<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1997
1933 ACT FILE NO. 2-60210
1940 ACT FILE NO. 811-2778
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 23 [X]
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 20 [X]
EATON VANCE MUNICIPAL BOND FUND L.P.
--------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
------------
(REGISTRANT'S TELEPHONE NUMBER)
THOMAS OTIS, SECRETARY
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective on May 1, 1997
pursuant to paragraph (b) of Rule 485.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on
February 28, 1997 filed its "Notice" as required by that Rule for the fiscal
year ended December 31, 1996. Registrant continues its election to register an
indefinite number of shares of beneficial interest pursuant to Rule 24f-2.
- --------------------------------------------------------------------------------
<PAGE>
EATON VANCE MUNICIPAL BOND FUND L.P.
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------------ -------- ----------------------------------------
<S> <C> <C>
1. ...................... Cover Page Cover Page
2. ...................... Synopsis Shareholder and Fund Expenses
3. ...................... Condensed Financial Information The Fund's Financial Highlights;
Performance Information
4. ...................... General Description of Registrant The Fund's Investment Objective;
Investment Policies and Risks; Limited
Partnership Form; Power of Attorney
5. ...................... Management of the Fund Management of the Fund
5A. ..................... Management's Discussion of Fund Not Applicable
Performance
6. ...................... Capital Stock and Other Securities Limited Partnership Form; The Lifetime
Investing Account; Allocations,
Distributions and Taxes
7. ...................... Purchase of Securities Being Offered Valuing Fund Shares; How to Buy Fund
Shares; The Lifetime Investing
Account; The Eaton Vance Exchange
Privilege; Eaton Vance Shareholder
Services
8. ...................... Redemption or Repurchase How to Redeem Fund Shares
9. ...................... Pending Legal Proceedings Not Applicable
<CAPTION>
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------------ -------- ----------------------------------------
<S> <C> <C>
10. ...................... Cover Page Cover Page
11. ...................... Table of Contents Table of Contents
12. ...................... General Information and History Summary of Partnership Agreement
13. ...................... Investment Objectives and Policies Additional Information about Investment
Policies; Investment Restrictions
14. ...................... Management of the Fund Management; Investment Adviser
15. ...................... Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
16. ...................... Investment Advisory and Other Investment Adviser; Custodian;
Services Independent Certified Public
Accountants
17. ...................... Brokerage Allocation and Other Portfolio Security Transactions
Practices
18. ...................... Capital Stock and Other Securities Summary of Partnership Agreement
19. ...................... Purchase, Redemption and Pricing of Determination of Net Asset Value;
Securities Being Offered Services for Accumulation; Service for
Withdrawal
20. ...................... Tax Status Taxes; Tax Equivalent Yield Table
21. ...................... Underwriters Principal Underwriter
22. ...................... Calculation of Performance Data Investment Performance
23. ...................... Financial Statements Financial Statements
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EATON VANCE
MUNICIPAL BOND FUND L.P.
- --------------------------------------------------------------------------------
EATON VANCE MUNICIPAL BOND FUND L.P. (THE "FUND") IS A MUTUAL FUND SEEKING TO
PROVIDE CURRENT INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAX.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated May 1, 1997 for the Fund, as supplemented from
time to time, has been filed with the Securities and Exchange Commission (the
"Commission") and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Fund's
investment adviser is Eaton Vance Management (the "Investment Adviser"), which
is located at the same address.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ......................... 2 Reports to Shareholders ........................... 13
The Fund's Financial Highlights ....................... 3 The Lifetime Investing Account .................... 13
The Fund's Investment Objective ....................... 4 The Eaton Vance Exchange Privilege ................ 13
Investment Policies and Risks ......................... 4 Eaton Vance Shareholder Services .................. 14
Limited Partnership Form ............................. 7 Allocations, Distributions and Taxes .............. 15
Management of the Fund ............................... 8 Performance Information ........................... 17
Valuing Fund Shares ................................... 9 Power of Attorney ................................. 18
How to Buy Fund Shares ................................ 9 Appendix .......................................... 19
How to Redeem Fund Shares ............................. 11
</TABLE>
- -------------------------------------------------------------------------------
PROSPECTUS DATED MAY 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.75%
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)
- ---------------------------------------------------------------------------------------------------------
Investment Adviser Fee 0.51%
Other Expenses 0.27%
----
Total Operating Expenses 0.78%
====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following maximum initial sales
charge and expenses on a $1,000 investment, assuming (a) 5%
annual return and (b) redemption at the end of each period: $45 $61 $79 $130
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and are
designed to help investors understand the costs and expenses they will bear,
directly or indirectly, by investing in the Fund. Information for the Fund is
based on its expenses for the most recent fiscal year.
The Example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual annual
return will vary. For further information regarding the expenses of the Fund see
"The Fund's Financial Highlights" and "Management of the Fund."
No sales charge is payable at the time of purchase on investments of $1 million
or more. However, a contingent deferred sales charge of 0.50% will be imposed on
such investments in the event of certain redemptions within 12 months of
purchase. See "How to Buy Fund Shares" and "How to Redeem Fund Shares."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and
auditing. The financial statements and independent auditors' report are
incorporated by reference into the Statement of Additional Information.
