<PAGE>
[LOGO]
[PHOTO]
Semiannual Report June 30, 1999
EATON VANCE
MUNICIPAL
BOND FUND
Global Management - Global Distribution
[PHOTO]
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
INVESTMENT UPDATE
[PHOTO]
Thomas J. Fetter
President
INVESTMENT ENVIRONMENT
- --------------------------------------------------------------------------------
THE ECONOMY
- - The nation's gross domestic product increased by 4.6% in the first quarter of
1999 before growing a more moderate 2.3% in the second quarter. Weaker demand
from Asia was offset by continuing gains in productivity and strong consumer
activity at home.
- - At its Open Market Committee meeting in late June, the Federal Reserve raised
the target rate for its Federal Funds rate - a key barometer of short-term
interest rates - by 25 basis points (.25%). The move indicated that the Fed
remains intent on keeping inflation from gathering steam.
- - Unlike 1998, when supply pressures weighed heavily on the municipal market,
supply and demand have been more in balance in 1999. Not surprisingly, with
their unusually high yields relative to taxable yields, municipal bonds
outperformed Treasuries in the first half of the year.
THE FUND
- -----------------------------
MANAGEMENT DISCUSSION
- - Escrowed bonds - bonds that have been pre-refunded in anticipation of their
call date - were again the Fund's largest sector weighting at June 30.
Because the bonds are backed by Treasury bonds, they are considered very high
quality and typically rise in value following their pre-refunding.
- - Life care facility bonds, which typically carry above-average coupons,
remained an important emphasis of the Fund. These non-rated bonds require
especially rigorous analysis and have become a major research focus at Eaton
Vance in recent years.
- - Hospital bonds were well-represented in the Fund. Adjusting to mergers and
shifting Medicare policies, the Fund's hospital investments have emerged more
financially sound and better equipped to operate in an increasingly
competitive environment.
PERFORMANCE FOR THE PAST SIX MONTHS
- - The Fund's Class A shares had a total return of -2.54% during the six months
ended June 30, 1999. This return was the result of a decrease in net asset
value (NAV) to $9.45 per share on June 30, 1999 from $9.97 on December 31,
1998, and the reinvestment of $0.258 in dividends and $0.016 in capital gain
distributions.(1)
- - The Fund's Class B shares had a total return of -2.93% during the six
months ended June 30, 1999. This return was the result of a decrease in NAV
to $9.36 per share on June 30, 1999 from $9.88 on December 31, 1998 and the
reinvestment of $0.218 in dividends and $0.016 in capital gain
distributions.(1)
- - The Fund's Class I shares had a total return of -2.57% during the six
months ended June 30, 1999. This return was the result of a decrease in NAV
to $10.30 per share on June 30, 1999 from $10.87 on December 31, 1998 and
the reinvestment of $0.282 in dividends and $0.016 in capital gain
distributions.(1)
RATING DISTRIBUTION(2)
- -----------------------------
BY TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
AAA 30.7%
Non-rated 26.0%
A 18.5%
AA 17.7%
BBB 6.8%
B 0.3%
</TABLE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
FUND INFORMATION
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
Performance(3) Class A Class B Class I
- ----------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
One Year 0.74% 0.04% 0.74%
Five Years N.A. N.A. 7.56
Ten Years N.A. N.A. 7.70
Life of Fund+ 2.27 0.67 7.53
<CAPTION>
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
One Year -4.06% -4.68% 0.74%
Five Years N.A. N.A. 7.56
Ten Years N.A. N.A. 7.70
Life of Fund+ -1.05 -2.55 7.53
</TABLE>
+Inception dates: Class A: 1/6/98; Class B: 1/14/98; Class I: 3/16/78
<TABLE>
<CAPTION>
Fund Overview(2)
- -----------------------------------------------------
<S> <C>
Number of Issues 107
Average Maturity 25.5 Yrs.
Effective Maturity 20.2 Yrs.
Average Rating A
Average Call 11.3 Yrs.
Average Dollar Price $92.11
</TABLE>
(1) These returns do not include the 4.75% maximum sales charge for the Fund's
Class A shares or the applicable contingent deferred sales charge (CDSC) for
Class B shares. There is generally no sales charge for the Class I shares.
(2) Rating Distribution and Fund Overview are subject to change. (3) 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 the applicable
CDSC based on the following schedule: 5% - 1st and 2nd years; 4% - 3rd year;
3% - 4th year; 2% - 5th year; 1% - 6th year.
Past performance is no guarantee of future results. Investment return and
market price will fluctuate so that shares, when sold, may be worth more or
less than their original cost.
