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[LOGO OF EATON VANCE MUTUAL FUNDS APPEARS HERE]
[PHOTOGRAPH OF EDUCATION SIGN APPEARS HERE]
Investing
for the
21st
Century(R)
Semiannual Report June 30, 1998
EATON VANCE
MUNICIPAL BOND
FUND
[PHOTOGRAPH OF HIGHWAY APPEARS HERE]
Eaton Vance
Global Management-Global Distribution
[PHOTOGRAPH OF BROOKLYN BRIDGE APPEARS HERE]
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Eaton Vance Municipal Bond Fund as of June 30, 1998
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INVESTMENT UPDATE
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[PHOTOGRAPH OF THOMAS J. FETTER APPEARS HERE]
Thomas J. Fetter,
Portfolio Manager
Investment Environment
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The Economy
. In the first half of 1998, the U.S. economy continued to benefit from a
confluence of favorable trends, including robust growth, historically low
unemployment, and tame inflation.
. Gross domestic product increased by a stronger-than-expected 5.4% in the first
quarter, before slowing to a 1.4% pace in the second quarter. On the inflation
front, the Consumer Price Index rose only 1.6% in the year ending June, 1998.
. The municipal market underperformed the taxable bond market during the
six-month period. The Lehman Brothers Municipal Bond Index/1/ had a return of
2.7%, trailing the 4.2% return for the Lehman Government Bond Index./1/
The Fund
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Management Discussion
. The Fund's largest sector weighting remained escrowed bonds. Because escrowed
bonds have been pre-refunded by their issuers and are backed by Treasury bond
payments, they are of the very highest quality.
. Long-term care facilities continued to offer good opportunities for municipal
investors. The depth of Eaton Vance's municipal research department has
provided a major advantage in pursuing the non-rated segment of the market.
. The Fund's average maturity remained at the longer-end of its range to take
advantage of attractive yields. We continued to focus on improving the Fund's
call protection.
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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.
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Performance for the Past Six Months
. The Fund's Class A shares had a total return of 2.3% during the period from
inception on January 7, 1998 through June 30, 1998. This return was the result
of an increase in NAV to $10.01 per share from $10.00 per share and the
reinvestment of $0.22 in dividends./2/
. The Fund's Class B shares had a total return of 0.9% during the period from
inception on January 14, 1998 through June 30, 1998. This return was the
result of a decline in NAV to $9.91 per share from $10.00 per share and the
reinvestment of $0.182 in dividends./2/
. During the six months ended June 30, 1998, the Fund's Class I shares had a
total return of 3.3%. This return resulted from an increase in net asset value
(NAV) to $10.90 per share on June 30, 1998 from $10.84 on December 31, 1997
and the reinvestment of $0.289 in dividends.
. The risk-adjusted performance of the Fund's I shares through June 30 earned a
Five-Star Overall Rating among municipal bond funds covered by Morningstar,
Inc./3/ - a nationally-recognized monitor of mutual fund performance.
Your Investment at Work
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Port of Camas-Washougal WA
Public Industrial Corp.
James River Project
. These bonds refunded an earlier issue that financed for the construction of a
pollution control facility in Camas-Washougal.
. Fort James (formerly James River Corp.) is a major paper manufacturer, active
in a number of paper grades, and is a large employer in the Port Camas area.
This project was well-received by environmentalists and investors alike
because it addresses the important issue of pollution.
. This investment was the result of solid, in-depth research, long a hallmark at
Eaton Vance. Rated BBB- by S&P and non-rated by Moody's, this bond has an
attractive 6.70% coupon and generates excellent income for the Portfolio.
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Fund Information
as of June 30, 1998
Performance/4/ Class A Class B Class I
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Average Annual Total Returns (at net asset value)
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One Year N.A. N.A. 12.3%
Five Years N.A. N.A. 7.2
Ten Years N.A. N.A. 9.1
Life of Fund+ 2.3 0.9 7.9
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
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One Year N.A. N.A. 12.3%
Five Years N.A. N.A. 7.2
Ten Years N.A. N.A. 9.1
Life of Fund+ -2.6 -4.0 7.9
+Inception Dates - Class A: 1/7/98; Class B: 1/14/98; Class I:3/16/78
5 Largest Sectors/5/
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By total investments
[BAR GRAPH APPEARS HERE]
Escrowed/Prerefunded 23.8%
Insured Hospitals* 9.0%
Transportation 9.0%
IDB/Pollution Control 6.7%
Nursing Homes 6.7%
/1/It is not possible to invest directly in an Index. /2/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 the Fund's Class B
shares. /3/Morningstar proprietary ratings reflect historical risk-adjusted
performance through 6/30/98 and are subject to change every month. Funds are
assigned ratings from 1 star (lowest) to 5 stars (highest). Morningstar
ratings are calculated from the Fund's 3-, 5-, and 10-year average annual
returns (with fee adjustment) in excess of 90-day Treasury bill returns, and
a risk factor that reflects fund performance below 90-day Treasury bill
returns. The top 10% of the funds in a category receive 5 stars. The Fund's
Class I shares were rated 5 stars for the 3-year period (1549 funds), for the
5-year period (860 funds), and for the 10-year period (349 funds). Ratings
are for Class I shares only. /4/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. /5/As of 6/30/98; may not be representative of the
Portfolio's current or future investments. The 5 largest sector weightings
accounted for 55.2% of the Portfolio's investments. *Private insurance does
not remove the interest rate risks that are 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.