Further information regarding the performance of the Fund is contained in the
Fund's annual report to shareholders which may be obtained without charge by
contacting the Principal Underwriter.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $10.210 $ 9.260 $10.630 $ 9.950 $ 9.750 $ 9.200 $ 9.250 $ 8.990 $ 8.590 $ 9.260
------- ------- ------- -------- -------- ------- ------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment
income $ 0.605 $ 0.604 $ 0.611 $ 0.614 $ 0.639 $ 0.638 $ 0.627 $ 0.632 $ 0.630 $ 0.655
Net realized and
unrealized gain
(loss) on
investments (0.143) 0.962 (1.369) 0.692 0.195 0.552 (0.017) 0.288 0.430 (0.665)
------- ------- ------- -------- -------- ------- ------- ------- ------- -------
Total income
(loss) from
operations $ 0.462 $ 1.566 $ (0.758) $ 1.306 $ 0.834 $ 1.190 $ 0.610 $ 0.920 $ 1.060 $ 0.000
------- ------- ------- -------- -------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income $(0.594) $(0.604) $ (0.611) $ (0.619) $ (0.634) $(0.638) $(0.627) $(0.660) $(0.660) $(0.660)
In excess of net
investment income(2) (0.008) (0.012) (0.001) (0.007) -- (0.002) (0.033) -- -- --
------- ------- ------- -------- -------- ------- ------- ------- ------- -------
Total
distributions $(0.602) $(0.616) $(0.612) $ (0.626) $ (0.634) $(0.640) $(0.660) $(0.660) $(0.660) $(0.660)
------- ------- ------- -------- -------- ------- ------- ------- ------- -------
NET ASSET VALUE, end
of year $10.070 $10.210 $ 9.260 $ 10.630 $ 9.950 $ 9.750 $ 9.200 $ 9.250 $ 8.990 $ 8.590
======= ======= ======== ======== ======== ======= ======= ======= ======= =======
TOTAL RETURN(1) 4.78% 17.40% (7.27)% 13.52% 8.91% 13.49% 6.97% 10.65% 12.83% (0.03)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000's omitted) $88,184 $96,410 $90,802 $114,425 $103,208 $92,771 $80,907 $77,780 $63,385 $51,771
Ratio of expenses to
average daily
net assets(3) 0.78% 0.76% 0.80% 0.72% 0.74% 0.76% 0.85% 0.92% 0.96% 0.82%
Ratio of expenses to
average daily net
assets
after custodian
fee reduction 0.74% -- -- -- -- -- -- -- -- --
Ratio of net
investment income
to average
daily net assets 6.12% 6.16% 6.26% 5.91% 6.50% 6.75% 6.94% 6.87% 7.20% 7.44%
PORTFOLIO TURNOVER 30% 58% 58% 86% 60% 105% 187% 188% 139% 103%
(1) Total investment 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. Distributions, if any, are assumed to be reinvested at the net asset
value on the payabledate. Total return is computed on a non-annualized basis.
(2) During the year ended September 30, 1993, the Fund adopted Statement of Position (SOP) 93-2: Determination, Disclosure
and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. The SOP requires that differences in the recognition or classification of income between the financial
statements and tax earnings and profits that result in temporary over-distributions for financial statement purposes, are
classified as distributions in excess of net investment income or accumulated net realized gains.
(3) The expense ratios for the year ended December 31, 1995 and 1996 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund to increase its expense ratio by the effect of any expense
offset arrangements with its service providers. The expense ratios for each of the periods ended on or before December
31, 1994 have not been adjusted to reflect this change.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK CURRENT INCOME EXEMPT FROM REGULAR
FEDERAL INCOME TAX. The Fund is an open-end diversified investment company which
commenced its investment operations in 1977.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
DURING PERIODS OF NORMAL MARKET CONDITIONS, THE FUND WILL HAVE AT LEAST 80% OF
ITS NET ASSETS INVESTED IN OBLIGATIONS, INCLUDING NOTES AND TAX-EXEMPT
COMMERCIAL PAPER, ISSUED BY OR ON BEHALF OF STATES, TERRITORIES AND POSSESSIONS
OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA AND THEIR POLITICAL
SUBDIVISIONS, AGENCIES AND INSTRUMENTALITIES, THE INTEREST ON WHICH IS EXEMPT
FROM THE REGULAR FEDERAL INCOME TAX ("MUNICIPAL BONDS"). The foregoing policy is
a fundamental policy which may not be changed unless authorized by a vote of the
holders of the Fund's units of partnership interest ("Shares").
The Fund's assets normally will be invested primarily in (1) Municipal Bonds
(other than tax-exempt commercial paper) which are rated at the time of purchase
within the three highest grades assigned by Moody's Investors Service, Inc.
("Moody's") (Aaa, Aa, or A, VMIG 1, VMIG 2 or VMIG 3 or, in the case of notes,
MIG 1, MIG 2, or MIG 3), Standard & Poor's Ratings Group ("S&P") (AAA, AA, or A)
or Fitch Investors Service, Inc. ("Fitch") (AAA, AA or A), which are guaranteed,
backed or secured at the time of purchase by the U.S. Government or any of its
agencies or instrumentalities, or which are issued by issuers having at the time
of purchase an issue of outstanding Municipal Bonds rated within the three
highest grades assigned by Moody's, S&P or Fitch; or (2) tax-exempt commercial
paper which is rated at the time of purchase within the highest grade assigned
by Moody's (Prime-1) or S&P (A-1), which is guaranteed, backed or secured at the
time of purchase by the U.S. Government or any of its agencies or
instrumentalities, or which is issued by an issuer having at the time of
purchase an issue of outstanding Municipal Bonds rated within the highest grade
assigned by any of the aforesaid rating services. For a description of municipal
obligation ratings, see the Statement of Additional Information.
The Fund may also invest its assets in Municipal Bonds which are rated
investment grade (BBB by Moody's or Baa by S&P or Fitch) or below investment
grade or are unrated. Municipal Bonds rated BBB or Baa may have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher rated obligations. Municipal Bonds rated
below investment grade are commonly known as "junk bonds." See "Additional Risk
Considerations."
The Fund from time to time may make temporary investments in obligations of the
U.S. Government, its agencies, or instrumentalities; other debt securities rated
within the three highest grades by the aforesaid rating services; commercial
paper rated in the highest grade by such rating services (Prime-1 or A-1,
respectively); certificates of deposit of domestic banks with assets of $1
billion or more; and repurchase agreements. Interest income from temporary
investments may be taxable to holders of Shares as ordinary income. See
"Allocations, Distributions and Taxes." The Fund may also acquire rights to
resell Municipal Bonds or any of the foregoing temporary investments at an
agreed upon price and at or within an agreed upon time.
MUNICIPAL BONDS. Municipal Bonds are issued for a wide variety of both public
and private purposes. General obligation bonds are backed by the taxing power of
the issuing municipality. Revenue bonds are backed by the revenues of a project
or facility, or from the proceeds of a specific revenue source. Some revenue
bonds are payable solely or partly from funds which are subject to annual
appropriations by a State's legislature and the availability of monies for such
payments. Municipal notes include bond anticipation, tax anticipation and
revenue anticipation notes. Bond, tax and revenue anticipation notes are
short-term obligations that will be retired with the proceeds of an anticipated
bond issue, tax revenue or facility revenue, respectively.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors; as of
the date of this Prospectus the Fund held no such obligations. The Fund may not
invest more than 20% of its net assets in these obligations and obligations
subject to regular federal income tax. Distributions to corporate investors of
certain interest income may also be subject to the AMT.
