Eaton Vance Municipals Trust II
For the High Yield 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
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<CAPTION>
High Yield Municipals Portfolio
Portfolio of Investments
July 31, 1996
(Unaudited)
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Tax-Exempt Investments -- 100%
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Principal
Amount
(000
Omitted) Security Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assisted Living -- 3.8%
$2,500 Arizona Health Facilities Authority, Care Institute-Mesa Project, 7.625%, 1/1/26 $2,265,825
1,000 Chester County, Pennsylvania, IDA, Senior LifeChoice of Kimberton (AMT), 8.5%,
9/1/25 1,018,770
1,600 Delaware County, Pennsylvania, Industrial Development Authority, Senior
Quarters at Glen Riddle Project (AMT), 8.625%, 9/1/25 1,600,400
------------
$4,884,995
------------
Cogeneration Facilities -- 8.7%
$3,500 Maryland Energy Cogeneration, AES Warrior Run Project (AMT), 7.4%, 9/1/19 $3,639,160
3,500 Palm Beach County, Florida, Osceola Power Project (AMT), 6.95%, 1/1/22 3,208,730
3,500 Pennsylvania Economic Development Financing Authority, Northampton
Generating Project (AMT), 6.6%, 1/1/19 3,315,305
1,000 Pennsylvania Economic Development Finance Authority, Northampton
Generating Project-Subordinated (AMT), 6.875%, 1/1/11 968,710
------------
$11,131,905
------------
Colleges & Universities -- 1.6%
$2,000 New Hampshire Higher Educational and Health Facilities Authority, Colby-Sawyer
College, 7.5%, 6/1/26 $2,024,720
------------
Escrowed -- 4.3%
$1,400 Colorado Health Facilities Authority, Liberty Heights Project, 0%, 7/15/20 $266,868
2,995 Colorado Health Facilities Authority, Liberty Heights Project, 0%, 7/15/22 484,831
10,000 Dawson Ridge Metropolitan District #1, Douglas County, Colorado, 0%, 10/1/22 1,592,100
3,500 Dawson Ridge Metropolitan District #1, Douglas County, Colorado, 0%, 10/1/22 557,235
3,295 Illinois Development Finance Authority, Regency Park Project, 0%, 7/15/25 420,244
1,000 Montgomery County, Pennsylvania, United Hospitals, 8.375%, 11/1/11 1,131,680
1,000 Montgomery County, Pennsylvania, United Hospitals, 7.5%, 11/1/15 1,088,880
------------
$5,541,838
------------
Hospitals -- 22.9%
$2,500 Hidalgo County, Texas, Health Services Corp., Mission Hospital, Inc., 6.875%, 8/15/26 $2,492,025
3,000 Louisiana Public Finance Authority, General Health Systems Project, 6.8%, 11/1/16 2,993,010
3,000 Lufkin, Texas, Memorial Health System, 6.875%, 2/15/26 2,998,020
3,000 Massachusetts Health and Education Facilities Authority, Sisters of Providence
Hospital, 6.625%, 11/15/22 2,935,680
3,000 Massachusetts Health and Education Facilities Authority, Milford-Whitinsville Hospital 3,089,190
7.75%, 7/15/17
1,000 Michigan State Hospital Finance Authority, Central Michigan Community Hospital, 6.25%,
10/1/27 940,100
275 Missouri Health and Education Facilities Authority, Jefferson Memorial Hospital, 6%,
8/15/23 246,703
1,950 Missouri Health and Education Facilities Authority, Jefferson Memorial Hospital
Association Project, 6.8%, 5/15/25 1,939,957
2,205 Philadelphia, Pennsylvania, Graduate Health System, 6.625%, 7/1/21 2,130,603
2,650 Prince George's, Maryland, Greater Southeast Health, 6.375%, 1/1/23 2,442,691
1,000 San Bernadino, California, San Bernadino Community Hospital, 7.875%, 12/1/08 1,006,050
1,325 San Bernadino, California, San Bernadino Community Hospital, 7.875%, 12/1/19 1,333,016
1,500 Scranton-Lackawanna, Pennsylvania, Moses Taylor Hospital, 8.5%, 7/1/20 1,604,445
1,500 Vermont Health & Education, Northwest Medical Center Project, 6.25%, 9/1/18 1,430,940
1,500 Wells County, Indiana, Caylor-Nickel Medical Center, 8.75%, 4/15/12 1,696,965
------------
$29,279,395
------------
Housing -- 1.9%
$2,500 Lucas County, Ohio, EDA, County Creek Project (AMT), 8%, 7/1/26 $2,377,775
------------
Industrial Development Revenue Bonds -- 25.5%
$2,000 Camden County, New Jersey, Holt Hauling and Warehousing System, Inc. Project (AMT),