2
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED)
TAX-EXEMPT INVESTMENTS -- 100.0%
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- ---------------------------------------------------------------------------
Assisted Living -- 1.3%
- ---------------------------------------------------------------------------
$ 1,000 Bell County, TX, Health Facilities,
(Care Institute, Inc., Texas), 9.00%,
11/1/24 $ 1,118,930
1,000 St. Paul, MN, Housing and Redevelopment,
(Care Institute, Inc.-Highland), 8.75%,
11/1/24 1,130,400
- ---------------------------------------------------------------------------
$ 2,249,330
- ---------------------------------------------------------------------------
Education -- 7.2%
- ---------------------------------------------------------------------------
$ 1,500 California Educational Facilities
Authority, (Santa Clara University),
5.00%, 9/1/23 $ 1,422,330
2,000 Massachusetts Development Finance
Agency, (Boston University), 5.45%,
5/15/59 1,900,620
2,500 Massachusetts HEFA, (Boston College),
4.75%, 6/1/31 2,173,875
2,500 New York State Dormitory Authority,
(Rockefeller University), 4.75%, 7/1/37 2,200,650
3,750 New York State Dormitory Authority,
(State University Educational
Facilities), 4.75%, 5/15/28 3,303,375
1,500 New York State Dormitory Authority,
(State University Educational
Facilities), 7.50%, 5/15/11 1,754,205
- ---------------------------------------------------------------------------
$ 12,755,055
- ---------------------------------------------------------------------------
Electric Utilities -- 8.1%
- ---------------------------------------------------------------------------
$ 5,000 Burke County, GA, (Georgia Power Co.)
Pollution Control Revenue, 5.40%, 5/1/34 $ 4,777,200
1,000 Colorado Springs, CO, Utility System,
6.75%, 11/15/21 1,071,800
1,000 Connecticut State Development Authority,
(Connecticut Light and Power), 5.85%,
9/1/28 978,010
1,000 Connecticut State Development Authority,
(Western Massachusetts Electric Co.),
5.85%, 9/1/28 970,260
2,000 Long Island Power Authority, NY,
Electric System Revenue, 5.25%, 12/1/26 1,909,120
1,500 Long Island, NY, Power Authority,
(RITES), Variable Rate, 12/1/29(1) 1,467,090
1,500 Massachusetts Municipal Wholesale
Electric Co., 6.75%, 7/1/11 1,598,430
1,600 Mississippi Business Finance Corp.,
(System Energy Resources, Inc.), 5.90%,
5/1/22 1,565,696
- ---------------------------------------------------------------------------
$ 14,337,606
- ---------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- ---------------------------------------------------------------------------
Escrowed / Prerefunded -- 11.4%
- ---------------------------------------------------------------------------
$ 2,500 Boston City Hospital, MA, FHA Insured,
Prerefunded to 8/15/00, 7.625%, 2/15/21 $ 2,656,725
14,000 Dawson Ridge, CO, Metropolitan District
#1, Escrowed to Maturity, 0.00%, 10/1/22 3,159,940
1,000 Fredericksburg, VA, IDA, Hospital
Facility, (FGIC), "INFLOS", Prerefunded
to 8/15/01, Variable Rate, 8/15/23(1) 1,130,000
1,000 Maricopa County, AZ, IDA, (Place Five
and The Greenery), Escrowed to Maturity,
8.625%, 1/1/11 1,285,640
5,500 Massachusetts Turnpike Authority,
Escrowed to Maturity, 5.00%, 1/1/20 5,345,394
655 New Hampshire HEFA, (Riverwoods at
Exeter), Prerefunded to 3/1/03, 9.00%,
3/1/23 760,763
665 North Carolina Eastern Municipal Power,
Escrowed to Maturity, 6.50%, 1/1/18 766,512
2,500 San Joaquin Hills Transportation
Corridor Agency, CA, Toll Road Bonds,
Escrowed to Maturity, 0.00%, 1/1/14 1,159,250
10,000 San Joaquin Hills Transportation
Corridor Agency, CA, Toll Road Bonds,
Escrowed to Maturity, 0.00%, 1/1/25 2,453,500
6,000 Savannah, GA, EDA, Escrowed to Maturity,
0.00%, 12/1/21 1,397,760
- ---------------------------------------------------------------------------
$ 20,115,484
- ---------------------------------------------------------------------------
General Obligations -- 4.9%
- ---------------------------------------------------------------------------
$ 1,600 Bell Mountain Ranch, CO, 6.625%,
11/15/25 $ 1,553,520
2,000 Florida Board of Education, 4.75%,
6/1/28 1,785,300
8,000 New York City, NY, 0.00%, 8/1/07 5,366,159
- ---------------------------------------------------------------------------
$ 8,704,979
- ---------------------------------------------------------------------------