MATURITY. It is expected that the Fund's portfolio will normally contain
substantial amounts of long-term Municipal Bonds with maturities of ten years or
more, because such long-term obligations generally produce higher income than
short-term obligations. Such long-term obligations are more susceptible to
market fluctuations resulting from changes in interest rates than shorter term
obligations. The average maturity of the Fund's portfolio may vary depending on
anticipated market conditions.
CONCENTRATION. The Fund expects that it will not invest more than 25% of its
total assets in Municipal Bonds whose issuers are located in the same state or
more than 25% of its total assets in Municipal Bonds the security of which is
derived from any one of the following categories; hospitals and health
facilities; turnpikes and toll roads; ports and airports; or colleges and
universities. The Fund may invest more than 25% of its total assets in Municipal
Bonds the security of which is derived from any one or more other categories
including without limitation the following: public housing authorities; general
obligations of states and localities; obligations dependent on annual
appropriations for payment; lease rental obligations of state and local
authorities; obligations of state and local housing finance authorities;
municipal utilities systems; or industrial development and pollution control
bonds. This may make the Fund more susceptible to adverse economic, political or
regulatory occurrences affecting a particular category of issuers.
OTHER INVESTMENT PRACTICES
The Fund may engage in the following investment practices, some of which may be
considered to involve "derivative" instruments because they derive their value
from another instrument, security or index. In addition, the Fund may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. The Fund may purchase securities on a "when-issued"
basis, which means that payment and delivery occur on a future settlement date.
The price and yield are generally fixed on the date of commitment to purchase.
However, the market value of the securities may fluctuate prior to delivery and
upon delivery the securities may be worth more or less than the Fund agreed to
pay for them. The Fund may also purchase instruments that give the Fund the
option to purchase a Municipal Bond when and if issued.
INVERSE FLOATERS. The Fund may invest in municipal securities whose interest
rates bear an inverse relationship to the interest rate on another security or
the value of an index ("inverse floaters"). An investment in inverse floaters
may involve greater risk than an investment in a fixed rate bond. Because
changes in the interest rate on the other security or index inversely affect the
residual interest paid on the inverse floater, the value of an inverse floater
is generally more volatile than that of a fixed rate bond. Inverse floaters have
interest rate adjustment formulas which generally reduce or, in the extreme,
eliminate the interest paid to the Fund when short-term interest rates rise, and
increase the interest paid to the Fund when short-term interest rates fall.
Inverse floaters have varying degrees of liquidity, and the market for these
securities is new and relatively volatile. These securities tend to underperform
the market for fixed rate bonds in a rising interest rate environment, but tend
to outperform the market for fixed bonds when interest rates decline. Shifts in
long-term interest rates may, however, alter this tendency. Although volatile,
inverse floaters typically offer the potential for yields exceeding the yields
available on fixed rate bonds with comparable credit quality and maturity. These
securities usually permit the investor to convert the floating rate to a fixed
rate (normally adjusted downward), and this optional conversion feature may
provide a partial hedge against rising interest rates if exercised at an
opportune time. Inverse floaters are leveraged because they provide two or more
dollars of bond market exposure for every dollar invested.
FUTURES TRANSACTIONS. The Fund may purchase and sell various kinds of financial
futures contracts and options thereon to hedge against changes in interest
rates. Futures contracts may be based on various debt securities (such as U.S.
Government securities and municipal obligations) and securities indices (such as
the Municipal Bond Index traded on the Chicago Board of Trade). Such
transactions involve a risk of loss or depreciation due to unanticipated adverse
changes in securities prices, which may exceed the Fund's initial investment in
these contracts. The Fund may not purchase or sell futures contracts or related
options, except for closing purchase or sale transactions, if immediately
thereafter the sum of the amount of margin deposits and premiums paid on the
Fund's outstanding positions would exceed 5% of the market value of the Fund's
net assets. These transactions involve transaction costs. There can be no
assurance that the Investment Adviser's use of futures will be advantageous to
the Fund. Allocations by the Fund of any gains realized on the Fund's
transactions in futures and options on futures will be taxable.
INSURED OBLIGATIONS. The Fund may purchase Municipal Bonds that are additionally
secured by insurance, bank credit agreements, or escrow accounts. The credit
quality of companies which provide such credit enhancements will affect the
value of those securities. Although the insurance feature reduces certain
financial risks, the premiums for insurance and the higher market price paid for
insured obligations may reduce the Fund's current yield. Insurance generally
will be obtained from insurers with a claims-paying ability rated Aaa by Moody's
or AAA by S&P or Fitch. The insurance does not guarantee the market value of the
insured obligations or the net asset value of the Fund's shares.
ADDITIONAL RISK CONSIDERATIONS
Some Municipal Bonds offering current income are in the lowest investment grade
category (Baa or BBB), lower categories or may be unrated. As indicated above,
the Fund may invest in municipal obligations rated below investment grade (but
not lower than B by Moody's, S&P or Fitch) and comparable unrated obligations.
See the Appendix to this Prospectus for the asset composition of the Fund for
the fiscal year ended December 31, 1996. The lowest investment grade, lower
rated and comparable unrated municipal obligations in which the Fund may invest
will have speculative characteristics in varying degrees. While such obligations
may have some quality and protective characteristics, these characteristics can
be expected to be offset or outweighed by uncertainties or major risk exposures
to adverse conditions. Lower rated and comparable unrated Municipal Bonds are
subject to the risk of an issuer's inability to meet principal and interest
payments on the obligations (credit risk) and may also be subject to greater
price volatility due to such factors as interest rate sensitivity, market
perception of the creditworthiness of the issuer and general market liquidity
(market risk). Lower rated or unrated Municipal Bonds are also more likely to
react to real or perceived developments affecting market and credit risk than
are more highly rated obligations, which react primarily to movements in the
general level of interest rates. The Investment Adviser seeks to minimize the
risks of investing in below investment grade securities through professional
investment analysis and attention to current developments in interest rates and
economic conditions. When the Fund invests in lower rated or unrated Municipal
Bonds, the achievement of the Fund's goals is more dependent on the Investment
Adviser's ability than would be the case if the Fund were investing in Municipal
Bonds in the higher rating categories.
