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[LOGO]
[GRAPHICS]
ANNUAL REPORT DECEMBER 31, 1999
EATON VANCE MUNICIPAL BOND FUND
GLOBAL MANAGEMENT-GLOBAL DISTRIBUTION
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
LETTER TO SHAREHOLDERS
[PHOTO]
Thomas J. Fetter
President
Eaton Vance Municipal Bond Fund, Class A shares, had a total return of -8.85%
during the year ended December 31, 1999, the result of a decline in net asset
value per share (NAV) from $9.97 on December 31, 1998 to $8.59 on December 31,
1999, and the reinvestment of $0.512 in dividends and $0.016 in capital
gains.(1)
Class B shares had a total return of -9.51% for the year ended December 31,
1999, the result of a decline in NAV from $9.88 on December 31, 1998 to $8.52 on
December 31, 1999, and the reinvestment of $0.434 in dividends and $0.016 in
capital gains.(1)
Class I shares had a total return of -8.69% for the year ended December 31,
1999, the result of a decline in NAV from $10.87 on December 31, 1998 to $9.38
on December 31, 1999, and the reinvestment of $0.563 in dividends and $0.016 in
capital gains.(1)
IN THE WAKE OF THIS YEAR'S MARKET DECLINE, MUNICIPAL YIELDS NEARLY EQUAL
TREASURY YIELDS...
1999 has proven a very challenging year for fixed-income investors, as a
continuing strong economy has led to sharply higher interest rates and negative
total returns for municipal bonds. However, the period also produced a major
opportunity to lock in tax-exempt yields at historically high ratios. In last
year's flight to quality, the ratio of Treasury yields to municipal yields
reached historically high levels, with municipal yields actually EQUALLING
Treasury yields at one point. By December 31, 1999, those ratios had narrowed,
but only slightly. Municipal yields still equalled around 95% of Treasury yields
at December 31, 1999, representing exceptional value in a tax-exempt investment.
Eaton Vance Municipal Bond Fund was able to take advantage of the market decline
and offered a yield well above the average tax-exempt bond yields.
A GROWING BUDGET SURPLUS SUGGESTS A FAVORABLE LONG-TERM OUTLOOK FOR MUNICIPAL
BONDS...
A strong economy combined with low inflation has resulted in the first budget
surpluses in a generation, which we believe have created an excellent
long-term scenario for bonds. In addition, the forward calendar of new
municipal issuance is significantly lighter than in recent years. That should
be a positive factor for municipal bonds because the market should be less
impacted by supply pressures. Finally, the recent veto of a bill to lower
federal income taxes suggests that any future tax proposals put forth this
year are likely to meet firm resistance, especially with the contentious 2000
election campaign under way. As a result, we believe municipal bonds should
remain an attractive income alternative for tax-conscious investors.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter
President
February 9, 2000
FUND INFORMATION
as of December 31, 1999
<TABLE>
<CAPTION>
PERFORMANCE(2) Class A Class B Class I
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average Annual Total Returns (at net asset value)
- -----------------------------------------------------------------------------------------------------
One Year -8.85% -9.51% -8.69%
Five Years N.A. N.A. 6.48
Ten Years N.A. N.A. 6.66
Life of Fund+ -1.69 -3.04 7.03
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- ------------------------------------------------------------------------------------------------------
One Year -13.20% -13.82% -8.69%
Five Years N.A. N.A. 6.48
Ten Years N.A. N.A. 6.66
Life of Fund+ -4.08 -5.30 7.03
+Inception dates: Class A: 1/7/98; Class B: 1/14/98; Class I: 3/16/78
</TABLE>
FIVE LARGEST SECTOR WEIGHTINGS(3)
- ----------------------------------
By total net assets
Hospital 13.9%
Escrowed Prerefunded 10.0%
Transportation 8.7%
Education 7.6%
Senior Living/Life Care 6.5%
(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 no sales charge for the Class I shares.
(2) 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. There is
no sales charge for the Class I shares. (3) Five largest sector weightings
account for 46.7% of the Fund's net assets, determined by dividing the total
market value of the holdings by the total net assets of the Fund. Holdings
are subject to change.
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
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
MANAGEMENT DISCUSSION
[PHOTO]
Thomas J. Fetter
Portfolio Manager
AN INTERVIEW WITH THOMAS J. FETTER, PRESIDENT AND PORTFOLIO MANAGER OF EATON
VANCE MUNICIPAL BOND FUND.
Q: TOM, 1999 WAS A VOLATILE AND TROUBLING YEAR FOR THE FIXED-INCOME MARKETS,
INCLUDING THE MUNICIPAL MARKET. IN YOUR VIEW, WHAT CONTRIBUTED TO THE
DIFFICULT ENVIRONMENT FOR THE BOND MARKET?
A: Rising interest rates throughout the year created a very difficult climate
for fixed-income markets, especially for long-term vehicles. Investors
anticipated and responded to interest rate increases by the Federal
Reserve, which raised its benchmark Federal Funds rate a total of three
times during the year. While actual inflation figures have remained fairly
subdued, the strong U.S. economy prompted the Fed to launch a pre-emptive
strike against the potential for inflation further down the road. Over the
LONG-TERM, the Fed's vigilance is a favorable development. Over the
SHORT-TERM, however, it has tended to pressure the bond markets.
Q: IS THIS DECLINE UNUSUAL FROM A HISTORICAL PERSPECTIVE?
A: Yes. It's very unusual to see a decline of this magnitude. There have been
a number of significant market corrections, including those related to the
oil embargoes of the 1970s, the hyper-inflation of the early 1980s and,
most recently, a Fed-driven decline in 1994. Interestingly, the 1994
correction was the worst year on record for municipal bonds, but the
market demonstrated its resilience and recovered fully to make new highs
in the following year.
In my view, this year's correction is no different. It's important for
investors to view these trends from a long-term perspective. While
periodic corrections are to be expected in the bond markets, we remain
confident about the long-term attractiveness of the municipal market.
Q: WHAT WOULD YOU TELL INVESTORS WHO ARE NERVOUS ABOUT THESE MARKET DECLINES?
A: I think it's important for investors to remember why they initially
invested in a municipal fund. For the vast majority, it was to receive
tax-exempt income. Interest rates are going to fluctuate over time, and
with them, the bond market. That's a given. However, the attractiveness of
tax-exempt income - especially in our current high-tax environment
- remains intact.
Q: HOW HAVE YOU POSITIONED THE FUND IN RECENT MONTHS?
A:The Fund's largest sector weighting at December 31 was in hospital bonds,
which represented 13.9% of the Fund's net assets.
