,000
Payable to affiliate --
Trustees' fees 14 14 14
Accrued expenses 2,395 3,879 2,479
------------ ------------ ------------
Total liabilities $ 146,364 $ 14,299 $ 194,931
------------ ------------ ------------
Net Assets applicable to investors' interest in Portfolio $ 23,175,023 $ 15,575,185 $ 11,652,507
============ ============ ============
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $ 22,552,130 $ 14,774,331 $ 11,414,665
Unrealized appreciation of investments and financial
futures contracts (computed on the basis of identified cost) 622,893 800,854 237,842
------------ ------------ ------------
Total $ 23,175,023 $ 15,575,185 $ 11,652,507
============ ============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
For the Six Months Ended July 31, 1996 (Unaudited)
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
------------------ -------------- --------------
<S> <C> <C> <C>
Investment Income:
Interest income $ 635,898 $ 456,177 $ 342,635
------------ ------------ ------------
Expenses --
Investment adviser fee (Note 2) $ 18,958 $ 12,123 $ 9,288
Compensation of Trustees not members of the
Investment Adviser's organization 58 58 58
Custodian fees (Note 1H) 15,614 11,083 10,474
Legal and accounting services 17,649 17,649 14,549
Bond pricing 3,486 3,116 3,590
Amortization of organization expenses (Note 1D) 1,208 1,103 1,092
Miscellaneous 536 1,379 205
------------ ------------ ------------
Total expenses $ 57,509 $ 46,511 $ 39,256
------------ ------------ ------------
Deduct --
Preliminary reduction of investment adviser fee (Note 2) $ 18,958 $ 12,123 $ 9,288
Preliminary allocation of expenses to the Investment Adviser (Note 2) 22,937 27,897 19,494
Reduction of custodian fee (Note 1H) 15,614 6,491 10,474
------------ ------------ ------------
Total $ 57,509 $ 46,511 $ 39,256
------------ ------------ ------------
Net expenses $ -- $ -- $ --
------------ ------------ ------------
Net investment income $ 635,898 $ 456,177 $ 342,635
------------ ------------ ------------
Realized and Unrealized Gain (Loss):
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 145,608 $ (23,229) $ 11,139
Financial futures contracts 62,720 39,643 10,787
------------ ------------ ------------
Net realized gain $ 208,328 $ 16,414 $ 21,926
------------ ------------ ------------
Change in unrealized appreciation (depreciation) --
Investments $ (1,002,946) $ (541,183) $ (397,352)
Financial futures contracts (49,674) (13,458) (3,143)
------------ ------------ ------------
Net unrealized depreciation $ (1,052,620) $ (554,641) $ (400,495)
------------ ------------ ------------
Net realized and unrealized loss $ (844,292) $ (538,227) $ (378,569)
------------ ------------ ------------
Net decrease in net assets from operations $ (208,394) $ (82,050) $ (35,934)
============ ============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six Months Ended July 31, 1996 (Unaudited)
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
------------------ -------------- --------------
Increase (Decrease) in Net Assets:
From operations --
<S> <C> <C> <C>
Net investment income $ 635,898 $ 456,177 $ 342,635
Net realized gain 208,328 16,414 21,926
Change in unrealized appreciation (depreciation) (1,052,620) (554,641) (400,495)
------------ ------------ ------------
Net decrease in net assets from operations $ (208,394) $ (82,050) $ (35,934)
------------ ------------ ------------
Capital transactions --
Contributions $ 3,152,766 $ 1,093,748 $ 1,257,392
Withdrawals (1,185,149) (1,014,590) (1,177,592)
------------ ------------ ------------
Increase in net assets resulting from capital transactions $ 1,967,617 $ 79,158 $ 79,800
------------ ------------ ------------
Total increase (decrease) in net assets $ 1,759,223 $ (2,892) $ 43,866
Net Assets:
At beginning of period 21,415,800 15,578,077 11,608,641
------------ ------------ ------------
At end of period $ 23,175,023 $ 15,575,185 $ 11,652,507
============ ============ ============
- -----------------------------------------------------------------------------------------------------------------------------
For the Year Ended January 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------
Florida Insured Hawaii Kansas
Portfolio Portfolio Portfolio
---------------- -------------- --------------
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 1,016,847 $ 890,336 $ 590,562
Net realized loss (93,236) (221,382) (12,613)
Change in unrealized appreciation 1,447,272 1,475,473 756,065
------------ ------------ ------------
Net increase in net assets from operations $ 2,370,883 $ 2,144,427 $ 1,334,014
------------ ------------ ------------
Capital transactions --
Contribtutions $ 7,413,811 $ 3,305,491 $ 3,013,009
Withdrawals (2,768,845) (2,736,380) (1,044,410)