The Fund may retain defaulted obligations in its portfolio when such retention
is considered desirable by the Investment Adviser. In the case of a defaulted
obligation, the Fund may incur additional expense seeking recovery of its
investment. Municipal Bonds held by the Fund which are rated below investment
grade but which, subsequent to the assignment of such rating, are backed by
escrow accounts containing U.S. Government obligations may be determined by the
Investment Adviser to be of investment grade quality for purposes of the Fund's
investment policies. Holdings of obligations rate below Baa or BBB will not
exceed 35% of net assets. In the event the rating of an obligation held by the
Fund is downgraded, causing the Fund to exceed this limitation, the Investment
Adviser will (in an orderly fashion within a reasonable period of time) dispose
of such obligations as it deems necessary in order to comply with the Fund's
credit quality limitations.
The net asset value of Fund Shares will change in response to fluctuations in
prevailing interest rates and changes in the value of its portfolio securities.
When interest rates decline, the value of securities held by the Fund can be
expected to rise. Conversely, when interest rates rise, the value of most
portfolio security holdings can be expected to decline. Changes in the credit
quality of the issuers of Municipal Bonds held by the Fund will affect the
principal value of (and possibly the income earned on) such Bonds. In addition,
the values of such securities are affected by changes in general economic
conditions and business conditions affecting the specific industries of their
issuers. Changes by recognized rating services in their ratings of a security
and in the ability of the issuer to make payments of principal and interest may
also affect the value of the Fund's investments. The amount of information about
the financial condition of an issuer of Municipal Bonds may not be as extensive
as that made available by corporations whose securities are publicly traded. An
investment in shares of the Fund will not constitute a complete investment
program.
At times, a substantial portion of the Fund's assets may be invested in
securities as to which the Fund, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Fund
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Fund's net asset value.
The secondary market for some Municipal Bonds (including issues which are
privately placed with the Fund) is less liquid than that for taxable debt
obligations or other more widely traded municipal obligations. No established
resale market exists for certain of the municipal obligations in which the Fund
may invest. The market for obligations rated below investment grade is also
likely to be less liquid than the market for higher rated obligations. As a
result, the Fund may be unable to dispose of these municipal obligations at
times when it would otherwise wish to do so at the prices at which they are
valued.
Certain securities held by the Fund may permit the issuer at its option to
"call," or redeem, its securities. If an issuer redeems securities held by the
Fund during a time of declining interest rates, the Fund may not be able to
reinvest the proceeds in securities providing the same investment return as the
securities redeemed.
Some of the securities in which the Fund invests may include so-called "zero-
coupon" bonds, whose values are subject to greater fluctuation in response to
changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. The Fund is required to accrue income from zero-coupon bonds on a
current basis, even though it does not receive that income currently in cash,
and is required to distribute such income for each taxable year. Thus, the Fund
may have to sell other investments to obtain cash needed to make income
distributions.
The Fund may invest in municipal leases, and participations in municipal leases.
The obligation of the issuer to meet its obligations under such leases is often
subject to the appropriation by the appropriate legislative body, on an annual
or other basis, of funds for the payment of the obligations. Investments in
municipal leases are thus subject to the risk that the legislative body will not
make the necessary appropriation and the issuer will not otherwise be willing or
able to meet its obligation.
THE FUND HAS ADOPTED CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS WHICH ARE
ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION AND WHICH MAY
NOT BE CHANGED UNLESS AUTHORIZED BY A VOTE OF THE HOLDERS OF SHARES. EXCEPT
FOR SUCH ENUMERATED RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS
PROSPECTUS, THE INVESTMENT OBJECTIVE AND POLICIES OF THE FUND ARE NOT
FUNDAMENTAL POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE DIRECTOR GENERAL
PARTNERS WITHOUT OBTAINING THE APPROVAL OF THE FUND'S SHAREHOLDERS.
LIMITED PARTNERSHIP FORM
- --------------------------------------------------------------------------------
THE FUND WAS FORMED AS A CALIFORNIA LIMITED PARTNERSHIP IN 1977 IN ORDER TO
PROVIDE FOR ITS PARTNERS VARIOUS TAX ADVANTAGES WHICH ARE NOT AVAILABLE TO
INVESTORS IN FUNDS ORGANIZED AS CORPORATIONS OR TRUSTS.
The Fund was organized in partnership form rather than in the form of a
corporation or business trust, because:
1. A partnership is not subject to federal income tax, and therefore does
not have to comply with the restrictive provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") to avoid tax at the
entity level, as does an investment company in corporate or trust form.
Under 1987 federal tax legislation, the Fund will be treated as a
partnership for federal tax purposes until December 31, 1997. After that
date the Fund may be taxed as a corporation for federal tax purposes, and
management will take appropriate steps to avoid such tax by, for example,
enabling the Fund to qualify as a regulated investment company under
Subchapter M of the Code. See "Allocations, Distributions and Taxes."
2. Partnerships are not normally subject to state income taxes, and the
income of a partnership is considered to be the income of the Partners both
in timing and in character.
3. The tax-exempt character of interest income which is exempt from regular
federal income tax is retained when such income is allocated or distributed
to the holders of Shares of a partnership regardless of the percentage of
its assets that is comprised of Municipal Bonds.
4. A holder of Shares may deduct his allocable portion of Fund losses up to
his adjusted basis for his or her partnership interest in the Fund in
computing his federal income tax liability without redeeming any Shares. It
is expected that such losses will not constitute "passive activity" losses
under the Code.
5. On redemption of Shares the holder may receive cash distributions from
the Fund in payment therefor without federal income tax consequences so long
as such cash redemption proceeds do not exceed such holder's adjusted basis
of his partnership interest in the Fund.
The Fund is not required to hold annual meetings of the Partners, and does not
intend to do so. The Fund may, however, hold meetings of the Partners for the
purpose of electing new General Partners, approving a new investment advisory
contract or distribution plan and, at the request of Partners owning 10% or more
of the Shares, considering the removal of any General Partner. Partners of the
Fund have the voting, approval, consent or similar rights required under the
Investment Company Act of 1940, as amended, for voting security holders.