<TABLE>
Portfolio Quality Weightings(1)
- -------------------------------
<S> <C>
Non-Rated 29.70%
AAA 32.40%
AA 15.80%
A 14.60%
BBB 7.20%
CCC 0.30%
</TABLE>
<TABLE>
<CAPTION>
Portfolio Overview(1)
- -------------------------------------------------------------------
<S> <C>
Number of Issues 107
Average Rating A
Average Maturity 25.3 Yrs.
Effective Maturity 21.7 Yrs.
Average Call 12.2 Yrs.
Average Dollar Price $84.65
</TABLE>
(1) Because the Fund is actively managed, Portfolio Quality Weightings and
Portfolio Overview are subject to change.
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.
3
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
MANAGEMENT DISCUSSION CONT'D
The hospital industry has undergone major changes that are likely to
continue in coming years. With Medicare reimbursement rates being pared
and many health maintenance organizations having financial difficulties,
pressure has been brought to bear on the hospital sector to focus on niche
medical specialties, to reduce costs and to consider mergers where
financially feasible.
The clouds over the hospital industry have created an opportunity to
purchase attractive hospital bonds at excellent prices. The Fund has taken
advantage of this opportunity by focusing on institutions with sound
fundamentals and the ability to grow their business in an increasingly
competitive healthcare environment.
Q: THE FUND ALSO MAINTAINED LARGE INVESTMENTS IN ESCROWED BONDS. WHAT DID YOU
FIND ATTRACTIVE ABOUT THAT SECTOR?
A: Escrowed bonds have been pre-refunded by their issuers to take advantage
of a decline in interest rates from higher levels set earlier in the
cycle. It's similar to a homeowner refinancing his or her mortgage to lock
in a better rate. While the issuer is able to take advantage of lower
rates, the original outstanding bonds are backed by U.S. Treasury bonds.
That means that the investor who owns the original bonds continues to
receive a fairly high coupon for the remaining period until the bonds are
called. And, because the bonds are backed by Treasuries, the investor now
owns a bond considered to be of the very highest quality. Finally, because
the bonds generally trade very close to their call price, they tend to be
fairly stable performers.
Q: THE FUND CONTINUED A FAIRLY LARGE EXPOSURE TO NON-RATED BONDS. WHAT HAVE
YOU FOUND ATTRACTIVE ABOUT THAT SEGMENT OF THE MUNICIPAL MARKET?
A: In recent years, non-rated bonds have become a research specialty at Eaton
Vance. Often, non-rated bonds are smaller bond offerings issued by
colleges, nursing homes or life care facilities. But they may also be
issued as industrial revenue bonds to fund commercial enterprises.
Because they are not rated by the major rating agencies, these bonds
require an especially intensive analysis. We apply our own rigorous
standards to non-rated bonds and we have increased the resources we
dedicate to this portion of the municipal market. In the past year, we
have been able to add a significant yield advantage to the Fund through
the use of non-rated bonds. In addition, non-rated bonds may benefit from
improvement in underlying fundamentals, providing the potential for
capital appreciation.
Q: WHERE HAVE YOU FOCUSED YOUR NON-RATED INVESTMENTS?
A: There were good opportunities in the nursing home, life care and assisted
living sectors. As I've indicated in past reports, these facilities are
playing an increasingly important role in the health care for senior
citizens. As the graying of the nation continues, an increasing number of
seniors are opting for long-term care that allows them to tend to a
portion of their own daily needs. These programs have been found
Your Investment at Work
- ------------------------------------------- [PHOTO]
New Jersey Economic Development Authority
Holt Hauling
- - Holt Hauling is a major cargo container operator, loading and unloading
containers from ships, railroad cars and trucks in ports and cities along the
East Coast.
- - This bond was issued by the New Jersey Economic Development Authority to
finance facilities at Holt's Camden-based operations.
- - The bonds have an attractive 7.75% coupon. They are a good example of the
Fund's efforts to find value in the non-rated sector of the market.
4
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
MANAGEMENT DISCUSSION CONT'D
to provide people with the level of assistance they need while affording
them a high degree of independence. They are often better for families and
a cost-effective alternative to the traditional nursing home.
Q: TOM, WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET IN THE COMING YEAR?
A: I believe that the long-term outlook is favorable. While the economy
remains strong, inflation appears to be well under control. Many of last
year's global difficulties that triggered the flight to Treasuries are
being rectified. And, with the nation now enjoying nominal budget
surpluses, the borrowing needs are likely to fall significantly. Another
good sign for bonds.
Meanwhile, the municipal market has completed much of the refunding that
produced supply problems in previous years. That should help the market
significantly. Moreover, this year's decline in the municipal markets
provided excellent buying opportunities for tax-conscious, income-oriented
investors. With tax-exempt yields nearly equalling Treasury yields, I
believe there is unprecedented value in the municipal market.