------------ ------------ ------------
Increase in net assets resulting from capital transactions $ 4,644,966 $ 569,111 $ 1,968,599
------------ ------------ ------------
Total increase in net assets $ 7,015,849 $ 2,713,538 $ 3,302,613
Net Assets:
At beginning of year 14,399,951 12,864,539 8,306,028
------------ ------------ ------------
At end of year $ 21,415,800 $ 15,578,077 $ 11,608,641
============ ============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Supplementary Data
Florida Insured Portfolio Hawaii Portfolio
----------------------------------------- --------------------------------------
Six Months Ended Year Ended January 31, Six Months Ended Year Ended January 31,
July 31, 1996 ----------------------- July 31, 1996 -------------------
(Unaudited) 1996 1995* (Unaudited) 1996 1995*
--------------- ---------- ---------- --------------- ---------- ---------
Ratios (As a percentage of average
daily net assets)**:
<S> <C> <C> <C> <C> <C> <C>
Net expenses (1) 0.14%+ 0.07% 0.01%+ 0.09%+ 0.06% 0.06%+
Net expenses, after custodian fee reduction (1) 0.00%+ 0.00% -- 0.00%+ 0.00% --
Net investment income 5.80%+ 5.82% 5.73%+ 6.03%+ 6.01% 6.03%+
Portfolio Turnover 23% 32% 33% 19% 19% 66%
**The operating expenses of the Portfolios reflect a reduction of the investment adviser fee and/or allocation of expenses to
the Investment Adviser. Had such actions not been taken, the ratios would have been as follows:
Ratios (As a percentage of average
daily net assets):
Expenses (1) 0.52%+ 0.39% 0.41%+ 0.62%+ 0.41% 0.38%+
Expenses after custodian fee reduction (1) 0.38%+ 0.32% -- 0.53%+ 0.35% --
Net investment income 5.42%+ 5.50% 5.33%+ 5.50%+ 5.66% 5.70%+
+ Annualized.
* For the period from the start of business, March 2, 1994, to January 31, 1995.
(1) The expense ratios for the six months ended July 31, 1996 and year ended January 31, 1996 have been adjusted to reflect a
change in reporting requirements. The reporting guidelines require each Portfolio to increase its expense ratio by the
effect of any expense offset arrangements with its service providers. The expense ratios for the period ended January 31,
1995 have not been adjusted to reflect this change. The expense ratios, after custodian fee reductions, for the year ended
January 31, 1996 are unaudited.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Supplementary Data
Kansas Portfolio
------------------------------------------------
Six Months Ended Year Ended January 31,
July 31, 1996 ----------------------------
(Unaudited) 1996 1995*
------------------ ---------- ----------
Ratios (As a percentage of average daily net assets)**:
<S> <C> <C> <C>
Net expenses (1) 0.18%+ 0.09% 0.01%+
Net expenses, after custodian fee reduction (1) 0.00%+ 0.00% --
Net investment income 5.84%+ 5.93% 5.68%+
Portfolio Turnover 17% 21% 12%
**The operating expenses of the Portfolio reflect a reduction of the investment adviser fee and/or allocation of expenses to the
Investment Adviser. Had such actions not been taken, the ratios would have been as follows:
Ratios (As a percentage of average daily net assets):
Expenses (1) 0.67%+ 0.50% 0.43%+
Expenses, after custodian fee reduction (1) 0.49%+ 0.41% --
Net investment income 5.35%+ 5.52% 5.26%+
+ Annualized.
* For the period from the start of business, March 2, 1994, to January 31, 1995.
(1) The expense ratios for the six months ended July 31, 1996 and year ended January 31, 1996 have been adjusted to reflect a
change in reporting requirements. The reporting guidelines require the Portfolio to increase its expense ratio by the
effect of any expense offset arrangements with its service providers. The expense ratios for the period ended January 31,
1995 have not been adjusted to reflect this change. The expense ratios, after custodian fee reductions, for the year ended
January 31, 1996 are unaudited.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(Unaudited)
(1) Significant Accounting Policies
Florida Insured Municipals Portfolio ("Florida Insured Portfolio"),
Hawaii Municipals Portfolio ("Hawaii Portfolio") and Kansas
Municipals Portfolio ("Kansas Portfolio"), collectively the
Portfolios, are registered under the Investment Company Act of 1940
as non-diversified open-end management investment companies which
were organized as trusts under the laws of the State of New York on
May 1, 1992 for the Hawaii Portfolio and October 25, 1993 for the
Florida Insured Portfolio and Kansas Portfolio. The Declarations of
Trust permit the Trustees to issue interests in the Portfolios. The
following is a summary of significant accounting policies
consistently followed by the Portfolios in the preparation of their
financial statements. The policies are in conformity with generally
accepted accounting principles.