Partners have one vote for each Share held by them. All new General Partners are
subject to election by the Partners in accordance with the Amended and Restated
Agreement of Limited Partnership of the Fund ("Partnership Agreement").
The General Partners are divided into two classes: the Director General Partners
and the Advisor General Partner. Only individuals may act as Director General
Partners and all individual General Partners act as Director General Partners.
Except as otherwise provided under the terms of the Partnership Agreement, the
Director General Partners have complete and exclusive control over the
management, conduct and operation of the Fund's business. The Advisor General
Partner (currently Eaton Vance) as such is not permitted to participate in the
management of the Fund except when engaged as investment adviser of the Fund.
A purchaser of Shares is subject to and is deemed to have granted and executed a
Power of Attorney in the form set forth in this prospectus and in the
Partnership Agreement. A purchaser, by the act of purchasing Shares of the Fund,
will be bound by the terms and provisions of the Partnership Agreement and Power
of Attorney even if he does not sign any of such documents. The Power of
Attorney may be used by the General Partners for various purposes, including
without limitation to amend the Partnership Agreement without the approval or
vote of the Limited Partners.
Throughout this Prospectus, "Partners" are generally referred to as
"Shareholders." The Statement of Additional Information contains a copy of the
Fund's Partnership Agreement and a description of the rights and obligations of
the Partners under the Partnership Agreement and applicable law.
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
THE FUND ENGAGES EATON VANCE MANAGEMENT ("EATON VANCE") AS ITS INVESTMENT
ADVISER. EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN
MANAGING ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING
INVESTMENT COMPANIES SINCE 1931.
Acting under the general supervision of the Director General Partners of the
Fund, Eaton Vance manages the Fund's investments and affairs. Eaton Vance also
furnishes for the use of the Fund office space and all necessary office
facilities, equipment and personnel for servicing the investments of the Fund.
The Fund is responsible for the payment of all expenses other than those
expressly stated to be payable by Eaton Vance under the investment advisory
contract. Under its investment advisory contract with the Fund, Eaton Vance
receives a monthly advisory fee in an amount equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each Category as
indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which portion
shall bear the same relationship to the total gross income on such day as
that portion of the total daily net assets in the same Category bears to the
total net assets on such day) in each Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
</TABLE>
As at December 31, 1996, the Fund had net assets of $88,183,659. For the fiscal
year ended December 31, 1996, the Fund paid Eaton Vance advisory fees equivalent
to 0.51% of the Fund's average daily net assets for such year.
EATON VANCE OR ITS AFFILIATES ACT AS INVESTMENT ADVISER TO INVESTMENT COMPANIES
AND VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
Thomas J. Fetter, a Vice President of Eaton Vance, has acted as the portfolio
manager of the Fund since 1986.
Municipal obligations are normally traded on a net basis (without commission)
through broker-dealers and banks acting for their own account. Such firms
attempt to profit from such transactions by buying at the bid price and selling
at the higher asked price of the market, and the difference is customarily
referred to as the spread. In selecting firms which will execute Fund portfolio
transactions, Eaton Vance judges their professional ability and quality of
service and uses its best efforts to obtain execution at prices which are
advantageous to the Fund and at reasonably competitive spreads. Subject to the
foregoing, Eaton Vance may consider sales of shares of the Fund or of other
investment companies sponsored by Eaton Vance or Boston Management and Research
("BMR") as a factor in the selection of firms to execute portfolio transactions.
The Fund and the Investment Adviser have adopted Codes of Ethics relating to
personal securities transactions. The Codes permit Eaton Vance personnel to
invest in securities (including securities that may be purchased or held by the
Fund) for their own accounts, subject to certain reporting and other
restrictions and procedures contained in such Codes.
VALUING FUND SHARES
- -------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m., New York time). The Fund's net asset value per
Share is determined by its custodian, Investors Bank & Trust Company ("IBT") (as
agent for the Fund) in the manner authorized by the Director General Partners.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of Shares outstanding. Municipal Bonds will
normally be valued on the basis of valuations furnished by a pricing service.
For further information regarding the valuation of the Fund's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
Financial service firms ("Authorized Firms") must communicate an investor's
order to the Principal Underwriter prior to the close of the Principal
Underwriter's business day to receive that day's net asset value per Share and
the public offering price based thereon. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase Shares of the Fund through Authorized Firms
at the effective public offering price, which price is based on the effective
net asset value per Share plus the applicable sales charge. The Fund receives
the net asset value, while the sales charge is divided between the Authorized
Firm and the Principal Underwriter. An Authorized Firm may charge its customers
a fee in connection with transactions executed by that Firm. The Fund may
suspend the offering of Shares at any time and may refuse an order for the
purchase of Shares.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement to
purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase Shares at reduced sales
charges under a Statement of Intention or Right of Accumulation are available
from Authorized Firms or the Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 3.75% 3.90% 4.00%
$50,000 but less than $100,000 2.75% 2.83% 3.00%
$100,000 but less than $250,000 2.25% 2.30% 2.50%
$250,000 but less than $500,000 1.75% 1.78% 2.00%
$500,000 but less than $1,000,000 1.25% 1.27% 1.50%
$1,000,000 or more 0.00%* 0.00%* 0.50%
* No sales charge is payable at the time of purchase on investments of $1 million or more or where the amount
invested represents redemption proceeds from a mutual fund unaffiliated with Eaton Vance, if the redemption
occurred no more than 60 days prior to the purchase of Fund shares and the redeemed shares were potentially
subject to a sales charge. A contingent deferred sales charge ("CDSC") of 0.50% will be imposed on such investments
(as described below) in the event of certain redemptions within 12 months of purchase.
</TABLE>
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell Fund Shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services."