<TABLE>
<CAPTION>
Date EVMBX Lehman Index
<S> <C> <C>
31-Dec-89 $10,000 $10,000
31-Jan-90 $ 9,875 $ 9,953
28-Feb-90 $ 9,990 $10,042
31-Mar-90 $10,006 $10,045
30-Apr-90 $ 9,835 $ 9,972
31-May-90 $10,141 $10,190
30-Jun-90 $10,247 $10,279
31-Jul-90 $10,433 $10,431
31-Aug-90 $10,155 $10,279
30-Sep-90 $10,184 $10,285
31-Oct-90 $10,327 $10,472
30-Nov-90 $10,633 $10,682
31-Dec-90 $10,697 $10,729
31-Jan-91 $10,843 $10,873
28-Feb-91 $10,919 $10,968
31-Mar-91 $10,925 $10,971
30-Apr-91 $11,086 $11,118
31-May-91 $11,197 $11,217
30-Jun-91 $11,164 $11,206
31-Jul-91 $11,349 $11,342
31-Aug-91 $11,534 $11,492
30-Sep-91 $11,697 $11,641
31-Oct-91 $11,810 $11,746
30-Nov-91 $11,850 $11,779
31-Dec-91 $12,140 $12,031
31-Jan-92 $12,118 $12,059
29-Feb-92 $12,121 $12,063
31-Mar-92 $12,137 $12,068
30-Apr-92 $12,242 $12,175
31-May-92 $12,450 $12,318
30-Jun-92 $12,686 $12,525
31-Jul-92 $13,091 $12,900
31-Aug-92 $12,874 $12,775
30-Sep-92 $12,930 $12,858
31-Oct-92 $12,658 $12,732
30-Nov-92 $13,032 $12,960
31-Dec-92 $13,222 $13,092
31-Jan-93 $13,373 $13,244
28-Feb-93 $13,874 $13,723
31-Mar-93 $13,743 $13,578
30-Apr-93 $13,910 $13,715
31-May-93 $14,023 $13,792
30-Jun-93 $14,285 $14,023
31-Jul-93 $14,288 $14,041
31-Aug-93 $14,581 $14,333
30-Sep-93 $14,820 $14,497
31-Oct-93 $14,850 $14,525
30-Nov-93 $14,683 $14,396
31-Dec-93 $15,009 $14,700
31-Jan-94 $15,181 $14,868
28-Feb-94 $14,755 $14,483
31-Mar-94 $13,997 $13,893
30-Apr-94 $14,044 $14,011
31-May-94 $14,219 $14,133
30-Jun-94 $14,119 $14,046
31-Jul-94 $14,369 $14,304
31-Aug-94 $14,459 $14,353
30-Sep-94 $14,194 $14,143
31-Oct-94 $13,913 $13,892
30-Nov-94 $13,556 $13,640
31-Dec-94 $13,918 $13,940
31-Jan-95 $14,404 $14,339
28-Feb-95 $14,861 $14,756
31-Mar-95 $14,954 $14,925
30-Apr-95 $14,970 $14,943
31-May-95 $15,404 $15,420
30-Jun-95 $15,220 $15,285
31-Jul-95 $15,285 $15,429
31-Aug-95 $15,413 $15,625
30-Sep-95 $15,478 $15,724
31-Oct-95 $15,797 $15,953
30-Nov-95 $16,118 $16,218
31-Dec-95 $16,344 $16,373
31-Jan-96 $16,443 $16,497
29-Feb-96 $16,362 $16,386
31-Mar-96 $16,102 $16,176
30-Apr-96 $16,037 $16,130
31-May-96 $16,053 $16,124
30-Jun-96 $16,152 $16,300
31-Jul-96 $16,335 $16,447
31-Aug-96 $16,318 $16,444
30-Sep-96 $16,603 $16,674
31-Oct-96 $16,855 $16,862
30-Nov-96 $17,177 $17,171
31-Dec-96 $17,126 $17,098
31-Jan-97 $17,194 $17,131
28-Feb-97 $17,349 $17,288
31-Mar-97 $17,124 $17,057
30-Apr-97 $17,281 $17,200
31-May-97 $17,542 $17,459
30-Jun-97 $17,963 $17,645
31-Jul-97 $18,702 $18,134
31-Aug-97 $18,455 $17,964
30-Sep-97 $18,775 $18,177
31-Oct-97 $19,042 $18,294
30-Nov-97 $19,150 $18,402
31-Dec-97 $19,544 $18,670
31-Jan-98 $19,778 $18,863
28-Feb-98 $19,840 $18,868
31-Mar-98 $19,912 $18,885
30-Apr-98 $19,799 $18,800
31-May-98 $20,109 $19,097
30-Jun-98 $20,179 $19,173
31-Jul-98 $20,197 $19,221
31-Aug-98 $20,568 $19,518
30-Sep-98 $20,844 $19,761
31-Oct-98 $20,711 $19,761
30-Nov-98 $20,820 $19,830
31-Dec-98 $20,864 $19,880
31-Jan-99 $21,132 $20,116
28-Feb-99 $20,927 $20,028
31-Mar-99 $20,983 $20,056
30-Apr-99 $21,035 $20,106
31-May-99 $20,795 $19,990
30-Jun-99 $20,328 $19,702
31-Jul-99 $20,303 $19,774
31-Aug-99 $19,842 $19,615
30-Sep-99 $19,654 $19,623
31-Oct-99 $19,168 $19,411
30-Nov-99 $19,381 $19,617
31-Dec-99 $19,052 $19,471
</TABLE>
<TABLE>
<CAPTION>
Performance** Class A Class B Class I
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average Annual Total Returns (at net asset value)
- -------------------------------------------------------------------------------------------------
One Year -8.85% -9.51% -8.69%
Five Years N.A. N.A. 6.48
Ten Years N.A. N.A. 6.66
Life of Fund+ -1.69 -3.04 7.03
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- -------------------------------------------------------------------------------------------------
One Year -13.20% -13.82% -8.69%
Five Years N.A. N.A. 6.48
Ten Years N.A. N.A. 6.66
Life of Fund+ -4.08 -5.30 7.03
+Inception dates: Class A: 1/7/98; Class B: 1/14/98; Class I: 3/16/78
</TABLE>
* Source: Towers Data Systems, Bethesda, MD.
The chart compares the Fund's total return with that of the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged market index of municipal
bonds. Returns are calculated by determining the percentage change in net
asset value (NAV) with all distributions reinvested. The lines on the chart
represent the total returns of $10,000 hypothetical investments in the Fund
and the Index. The Index's total return does not reflect commissions or
expenses that would have been incurred if an investor individually purchased
or sold the securities represented in the Index. It is not possible to
invest directly in an Index. An investment in the Fund's Class A shares on
1/7/98 at net asset value would have been worth $9,668 on December 31, 1999;
$9,208 including the 4.75% sales charge. An investment in the Fund's Class B
shares on 1/14/98 at net asset value would have been worth $9,413 on
December 31, 1999; $8,987, including the Fund's applicable CDSC.
**Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC returns reflect
applicable sales charge as noted.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
5
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS
TAX-EXEMPT INVESTMENTS -- 100.8%
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Assisted Living -- 1.4%
- -----------------------------------------------------------------------------
$ 1,000 Bell County, TX, Health Facilities
Authority, (Care Institute, Inc.,
Texas), 9.00%, 11/1/24 $ 1,093,530
990 St. Paul, MN, Housing and Redevelopment,
(Care Institute, Inc. - Highland),
8.75%, 11/1/24 1,079,684
- -----------------------------------------------------------------------------
$ 2,173,214
- -----------------------------------------------------------------------------
Education -- 7.6%
- -----------------------------------------------------------------------------
$ 1,850 California Educational Facilities
Authority, (Santa Clara University),
5.00%, 9/1/23 $ 1,606,059
2,000 Massachusetts Development Finance
Agency, (Boston University),
5.45%, 5/15/59 1,673,300
2,500 Massachusetts HEFA, (Boston College),
4.75%, 6/1/31 1,961,975
2,500 New York Dormitory Authority,
(Rockefeller University), 4.75%, 7/1/37 2,000,850
3,750 New York Dormitory Authority, (State
University Educational Facilities),
4.75%, 5/15/28 2,956,200
1,500 New York Dormitory Authority, (State
University Educational Facilities),
7.50%, 5/15/11 1,707,750
- -----------------------------------------------------------------------------
$ 11,906,134
- -----------------------------------------------------------------------------
Electric Utilities -- 5.1%
- -----------------------------------------------------------------------------
$ 5,000 Burke County, GA, (Georgia Power Co.)