A. Investment Valuations - Municipal bonds are normally valued on
the basis of valuations furnished by a pricing service. Taxable
obligations, if any, for which price quotations are readily
available are normally valued at the mean between the latest bid and
asked prices. Futures contracts and options on financial futures
contracts listed on commodity exchanges are valued at closing
settlement prices. Over the counter options on financial futures
contracts are normally valued at the mean between the latest bid and
asked prices. Short-term obligations, maturing in sixty days or
less, are valued at amortized cost, which approximates value.
Investments for which valuations or market quotations are
unavailable are valued at fair value using methods determined in
good faith by or at the direction of the Trustees.
B. Income - Interest income is determined on the basis of interest
accrued, adjusted for amortization of premium or discount when
required for federal income tax purposes.
C. Income Taxes - The Portfolios are treated as partnerships for
Federal tax purposes. No provision is made by the Portfolios for
federal or state taxes on any taxable income of the Portfolios
because each investor in the Portfolios is ultimately responsible
for the payment of any taxes. Since some of the Portfolios'
investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolios, the Portfolios
normally must satisfy the applicable source of income and
diversification requirements (under the Internal Revenue Code) in
order for their respective investors to satisfy them. The Portfolios
will allocate at least annually among their respective investors
each investor's distributive share of the Portfolios' net taxable
(if any) and tax-exempt investment income, net realized capital
gains, and any other items of income, gain, loss, deductions or
credit. Interest income received by the Portfolios on investments in
municipal bonds which is excludable from gross income under the
Internal Revenue Code, will retain its status as income exempt from
federal income tax when allocated to each Portfolio's investors. The
portion of such interest, if any, earned on private activity bonds
issued after August 7, 1986, may be considered a tax preference item
for investors.
D. Deferred Organization Expenses - Costs incurred by a Portfolio in
connection with its organization are being amortized on the
straight-line basis over five years.
E. Financial Futures Contracts - Upon the entering of a financial
futures contract, a Portfolio is required to deposit ("initial
margin") either in cash or securities an amount equal to a certain
percentage of the purchase price indicated in the financial futures
contract. Subsequent payments are made or received by a Portfolio
("margin maintenance") each day, dependent on the daily fluctuations
in the value of the underlying security, and are recorded for book
purposes as unrealized gains or losses by a Portfolio. A Portfolio's
investment in financial futures contract is designed only to hedge
against anticipated future changes in interest rates. Should
interest rates move unexpectedly, a Portfolio may not achieve the
anticipated benefits of the financial futures contracts and may
realize a loss.
F. Options on Financial Futures Contracts - Upon the purchase of a
put option on a financial futures contract by a Portfolio, the
premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, a Portfolio
will realize a loss in the amount of the cost of the option. When a
Portfolio enters into a closing sales transaction, the Portfolio
will realize a gain or loss depending on whether the sales proceeds
from the closing sales transaction is greater or less than the cost
of the option. When a Portfolio exercises a put option, settlement
is made in cash. The risk associated with purchasing options is
limited to the premium originally paid.
G. When-issued and Delayed Delivery Transactions - The Portfolios
may engage in when-issued and delayed delivery transactions. The
Portfolios record when-issued securities on trade date and maintain
security positions such that sufficient liquid assets will be
available to make payments for the securities purchased. Securities
purchased on a when-issued or delayed delivery basis are marked-to-
market daily and begin accruing interest on settlement date.
H. Expense Reduction - Investors Bank & Trust Company (IBT) serves
as custodian of the Portfolios. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are
determined based on the average daily cash balances each Portfolio
maintains with IBT. All significant credit balances used to reduce
the Portfolios' custodian fees are reported as a reduction of
expenses in the statements of operations.
I. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expense
during the reporting period. Actual results could differ from those
estimates.
J. Other - Investment transactions are accounted for on a trade date
basis.
K. Interim Financial Information - The interim financial statements
relating to July 31, 1996 and for the six month period then ended
have not been audited by independent certified public accountants,
but in the opinion of the Portfolio's management, reflect all
adjustments, consisting of only normal recurring adjustments,
necessary for the fair presentation of the financial statements.
(2) Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Boston Management and
Research (BMR), a wholly-owned subsidiary of Eaton Vance Management
(EVM), as compensation for management and investment advisory
services rendered to each Portfolio. The fee is based upon a
percentage of average daily net assets plus a percentage of gross
income (i.e., income other than gains from the sale of securities).