9.875%, 1/1/21 $2,011,020
2,000 Florence County, Kentucky, IDR, Stone Container Co., 7.375%, 2/1/07 2,046,700
3,000 Gulf Coast Waste Disposal, Texas, Champion International Corporation (AMT),
6.875%, 12/1/28 3,093,720
2,700 Hancock County, Kentucky, Southwire Co. Project (AMT), 7.75%, 7/1/25 2,756,483
2,500 Kansas City, Missouri, IDA, AFCO Cargo MCI (AMT), 8.5%, 1/1/17 2,708,800
1,000 Michigan Strategic, PCR, Roseville K-Mart Co., 6.25%,10/1/06 904,790
3,500 Michigan Strategic, PCR, S.D. Warren Series-87C (AMT), 7.375%, 1/15/22 3,544,240
1,000 Mobile, Alabama, IDA, Mobile Energy Project, 6.95%, 1/1/20 1,032,800
1,135 New Albany, Indiana, IDA, K-Mart Co., 7.4%, 6/1/06 1,118,531
2,750 New Hampshire Business Finance Authority, Crown Paper Co. (AMT), 7.875%, 7/1/26 2,779,563
1,500 New Jersey EDA, Holt Hauling and Warehousing System, Inc. (AMT), 9.75%, 12/15/16 1,554,480
500 New Jersey EDA, 777 Pattison Ave., Inc. (AMT), 8.95%, 12/15/18 521,935
2,500 State of Ohio Solid Waste, Republic Engineered Steel, Inc. Project (AMT), 9%, 6/1/21 2,568,450
500 Philadelphia, Pennsylvania, IDA, Refrigerated Enterprises (AMT), 9.05%, 12/1/19 528,890
3,345 Riverdale Village, Illinois, IDA, ACME Metals, Inc. Project (AMT), 7.95%, 4/1/25 3,374,771
2,000 Tooele County, Utah, IDA, Laidlaw/USPCI Incineration, Inc. (AMT), 6.75%, 8/1/10 2,054,460
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$32,599,633
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Insured Water and Sewer -- 2.1%
$3,000 Detroit, Michigan, Sewer Revenue, (FGIC), Variable Rate, 7/1/23 (1) $2,737,500
------------
Lease/Certificates of Participation -- 1.5%
$9,190 Los Angeles, California, COP, Disney Parking Project, 0%, 9/1/19 $1,877,425
------------
Life Care -- 2.8%
$3,500 Delaware County, Pennsylvania, White Horse Village, 7.3%, 7/1/14 $3,510,675
------------
Miscellaneous -- 1.7%
$2,300 Atlanta, Georgia, Downtown Development Authority, Central Atlanta Hospitality
Childcare, Inc., 8%, 1/1/26 $2,178,468
------------
Multi-Purpose Utilities -- 3.5%
$2,500 New York State Energy, Research and Development Authority, Long Island Lighting Co.
(AMT), 7.15%, 9/1/19 $2,493,900
2,000 Southern California Public Power Authority, Variable Rate, 7/1/12 (1) 2,010,000
------------
$4,503,900
------------
Nursing Homes -- 9.6%
$1,500 Cuyahoga County, Ohio, Health Care Facilities, Judson Retirement Community, 8.875%,
7/1/12 1,614,915
1,250 Greene County, Ohio, IDA, Fairview Extended Care-91, 10.125%, 1/1/11 1,411,725
1,850 Massachusetts Health & Education Facilities Authority, Fairview Extended Care,
10.125%,1/1/11 2,089,353
2,500 Massachusetts Industrial Finance Authority, AGE Institute of Massachusetts, 8.05%, 11/25 2,471,775
1,000 Mississippi Business Finance Corp., Magnolia Health Care-95A, 7.99%, 7/1/25 973,540
2,175 Missouri Economic Development Authority, Beverly Enterprises, Inc., 8%, 12/1/02 2,257,324
1,250 Wilkins Area, Pennsylvania, IDA, Fairview Extended Care, 10.25%, 1/1/21 1,417,525
------------
$12,236,157
------------
Pooled Loans -- 1.6%
$2,000 Osceola County, Florida, IDA, Community Pooled Loan-93, 7.75%, 7/1/17 $2,011,240
------------
Solid Waste -- 4.6%
$10,090 Mercer County, New Jersey, Solid Waste Improvement Bonds (AMT), 0%, 4/1/15 $2,403,337
3,500 Robbins, Cook County, Illinois, Resource Recovery-94B (AMT), 9.25%, 10/15/14 3,412,500
------------
$5,815,837
------------
Transportation -- 3.9%
$1,500 Denver, Colorado, Special Facilities Airport Revenue Bonds, United Airlines
Project (AMT), 6.875%, 10/1/32 $1,526,460
500 Eagle County, Colorado, Airport Terminal Project, 7.5%, 5/1/21 511,750
10,000 San Joaquin Hills, California, Toll Roads, 0%, 1/1/25 1,500,600
10,000 San Joaquin Hills, California, Toll Roads, 0%, 1/1/26 1,403,600
------------
$4,942,410
------------
Total Tax-Exempt Investments (identified cost $127,211,380) $127,653,873
============
(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 purpose of the Federal
Alternative Minimum Tax.