Pollution Control Revenue, 5.40%, 5/1/34 $ 4,289,150
500 Connecticut Development Authority,
(Connecticut Light and Power), Variable
Rate, 9/1/28(1)(2) 392,790
500 Connecticut Development Authority,
(Western Mass Electric), Variable Rate,
9/1/28(1)(2) 373,390
1,500 Long Island Power Authority, NY,
Electric System Revenue, 5.50%, 12/1/29 1,334,625
1,500 Massachusetts Municipal Wholesale
Electric Co., 6.75%, 7/1/11 1,576,635
- -----------------------------------------------------------------------------
$ 7,966,590
- -----------------------------------------------------------------------------
Escrowed / Prerefunded -- 10.0%
- -----------------------------------------------------------------------------
$14,000 Dawson Ridge, CO, Metropolitan District
#1, Escrowed to Maturity, 0.00%, 10/1/22 $ 3,041,220
1,000 Fredericksburg, VA, IDA, Hospital
Facility, (FGIC), "INFLOS", Prerefunded
to 8/15/01, Variable Rate, 8/15/23(1) 1,093,750
1,000 Maricopa County, AZ, IDA, (Place Five
and The Greenery), Escrowed to Maturity,
8.625%, 1/1/27 1,230,320
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Escrowed / Prerefunded (continued)
- -----------------------------------------------------------------------------
$ 5,500 Massachusetts Turnpike Authority,
Escrowed to Maturity, 5.00%, 1/1/20 $ 4,914,360
655 New Hampshire HEFA, (Riverwoods at
Exeter), Prerefunded to 3/1/03,
9.00%, 3/1/23 742,646
2,500 San Joaquin Hills Transportation
Corridor Agency, CA, Toll Road Bonds,
Escrowed to Maturity, 0.00%, 1/1/14 1,137,425
10,000 San Joaquin Hills Transportation
Corridor Agency, CA, Toll Road Bonds,
Escrowed to Maturity, 0.00%, 1/1/25 2,202,200
6,000 Savannah, GA, EDA, Escrowed to Maturity,
0.00%, 12/1/21 1,307,280
- -----------------------------------------------------------------------------
$ 15,669,201
- -----------------------------------------------------------------------------
General Obligations -- 4.6%
- -----------------------------------------------------------------------------
$ 1,495 Bell Mountain Ranch, CO, Metropolitan
District, 6.625%, 11/15/25 $ 1,356,907
2,000 Florida Board of Education,
4.75%, 6/1/28 1,606,760
2,000 Georgia, 4.25%, 8/1/18 1,617,780
4,000 New York City, NY, 0.00%, 8/1/07 2,676,320
- -----------------------------------------------------------------------------
$ 7,257,767
- -----------------------------------------------------------------------------
Health Care-Miscellaneous -- 2.8%
- -----------------------------------------------------------------------------
$ 2,479 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 5.50%, 12/1/36 $ 2,111,216
2,083 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 5.50%, 12/1/36 1,770,652
590 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 6.00%, 12/1/36 530,421
- -----------------------------------------------------------------------------
$ 4,412,289
- -----------------------------------------------------------------------------
Hospital -- 13.9%
- -----------------------------------------------------------------------------
$ 1,000 Bell County, TX, (Heritage Oaks
Healthcare), 6.70%, 6/1/29 $ 894,160
1,500 California Health Facilities Financing
Authority, (Cedars-Sinai Medical
Center), Variable Rate, 12/1/34(1)(2) 1,432,365
1,000 Chautauqua County, NY, IDA, (Women's
Christian Association), 6.40%, 11/15/29 873,310
1,500 Forsyth County, GA, Hospital Authority
Revenue, (Georgia Baptist Health Care
System), 6.375%, 10/1/28 1,299,525
1,500 Greenville, SC, Hospital System,
5.25%, 5/1/23 1,294,740
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Hospital (continued)
- -----------------------------------------------------------------------------
$ 2,000 Illinois Health Facilities Authority,
(Rush-Presbyterian St. Luke's Medical
Center), 6.658%, 10/1/24 $ 2,104,820
1,885 Louisiana Public Facilities Authority,
(General Health Systems),
6.80%, 11/1/16 1,892,201
750 Maricopa County, AZ, IDA, (Mayo
Foundation), Residual Certificates,
Variable Rate, 11/15/37(1)(2) 524,880
5,000 Massachusetts HEFA, (Partners Healthcare
System), 5.25%, 7/1/29 4,141,850
3,000 New Jersey Health Care Facilities
Financing Authority, (Trinitas Hospital
Obligated Group), 7.50%, 7/1/30 2,954,100
2,000 Orange County, FL, Health Facilities
Authority, (Westminster Community Care),
6.60%, 4/1/24 1,824,780
265 Prince George's County, MD, (Greater
Southeast Healthcare System),
6.20%, 1/1/08 108,650
1,030 Prince George's County, MD, (Greater
Southeast Healthcare System),
6.375%, 1/1/23 422,300
1,135 Rochester, MN, Health Care Facilities,
(Mayo Clinic), Variable Rate,
11/15/27(1)(2) 962,208
1,500 San Benito, CA, Health Care District,
5.40%, 10/1/20 1,196,235
- -----------------------------------------------------------------------------
$ 21,926,124
- -----------------------------------------------------------------------------
Housing -- 4.1%
- -----------------------------------------------------------------------------
$ 1,000 Florence, KY, Housing Facilities, (Blue
Grass Housing), 7.625%, 5/1/27 $ 1,156,260
1,480 Lake Creek, CO, (Affordable Housing
Corp.), 6.25%, 12/1/23 1,369,622
960 Maricopa County, AZ, IDA, (National
Health Facilities II), 6.375%, 1/1/19 886,138
1,340 North Little Rock, AR, Residential
Housing Facilities, (Parkstone Place),
6.50%, 8/1/21 1,260,203
1,650 Travis County, TX, HFC, (Travis Station
Apartments), 6.75%, 4/1/19 1,713,508
- -----------------------------------------------------------------------------
$ 6,385,731
- -----------------------------------------------------------------------------
Industrial Development Revenue -- 5.2%
- -----------------------------------------------------------------------------
$ 700 Florence County, SC, (Stone Container
Co.), 7.375%, 2/1/07 $ 716,429
1,000 Iowa Finance Authority, (Southbridge
Mall), 6.375%, 12/1/13 956,710
1,600 Mississippi Business Finance Corp.,
(System Energy Resources, Inc.),
5.90%, 5/1/22 1,383,920
1,750 New Jersey EDA, (Holt Hauling),
7.75%, 3/1/27 1,844,990
2,450 Port Camas-Washougan, WA, (James River),
6.70%, 4/1/23 2,422,094
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Industrial Development Revenue (continued)
- -----------------------------------------------------------------------------
$ 1,005 Valdez, AK, (British Petroleum),
Variable Rate, 8/1/25(1)(2) $ 882,189
- -----------------------------------------------------------------------------
$ 8,206,332
- -----------------------------------------------------------------------------
Insured-Electric Utilities -- 3.2%
- -----------------------------------------------------------------------------
$ 2,000 Intermountain Power Agency, UT, (MBIA),
5.00%, 7/1/19 $ 1,735,680
3,000 Piedmont, SC, Municipal Power Agency,
(MBIA), 4.75%, 1/1/25 2,391,420
800 Puerto Rico Electric Power Authority,
STRIPES, (FSA), Variable Rate, 7/1/03(1) 852,000
- -----------------------------------------------------------------------------
$ 4,979,100