Health Care-Miscellaneous -- 2.9%
- ---------------------------------------------------------------------------
$ 2,500 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 5.50%, 12/1/36 $ 2,385,775
2,100 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 5.50%, 12/1/36 2,035,194
595 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 6.00%, 12/1/36 612,595
- ---------------------------------------------------------------------------
$ 5,033,564
- ---------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
Hospital -- 11.1%
- ---------------------------------------------------------------------------
$ 1,000 Bell County, TX, Health Facilities
Development, (Heritage Oaks), 6.70%,
6/1/29 $ 980,950
3,250 Cuyahoga County Health Care Facilities,
OH, (Cleveland Health Clinic), 5.125%,
1/1/29 3,070,860
1,500 Forsyth County, GA, Hospital Authority
Revenue, (Georgia Baptist Health Care
System), 6.375%, 10/1/28 1,432,095
1,500 Greenville, SC, Hospital System, 5.25%,
5/1/23 1,400,460
750 Illinois Health Facilities Authority,
(Proctor Community Hospital), 7.375%,
1/1/23 784,065
1,945 Louisiana Public Facilities Authority,
(General Health Systems), 6.80%, 11/1/16 2,101,631
750 Maricopa County, AZ, IDA, Residual
Certificates, Variable Rate,
11/15/37(1)(2) 696,030
5,000 Massachusetts HEFA, (Partners Healthcare
System), 5.25%, 7/1/29 4,750,550
265 Prince George's County, MD, (Greater
Southeast Healthcare System), 6.20%,
1/1/08 119,250
1,030 Prince George's County, MD, (Greater
Southeast Healthcare System), 6.375%,
1/1/23 463,500
2,270 Rochester, MN, Health Care Facilities
Revenue, (Mayo Clinic), 5.50%, 11/15/27 2,272,611
1,500 San Benito, CA, Health Care District,
5.40%, 10/1/20 1,413,135
- ---------------------------------------------------------------------------
$ 19,485,137
- ---------------------------------------------------------------------------
Housing -- 3.1%
- ---------------------------------------------------------------------------
$ 1,000 Florence, KY, Housing Facilities, (Blue
Grass Housing), 7.625%, 5/1/27 $ 1,183,740
1,500 Lake Creek, CO, (Affordable Housing
Corp.), Multifamily, 6.25%, 12/1/23 1,485,090
970 Maricopa County, AZ, IDA, (National
Health Facilities II), 6.375%, 1/1/19 963,055
1,650 Travis County, TX, HFC, (Travis Station
Apartments), 6.75%, 4/1/19(3) 1,761,986
- ---------------------------------------------------------------------------
$ 5,393,871
- ---------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- ---------------------------------------------------------------------------
Industrial Development Revenue -- 4.1%
- ---------------------------------------------------------------------------
$ 700 Florence County, SC, (Stone Container
Co.), 7.375%, 2/1/07 $ 736,295
1,000 Iowa Finance Authority, (Southbridge
Mall), 6.375%, 12/1/13 996,670
1,750 New Jersey EDA, (Holt Hauling), 7.75% ,
3/1/27 1,912,610
2,450 Port Camas-Washougan, WA, (James River),
6.70%, 4/1/23 2,555,424
1,005 Valdez, AK, Marine Terminal, (BP
Pipelines, Inc.), 5.85%, 8/1/25 1,025,100
- ---------------------------------------------------------------------------
$ 7,226,099
- ---------------------------------------------------------------------------
Insured-Electric Utilities -- 2.0%
- ---------------------------------------------------------------------------
$ 3,000 Piedmont, SC, Municipal Electric Power
Agency, (MBIA), 4.75%, 1/1/25 $ 2,676,480
800 Puerto Rico Electric Power Authority,
"STRIPES", (FSA), Variable Rate,
7/1/03(1) 881,000
- ---------------------------------------------------------------------------
$ 3,557,480
- ---------------------------------------------------------------------------
Insured-General Obligations -- 2.0%
- ---------------------------------------------------------------------------
$ 1,000 Detroit, MI, School District, (FGIC),
4.75%, 5/1/28 $ 894,080
1,500 Florida Board of Education, (FGIC),
4.50%, 6/1/23 1,302,600
1,500 South-Western City, OH, School District,
Franklin and Pickway Counties, (AMBAC),
4.75%, 12/1/26 1,346,475
- ---------------------------------------------------------------------------
$ 3,543,155
- ---------------------------------------------------------------------------
Insured-Hospital -- 0.7%
- ---------------------------------------------------------------------------
$ 1,000 Illinois HFA, (Rush-Presbyterian - St.