At July 31, 1996, the concentration of the Portfolio's investments in various states
determined as a percentage of total investments is as follows:
Pennsylvania 14.40%
Others, representing less than 10% individually 85.60%
See notes to financial statements
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<CAPTION>
High Yield Municipals Portfolio
Financial Statements
Statement of Assets and Liabilities
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July 31, 1996 (Unaudited)
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<S> <C> <C>
Assets:
Investments, at value (Note 1A) (identified cost, $127,211,380) $127,653,873
Cash 60,280
Receivable for investments sold 985,227
Interest receivable 1,672,766
Deferred organization expenses (Note 1D) 9,990
------------
Total assets $130,382,136
Liabilities:
Demand note payable (Note 5) $3,308,000
Payable to affiliate --
Trustees' fees 564
Accrued expenses 7,535
------------
Total liabilities 3,316,099
------------
Net Assets applicable to investors' interest in Portfolio $127,066,037
============
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $126,623,544
Unrealized appreciation of investments (computed on the basis of identified cost) 442,493
------------
Total $127,066,037
============
See notes to financial statements
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<CAPTION>
Statement of Operations
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For the Six Months Ended July 31, 1996 (Unaudited)
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<S> <C> <C>
Investment Income:
Interest income $3,662,446
Expenses --
Investment adviser fee (Note 2) $304,120
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 3,925
Custodian fee 13,760
Legal and accounting services 21,649
Amortization of organization expenses (Note 1D) 200
Miscellaneous 14,198
----------
Total expenses $357,852
----------
Deduct --
Preliminary reduction of investment advisor fee (Note 2) $302,904
Deduct reduction of custodian fee (Note 1H) 10,948
----------
Total $313,852
----------
Net expenses 44,000
----------
Net investment income $3,618,446
Realized and Unrealized Loss on Investments:
Net realized loss on investments (identified cost basis) ($405,635)
Change in unrealized appreciation (depreciation) of investments (1,209,116)
----------
Net realized and unrealized loss on investments (1,614,751)
----------
Net increase in net assets resulting from operations $2,003,695
==========
See notes to financial statements
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<CAPTION>
Statements of Changes in Net Assets
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Six Months Year
Ended Ended
July 31, 1996 January 31,
(Unaudited) 1996*
-------------- --------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $3,618,446 $1,186,284
Net realized gain (loss) on investments (405,635) 9,767
Change in unrealized appreciation (depreciation) of investments (1,209,116) 1,651,609
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Net increase in net assets resulting from operations $2,003,695 $2,847,660
------------ -----------
Capital transactions --
Contributions $61,611,160 $71,481,492
Withdrawals (8,626,285) (2,351,685)
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Increase in net assets resulting from capital transactions $52,984,875 $69,129,807
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Total increase in net assets $54,988,570 $71,977,467
Net Assets:
At beginning of period 72,077,467 100,000
------------ -----------
At end of period $127,066,037 $72,077,467
============ ===========
* For the period from the start of business, August 7, 1995, to January 31, 1996.
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Supplementary Data
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Six Months Year
Ended Ended
July 31, 1996 January 31,
(Unaudited) 1996*
-------------- --------------
Ratios (as a percentage of average daily net assets)**:
Expenses 0.11%+ 0.06%+
Expenses after custodian fee reduction 0.09%+ 0.06%+
Net investment income 7.18%+ 6.95%+
Portfolio Turnover 26% 32%
** The operating expenses of the Portfolio reflect a reduction of the investment adviser fee. Had such action
not been taken, the ratios would have been as follows:
Ratios (as a percentage of average daily net assets):
Expenses 0.71%+ 0.71%+
Expenses after custodian fee reduction 0.69%+ 0.71%+
Net investment income 6.57%+ 6.30%+
+ Annualized.
* For the period from the start of business, August 7, 1995, to January 31, 1996.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(Unaudited)
(1) Significant Accounting Policies
High Yield Municipals Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a non-diversified open-end management
investment company. The Portfolio, which was organized as a trust under
the laws of the State of New York on May 1, 1995, seeks to provide high
current income exempt from regular federal income tax. The Declaration
of Trust permits the Trustees to issue interests in the Portfolio. The
following is a summary of significant accounting policies of the
Portfolio. 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 listed on commodity exchanges are valued at closing settlement
prices. Short-term obligations, maturing in sixty days or less, are
valued at amortized cost, which approximates value. Investments for
which valuations or market quotations are unavailable are valued at fair
value using methods determined in good faith by or at the direction of
the Trustees.