- -----------------------------------------------------------------------------
Insured-General Obligations -- 0.9%
- -----------------------------------------------------------------------------
$ 1,000 Detroit, MI, School District, (FGIC),
4.75%, 5/1/28 $ 799,430
2,340 Merced, CA, Union High School District,
(FGIC), 0.00%, 8/1/20 665,215
- -----------------------------------------------------------------------------
$ 1,464,645
- -----------------------------------------------------------------------------
Insured-Hospital -- 2.4%
- -----------------------------------------------------------------------------
$ 3,000 Cuyahoga County, OH, (Cleveland Clinic),
(MBIA), 5.125%, 1/1/29 $ 2,545,350
1,500 Maryland HEFA, (Medlantic/Helix Issue),
(AMBAC), 5.25%, 8/15/38 1,318,380
- -----------------------------------------------------------------------------
$ 3,863,730
- -----------------------------------------------------------------------------
Insured-Housing -- 1.3%
- -----------------------------------------------------------------------------
$ 1,000 SCA MFMR Receipts, Burnsville, MN,
(FSA), 7.10%, 1/1/30 $ 1,064,840
1,000 SCA MFMR Receipts, Springfield, MO,
(FSA), 7.10%, 1/1/30 1,064,840
- -----------------------------------------------------------------------------
$ 2,129,680
- -----------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of Participation -- 1.1%
- -----------------------------------------------------------------------------
$ 2,500 San Mateo County, CA, Joint Powers
Financing Authority, (FSA), Variable
Rate, 7/15/29(1)(2) $ 1,760,100
- -----------------------------------------------------------------------------
$ 1,760,100
- -----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Insured-Special Tax Revenue -- 1.5%
- -----------------------------------------------------------------------------
$ 3,000 East Bay, CA, Municipal Utility
District, (MBIA), 4.75%, 6/1/28 $ 2,434,950
- -----------------------------------------------------------------------------
$ 2,434,950
- -----------------------------------------------------------------------------
Insured-Transportation -- 4.0%
- -----------------------------------------------------------------------------
$ 1,500 Central Puget Sound, WA, Transportation
Authority, (FGIC), 4.75%, 2/1/28 $ 1,191,390
1,500 Florida Turnpike Authority, (Department
of Transportation), (FGIC),
4.50%, 7/1/27 1,162,980
1,500 Ohio Turnpike Commission, (FGIC),
4.75%, 2/15/28 1,206,870
2,000 Puerto Rico Highway and Transportation
Authority, (FSA), 4.75%, 7/1/38 1,595,020
1,000 Triborough Bridge and Tunnel Authority,
RITES, (AMBAC), Variable Rate,
1/1/12(1)(2) 1,085,660
- -----------------------------------------------------------------------------
$ 6,241,920
- -----------------------------------------------------------------------------
Insured-Water and Sewer -- 1.8%
- -----------------------------------------------------------------------------
$ 1,000 Fairmont, WV, Waterworks Revenue,
(AMBAC), 4.50%, 7/1/24 $ 776,280
1,000 Loudoun County, VA, Sanitation
Authority, Water and Sewer Revenue,
(MBIA), 4.75%, 1/1/30 796,190
1,500 Prince William County, Service
Authority, (FGIC), 4.75%, 7/1/29 1,197,750
- -----------------------------------------------------------------------------
$ 2,770,220
- -----------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 0.7%
- -----------------------------------------------------------------------------
$ 1,000 Hardeman County, TN, (Correctional
Facilities Corp.), 7.75%, 8/1/17 $ 1,050,210
- -----------------------------------------------------------------------------
$ 1,050,210
- -----------------------------------------------------------------------------
Miscellaneous -- 1.6%
- -----------------------------------------------------------------------------
$ 1,000 Barona, CA, (Band of Mission Indians),
8.25%, 1/1/20 $ 976,110
500 San Juan, NM, Pueblo Development
Authority, 7.097%, 10/15/06 476,390
1,000 Santa Fe, NM, (Crow Hobbs),
8.50%, 9/1/16 1,053,680
- -----------------------------------------------------------------------------
$ 2,506,180
- -----------------------------------------------------------------------------
Nursing Home -- 3.7%
- -----------------------------------------------------------------------------
$ 1,425 Bell County, TX, (Riverside Healthcare,
Inc. - Normandy Terrace), 9.00%, 4/1/23 $ 1,600,945
970 Clovis, NM, IDR, (Retirement Ranches,
Inc.), 7.75%, 4/1/19 984,298
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Nursing Home (continued)
- -----------------------------------------------------------------------------
$ 205 Covington-Allegheny County, VA, IDA,
(Beverly Enterprises), 9.375%, 9/1/01 $ 209,190
1,100 Massachusetts IFA, (Age Institute of
Massachusetts), 8.05%, 11/1/25 1,153,064
1,250 Montgomery, PA, IDA, (Advancement of
Geriatric Health Care Institute),
8.375%, 7/1/23 1,312,325
680 Tarrant County, TX, Health Facilities,
(3927 Foundation), 10.25%, 9/1/19 605,880
- -----------------------------------------------------------------------------
$ 5,865,702
- -----------------------------------------------------------------------------
Senior Living / Life Care -- 6.5%
- -----------------------------------------------------------------------------
$ 1,255 Albuquerque, NM, Retirement Facilities,
(La Vida Liena Retirement Center),
5.75%, 12/15/28 $ 1,015,533
1,500 Albuquerque, NM, Retirement Facilities,
(La Vida Liena Retirement Center),
6.60%, 12/15/28 1,316,685
1,000 Colorado HFA, Revenue Refunding and
Improvement, (Volunteers of America),
5.875%, 7/1/28 825,990
1,290 Grove City, PA, Area Hospital Health
Facilities Authority, (Grove Manor),
6.625%, 8/15/29 1,136,387
1,500 Kansas City, MO, IDA, (Kingswood United
Methodist Manor), 5.875%, 11/15/29 1,233,675
1,500 North Miami, FL, Health Facilities
Authority, (Imperial Club),
6.75%, 1/1/33 1,307,160
550 Ohio HFA, Retirement Rental Housing,
(Encore Retirement Partners),
6.75%, 3/1/19 484,308
1,500 Summit County, OH, Healthcare
Facilities, (Village at Saint Edward),
5.75%, 12/1/25 1,225,125
1,700 Wisconsin HEFA, (Wisconsin Illinois
Senior Housing), 7.00%, 8/1/29 1,604,137
- -----------------------------------------------------------------------------
$ 10,149,000
- -----------------------------------------------------------------------------
Special Tax Revenue -- 4.7%
- -----------------------------------------------------------------------------
$ 1,240 Brentwood, CA, Infrastructure Financing
Authority, 5.60%, 9/2/19 $ 1,091,609
1,500 Frederick County, MD, Urbana Community
Development Authority, 6.625%, 7/1/25 1,411,065
2,000 Lincoln, CA, Public Financing Authority,
(Twelve Bridges), 6.20%, 9/2/25 1,854,320
3,500 New York LGAC, 5.00%, 4/1/21 3,061,520
- -----------------------------------------------------------------------------
$ 7,418,514
- -----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Transportation -- 8.7%