2
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Eaton Vance Municipal Bond Fund as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Tax-Exempt Investments -- 100.0%
Ratings (Unaudited) Principal
- -------------------
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
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Assisted Living -- 2.1%
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NR NR $ 1,000 Bell County, TX, Health
Facilities, (Care Institute,
Inc., Texas), 9.00%, 11/1/24 $ 1,167,990
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NR NR 1,000 St. Paul, MN, Housing and
Redevelopment, (Care Institute,
Inc.-Highland), 8.75%, 11/1/24 1,178,600
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$ 2,346,590
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Colleges and Universities -- 4.5%
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A3 A- $ 3,250 New York State Dormitory
Authority, (State University),
5.125%, 5/15/21(1) $ 3,198,195
A3 A- 1,500 New York State Dormitory
Authority, (State University),
7.50%, 5/15/11 1,831,065
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$ 5,029,260
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Electric Utilities -- 3.8%
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Aa2 AA $ 1,000 Colorado Springs, CO, Utility
System, 6.75%, 11/15/21 $ 1,089,670
NR NR 1,500 Long Island, NY, Power
Authority, 7.00%, 12/1/29(2)(3) 1,541,250
Baa2 BBB+ 1,500 Massachusetts Municipal
Wholesale Electric Co.,
6.75%, 7/1/11 1,621,335
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$ 4,252,255
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Escrowed / Prerefunded -- 23.8%
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Aaa NR $ 2,500 Boston City Hospital, MA,
FHA Insured, Prerefunded
to 8/15/00, 7.625%, 2/15/21 $ 2,725,750
Aaa NR 14,000 Dawson Ridge, Metropolitan
District #1, CO, Escrowed to
Maturity, 0.00%, 10/1/22 3,650,500
Aaa NR 940 Greene County, OH, IDA,
(Fairview Extended Care),
Prerefunded to 1/1/01,
10.125%, 1/1/11 1,098,945
Aaa NR 1,500 Indiana Transportation
Finance Authority, Prerefunded
to 11/1/02, 6.25%, 11/1/16 1,649,145
NR NR 1,000 Maricopa County, AZ, IDA,
Place Five and The
Greenery Projects,
Escrowed to Maturity,
8.625%, 1/1/11 1,315,830
Aaa NR $ 5,500 Massachusetts Turnpike
Authority, Escrowed to
Maturity, 5.00%, 1/1/20 5,516,114
Aaa AAA 655 New Hampshire Higher
Educational and Health
Facilities, (Riverwoods
at Exeter), Prerefunded
to 3/1/03, 9.00%, 3/1/23 804,589
Aaa AAA 1,000 New Jersey EDA, (Keswick
Pines Project), Prerefunded
to 1/1/04, 8.75%, 1/1/24 1,228,500
Aaa AAA 1,550 New York State Medical Care
Facilities Finance Agency,
(Brookdale Medical Center),
Prerefunded to 2/15/05,
6.85%, 2/15/17(1) 1,803,642
Aaa AAA 420 New York State Medical
Care Facilities Finance
Agency, Prerefunded to
8/15/00, 7.875%, 8/15/20(1) 461,622
Aaa AAA 665 North Carolina Eastern
Municipal Power, Escrowed
to Maturity, 6.50%, 1/1/18 794,389
Aaa AAA 2,500 San Joaquin Hills Transportation
Corridor Agency, CA, Toll Road
Bonds, Escrowed to Maturity,
0.00%, 1/1/14 1,164,375
Aaa AAA 10,000 San Joaquin Hills
Transportation Corridor
Agency, CA, Toll Road
Bonds, Escrowed to
Maturity, 0.00%, 1/1/25 2,612,100
Aaa NR 6,000 Savannah, GA, EDA,
Escrowed to Maturity,
0.00%, 12/1/21 1,683,840
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$ 26,509,341
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Hospitals -- 6.1%
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Aa3 AA $ 1,500 Greenville, SC, Hospital
System, 5.25%, 5/1/23 $ 1,503,885
NR BBB 2,000 Louisiana PFA, General
Health Systems Project,
6.80%, 11/1/16 2,222,140
A3 A- 405 New York State Medical
Care Facilities Finance
Agency, Mental Health
Services, 7.875%, 8/15/20(1) 443,868
NR AA+ 2,500 Rochester, MN, Health
Care Facilities Revenue,
(Mayo Foundation), 5.50%,
11/15/27 2,582,475
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$ 6,752,368
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See notes to financial statements
3
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Eaton Vance Municipal Bond Fund as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Housing -- 5.8%
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NR AA $ 430 Arkansas Development
Finance Authority, SFMR,
8.00%, 8/15/11/(1)/ $ 460,779
Aa2 NR 605 Colorado HFA, Single
Family Access Program,
7.90%, 12/1/24 677,074
NR NR 1,000 Florence, KY, Housing
Facilities, (Blue Grass
Housing), 7.625%, 5/1/27 1,099,100
NR NR 1,280 Lake Creek, CO,
Affordable Housing Corp.,
8.00%, 12/1/23 1,350,298
NR NR 1,000 Maricopa County, AZ, IDA,
Multifamily, (National
Health Facilities II
Project), 6.375%, 1/1/19 998,300
Aa2 AA 160 North Carolina Single
Family Mortgage Revenue,
8.125%, 9/1/19 163,550
NR A 1,650 Travis County, TX, HFC
Multifamily, (Travis
Station Apartments),
6.75%, 4/1/19/(1)/ 1,748,687
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$ 6,497,788
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Industrial Development Revenue /
Pollution Control Revenue -- 6.7%
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B2 B $ 1,000 Apache County, AZ, IDA,
(Tuscon Electric Power
Co.), 5.85%, 3/1/28 $ 1,010,290
NR NR 775 Florence County, SC,
(Stone Container Co.),
7.375%, 2/1/07 836,496
NR NR 1,000 Iowa Finance Authority,
Commercial Development
Revenue, (Southbridge
Mall), 6.375%, 12/1/13 1,014,660