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds; to clients and current and retired
officers and employees of Eaton Vance, its affiliates and other investment
advisers of Eaton Vance sponsored funds; to registered representatives and
employees of Authorized Firms and bank employees who refer customers to
registered representatives of Authorized Firms; to officers and employees of IBT
and the Transfer Agent; and to such persons' spouses and children under the age
of 21 and their beneficial accounts. Shares may also be issued at net asset
value (1) in connection with the merger of an investment company with the Fund,
(2) to investors making an investment as part of a fixed fee program whereby an
entity unaffiliated with the Investment Adviser provides multiple investment
services, such as management, brokerage and custody, and (3) to investment
advisors, financial planners or other intermediaries who place trades for their
own accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; clients of such investment advisors,
financial planners or other intermediaries who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisor, financial planner or other intermediary on the books and records of the
broker or agent; and retirement and deferred compensation plans and trusts used
to fund those plans, including, but not limited to, those defined in Section
401(a), 403(b) or 457 of the Code and "rabbi trusts."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Investment Adviser, in exchange
for Fund Shares at the applicable public offering price as determined above. The
minimum value of securities (or securities and cash) accepted for deposit is
$5,000. Securities accepted will be sold on the day of their receipt or as soon
thereafter as possible. The number of Fund Shares to be issued in exchange for
securities will be the aggregate proceeds from the sale of such securities,
divided by the applicable public offering price per Fund Share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities, but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C Eaton Vance Municipal Bond Fund L.P.
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: Eaton Vance Municipal Bond Fund L.P.
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for Shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
Shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund Shares.
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor, on an application,
makes a Statement of Intention to invest a specified amount over a
thirteen-month period, then out of the initial purchase (or subsequent purchases
if necessary) 5% of the dollar amount specified on the application shall be held
in escrow by the escrow agent in the form of Shares (computed to the nearest
full Share at the public offering price applicable to the initial purchase
hereunder) registered in the investor's name. All distributions on escrowed
Shares will be paid to the investor or to the investor's order. When the minimum
investment so specified is completed, the escrowed Shares will be delivered to
the investor. If the investor has an accumulation account the Shares will remain
on deposit under the investor's account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such difference
in sales charge, the escrow agent will redeem an appropriate number of the
escrowed Shares in order to realize such difference. Full Shares remaining after
any such redemption together with any excess cash proceeds of the Shares so
redeemed will be delivered to the investor or to the investor's order by the
escrow agent.
If total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of this Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional Shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation an Authorized Firm other than the original Authorized Firm is
placing the orders, the adjustment will be made only on those Shares purchased
through the Authorized Firm then handling the account.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- -------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTIONS BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any Share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the Shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a Commission regulation and
acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where Shares are
registered in the name of a corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell Shares at their net asset value
through an Authorized Firm (a repurchase), a Shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of those
Shares is based upon the net asset value calculated after the Principal
Underwriter, as the Fund's agent, receives the order. It is the Authorized
Firm's responsibility to transmit promptly repurchase orders to the Principal
Underwriter. Throughout this Prospectus, the word "redemption" is generally
meant to include a repurchase.
REDEMPTIONS BY CHECK: Shareholders holding Shares for which certificates have
not been issued may make redemptions by check by completing an Account
Instruction form (available by calling 800-225-6265 (extension 7601)) and
appointing Boston Safe Deposit and Trust Company ("Boston Safe") their agent.
Boston Safe will provide Shareholders electing this option with checks drawn on
Boston Safe. These checks may be made payable by the Shareholder to the order of
any person in any amount of $500 or more. When a check is presented to Boston
Safe for payment, the number of full and fractional Shares required to cover the
amount of the check will be redeemed from the Shareholder's account by Boston
Safe as the Shareholder's agent. Through this procedure the Shareholder will
continue to be entitled to distributions paid on Shares up to the time the check
is presented to Boston Safe for payment. If the amount of the check is greater
than the value of the Shares for which the Fund has collected payment held in
the Shareholder's account, the check will be returned and the Shareholder may be
subject to extra charges. To obviate such a return of the check, the check
should not be written for close to the full value of an account. The Shareholder
will be required to execute signature cards and will be subject to Boston Safe's
rules and regulations governing such checking accounts. There is no charge to
Shareholders for this service. This service may be terminated or suspended at
any time by the Fund or Boston Safe.
If Shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
Shares purchased has cleared. Payment for Shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem Fund accounts with balances of less than $750. Prior to such a
redemption, Shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the Fund
if the cause of the low account balance was a reduction in the net asset value
of Fund Shares.
If Shares have been purchased at net asset value with no initial sales charge by
virtue of the purchase having been in the amount of $1 million or more, or if
Shares were purchased at net asset value because the amount invested represents
redemption proceeds from a mutual fund unaffiliated with Eaton Vance (as
described under "How to Buy Fund Shares"), and are redeemed within 12 months of
purchase, a CDSC of 0.50% will be imposed on such redemption. The CDSC will be
imposed on an amount equal to the lesser of the current market value or the
original purchase price of the Shares redeemed. Accordingly, no CDSC will be
imposed on increases in account value above the initial purchase price,
including any distributions that have been reinvested in additional Shares. In
determining whether a CDSC is applicable to a redemption, it will be assumed
that redemptions are made first from any Shares in the shareholder's account
that are not subject to a CDSC. The CDSC will be retained by the Principal
Underwriter.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a Shareholder
reinvests redemption proceeds in accordance with the conditions set forth under
"Eaton Vance Shareholder Services -- Reinvestment Privilege," the Shareholder's
account will be credited with the amount of any CDSC paid on such redeemed
Shares.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS, SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all holders of Shares
with information which is necessary for preparing federal and state tax returns.
Consistent with applicable law, duplicate mailings of shareholder reports and
certain other Fund information to Shareholders residing at the same address may
be eliminated.
THE LIFETIME INVESTING ACCOUNT
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund which at all times shows the balance of Shares owned. The Fund will not
issue Share certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN SHARES
BY SENDING A CHECK FOR $50 OR MORE TO the Transfer Agent.
Any questions concerning a Shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or writing to the Transfer Agent, First Data Investors Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
Shareholder, the Fund and the account number).
DISTRIBUTION INVESTMENT OPTION. Distributions made by the Fund may be invested
in additional shares of another Eaton Vance fund. Before selecting this option,
a shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If Shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange Shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of Shares in a "street
name" account to an account with another Authorized Firm or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the Shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an Authorized Firm, or transferring the account to another
Authorized Firm, an investor wishing to reinvest distributions should determine
whether the Authorized Firm which will hold the Shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of any of the following
funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of Boston,
Eaton Vance Tax Free Reserves and any fund in the Eaton Vance Traditional Group
of Funds on the basis of the net asset value per share of each fund at the time
of the exchange (plus, in the case of an exchange made within six months of the
date of purchase of shares subject to an initial sales charge, an amount equal
to the difference, if any, between the sales charge previously paid on the
Shares being exchanged and the sales charge payable on the shares being
acquired). Exchange offers are available only in states where shares of the fund
being acquired may be legally sold.