- -----------------------------------------------------------------------------
$ 1,500 Connector 2000 Association, Inc., South
Carolina Bridge & Toll Road Revenue,
(Southern Connector), 5.25%, 1/1/23 $ 1,191,255
10,000 Foothills, CA, (Eastern Transportation
Corridor Agency), 0.00%, 1/1/18 3,447,300
758 Indiana Transportation Finance
Authority, 6.25%, 11/1/16 759,167
800 Kansas Highway Transportation
Department, 5.25%, 9/1/19 731,624
2,000 Metropolitan Atlanta Rapid
Transportation Authority, GA, Variable
Rate, 7/1/20(1)(2) 1,517,700
3,500 New Jersey Transportation Authority,
Variable Rate, 6/15/17(1)(2) 2,801,330
1,000 Port Authority of New York and New
Jersey, 5.375%, 3/1/28 910,290
2,500 Puerto Rico Highway and Transportation
Authority, 5.50%, 7/1/36 2,267,075
- -----------------------------------------------------------------------------
$ 13,625,741
- -----------------------------------------------------------------------------
Utilities - Electrical and Gas -- 2.1%
- -----------------------------------------------------------------------------
$ 4,150 San Antonio, TX, Electric and Natural
Gas Revenue, 4.50%, 2/1/21 $ 3,266,424
- -----------------------------------------------------------------------------
$ 3,266,424
- -----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Water and Sewer -- 1.9%
- -----------------------------------------------------------------------------
$ 3,000 Metropolitan Southern California
Waterworks Revenue, Variable Rate,
7/1/27(2)(3) $ 1,691,130
1,500 Metropolitan Water District, (Southern
California Waterworks), 4.75%, 7/1/22 1,243,545
- -----------------------------------------------------------------------------
$ 2,934,675
- -----------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.8%
(identified cost $169,993,180) $158,364,173
- -----------------------------------------------------------------------------
Other Assets, Less Liabilities -- (0.8)% $ (1,261,612)
- -----------------------------------------------------------------------------
Net Assets -- 100.0% $157,102,561
- -----------------------------------------------------------------------------
</TABLE>
At December 31, 1999, the concentration of the Fund's investments in the
various states, determined as a percentage of net assets, is as follows:
<TABLE>
<S> <C>
California 14.5%
New York 10.0%
Others, representing less than 10% individually 76.3%
</TABLE>
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
December 31, 1999, 16.9% of the securities in the portfolio of investments are
backed by bond insurance of various financial institutions and financial
guaranty assurance agencies. The aggregate percentage insured by financial
institutions ranged from 2.0% to 6.3% 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.
(3) Security has been issued as a leveraged inverse floater bond.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
<S> <C>
Assets
- ------------------------------------------------------
Investments, at value
(identified cost, $169,993,180) $158,364,173
Receivable for investments sold 10,000
Receivable for Fund shares sold 682,112
Interest receivable 3,129,874
- ------------------------------------------------------
TOTAL ASSETS $162,186,159
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Payable for investments purchased $ 3,952,025
Payable for Fund shares redeemed 526,504
Dividends payable 405,097
Demand note payable 100,000
Due to bank 60,747
Payable to affiliate for Trustees' fees 500
Accrued expenses 38,725
- ------------------------------------------------------
TOTAL LIABILITIES $ 5,083,598
- ------------------------------------------------------
NET ASSETS $157,102,561
- ------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------
Paid-in capital $171,178,097
Accumulated distributions in excess of
net realized gain (computed on the
basis of identified cost) (2,446,529)
Net unrealized depreciation (computed on
the basis of identified cost) (11,629,007)
- ------------------------------------------------------
TOTAL $157,102,561
- ------------------------------------------------------
Class A Shares
- ------------------------------------------------------
NET ASSETS $ 49,426,683
SHARES OUTSTANDING 5,756,150
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 8.59
MAXIMUM OFFERING PRICE PER SHARE
(100 DIVIDED BY 95.25 of $8.59) $ 9.02
- ------------------------------------------------------
Class B Shares
- ------------------------------------------------------
NET ASSETS $ 22,738,343
SHARES OUTSTANDING 2,668,756
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 8.52
- ------------------------------------------------------
Class I Shares
- ------------------------------------------------------
NET ASSETS $ 84,937,535
SHARES OUTSTANDING 9,059,506
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 9.38
- ------------------------------------------------------
</TABLE>
On sales of $25,000 or more, the offering price of Class A shares is reduced.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1999
<S> <C>
Investment Income
- ------------------------------------------------------
Interest $ 10,152,501
- ------------------------------------------------------
TOTAL INVESTMENT INCOME $ 10,152,501
- ------------------------------------------------------
Expenses
- ------------------------------------------------------
Investment adviser fee $ 808,782
Trustees fees and expenses 12,355
Distribution and service fees
Class A 19,706
Class B 152,621
Registration fees 82,580
Transfer and dividend disbursing agent
fees 76,364
Custodian fee 75,906
Legal and accounting services 39,376
Printing and postage 17,425
Miscellaneous 41,391
- ------------------------------------------------------
TOTAL EXPENSES $ 1,326,506
- ------------------------------------------------------
Deduct --
Reduction of custodian fee $ 39,770
- ------------------------------------------------------
TOTAL EXPENSE REDUCTIONS $ 39,770
- ------------------------------------------------------
NET EXPENSES $ 1,286,736
- ------------------------------------------------------
NET INVESTMENT INCOME $ 8,865,765
- ------------------------------------------------------
Realized and Unrealized Gain (Loss)
- ------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ (2,112,001)
Financial futures contracts 51,491
- ------------------------------------------------------
NET REALIZED LOSS $ (2,060,510)
- ------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(23,024,209)
- ------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $(23,024,209)
- ------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(25,084,719)
- ------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $(16,218,954)
- ------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase (Decrease) YEAR ENDED YEAR ENDED
IN NET ASSETS DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------
From operations --