Lukes Medical Center), (MBIA), "INFLOS",
Variable Rate, 10/1/24(1) $ 1,142,500
- ---------------------------------------------------------------------------
$ 1,142,500
- ---------------------------------------------------------------------------
Insured-Housing -- 1.2%
- ---------------------------------------------------------------------------
$ 1,000 SCA MFMR Receipts, Burnsville, MN,
(FSA), 7.10%, 1/1/30 $ 1,094,700
1,000 SCA MFMR Receipts, Springfield, MO,
(FSA), 7.10%, 1/1/30 1,094,700
- ---------------------------------------------------------------------------
$ 2,189,400
- ---------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
Insured-Lease Revenue /
Certificates of Participation -- 1.3%
- ---------------------------------------------------------------------------
$ 2,500 San Mateo County, CA, Joint Powers
Financing Authority, (FSA), Variable
Rate, 7/15/29(1)(2) $ 2,207,800
- ---------------------------------------------------------------------------
$ 2,207,800
- ---------------------------------------------------------------------------
Insured-Senior Living / Life Care -- 0.8%
- ---------------------------------------------------------------------------
$ 1,500 Maryland HEFA, (Medlantic/Helix Issue),
(AMBAC), 5.25%, 8/15/38 $ 1,450,395
- ---------------------------------------------------------------------------
$ 1,450,395
- ---------------------------------------------------------------------------
Insured-Special Tax Revenue -- 2.4%
- ---------------------------------------------------------------------------
$ 3,000 East Bay, CA, Municipal Utility
District, (MBIA), 4.75%, 6/1/28 $ 2,685,930
1,500 Tampa, FL, Sports Authority, (MBIA),
5.25%, 1/1/17 1,495,740
- ---------------------------------------------------------------------------
$ 4,181,670
- ---------------------------------------------------------------------------
Insured-Transportation -- 2.4%
- ---------------------------------------------------------------------------
$ 2,000 Atlanta, GA, Metropolitan Rapid
Transportation Authority, (MBIA),
Variable Rate, 7/1/20(1)(2) $ 1,860,100
1,500 Florida Turnpike Authority, (Department
of Transportation), (FGIC), 4.50%,
7/1/27 1,303,305
1,000 Triborough Bridge and Tunnel Authority
of New York, "RITES", (AMBAC), Variable
Rate, 1/1/12(1)(2) 1,103,550
- ---------------------------------------------------------------------------
$ 4,266,955
- ---------------------------------------------------------------------------
Insured-Utilities -- 2.9%
- ---------------------------------------------------------------------------
$ 15,000 New York, NY, City Municipal Water
Finance Authority, (MBIA), 0.00%,
6/15/19 $ 5,089,199
- ---------------------------------------------------------------------------
$ 5,089,199
- ---------------------------------------------------------------------------
Insured-Water and Sewer -- 3.0%
- ---------------------------------------------------------------------------
$ 1,000 Fairmont, WV, Waterworks Revenue,
(AMBAC), 4.50%, 7/1/24 $ 854,740
1,500 Honolulu, HI, City and County Waterworks
System Revenue, (FGIC), 4.50%, 7/1/28 1,263,795
2,000 Pittsburgh, PA, Water and Sewer
Authority,(FSA), 5.00%, 9/1/19 1,901,100
1,500 Prince William County, Service
Authority,(FGIC), 4.75%, 7/1/29 1,342,680
- ---------------------------------------------------------------------------
$ 5,362,315
- ---------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- ---------------------------------------------------------------------------
Lease Revenue /
Certificates of Participation -- 0.6%
- ---------------------------------------------------------------------------
$ 1,000 Hardeman County, TN, (Correctional
Facilities Corp.), 7.75%, 8/1/17 $ 1,092,470
- ---------------------------------------------------------------------------
$ 1,092,470
- ---------------------------------------------------------------------------
Miscellaneous -- 1.4%
- ---------------------------------------------------------------------------
$ 1,000 Chautauqua County, NY, IDA, (Womans
Christian Association), 6.40%, 11/15/29 $ 963,810
500 San Juan, NM, Pueblo Development
Authority, 7.097%, 10/15/06 488,695
1,000 Santa Fe, NM, (Crow Hobbs), 8.50%,
9/1/16 1,087,820
- ---------------------------------------------------------------------------
$ 2,540,325
- ---------------------------------------------------------------------------
Nursing Home -- 4.3%
- ---------------------------------------------------------------------------
$ 1,425 Bell County, TX, (Riverside Healthcare,
Inc. - Normandy Terrace), 9.00%, 4/1/23 $ 1,680,859
970 Clovis, NM, IDR, (Retirement Ranches,
Inc.), 7.75%, 4/1/19 1,040,713
305 Covington-Allegheny County, VA, IDA,
(Beverly Enterprises), 9.375%, 9/1/01(3) 317,883
1,290 Grove City, PA, Area Hospital Health
Facilities Authority, (Grove Manor),
6.625%, 8/15/29 1,246,695
1,100 Massachusetts IFA, (Age Institute of
Massachusetts), 8.05%, 11/1/25 1,209,241
1,250 Montgomery, PA, IDA, (Advancement of
Geriatric Health Care Institute),
8.375%, 7/1/23 1,328,325
680 Tarrant County Health Facilities, TX,
10.25%, 9/1/19 702,998
- ---------------------------------------------------------------------------
$ 7,526,714
- ---------------------------------------------------------------------------
Senior Living / Life Care -- 5.4%
- ---------------------------------------------------------------------------
$ 1,255 Albuquerque, NM, Retirement Facilities,
(La Vida Liena Retirement Center),
5.75%, 12/15/28 $ 1,203,482
1,500 Albuquerque, NM, Retirement Facilities,
(La Vida Liena Retirement Center),
6.60%, 12/15/28 1,443,555
1,000 Colorado HFA, Revenue Refunding and
Improvement, (Volunteers), 5.875%,
7/1/28 949,430
1,500 Kansas City, MO, IDA, (Kingswood United
Methodist Manor), 5.875%, 11/15/29 1,402,560
1,500 North Miami, FL, HFA, (Imperial Club),
6.75%, 1/1/33 1,435,035
550 Ohio HFA, Retirement Rental Housing,
(Encore Retirement Partners), 6.75%,
3/1/19 522,995
1,500 Summit County, OH, Healthcare