For the six months ended July 31, 1996, the fee for the Florida
Insured Portfolio, Hawaii Portfolio and Kansas Portfolio was
equivalent to 0.16% of each Portfolio's average net assets and
amounted to $18,958, $12,123 and $9,288 respectively. To enhance the
net income of the Florida Insured Portfolio, Hawaii Portfolio and
Kansas Portfolio, BMR made a preliminary reduction of its fee in the
amount of $18,958, $12,123 and $9,288, respectively, and $22,937,
$27,897 and $19,494, respectively, of expenses related to the
operation of the Portfolios were allocated, on a preliminary basis,
to BMR. Except as to Trustees of the Portfolios who are not members
of EVM's or BMR's organization, officers and Trustees receive
remuneration for their services to the Portfolios out of such
investment adviser fee.
Certain of the officers and Trustees of the Portfolios are officers
and directors/trustees of the above organizations.
Trustees of the Portfolios that are not affiliated with the
Investment Adviser may elect to defer receipt of all or a percentage
of their annual fees in accordance with the terms of the Trustees
Deferred Compensation Plan. For the six months ended July 31, 1996,
no significant amounts have been deferred.
(3) Investments
Purchases and sales of investments, other than U.S. Government
securities, put option transactions and short-term obligations, for
the six months ended July 31, 1996 were as follows:
<TABLE>
<CAPTION>
Florida Hawaii Kansas
Insured Portfolio Portfolio Portfolio
------------------ ------------------- --------------------
<S> <C> <C> <C>
Purchases $8,051,725 $3,333,000 $2,722,686
Sales 4,960,581 2,846,489 1,949,049
</TABLE>
<TABLE>
<CAPTION>
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the investments owned by each Portfolio at
July 31, 1996, as computed on a federal income tax basis, are as follows:
Florida Hawaii Kansas
Insured Portfolio Portfolio Portfolio
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Aggregate Cost $ 21,865,013 $ 14,542,682 $ 11,375,782
============ ============ ============
Gross unrealized appreciation $ 731,624 $ 832,310 $ 322,169
Gross unrealized depreciation 59,057 17,998 80,358
------------ ------------ ------------
Net unrealized appreciation $ 672,567 $ 814,312 $ 241,811
============ ============ ============
</TABLE>
(5) Line of Credit
The Portfolios participate with other portfolios and funds managed
by BMR and EVM in a $120 million unsecured line of credit agreement
with a bank. The line of credit consists of a $20 million committed
facility and a $100 million discretionary facility. Each Portfolio
may temporarily borrow up to 5% of its total assets to satisfy
redemption requests or settle securities transactions. Interest is
charged to each portfolio or fund based on its borrowings at an
amount above either the bank's adjusted certificate of deposit rate,
a variable adjusted certificate of deposit rate, or a federal funds
effective rate. In addition, a fee computed at an annual rate of 1/4
of 1% on the $20 million committed facility and on the daily unused
portion of the $100 million discretionary facility is allocated
among the participating funds and portfolios at the end of each
quarter. At July 31, 1996, the Kansas Portfolio had a balance
outstanding pursuant to this line of credit of $189,000. The Florida
Insured Portfolio, Hawaii Portfolio and the Kansas Portfolio did not
have any significant borrowings or allocated fees during the six
months ended July 31, 1996.
(6) Financial Instruments
The Portfolios regularly trade in financial instruments with off-
balance sheet risk in the normal course of their investing
activities to assist in managing exposure to various market risks.
These financial instruments include written options and futures
contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent
the investment a Portfolio has in particular classes of financial
instruments and does not necessarily represent the amounts
potentially subject to risk. The measurement of the risks associated
with these instruments is meaningful only when all related and
offsetting transactions are considered.
<TABLE>
<CAPTION>
A summary of obligations under these financial instruments at July
31, 1996 is as follows:
Futures
Contracts Net Unrealized
Portfolio Expiration Date Contracts Position Depreciation
- ---------- -------------------- ------------ ---------- ----------------
<S> <C> <C> <C> <C>
Florida Insured 9/96 25 U.S. Treasury Bond Short $(49,674)
Hawaii 9/96 15 U.S. Treasury Bond Short (13,458)
Kansas 9/96 5 U.S. Treasury Bond Short (3,969)
At July 31, 1996, the Portfolios had sufficient cash and/or securities segregated to cover margin
requirements on open futures contracts.
</TABLE>
INVESTMENT MANAGEMENT FOR HAWAII
PORTFOLIO
OFFICERS
Thomas J. Fetter
President, Director
James B. Hawkes
Vice President, Trustee
Robert B. MacIntosh
Vice President
James L. O'Connor
Treasurer
Thomas Otis
Secretary
INDEPENDENT TRUSTEES
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers
of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of
Investment Banking, Harvard
University Graduate School of
Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