Net investment income $ 8,865,765 $ 6,082,615
Net realized gain (loss) (2,060,510) 1,785,392
Net change in unrealized
appreciation (depreciation) (23,024,209) (555,744)
- ------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (16,218,954) $ 7,312,263
- ------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (2,600,117) $ (729,146)
Class B (891,318) (164,930)
Class I (5,374,330) (5,188,539)
In excess of net investment income
Class A (43,503) --
Class B (4,100) --
Class I (88,693) --
From net realized gain
Class A -- (194,132)
Class B -- (49,556)
Class I -- (1,053,475)
In excess of net realized gain
Class A (91,540) (152,749)
Class B (41,414) (57,351)
Class I (158,431) --
- ------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (9,293,446) $ (7,589,878)
- ------------------------------------------------------------------------------
Transactions in shares of beneficial interest --
Proceeds from sale of shares
Class A $ 38,376,724 $ 32,686,526
Class B 19,208,003 10,386,143
Class I 9,905,056 21,582,811
Net asset value of shares issued to
shareholders in payment of
distributions declared
Class A 1,562,297 590,413
Class B 574,467 181,597
Class I 2,705,265 3,347,030
Cost of shares redeemed
Class A (15,030,293) (577,172)
Class B (3,906,414) (480,650)
Class I (18,964,373) (11,630,237)
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS $ 34,430,732 $ 56,086,461
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 8,918,332 $ 55,808,846
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
NET ASSETS DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------
At beginning of year $ 148,184,229 $ 92,375,383
- ------------------------------------------------------------------------------
AT END OF YEAR $ 157,102,561 $ 148,184,229
- ------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
------------------------
YEAR ENDED DECEMBER 31,
------------------------
1999 1998(1)(2)
<S> <C> <C>
- ----------------------------------------------------------
Net asset value -- Beginning
of year $ 9.970 $ 10.000
- ----------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------
Net investment income $ 0.505 $ 0.502
Net realized and unrealized
gain (loss) (1.357) 0.099
- ----------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ (0.852) $ 0.601
- ----------------------------------------------------------
Less distributions
- ----------------------------------------------------------
From net investment income $ (0.504) $ (0.522)
In excess of net investment
income (0.008) --
From net realized gain -- (0.061)
In excess of net realized gain (0.016) (0.048)
- ----------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.528) $ (0.631)
- ----------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $ 8.590 $ 9.970
- ----------------------------------------------------------
TOTAL RETURN(3) (8.85)% 6.07%
- ----------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------
Net assets, end of year
(000's omitted) $ 49,427 $ 32,352
Ratios (As a percentage of
average daily net assets):
Expenses 0.71% 0.65%
Expenses after custodian
fee reduction 0.69% 0.60%
Net investment income 5.31% 5.07%
Portfolio Turnover 80% 38%
- ----------------------------------------------------------
</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) 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.
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
------------------------
YEAR ENDED DECEMBER 31,
------------------------
1999 1998(1)(2)
<S> <C> <C>
- ----------------------------------------------------------
Net asset value -- Beginning
of year $ 9.880 $ 10.000
- ----------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------
Net investment income $ 0.431 $ 0.416
Net realized and unrealized
gain (loss) (1.343) 0.006
- ----------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ (0.912) $ 0.422
- ----------------------------------------------------------
Less distributions
- ----------------------------------------------------------
From net investment income $ (0.430) $ (0.433)
In excess of net investment
income (0.002) --
From net realized gain -- (0.051)
In excess of net realized gain (0.016) (0.058)
- ----------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.448) $ (0.542)
- ----------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $ 8.520 $ 9.880
- ----------------------------------------------------------
TOTAL RETURN(3) (9.51)% 4.03%
- ----------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------
Net assets, end of year
(000's omitted) $ 22,738 $ 10,008
Ratios (As a percentage of
average daily net assets):
Expenses 1.47% 1.39%
Expenses after custodian
fee reduction 1.45% 1.34%
Net investment income 4.61% 4.33%
Portfolio Turnover 80% 38%
- ----------------------------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) For the period from the commencement of offering of Class B shares,
January 14, 1998, to December 31, 1998.
(3) 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.
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS I
-------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1999 1998(1) 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Net asset value -- Beginning
of year $ 10.870 $ 10.840 $ 10.070 $ 10.210 $ 9.260
- -----------------------------------------------------------------------------------------------
Income (loss) from operations
- -----------------------------------------------------------------------------------------------
Net investment income $ 0.553 $ 0.574 $ 0.584 $ 0.605 $ 0.604
Net realized and unrealized
gain (loss) (1.464) 0.141 0.785 (0.143) 0.962
- -----------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ (0.911) $ 0.715 $ 1.369 $ 0.462 $ 1.566
- -----------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------
From net investment income $ (0.554) $ (0.576) $ (0.584) $ (0.594) $ (0.604)
In excess of net investment
income (0.009) -- (0.015) (0.008) (0.012)
From net realized gain -- (0.109) -- -- --
In excess of net realized gain (0.016) -- -- -- --
- -----------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.579) $ (0.685) $ (0.599) $ (0.602) $ (0.616)
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $ 9.380 $ 10.870 $ 10.840 $ 10.070 $ 10.210
- -----------------------------------------------------------------------------------------------
TOTAL RETURN(2) (8.69)% 6.75% 14.13% 4.78% 17.40%
- -----------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------
Net assets, end of year
(000's omitted) $ 84,938 $105,824 $ 92,375 $ 88,184 $ 96,410
Ratios (As a percentage of
average daily net assets):
Expenses 0.69% 0.70% 0.81% 0.78% 0.76%
Expenses after custodian
fee reduction 0.67% 0.65% 0.77% 0.74% --
Net investment income 5.38% 5.25% 5.69% 6.12% 6.16%
Portfolio Turnover 80% 38% 34% 30% 58%
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) 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.