Facilities, (Village at Saint Edward),
5.75%, 12/1/25 1,418,310
1,000 Vermont IDA, (Wake Robin Corp.), 8.75%,
4/1/23 1,101,860
- ---------------------------------------------------------------------------
$ 9,477,227
- ---------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
Special Tax Revenue -- 4.3%
- ---------------------------------------------------------------------------
$ 1,500 Brentwood, CA, Infrastructure Financing
Authority, 5.60%, 9/2/19 $ 1,440,360
1,500 Frederick County, MD, Urbana Community
Development Authority, 6.625%, 7/1/25 1,500,000
2,000 Lincoln, CA, Public Finance Authority,
(Twelve Bridges), 6.20%, 9/2/25(4) 1,994,680
2,500 Michigan State Trunk Line, 5.50%,
11/1/18 2,564,425
- ---------------------------------------------------------------------------
$ 7,499,465
- ---------------------------------------------------------------------------
Transportation -- 8.0%
- ---------------------------------------------------------------------------
$ 1,500 Connector 2000 Association, Inc., South
Carolina Bridge & Toll Road Revenue,
(Southern Connector), 5.25%, 1/1/23 $ 1,338,465
758 Indiana Transportation Finance
Authority, 6.25%, 11/1/16 804,268
3,500 New Jersey State Transportation
Authority, Variable Rate, 6/15/17(1)(2) 3,270,330
1,500 New York State Thruway Authority,
General Revenue, 5.00%, 1/1/25 1,398,780
1,000 Port Authority of New York and New
Jersey, 5.375%, 3/1/28 1,005,760
2,000 Puerto Rico Highway and Transportation
Authority, 4.75%, 7/1/38 1,770,280
2,500 Puerto Rico Highway and Transportation
Authority, 5.50%, 7/1/36 2,517,875
2,000 Triborough Bridge and Tunnel Authority
of New York, 5.25%, 1/1/28 1,938,240
- ---------------------------------------------------------------------------
$ 14,043,998
- ---------------------------------------------------------------------------
Utilities-Electrical and Gas -- 0.8%
- ---------------------------------------------------------------------------
$ 1,650 San Antonio, TX, Electric and Natural
Gas Revenue, 4.50%, 2/1/21 $ 1,432,580
- ---------------------------------------------------------------------------
$ 1,432,580
- ---------------------------------------------------------------------------
Water and Sewer -- 2.4%
- ---------------------------------------------------------------------------
$ 3,000 New York City, NY, Municipal Water
Finance Authority, Water & Sewer System,
5.25%, 6/15/29 $ 2,871,330
1,500 Southern California, Metropolitan Water
District, 4.75%, 7/1/22 1,362,345
- ---------------------------------------------------------------------------
$ 4,233,675
- ---------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $175,150,715) $176,138,448
- ---------------------------------------------------------------------------
</TABLE>
At June 30, 1999, the concentration of the Fund's investments in the various
states, determined as a percentage of total investments, is as follows:
New York 17.9%
Massachusetts 11.6%
Others, representing less than 10% individually 70.5%
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,
1999, 20.9% 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 1.5% to
8.3% of total investments.
(1) Security has been issued as an inverse floater bond.
(2) 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 Fund's
intention to hold the item until maturity. At June 30, 1999, the value of
these securities amounted to $9,137,810 or 5.1% of the Portfolio's net
assets.
(3) Security (or a portion thereof) has been segregated to cover when-issued
securities.
(4) When-issued securities.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
<S> <C>
Assets
- -------------------------------------------------------
Investments, at value
(identified cost, $175,150,715) $ 176,138,448
Cash 780,676
Receivable for investments sold 2,122,084
Receivable for Fund shares sold 1,497,495
Interest receivable 2,822,874
- -------------------------------------------------------
TOTAL ASSETS $ 183,361,577
- -------------------------------------------------------
Liabilities
- -------------------------------------------------------
Payable for investments purchased $ 2,361,251
Payable for when-issued securities 1,986,980
Dividends payable 399,395
Payable for Fund shares redeemed 318,543
Payable to affiliate for Trustees' fees 436
Other accrued expenses 12,932
- -------------------------------------------------------
TOTAL LIABILITIES $ 5,079,537
- -------------------------------------------------------
NET ASSETS $ 178,282,040
- -------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------
Paid-in capital $ 176,551,691
Accumulated undistributed net realized
gain (computed on the basis of
identified cost) 827,526
Accumulated distributions in excess of
net investment income (84,910)
Net unrealized appreciation (computed on
the basis of identified cost) 987,733
- -------------------------------------------------------
TOTAL $ 178,282,040
- -------------------------------------------------------
Class A Shares
- -------------------------------------------------------
NET ASSETS $ 55,007,102
SHARES OUTSTANDING 5,823,555
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE
(NET ASSETS DIVIDED BY SHARES OF
BENEFICIAL INTEREST OUTSTANDING) $ 9.45
MAXIMUM OFFERING PRICE PER SHARE
(100 DIVIDED BY 95.25 OF $9.45) $ 9.92
- -------------------------------------------------------
Class B Shares
- -------------------------------------------------------
NET ASSETS $ 21,227,344
SHARES OUTSTANDING 2,268,754
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY SHARES OF
BENEFICIAL INTEREST OUTSTANDING) $ 9.36
- -------------------------------------------------------
Class I Shares
- -------------------------------------------------------
NET ASSETS $ 102,047,594
SHARES OUTSTANDING 9,908,340
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY SHARES OF
BENEFICIAL INTEREST OUTSTANDING) $ 10.30
- -------------------------------------------------------
On sales of $25,000 or more, the offering price of
Class A shares is reduced.