NR NR 1,750 New Jersey EDA, (Holt
Hauling), 7.75%, 3/1/27 1,976,975
NR BBB- 2,450 Port Camas-Washougan, WA,
(James River Project),
6.70%, 4/1/23 2,624,318
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$ 7,462,739
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Insured-Electric Utilities -- 1.7%
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Aaa AAA $ 1,000 Cleveland, OH, Public
Power System Revenue,
(MBIA), 5.00%, 11/15/20 $ 982,110
Aaa AAA $ 800 Puerto Rico Electric
Power Authority,
"STRIPES", (FSA),
Variable Rate, 7/1/03/(2)/ $ 909,000
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$ 1,891,110
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Insured-Hospitals -- 9.0%
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Aaa AAA $ 1,000 Fredericksburg, VA, IDA,
Hospital Facility,
(FGIC), "INFLOS",
Variable Rate, 8/15/23/(2)/ $ 1,185,000
Aaa AAA 1,000 Illinois HFA,
(Rush-Presbyterian - St.
Lukes Medical Center),
(MBIA), "INFLOS",
Variable Rate, 10/1/24/(2)/ 1,183,750
Aaa NR 1,000 Kalamazoo, MI, HFA,
(MBIA), 5.50%, 5/15/28 1,027,610
Aaa AAA 1,000 King County, WA, Public
Hospital District No. 1,
(AMBAC), 6.00%, 9/1/20 1,043,170
Aaa AAA 1,250 Mahoning County, OH,
Hospital Facilities
Revenue, (Forum Health),
(MBIA), 5.00%, 11/15/17 1,229,363
Aaa NR 2,000 Medina County, OH,
Hospital Revenue, (Medina
Hospital), (AMBAC),
5.00%, 2/1/16 1,961,000
Aaa AAA 1,000 Rhode Island HEFA, (Rhode
Island Hospital), (FGIC),
"INFLOS", Variable Rate,
8/15/21/(2)/ 1,200,000
Aaa AAA 1,000 Salt Lake City, UT, (IHC
Hospitals Inc.),
"INFLOS", (AMBAC),
Variable Rate, 5/15/20/(2)/ 1,181,250
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$ 10,011,143
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Insured-Housing -- 2.0%
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Aaa AAA $ 1,000 SCA MFMR Receipts,
Burnsville, MN, (FSA),
7.10%, 1/1/30 $ 1,094,090
Aaa AAA 1,000 SCA MFMR Receipts,
Springfield, MO, (FSA),
7.10%, 1/1/30 1,094,090
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$ 2,188,180
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Insured-Special Tax Revenue -- 1.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,500 Tampa, FL, Sports Authority,
(MBIA), 5.25%, 1/1/17 $ 1,522,380
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$ 1,522,380
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See notes to financial statements
4
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Eaton Vance Municipal Bond Fund as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Insured-Transportation -- 2.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,000 Columbus Municipal
Airport Authority, OH,
(AMBAC), 5.00%, 1/1/28 $ 1,953,260
Aaa AAA 1,000 Triborough Bridge and
Tunnel Authority of New
York, "RITES", (AMBAC),
Variable Rate, 1/1/12/(2)(4)/ 1,151,250
- --------------------------------------------------------------------------------
$ 3,104,510
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Insured-Water and Sewer -- 1.8%
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Aaa AAA $ 2,000 Pittsburgh, PA, Water and
Sewer Authority, (FSA),
5.00%, 9/1/19 $ 1,965,260
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$ 1,965,260
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Lease Revenue /
Certificates of Participation -- 1.9%
- --------------------------------------------------------------------------------
NR NR $ 1,000 Hardeman County, TN,
(Correctional Facilities
Corp.), 7.75%, 8/1/17 $ 1,129,200
A1 NR 1,000 Kenton County, KY,
(Public Properties
Corp.), 5.00%, 3/1/29 965,720
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$ 2,094,920
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Life Care -- 2.8%
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Aaa AAA $ 1,060 Loudoun County, VA, IDA,
(Falcons Landing), 8.75%,
11/1/24 $ 1,347,811
NR NR 600 Tax Revenue Exempt
Securities Trust,
Community Health
Provider, (Pooled Loan
Program Various States
Trust Certificates),
6.00%, 12/1/36 612,372
NR NR 1,000 Vermont IDA, (Wake Robin
Corp.), 8.75%, 4/1/23 1,133,620
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$ 3,093,803
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Miscellaneous -- 3.6%
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NR BB- $ 1,000 New Hampshire State
Business Finance
Authority, 7.75%, 1/1/22 $ 1,163,420
NR NR $ 1,500 New Jersey Sports and
Exposition Authority,
(Monmouth Park), 8.00%,
1/1/25 $ 1,714,035
NR NR 1,000 Santa Fe, NM, Crow Hobbs
Project, 8.50%, 9/1/16 1,121,550
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$ 3,999,005
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Nursing Homes -- 6.7%
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NR NR $ 1,440 Bell County, TX,
(Riverside Healthcare,
Inc. - Normandy Terrace),
9.00%, 4/1/23 $ 1,755,115
NR NR 990 Clovis, NM, IDR,
(Retirement Ranches,
Inc.), 7.75%, 4/1/19 1,094,257
NR NR 395 Covington-Allegheny
County, VA, IDA, (Beverly
Enterprises), 9.375%,
9/1/01/(1)/ 422,721
NR NR 1,100 Massachusetts IFA, (Age
Institute of Massachusetts),
8.05%, 11/1/25 1,243,275
NR NR 1,265 Montgomery, PA, IDA,
(Advancement of Geriatric
Health Care Institute),
8.375%, 7/1/23 1,372,373
NR NR 360 Okaloosa County, FL,
(Beverly Enterprises),
10.75%, 10/1/03 372,164
NR NR 680 Tarrant County Health
Facilities, TX, 10.25%,
9/1/19 721,983
NR NR 469 Wisconsin Health Facility
Authority, (Villa
Clement), 8.75%, 6/1/12 470,285