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
Eaton Vance Municipal Bond Fund (the Fund) 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. At December 31, 1999, the Fund, for
federal income tax purposes had a capital loss carryover of $1,863,510 which
will reduce the taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code,
and thus will reduce the amount of distributions to shareholders which would
otherwise be necessary to relieve the Fund of any liability for federal
income or excise tax. The capital loss carryover expires on December 31,
2007. Additionally, at December 31, 1999, net capital losses of $445,201
attributable to security transactions incurred after October 31, 1999 are
treated as arising on the first day of the Fund's next taxable year.
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.
15
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
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.
G Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
to the Fund. Pursuant to the custodian agreement, IBT receives a fee reduced
by credits which are determined based on the average daily cash balance the
Fund maintains with IBT. All significant credit balances used to reduce the
Fund's custodian fees are reported as a reduction of total 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 income and expense during the reporting period. Actual results could
differ from those estimates.
I Other -- Investment transactions are accounted for on a trade date basis.
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.
During the year ended December 31, 1999, $136,296 was reclassified from
accumulated distributions in excess of net investment income to paid-in
capital due to permanent differences between book and tax accounting for
operating losses. Additionally, $13,256 was reclassified from accumulated
distributions in excess of net realized gain to paid-in capital due to
permanent differences between book and tax accounting for capital losses. Net
investment income, net realized loss on investment transactions and net
assets were unaffected by these reclassifications.
3 Shares of Beneficial Interest
- -------------------------------------------
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
CLASS A 1999 1998(1)
<S> <C> <C>
------------------------------------------------------------------
Sales 4,001,503 3,242,591
Issued to shareholders electing to
receive payments of distributions in
Fund shares 167,567 58,980
Redemptions (1,656,768) (57,723)
------------------------------------------------------------------
NET INCREASE 2,512,302 3,243,848
------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
CLASS B 1999 1998(2)
<S> <C> <C>
------------------------------------------------------------------
Sales 2,028,334 1,042,463
Issued to shareholders electing to
receive payments of distributions in
Fund shares 62,180 18,306
Redemptions (434,690) (47,837)
------------------------------------------------------------------
NET INCREASE 1,655,824 1,012,932
------------------------------------------------------------------
</TABLE>
16
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
CLASS I 1999 1998
<S> <C> <C>
------------------------------------------------------------------
Sales 945,281 1,969,000
Issued to shareholders electing to
receive payments of distributions in
Fund shares 264,623 306,746
Redemptions (1,882,488) (1,064,820)
Issued to Eaton Vance Municipal Bond
Fund, L.P. shareholders -- 8,521,164
------------------------------------------------------------------
NET INCREASE (DECREASE) (672,584) 9,732,090
------------------------------------------------------------------
</TABLE>
(1) For the period from the commencement of offering of Class A shares,
January 6, 1998, to December 31, 1998.
(2) For the period from the commencement of offering of Class B shares,
January 14, 1998, to December 31, 1998.
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 year ended December 31, 1999,
the fee was equivalent to 0.48% of the Fund's average daily net assets for
such period and amounted to $808,782. 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. The Fund was informed that Eaton Vance Distributors, Inc. (EVD), a
subsidiary of EVM and the Fund's principal underwriter, received $30,544 from
the Fund as its portion of the sales charge on sales of Class A shares for
the year ended December 31, 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
year ended December 31, 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 in effect a distribution plan for Class B (Class B Plan)
pursuant to Rule 12b-1 under the Investment Company Act of 1940 and a Service
Plan for Class A shares (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 $144,840 for
Class B shares to EVD for the year ended December 31, 1999, representing
0.75% of the average daily net assets for Class B shares. At December 31,
1999, the amount of Uncovered Distribution Charges EVD calculated under the
Class B Plan was approximately $1,102,000.
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 initially implemented the Plans by
authorizing the Fund to make quarterly service fee payments to EVD and
investment dealers equal to 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.
On October 4, 1999, the Trustees approved service fee payments equal to 0.25%
per annum of the Fund's average daily net assets attributable to Class A and
Class B shares for any fiscal year on shares of the Fund sold on or after
October 12, 1999. 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 year ended December 31, 1999 amounted to $19,706 and $7,781 for Class A
and Class B shares, respectively.
17
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
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 limited
conditions. CDSC charges are paid to EVD to reduce the amount of Uncovered
Distribution Charges calculated under the Class B Distribution Plan (see
Notes 5). CDSC charges received when no Uncovered Distribution Charges exist
will be credited to the Fund. EVD received approximately $30,000 of CDSC paid
by Class B shareholders for the period ended December 31, 1999.
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,
aggregated $163,080,613, and $132,223,902, respectively.
8 Line of Credit
- -------------------------------------------
The Fund participates with other portfolios and funds managed by EVM and
affiliates in a $150 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 December 31, 1999, amounts outstanding under the
line of credit totaled $100,000.
9 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investment securities at December 31, 1999, as computed on a federal income
tax basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $170,064,877
------------------------------------------------------
Gross unrealized appreciation $ 2,854,861
Gross unrealized depreciation (14,555,565)
------------------------------------------------------
NET UNREALIZED DEPRECIATION $(11,700,704)
------------------------------------------------------
</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 December 31, 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.
18
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 1999
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS
OF EATON VANCE MUNICIPAL BOND FUND:
- ---------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Eaton Vance Municipal Bond Fund as of
December 31, 1999, the related statement of operations for the year then ended,
the statements of changes in net assets for the two years then ended and the
financial highlights for each of the years in the five-year period ended
December 31, 1999. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities held as of
December 31, 1999 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other audit procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Eaton Vance
Municipal Bond Fund as of December 31, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 11, 2000
19
<PAGE>
EATON VANCE MUNICIPAL BOND FUND AS OF DECEMBER 31, 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
Michael R. Mach
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 Executive 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
20
<PAGE>
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<PAGE>
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<PAGE>
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<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
PFPC GLOBAL FUND SERVICES
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
200 Berkeley Street
Boston, MA 02116-5022
EATON VANCE
MUNICIPAL BOND FUND
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
279-2/00 MBSRC