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1999
<S> <C>
Investment Income
- -------------------------------------------------------
Interest $ 4,801,002
- -------------------------------------------------------
TOTAL INVESTMENT INCOME $ 4,801,002
- -------------------------------------------------------
Expenses
- -------------------------------------------------------
Investment adviser fee $ 392,494
Trustees fees and expenses 4,368
Distribution and service fees
Class A 3,210
Class B 61,201
Registration fees 54,627
Custodian fee 39,491
Legal and accounting services 38,389
Transfer agent and dividend disbursing
agent fees 26,754
Printing and postage 7,783
Miscellaneous 20,286
- -------------------------------------------------------
TOTAL EXPENSES $ 648,603
- -------------------------------------------------------
DEDUCT --
REDUCTION OF CUSTODIAN FEE $ 39,491
- -------------------------------------------------------
TOTAL EXPENSE REDUCTIONS $ 39,491
- -------------------------------------------------------
NET EXPENSES $ 609,112
- -------------------------------------------------------
NET INVESTMENT INCOME $ 4,191,890
- -------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- -------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 1,175,311
Financial futures contracts 51,491
- -------------------------------------------------------
NET REALIZED GAIN $ 1,226,802
- -------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ (10,407,469)
- -------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ (10,407,469)
- -------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (9,180,667)
- -------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (4,988,777)
- -------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
FINANCIAL STATEMENTS (UNAUDITED) CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
Increase (Decrease) JUNE 30, 1999 YEAR ENDED
in Net Assets (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 4,191,890 $ 6,082,615
Net realized gain 1,226,802 1,785,392
Net change in unrealized appreciation
(depreciation) (10,407,469) (555,744)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (4,988,777) $ 7,312,263
- --------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (1,121,588) $ (729,146)
Class B (353,140) (164,930)
Class I (2,717,162) (5,188,539)
In excess of net investment income
Class A (22,607) --
Class B (7,534) --
Class I (54,769) --
From net realized gain
Class A (91,540) (194,132)
Class B (41,414) (49,556)
Class I (158,432) (1,053,475)
In excess of net realized gain
Class A -- (152,749)
Class B -- (57,351)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (4,568,186) $ (7,589,878)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial
interest --
Proceeds from sales of shares
Class A $ 28,041,976 $ 32,686,526
Class B 12,983,603 10,386,143
Class I 7,199,827 21,582,811
Net asset value of shares issued to
shareholders in payment of
distributions declared
Class A 750,633 590,413
Class B 263,017 181,597
Class I 1,442,920 3,347,030
Cost of shares redeemed
Class A (3,336,954) (577,172)
Class B (969,876) (480,650)
Class I (6,720,372) (11,630,237)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS $ 39,654,774 $ 56,086,461
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 30,097,811 $ 55,808,846
- --------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
Net Assets (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
At beginning of period $ 148,184,229 $ 92,375,383
- --------------------------------------------------------------------------------
AT END OF PERIOD $ 178,282,040 $ 148,184,229
- --------------------------------------------------------------------------------
Accumulated
distributions in excess
of net investment income
included in net assets
- --------------------------------------------------------------------------------
AT END OF PERIOD $ (84,910) --
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
(UNAUDITED)
-----------------------------------
CLASS A CLASS B CLASS I
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Net asset value -- Beginning of period $ 9.970 $ 9.880 $10.870
- --------------------------------------------------------------------------------
Income (loss) from operations
- --------------------------------------------------------------------------------
Net investment income $ 0.253 $ 0.214 $ 0.276
Net realized and unrealized gain (loss) (0.499) (0.500) (0.548)
- --------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ (0.246) $(0.286) $(0.272)
- --------------------------------------------------------------------------------
Less distributions
- --------------------------------------------------------------------------------
From net investment income $ (0.253) $(0.214) $(0.276)
In excess of net investment income (0.005) (0.004) (0.006)
From net realized gain (0.016) (0.016) (0.016)