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$ 7,452,173
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Special Tax Revenue -- 2.4%
- --------------------------------------------------------------------------------
Aa3 AA- $ 2,500 Michigan State Trunk Line,
5.50%, 11/1/18/(3)/ $ 2,664,850
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$ 2,664,850
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Transportation -- 9.0%
- --------------------------------------------------------------------------------
A1 A $ 758 Indiana Transportation
Finance Authority, 6.25%,
11/1/16 $ 821,702
Baa1 BBB+ 2,640 Metropolitan Transportation
Authority, NY, Commuter
Facilities Revenue,
5.50%, 7/1/17 2,705,314
Aa3 A+ 2,000 New Jersey Turnpike
Authority, 5.00%, 6/15/17 1,977,020
See notes to financial statements
5
<PAGE>
Eaton Vance Municipal Bond Fund as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Transportation (continued)
- --------------------------------------------------------------------------------
Baa1 A $ 2,000 Puerto Rico Highway and
Transportation Authority,
4.75%, 7/1/38 $ 1,885,920
Baa1 A 2,500 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/36 2,639,600
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$ 10,029,556
- --------------------------------------------------------------------------------
Water and Sewer -- 2.1%
- --------------------------------------------------------------------------------
A1 A+ $ 2,375 Richmond, VA, Public
Utility Revenue, 0.00%,
1/15/28 $ 2,339,399
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$ 2,339,399
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $99,691,043) $111,206,630
- --------------------------------------------------------------------------------
At June 30, 1998, the concentration of the Fund's investments in the various
states, determined as a percentage of total investments, is as follows:
New York 12%
Massachusetts 10%
Others, representing less 78%
than 10% individually
The Fund invests primarily in debt securities issued by 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 June 30, 1998, 18.6% of the securities in
the portfolio of investments are backed by bond insurance of various
financial institutions and financial guaranty insurance agencies. The
aggregate percentage by financial institution range from 2.1% to 6.6% of
total investments.
(1) Security has been segregated to cover when-issued securities.
(2) Security has been issued as an inverse floater bond.
(3) When-issued security.
(4) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. It is the
Portfolio's intention to hold the security until maturity. At June 30, 1998,
the value of these securities amounted to $1,151,250 or 1.0% of the
Portfolio's net assets.
See notes to financial statements
6
<PAGE>
Eaton Vance Municipal Bond Fund as of June 30, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of June 30, 1998
Assets
- --------------------------------------------------------------------------------
Investments, at value (identified cost, $99,691,043) $111,206,630
Cash 3,018,495
Receivable for investments sold 3,060,718
Receivable for Fund shares sold 205,139
Interest receivable 1,792,551
- --------------------------------------------------------------------------------
Total assets $119,283,533
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for investments purchased $ 1,824,249
Payable for when-issued securities 4,190,773
Payable for Fund shares redeemed 73,978
Distributions payable 253,839
Payable to affiliate for Trustees' fees 4,162
Other accrued expenses 35,014
- --------------------------------------------------------------------------------
Total liabilities $ 6,382,015
- --------------------------------------------------------------------------------
Net Assets $112,901,518
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Paid-in capital $ 90,824,846
Accumulated undistributed net realized gain (computed
on the basis of identified cost) 10,757,677
Accumulated distributions in excess of net investment income (196,592)
Net unrealized appreciation (computed on the basis of
identified cost) 11,515,587
- --------------------------------------------------------------------------------
Total $112,901,518
- --------------------------------------------------------------------------------
Class A Shares
- --------------------------------------------------------------------------------
Net Assets $ 11,404,533
Shares Outstanding 1,139,844
Net Asset Value and Redemption Price Per Share
(net assets / shares of beneficial interest outstanding) $ 10.01
Maximum Offering Price Per Share
(100 / 95.25 of $10.01) $ 10.51
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Net Assets $ 3,364,526
Shares Outstanding 339,362
Net Asset Value, Offering Price and Redemption Price Per Share
(net assets / shares of beneficial interest outstanding) $ 9.91
- --------------------------------------------------------------------------------
Class I Shares
- --------------------------------------------------------------------------------
Net Assets $ 98,132,459
Shares Outstanding 9,000,410
Net Asset Value, Offering Price and Redemption Price Per Share
(net assets / shares of beneficial interest outstanding) $ 10.90
- --------------------------------------------------------------------------------
On sales of $25,000 or more, the offering price of Class A shares is reduced.