B.Income -- Interest income is determined on the basis of interest
accrued, adjusted for amortization of premium or discount when required
for federal income tax purposes.
C.Income Taxes -- The Portfolio is treated as a partnership for Federal
tax purposes. No provision is made by the Portfolio for federal or state
taxes on any taxable income of the Portfolio because each investor in
the Portfolio is ultimately responsible for the payment of any taxes.
Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of
income and diversification requirements (under the Internal Revenue
Code) in order for its investors to satisfy them. The Portfolio will
allocate at least annually among its investors each investor's
distributive share of the Portfolio's net taxable (if any) and tax-
exempt investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. Interest income
received by the Portfolio on investments in municipal bonds, which is
excludable from gross income under the Internal Revenue Code, will
retain its status as income exempt from Federal income tax when
allocated to the Portfolio's investors. The portion of such interest, if
any, earned on private activity bonds issued after August 7, 1986 may be
considered a tax preference item for investors.
D.Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-
line basis over five years.
E.Financial Futures Contracts -- Upon the entering of a financial
futures contract, the Portfolio is required to deposit ("initial
margin") either in cash or securities an amount equal to a certain
percentage of the purchase price indicated in the financial futures
contract. Subsequent payments are made or received by the Portfolio
("margin maintenance") each day, dependent on the daily fluctuations in
the value of the underlying security, and are recorded for book purposes
as unrealized gains or losses by the Portfolio. The Portfolio's
investment in financial futures contracts is designed only to hedge
against anticipated future changes in interest rates. Should interest
rates move unexpectedly, the Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
F.Legal Fees -- Legal fees and other related expenses incurred as part
of negotiations of the terms and requirements of capital infusions, or
that are expected to result in the restructuring of or a plan of
reorganization for an investment are recorded as realized losses.
Ongoing expenditures to protect or enhance an investment are treated as
operating expenses.
G.When-issued and Delayed Delivery Transactions -- The Portfolio may
engage in when-issued and delayed delivery transactions. The Portfolio
records when-issued securities on trade date and maintains security
positions such that sufficient liquid assets will be available to make
payments for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
accruing interest on settlement date.
H.Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT
receives a fee reduced by credits which are determined based on the
average daily cash balance the Portfolio maintains with IBT. All
significant credit balances used to reduce the Portfolio's custodian
fees are reported as a reduction of expenses in the statment 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 months then ended have not
been audited by independent certified public accountants, but in the
opinion of the Portfolio'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
the Portfolio. The fee is based upon a percentage of average daily net
assets plus a percentage of gross income (i.e. income other than gains
from the sale of securities). For the six months ended July 31, 1996,
the fee was equivalent to 0.60% (annualized) of the Portfolio's average
net assets for such period and amounted to $304,120. To enhance the net
income of the Portfolio, BMR made a preliminary reduction of its fee in
the amount of $302,904. Except as to Trustees of the Portfolio who are
not members of EVM's or BMR's organization, officers and Trustees
receive remuneration for their services to the Portfolio out of such
investment adviser fee. Certain of the officers and Trustees of the
Portfolio are officers and directors/trustees of the above
organizations.
Trustees of the Portfolio that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their
annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the six months ended July 31, 1996, no
significant amounts have been deferred.
(3)Investments
Purchases and sales of investments, other than U.S. Government
securities and short term obligations, aggregated $83,108,151 and
$25,803,085, respectively.
(4)Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the
investments owned at July 31, 1996, as computed on a federal income tax
basis, were as follows:
Aggregate cost $127,211,380
============
Gross unrealized appreciation $1,797,573
Gross unrealized depreciation 1,355,080
------------
Net unrealized appreciation $442,493
============
(5)Line of Credit
The Portfolio participates with other portfolios and funds managed by
BMR and EVM in a $120 million unsecured line of credit agreement with a
bank. The line of credit consists of a $20 million committed facility
and a $100 million discretionary facility. Borrowings will be made by
the Portfolio solely to facilitate the handling of unusual and/or
unanticipated short-term cash requirements. 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
portfolios and funds at the end of each quarter. The Portfolio did not
have any significant borrowing or allocated fees during the six months
ended July 31, 1996. At July 31, 1996, the Portfolio had a loan balance
outstanding pursuant to this line of credit of $3,308,000.
(6)Financial Instruments
The Portfolio regularly trades in financial instruments with off-balance
sheet risk in the normal course of its investing activities to assist in
managing exposure to various market risks. These financial instruments
include written options and futures contracts and may involve, to a
varying degree, elements of risk in excess of the amounts recognized for
financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial
instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting
transactions are considered. The Portfolio did not have any open
obligations under these financial instruments at July 31, 1996.
INVESTMENT MANAGEMENT FOR HIGH YIELD 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