In excess of net realized gain -- -- --
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.274) $(0.234) $(0.298)
- --------------------------------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD $ 9.450 $ 9.360 $10.300
- --------------------------------------------------------------------------------
TOTAL RETURN(4) (2.54)% (2.93)% (2.57)%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 55,007 $21,227 $102,048
Ratios (As a percentage of average daily net
assets):
Expenses(5) 0.71%(6) 1.45%(6) 0.71%(6)
Expenses after custodian fee reduction(5) 0.67%(6) 1.41%(6) 0.67%(6)
Net investment income 5.07%(6) 4.37%(6) 5.19%(6)
Portfolio Turnover 42% 42% 42%
- --------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
1998(1)
---------------------------- 1997 1996 1995 1994
CLASS CLASS ---------- ---------- ---------- ----------
A(2) B(3) CLASS I CLASS I CLASS I CLASS I CLASS I
<S> <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
- ---------------------------------------------
Income (loss) from operations
- ---------------------------------------------
Net investment income $ 0.502 $ 0.416 $ 0.574 $ 0.584 $ 0.605 $ 0.604 $ 0.611
Net realized and unrealized gain (loss) 0.099 0.006 0.141 0.785 (0.143) 0.962 (1.369)
- ---------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ 0.601 $ 0.422 $ 0.715 $ 1.369 $ 0.462 $ 1.566 $ (0.758)
- ---------------------------------------------
Less distributions
- ---------------------------------------------
From net investment income $ (0.522) $(0.433) $(0.576) $ (0.584) $ (0.594) $ (0.604) $ (0.611)
In excess of net investment income -- -- -- (0.015) (0.008) (0.012) (0.001)
From net realized gain (0.061) (0.051) (0.109) -- -- -- --
In excess of net realized gain (0.048) (0.058) -- -- -- -- --
- ---------------------------------------------
TOTAL DISTRIBUTIONS $ (0.631) $(0.542) $(0.685) $ (0.599) $ (0.602) $ (0.616) $ (0.612)
- ---------------------------------------------
NET ASSET VALUE -- END OF PERIOD $ 9.970 $ 9.880 $10.870 $ 10.840 $ 10.070 $ 10.210 $ 9.260
- ---------------------------------------------
TOTAL RETURN(4) 6.07% 4.03% 6.75% 14.13% 4.78% 17.40% (7.27)%
- ---------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------
Net assets, end of period (000's omitted) $ 32,352 $10,008 $105,824 $ 92,375 $ 88,184 $ 96,410 $ 90,802
Ratios (As a percentage of average daily net
assets):
Expenses(5) 0.65% 1.39% 0.70% 0.81% 0.78% 0.76% 0.80%
Expenses after custodian fee reduction(5) 0.60% 1.34% 0.65% 0.77% 0.74% -- --
Net investment income 5.07% 4.33% 5.25% 5.69% 6.12% 6.16% 6.26%
Portfolio Turnover 38% 38% 38% 34% 30% 58% 58%
- ---------------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) For the period from the commencement of offering of Class A shares, January
6, 1998, to December 31, 1998.
(3) For the period from the commencement of offering of Class B shares, January
14, 1998, to December 31, 1998.
(4) 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.
(5) 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 ratio for the year ended December 31, 1994
has not been adjusted to reflect this change.
(6) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
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 generally sold
subject to a sales charge imposed at time of purchase. Class B shares are
sold at net asset value and are subject to a contingent deferred sales charge
(see Note 6). Class I shares are sold at net asset value. Each class
represents a pro rata interest in the Fund, but votes separately on class-
specific matters and (as noted below) is subject to different expenses.
Realized and unrealized gains and losses 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. Net investment income, other than class specific expenses, is
allocated daily to each class of shares based upon the ratio of the value of
each class' paid shares to the total value of all paid shares. 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 -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is necessary. Dividends paid by
the Fund from net interest on tax-exempt municipal bonds are not includable
by shareholders as gross income for federal income tax purposes because the
Fund intends to meet certain requirements of the Internal Revenue Code
applicable to regulated investment companies which will enable the Fund to
pay exempt-interest dividends. The portion of such interest, if any, earned
on private activity bonds issued after August 7, 1986, may be considered a
tax preference item for shareholders.
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 for both hedging
against anticipated future changes in interest rates and investment purposes.
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 purchased on a when-issued or delayed delivery basis
are marked-to-market daily and begin accruing interest on settlement date.