Statement of Operations
For the Six Months Ended
June 30, 1998
Investment Income
- --------------------------------------------------------------------------------
Interest $ 3,098,753
- --------------------------------------------------------------------------------
Total investment income $ 3,098,753
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 247,551
Transfer agent and dividend disbursing agent fees 32,463
Trustees fees and expenses 6,230
Distribution fees
Class B 5,158
Custodian fee 35,254
Registration fees 20,584
Printing and postage 11,868
Legal and accounting services 3,586
Miscellaneous 14,052
- --------------------------------------------------------------------------------
Total expenses $ 376,746
- --------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee $ 19,524
- --------------------------------------------------------------------------------
Total expense reductions $ 19,524
- --------------------------------------------------------------------------------
Net expenses $ 357,222
- --------------------------------------------------------------------------------
Net investment income $ 2,741,531
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 872,406
Financial futures contracts 66,712
- --------------------------------------------------------------------------------
Net realized gain $ 939,118
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ (435,359)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ (435,359)
- --------------------------------------------------------------------------------
Net realized and unrealized gain $ 503,759
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 3,245,290
- --------------------------------------------------------------------------------
See notes to financial statements
7
<PAGE>
Eaton Vance Municipal Bond Fund as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Six Months Ended
Increase (Decrease) June 30, 1998 Year Ended
in Net Assets (Unaudited) December 31, 1997
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 2,741,531 $ 5,084,860
Net realized gain 939,118 2,037,037
Net change in unrealized
appreciation (depreciation) (435,359) 4,742,435
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 3,245,290 $ 11,864,332
- --------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (182,163) $ --
Class B (30,573) --
Class I (2,521,665) (5,084,860)
In excess of net investment
income
Class B (234) --
Class I -- (125,335)
- --------------------------------------------------------------------------------
Total distributions to shareholders $ (2,734,635) $ (5,210,195)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial
interest --
Proceeds from sales of shares
Class A $ 11,367,987 $ --
Class B 3,353,568 --
Class I 11,285,733 8,318,871
Net asset value of shares issued to
shareholders in payment of
distributions declared
Class A 78,577 --
Class B 14,363 --
Class I 1,265,203 2,708,543
Cost of shares redeemed
Class A (18,217) --
Class B (5,080) --
Class I (7,326,654) (13,489,827)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Fund share transactions $ 20,015,480 $ (2,462,413)
- --------------------------------------------------------------------------------
Net increase in net assets $ 20,526,135 $ 4,191,724
- --------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1998 December 31,
Net assets (Unaudited) 1997
- --------------------------------------------------------------------------------
At beginning of period $ 92,375,383 $ 88,183,659
- --------------------------------------------------------------------------------
At end of period $ 112,901,518 $ 92,375,383
- --------------------------------------------------------------------------------
Accumulated
distributions in excess
of net investment income
included in net assets
- --------------------------------------------------------------------------------
At end of period $ (196,592) $ (203,488)
- --------------------------------------------------------------------------------
See notes to financial statements
8
<PAGE>
Eaton Vance Municipal Bond Fund as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1998 -----------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
---------------------------- -----------------------------------------------
Class A* Class B** Class I Class I Class I Class I Class I Class I
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of period $10.000 $10.000 $ 10.840 $10.070 $10.210 $9.260 $10.630 $ 9.950
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.257 $ 0.208 $ 0.287 $ 0.584 $ 0.605 $ 0.604 $ 0.611 $ 0.614
Net realized and unrealized gain (loss) 0.011 (0.089) 0.062 0.785 (0.143) 0.962 (1.369) 0.692
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.268 $ 0.119 $ 0.349 $ 1.369 $ 0.462 $ 1.566 $(0.758) $ 1.306
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.258) $(0.208) $ (0.289) $(0.584) $(0.594) $(0.604) $(0.611) $ (0.619)
In excess of net investment income -- (0.001) -- (0.015) (0.008) (0.012) (0.001) (0.007)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.258) $(0.209) $ (0.289) $(0.599) $(0.602) $(0.616) $(0.612) $ (0.626)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of period $10.010 $ 9.910 $ 10.900 $10.840 $10.070 $10.210 $ 9.260 $ 10.630
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 2.32% 0.93% 3.25% 14.13% 4.78% 17.40% (7.27)% 13.52%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $11,405 $ 3,365 $ 98,132 $92,375 $88,184 $96,410 $90,802 $114,425
Ratios (As a percentage of average daily net assets):
Expenses/(2)/ 0.67%+ 1.37%+ 0.73%+ 0.81% 0.78% 0.76% 0.80% 0.72%
Expenses after custodian fee reduction/(2)/ 0.63%+ 1.33%+ 0.69%+ 0.77% 0.74% -- -- --
Net investment income 5.16%+ 4.38%+ 5.35%+ 5.69% 6.12% 6.16% 6.26% 5.91%
Portfolio turnover 19% 19% 19% 34% 30% 58% 58% 86%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the commencement of offering of Class A shares, January
6, 1998, to June 30, 1998.