Each exchange must involve Shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any Shareholder account engaged in Market Timing activity. Any
Shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of the
above funds without incurring the CDSC. The shares acquired in an exchange may
be subject to a CDSC upon redemption. For purposes of computing the CDSC payable
upon redemption of shares acquired in an exchange, the holding period of the
original Shares is added to the holding period of the shares acquired in the
exchange.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Fund Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and Shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
Shares of certain other funds advised or administered by Eaton Vance may be
exchanged for Fund Shares on the basis of the net asset value per share of each
fund at the time of the exchange (plus, in the case of an exchange made within
six months of the date of purchase of shares subject to an initial sales charge,
an amount equal to the difference, if any, between the sales charge previously
paid on the shares being exchanged and the sales charge payable on the Shares
being acquired), but subject to any restrictions or qualifications set forth in
the current prospectus of any such fund.
Telephone exchanges are accepted by the Transfer Agent, provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone; provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of Shareholders who
participate in them is borne by the Fund as an expense to all Shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of Eaton
Vance Municipal Bond Fund L.P. may be mailed directly to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 at
any time -- whether or not distributions are reinvested. The name of the
Shareholder, the Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from the
Shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $50,000 or more made over a 13-month
period are eligible for reduced sales charges. See "How to Buy Fund Shares --
Statement of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when the
current market value of holdings (Shares at current offering price), plus new
purchases, reach $50,000 or more. Shares of the Eaton Vance funds listed under
"The Eaton Vance Exchange Privilege" may be combined under the Statement of
Intention and Right of Accumulation.
WITHDRAWAL PLAN: A Shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the Shareholder. A minimum
deposit of $5,000 in Shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional Shares would be disadvantageous
because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A Shareholder who has redeemed Shares may reinvest at
net asset value any portion or all of the redemption proceeds (plus that amount
necessary to acquire a fractional Share to round off the purchase to the nearest
full Share) in Shares of the Fund, or, provided that the Shares redeemed have
been held for at least 60 days, in shares of any of the other funds offered by
the Principal Underwriter subject to an initial sales charge, provided that the
reinvestment is effected within 60 days after such redemption, and the privilege
has not been used more than once in the prior 12 months. Shares are sold to a
reinvesting Shareholder at the next determined net asset value following timely
receipt of a written purchase order by the Principal Underwriter or by the fund
the shares of which are being purchased (or by such fund's transfer agent). The
privilege is also available to shareholders of the funds listed under "The Eaton
Vance Exchange Privilege" who wish to reinvest such redemption proceeds in
shares of a Fund. If a Shareholder reinvests redemption proceeds within the
60-day period, the Shareholder's account will be credited with the amount of any
CDSC paid on such redeemed Shares. To the extent that any Shares of the Fund are
sold at a loss and the proceeds are reinvested in Shares of the Fund (or other
Shares of the Fund are acquired) within the period beginning 30 days before and
ending 30 days after the date of the redemption, some or all of the loss
generally will not be allowed as a tax deduction. Shareholders should consult
their tax advisers concerning the tax consequences of reinvestments.
ALLOCATIONS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
ALLOCATIONS AND DISTRIBUTIONS
The Fund intends to make monthly distributions substantially equivalent to
its net investment income to the holders of Shares, pro rata on the record date
for each such distribution. Such distributions will be paid, unless otherwise
directed, in additional Shares. Normally, net realized short-term and long-term
capital gains, if any, will not be distributed. Undistributed income and gains
(as well as losses), whether realized or not, will be reflected in the Fund's
net asset value per Share. Because Shareholders are limited partners of the
Fund, each Shareholder will be allocated for tax purposes a proportionate share
(computed on a weighted monthly average basis) of each item of income, gain,
loss, deduction or credit realized by the Fund. Allocations are made in a manner
intended to comport with each Shareholder's respective interest, as a limited
partner, in the Fund under the applicable U.S. Treasury regulations, although
there can be no assurance that the allocations made by the Fund will be
respected by the Internal Revenue Service and that additional income or gains
will not be reallocated to any particular Shareholder. The Fund's method of
allocation may result in allocation of gains and losses to shareholders for tax
purposes which do not necessarily reflect actual gains or losses realized by the
Fund during such Shareholders' period of investment in the Fund. For example,
discrepancies may be caused by the fact that gains or losses allocable to
particular Shareholders may reflect appreciation or depreciation in the assets
of the Fund which occurred prior to such Shareholders' purchase of their Shares
of the Fund.
TAXES
The Fund has received an opinion of counsel and rulings from the Internal
Revenue Service to the effect, among other things, that the Fund will be
classified as a partnership for federal income tax purposes and that interest
income exempt from federal income tax when received by the Fund will retain such
tax exempt status when allocated to Shareholders of the Fund. Such rulings are
conditioned on maintenance by the General Partners in the aggregate of a 1%
interest in the Fund at all times. As a partnership, the Fund is not an entity
subject to federal income tax. This federal income tax treatment will continue
to apply through December 31, 1997 at which time, in accordance with 1987
federal tax legislation, the Fund will be taxed as a corporation. At that time,
the Director General Partners will take appropriate steps to avoid such tax, by,
for example, electing to have the Fund taxed under Subchapter M of the Code
which, upon satisfaction of certain conditions, eliminates tax at the corporate
level and permits qualifying corporations to pay dividends from the tax-exempt
interest they earn that are exempt from federal income taxation.