10
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
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 Statements -- The interim financial statements relating to
June 30, 1999 and for the six-months then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Distributions to Shareholders
- -------------------------------------------
The net income of the 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 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 Fund distinguishes 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:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
CLASS A (UNAUDITED) DECEMBER 31, 1998(1)
<S> <C> <C>
- ------------------------------------------------------------------------------------
Sales 2,841,421 3,242,591
Issued to shareholders electing to
receive payment of distributions in
Fund shares 76,749 58,980
Redemptions (338,463) (57,723)
- ------------------------------------------------------------------------------------
NET INCREASE 2,579,707 3,243,848
- ------------------------------------------------------------------------------------
</TABLE>
(1) For the period from the commencement of offering of Class A shares, January
6, 1998, to December 31, 1998.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
CLASS B (UNAUDITED) DECEMBER 31, 1998(2)
<S> <C> <C>
- ------------------------------------------------------------------------------------
Sales 1,327,624 1,042,463
Issued to shareholders electing to
receive payment of distributions in
Fund shares 27,163 18,306
Redemptions (98,965) (47,837)
- ------------------------------------------------------------------------------------
NET INCREASE 1,255,822 1,012,932
- ------------------------------------------------------------------------------------
</TABLE>
(2) For the period from the commencement of offering of Class B shares, January
14, 1998, to December 31, 1998.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
CLASS I (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------
Sales 667,287 1,969,000
Issued to shareholders electing to
receive payment of distributions in
Fund shares 135,157 306,746
Redemptions (626,194) (1,064,820)
Issued to Eaton Vance Municipal Bond
Fund, L.P. Partners -- 8,521,164
- ---------------------------------------------------------------------------------
NET INCREASE 176,250 9,732,090
- ---------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
4 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,
1999, the fee was equivalent to 0.48% (annualized) of the Fund's average
daily net assets for such period and amounted to $392,494. 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. Eaton Vance Distributors, Inc. (EVD), a subsidiary of
EVM and the Fund's principal underwriter, received $20,749 from the Fund as
its portion of the sales charge on sales of Class A shares for the six months
ended June 30, 1999.
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, 1999, no significant amounts have been deferred.
Certain officers and Trustees of the Fund are officers of the above
organizations.
5 Distribution and Service Plans
- -------------------------------------------
The Fund has adopted a distribution plan (Class B Plan) pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a Service Plan (Class A
Plan) (collectively, the Plans). The Class B Plan requires the Fund to pay
the principal underwriter, EVD, amounts equal to 1/365 of 0.75% of the Fund's
Class B daily net assets 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 outstanding 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)
interest calculated by applying the rate of 1% over the prevailing prime rate
to the outstanding balance of Uncovered Distribution Charges due EVD reduced
by the aggregate amount of contingent deferred sales charges (see Note 6) and
amounts theretofore paid to or payable to EVD. The amount payable to EVD with
respect to each day is accrued on such day as a liability of the Fund and,
accordingly, reduces the Class B net assets. The Fund paid or accrued
distribution fees of $60,388 for Class B shares to EVD for the six months
ended June 30, 1999, representing 0.75% (annualized) of the average daily net
assets for Class B shares. At June 30, 1999, the amount of Uncovered
Distribution Charges of EVD calculated under the Class B Plan was
approximately $986,000.
In addition, the Plans authorize the Fund to make payments of service fees to
EVD, investment dealers 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 EVD and
investment dealers 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. Service fees for the six months ended June 30, 1999 amounted to
$3,210 and $813 for Class A and Class B shares, respectively.
6 Contingent Deferred Sales Charge
- -------------------------------------------
A contingent deferred sales charge (CDSC) generally is imposed on redemptions
of Class B shares made within six years of purchase. Generally, the CDSC is
based upon the lower of the net asset value at date of redemption or date of
purchase. No charge is levied on Class B shares acquired by reinvestment of
dividends or capital 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 and may be waived under certain other
circumstances. CDSC charges are paid to EVD to reduce the amount of Uncovered
Distribution Charges calculated under the Class B Distribution Plan (see Note
5). CDSC charges received when no Uncovered Distribution Charges exist will
be credited to the Fund. EVD received approximately $12,000 of CDSC paid by
Class B shareholders for the period ended June 30, 1999.
12
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
7 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 $102,588,489 and $69,352,032, respectively.
8 Line of Credit
- -------------------------------------------
The Fund participates with other portfolios and funds managed by EVM and its
affiliates in a $130 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. At June 30, 1999, there were no amounts outstanding
under the line of credit.
9 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation/depreciation in value of the investments
owned at June 30, 1999, as computed on a federal income tax basis, were as
follows:
<TABLE>
<S> <C>
Aggregate cost $ 175,150,715
- -------------------------------------------------------
Gross unrealized appreciation $ 5,842,277
Gross unrealized depreciation (4,854,544)
- -------------------------------------------------------
Net unrealized appreciation $ 987,733
- -------------------------------------------------------
</TABLE>
10 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. At June 30, 1999 there were no
obligations under these financial instruments outstanding.
11 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
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF JUNE 30, 1999
INVESTMENT MANAGEMENT
EATON VANCE MUNICIPAL BOND FUND
Officers
James B. Hawkes
President and Trustee
William H. Ahern, Jr.
Vice President
Thomas J. Fetter
Vice President and Portfolio
Manager
Armin J. Lang
Vice President
Robert B. MacIntosh
Vice President
Edward E. Smiley, Jr.
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Operating Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking,
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
14
<PAGE>
INVESTMENT ADVISER
EATON VANCE MANAGEMENT
The Eaton Vance Building
255 State Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
(617) 482-8260
CUSTODIAN
INVESTORS BANK & TRUST COMPANY
200 Clarendon Street,
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
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
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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.
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3-4261 MBSRC-8/99