** For the period from the commencement of offering of Class B shares, January
14, 1998, to June 30, 1998.
/(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)/ The expense ratios for the year ended December 31, 1995 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund to increase
its expense ratio 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
9
<PAGE>
Eaton Vance Municipal Bond Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
-----------------------------------------------------------------------------
Eaton Vance Municipal Bond Fund (the Fund) (formerly the Eaton Vance
Municipal Bond Fund, L.P.) is a diversified 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 Fund is a series of Eaton Vance Mutual Funds Trust
(the Trust). The Fund offers three 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 contingent deferred
sales charge (see Note 9). Class I shares are sold at net asset value. 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. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its 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 available 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 are normally valued at the mean between the latest bid and asked
prices. Investments, if any, for which there are no such valuations are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees. Short-term obligations, maturing in sixty days or
less, are valued at amortized cost, which approximates value.
B Income -- Interest income is determined on the basis of interest accrued
and discount earned, adjusted for amortization of premium or discount on
long-term debt securities when required for federal income tax purposes.
C Income Taxes -- Interest income received by the Fund 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 Fund'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 shareholders. No provision is made by
the Fund for federal or state taxes on any taxable income of the Fund
because each investor is individually responsible for the payment of any
taxes on his share of such taxable income.
D Financial Futures Contracts -- Upon the entering of a financial futures
contract, the Fund 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 Fund ("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 Fund. The Fund's
investment in financial futures contracts is designed only to hedge against
anticipated future changes in interest rates. Should interest rates move
unexpectedly, the Fund may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss.
E Put Options on Financial Futures Contracts -- Upon the purchase of a put
option on a financial futures contract by the Fund, the premium paid is
recorded as an investment, the value of which is marked-to-market daily.
When a purchased option expires, the Fund will realize a loss in the amount
of the cost of the option. When the Fund enters into a closing sale
transaction, the Fund 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 the Fund exercises a put option, settlement is
made in cash. The risk associated with purchasing options is limited to the
premium originally paid.
F When-issued and Delayed Delivery Transactions -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities
10
<PAGE>
Eaton Vance Municipal Bond Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT`D
purchased on a when-issued or delayed delivery basis are marked-to-market
daily and begin accruing interest on settlement date.
G Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Fund. Pursuant to the custodian agreement, IBT receives a
fee reduced by credits which are determined based on the average daily cash
balances the Fund maintains with IBT. All significant credit balances used
to reduce the Fund's custodian fees are reported as a reduction of expenses
in the Statement of Operations.
H 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 amounts.
I Other -- Investment transactions are accounted for on a trade date basis.
J Interim Financial Information -- The interim financial statements relating
to June 30, 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
are paid in the form of additional shares or, at the election of the
shareholder, in cash. 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.
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
------------------------------------------------------------------------------
Transactions in shares of beneficial interest were as follows:
Six Months Ended
June 30, 1998*
Class A (Unaudited)
------------------------------------------------------------------------------
Sales 1,133,799
Issued to shareholders electing to receive payment of
distributions in Fund shares 7,870
Redemptions (1,825)
------------------------------------------------------------------------------
Net increase 1,139,844
------------------------------------------------------------------------------
* For the period from the commencement of offering of Class A
shares, January 6, 1998, to June 30, 1998.
Six Months Ended
Class B June 30, 1998*
(Unaudited)
------------------------------------------------------------------------------
Sales 338,434
Issued to shareholders electing to receive payment
of distributions in Fund shares 1,448
Redemptions (520)
------------------------------------------------------------------------------
Net increase 339,362
------------------------------------------------------------------------------
* For the period from the commencement of offering of Class B
shares, January 14, 1998, to June 30, 1998.
Six Months Ended
June 30, 1998
Class I (Unaudited)
------------------------------------------------------------------------------
Sales 1,035,560
Issued to shareholders electing to receive payment
of distributions in Fund shares 116,199
Redemptions (672,513)
Issued to Eaton Vance Municipal Bond
Fund, L.P. Partners 8,521,164
------------------------------------------------------------------------------
Net increase 9,000,410
------------------------------------------------------------------------------
11
<PAGE>
Eaton Vance Municipal Bond Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT`D
Transactions in shares of partnership interest for the year ended December
31, 1997 were as follows:
Class I Year Ended December 31, 1997
------------------------------------------------------------------------------
General Partners Limited Partners
------------------------------------------------------------------------------
Sales -- 811,929
Issued to partners electing
to receive payment of
distributions in shares 8,204 256,996
Redemptions -- (1,310,465)
------------------------------------------------------------------------------
Net increase (decrease) 8,204 (241,540)
------------------------------------------------------------------------------
4 Purchases and Sales of Investments
------------------------------------------------------------------------------
The Fund invests primarily in debt securities. The ability of the issuers of
the debt securities held by the Fund to meet their obligations may be
affected by economic developments in a specific industry or municipality.
Purchases and sales of investments, other than short-term obligations and
put option transactions, aggregated $37,110,564 and $19,973,665,
respectively.
5 Investment Adviser Fee and Other Transactions
with Affiliates
------------------------------------------------------------------------------
The investment adviser fee, computed at the monthly rate of 0.025% (0.300%
per annum) of the average daily net assets and 3.00% of gross income
(excluding net realized gains on sales of securities) up to $500 million and
at reduced rates as daily net assets exceed that level, was earned by Eaton
Vance Management (EVM), as compensation for management and investment
advisory services rendered to the Fund. For the six months ended June 30,
1998, the fee was equivalent to 0.48% (annualized) of the Fund's average
daily net assets for such period and amounted to $247,551. Except as to
Trustees of the fund who are not members of EVM's organization, officers and
Trustees receive remuneration for their services to the Fund out of such
investment adviser fee.
Trustees of the Fund 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 June 30, 1998, no significant amounts have been
deferred.
Certain of the officers and Trustees of the Portfolio are officers and
directors/trustees of the above organization.
6 Line of Credit
------------------------------------------------------------------------------
The Fund participates with other portfolios and funds managed by EVM and
affiliates in a $100 million unsecured line of credit with a group of banks.
Borrowings will be made by the Fund solely to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Interest is
charged to each participating portfolio or fund based on its borrowings at
an amount above either the Eurodollar rate or federal funds rate. In
addition, a fee computed at an annual rate of 0.10% on the daily unused
portion of the line of credit is allocated among the participating
portfolios and funds at the end of each quarter. The Fund did not have any
significant borrowings during the six months ended June 30, 1998.
7 Federal Income Tax Basis of Investments
------------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at June 30, 1998, as computed on a federal income tax
basis, were as follows:
Aggregate cost $99,691,043
------------------------------------------------------------------------------
Gross unrealized appreciation $11,535,010
Gross unrealized depreciation (19,423)
------------------------------------------------------------------------------
Net unrealized appreciation $11,515,587
------------------------------------------------------------------------------
8 Financial Instruments
------------------------------------------------------------------------------
The Fund 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
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 Fund 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. There were
no open obligations under these financial instruments at June 30, 1998.
12
<PAGE>
Eaton Vance Municipal Bond Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT`D
9 Distribution Plan
------------------------------------------------------------------------------
The Fund has adopted a distribution plan (Class B Plan) pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Class B Plan requires
the Fund to pay the Principal Underwriter, Eaton Vance Distributors, Inc.
(EVD) amounts equal to 1/365 of 0.75% of the Fund's average daily net assets
attributable to Class B shares for providing ongoing distribution services
and facilities to the Fund. The Fund will automatically discontinue payments
to EVD during any period in which there are no Uncovered Distribution
Charges, which are equivalent to the sum of (i) 5% of the aggregate amount
received by the Fund for the 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 (see Note 10) and
amounts theretofore paid to EVD. The Fund paid or accrued $5,158 for Class B
shares, for the six months ended June 30, 1998, to or payable to EVD
representing 0.75% (annualized) of average daily net assets for Class B
shares. At June 30, 1998, the amount of Uncovered Distribution Charges of
EVD calculated under the Plan was approximately $135,000 for Class B shares.
In addition, the Plans authorize the Fund to make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in amounts
not exceeding 0.25% of the 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 the Fund to make quarterly service fee
payments to the Principal Underwriter and Authorized Firms in amounts not
expected to exceed 0.25% per annum of the Fund's average daily net assets
attributable to 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.
Service fee payments will be made for personal services and/or the
maintenance of shareholder accounts. Service fees are separate and distinct
from the sales commissions and distribution fees payable by the Fund to EVD,
and, as such are not subject to automatic discontinuance when there are no
outstanding Uncovered Distribution Charges of EVD. Class A expects to begin
making service fee payments during the quarter ending March 31, 1999. Class
B expects to begin accruing for service fees during the quarter ending March
31, 1999.
10 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 shares acquired by reinvestment of
dividends or capital gain distributions. The Class B CDSC is imposed at
declining rates that begin at 5% in the first and second year of redemption
after purchase, declining one percentage point each subsequent year. No CDSC
is levied on shares which have been sold to EVM or its affiliates or to
their respective employees or clients. CDSC charges are paid to EVD to
reduce the amount of Uncovered Distribution Charges calculated under the
Fund's Distribution Plans. CDSC charges received when no Uncovered
Distribution Charges exist will be credited to the Fund. No CDSC charges
were received by EVD for the six months ended June 30, 1998.
11 Special Meeting of Partners
------------------------------------------------------------------------------
On December 12, 1997, a special meeting of the partners of Eaton Vance
Municipal Bond Fund, L.P. was held for the purpose of voting on the matters
listed below. On October 27, 1997, the record date of the meeting, the Fund
had 8,582,837 shares outstanding and had 5,215,713 shares represented at
the December 12, 1997 meeting.
Item 1. To approve the Agreement and Plan of Reorganization set forth as
Exhibit A to the Proxy Statement dated October 22, 1997.
Item 2. To approve the revision of certain of the Fund's fundamental
investment restrictions as follows:
2A. Amend Restriction (1) concerning investing in any one issuer.
2B. Amend Restriction (2) concerning borrowing.
2C. Eliminate Restriction (3) concerning pledging.
2D. Amend Restriction (4) concerning purchases on margin.
2E. Reclassify and amend Restriction (5) concerning short sales.
2F. Amend Restriction (6) concerning underwriting securities.
2G. Amend Restriction (7) concerning real estate.
2H. Amend Restriction (9) concerning lending.
2I. Eliminate Restriction (10) concerning joint trading.
2J. Amend and reclassify Restriction (11) concerning investing in
securities held by affiliates.
13
<PAGE>
Eaton Vance Municipal Bond Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT`D
2K. Eliminate Restriction (12) concerning investing in investment
companies.
2L. Eliminate Restriction (13) concerning unseasoned issuers.
2M. Reclassify and amend Restriction (14) concerning investing in
restricted securities.
2N. Eliminate Restriction (15) concerning concentration.
The results of the vote on the proposals were as follows:
Proposal 1 2A 2B
---------------------------------------------------------------------------
Vote No. of Shares No. of Shares No. of Shares
---------------------------------------------------------------------------
Affirmative 4,941,649 4,815,845 4,673,615
Against 94,940 180,377 304,140
Abstain 179,125 219,492 237,959
---------------------------------------------------------------------------
Total 5,215,714 5,215,714 5,215,714
---------------------------------------------------------------------------
Proposal 2C 2D 2E
---------------------------------------------------------------------------
Vote No. of Shares No. of Shares No. of Shares
---------------------------------------------------------------------------
Affirmative 4,710,169 4,633,363 4,681,189
Against 268,197 356,067 295,284
Abstain 237,348 226,284 239,241
---------------------------------------------------------------------------
Total 5,215,714 5,215,714 5,215,714
---------------------------------------------------------------------------
Proposal 2F 2G 2H
---------------------------------------------------------------------------
Vote No. of Shares No. of Shares No. of Shares
---------------------------------------------------------------------------
Affirmative 4,729,508 4,767,653 4,696,155
Against 265,919 208,398 260,370
Abstain 220,287 239,663 259,189
---------------------------------------------------------------------------
Total 5,215,714 5,215,714 5,215,714
---------------------------------------------------------------------------
Proposal 2I 2J 2K
---------------------------------------------------------------------------
Vote No. of Shares No. of Shares No. of Shares
---------------------------------------------------------------------------
Affirmative
4,736,427 4,798,579 4,783,975
Against
179,059 175,792 189,761
Abstain 300,228 241,343 241,978
---------------------------------------------------------------------------
Total 5,215,714 5,215,714 5,215,714
---------------------------------------------------------------------------
Proposal 2L 2M 2N
---------------------------------------------------------------------------
Vote No. of Shares No. of Shares No. of Shares
---------------------------------------------------------------------------
Affirmative 4,781,429 4,802,728 4,800,641
Against 205,404 163,649 186,558
Abstain 228,881 249,337 228,515
---------------------------------------------------------------------------
Total 5,215,714 5,215,714 5,215,714
---------------------------------------------------------------------------
12 Transfer of Net Assets
-----------------------------------------------------------------------------
On January 1, 1998, Eaton Vance Municipal Bond Fund, L.P. transferred
substantially all of its assets and liabilities to Eaton Vance Municipal
Bond Fund pursuant to a Plan of Reorganization dated December 12, 1997. In
accordance with the agreement, Eaton Vance Municipal Bond Fund, L.P., at
the closing, issued 8,521,164 Class I shares of the Fund, having an
aggregate value of $92,375,383. As a result, the Fund issued one Class I
share for each share of Eaton Vance Municipal Bond Fund, L.P. The
transaction was structured for tax purposes to qualify as a tax free
reorganization under the Internal Revenue Code. The Eaton Vance Municipal
Bond Fund, L.P.'s net assets at the date of the transaction were
$92,375,383, including $11,950,946 of unrealized appreciation.
13 Name Change
----------------------------------------------------------------------------
Effective January 1, 1998, Eaton Vance Municipal Bond Fund, L.P. changed
its name to Eaton Vance Municipal Bond Fund.
14
<PAGE>
Eaton Vance Municipal Bond Fund as of June 30, 1998
INVESTMENT MANAGEMENT
Eaton Vance Municipal Bond Fund
Officers
M. Dozier Gardner
President and Trustee
James B. Hawkes
Vice President and Trustee
William H. Ahern, Jr.
Vice President
Thomas J. Fetter
Vice President and
Portfolio Manager
Robert B. MacIntosh
Vice President
Michael B. Terry
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer, United Asset Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
15
<PAGE>
Investment Adviser
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
Municipal Bond Fund
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.
- --------------------------------------------------------------------------------
MBSRC-8/98