Interest earned by the Fund on Municipal Bonds is not taxable to Shareholders
for regular federal income tax purposes. Interest income received by the Fund
from certain temporary investments (such as certificates of deposit, commercial
paper and obligations of the United States Government, its agencies and
instrumentalities) and net short-term capital gains realized by the Fund, if
any, will be taxable to Shareholders as ordinary income and short-term capital
gains, respectively, and will not qualify for the 70% deduction for dividends
received by corporate Shareholders. Net long-term capital gains realized by the
Fund, if any, will be taxable to Shareholders as long-term capital gains
regardless of the length of time an investor has held such Shares and will also
not qualify for the dividends received deduction for corporate Shareholders. An
allocable portion of net capital losses realized by the Fund may be deducted by
a Shareholder to the extent that such losses do not exceed the Shareholder's
adjusted basis for his Shares. The Fund's activities involving options and
futures contracts will generate taxable gains or losses, and the Fund's
acquisition of obligations at a market discount or its investment in stripped
Municipal Bonds or coupons may cause it to realize taxable ordinary income. The
Fund will report annually to Shareholders their proportion of the Fund's gains,
if any, interest income (including interest, taxable or exempt from regular
federal income tax and the interest, if any, treated as a tax preference item
for purposes of the AMT), losses, deductions and credits.
A Shareholder's adjusted basis for all Fund Shares in his account (his
partnership interest in the Fund) will be the aggregate prices paid therefor,
increased by the amounts of such holder's distributive share of items of income
(including interest income exempt from federal income tax) and realized net gain
of the Fund, and reduced, but not below zero, by (i) the amounts of such
Shareholder's distributive share of items of Fund loss, and (ii) the amount of
any cash distributions (including distributions of interest income exempt from
federal income tax and cash distributions on redemption of Shares) received by
such holder. Cash distributions in excess of a Shareholder's adjusted basis in
his Shares immediately prior thereto generally will result in the recognition of
gain to such Shareholder in the amount of such excess. The value of Shares
redeemed or repurchased may be more or less than their cost depending on the
market value of the Fund's portfolio securities at the time of redemption. To
the extent the cash proceeds of any redemption exceed the investor's adjusted
basis of his partnership interest in the Fund, he will generally realize a gain
for federal income tax purposes. If, upon redemption of all Shares (liquidation
of the entire partnership interest) in the account, the investor's adjusted
basis of his partnership interest exceeds the proceeds of such redemption, he
will generally realize a loss for federal income tax purposes. A Shareholder's
distributive share of tax-exempt interest realized by the Fund is includable in
the tax base for determining the taxability of social security and railroad
retirement benefits.
Interest on indebtedness incurred or continued by a Shareholder to purchase or
carry Shares of the Fund is not deductible. Further, entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by industrial development or private activity bonds should consult
their tax advisers before purchasing Shares of the Fund. "Substantial User" is
defined in applicable Treasury regulations to include a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of industrial development bonds and would likely be interpreted to
include private activity bonds issued to finance similar facilities.
Each Shareholder who is an individual (or a trust or estate) is required to take
into account separately on his federal income tax return his pro rata share of
any items of deduction of the Fund that are defined as miscellaneous itemized
deductions. Such amount will be deductible by such Shareholder only to the
extent his total miscellaneous itemized deductions exceed 2% of adjusted gross
income.
Partnerships are not treated as separate taxable entities under most state and
local tax laws, and the income of a partnership is considered to be income of
the partners both in timing and in character. The exemption of interest income
for federal income tax purposes does not necessarily result in exemption under
the income or other tax laws of any state or local taxing authority. The laws of
the various states and local taxing authorities vary with respect to the
taxation of such interest income, as well as to the status of a partnership
interest under state and local tax laws, and each Shareholder is advised to
consult his own tax adviser. The Fund will report annually to Shareholders the
percentage of interest income received by the Fund during the preceding year on
Municipal Bonds, indicating on a state-by-state basis the source of such income.
From time to time proposals have been introduced before Congress for the purpose
of restricting or eliminating the federal income tax exemption for interest on
municipal obligations. The Partnership Agreement provides that the General
Partners shall not be liable to any holders of Shares or to any Limited Partner
by reason of any change in the federal income tax laws as they apply to the Fund
and the Limited Partners, whether such change occurs through legislative,
judicial or administrative action, so long as the General Partners have acted in
good faith and in a manner reasonably believed to be in the best interests of
the Limited Partners.
This Fund is not a suitable investment for non-U.S. persons (including
nonresident aliens) because investment in the Fund may cause such investors to
be deemed to be engaged in a U.S. trade or business and to become fully
subject to U.S. tax on distributions and proceeds from the redemption of
Shares.
Shareholders should consult with their tax advisers concerning the applicability
of state, local and other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per Share during a recent 30-day period by the maximum offering price per
Share of the Fund on the last day of the period and annualizing the resulting
figure. A taxable-equivalent yield is computed by using the tax-exempt yield
figure and dividing by 1 minus the tax rate. The Fund's average annual total
return is determined by computing the average annual percentage change in value
of $1,000 invested at the maximum public offering price (which includes the
maximum sales charge) for specified periods, assuming reinvestment of all
distributions. The Fund may also publish annual and cumulative total return
figures from time to time.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on the Fund's net asset value per Share would be lower if a sales charge
were taken into account. The Fund's performance may be compared in publications
to the performance of various indices and investments for which reliable data is
available, and to averages, performance rankings, or other information prepared
by recognized mutual fund statistical services.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield or total return for any
prior period should not be considered as a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
The following chart reflects the annual investment returns of the Fund for
one-year periods ending December 31 and does not take into account any sales
charge which investors may bear.
5 YEAR AVERAGE ANNUAL TOTAL RETURN -- 7.89%
10 YEAR AVERAGE ANNUAL TOTAL RETURN -- 7.12%
1987 (0.03%)
1988 12.83%
1989 10.65%
1990 6.97%
1991 13.49%
1992 8.91%
1993 13.52%
1994 (7.27%)
1995 17.40%
1996 4.78%
<PAGE>
POWER OF ATTORNEY
- --------------------------------------------------------------------------------
The following provisions are adopted by each purchaser of Shares of the Fund,
irrespective of whether or not such purchaser has executed an account
application or any other document.
-- Each purchaser of Shares of the Fund specifically accepts and agrees to
be bound by all of the terms and provisions of the Amended and Restated
Agreement of Limited Partnership of Eaton Vance Municipal Bond Fund L.P.
as from time to time amended or restated (the "Partnership Agreement"),
including without limitation the Power of Attorney set forth in Section X
thereof and printed below, and agrees to become a Limited Partner and to
be subject to all of the rights and obligations of a Limited Partner
under the Partnership Agreement.
-- Each purchaser of Shares ("Limited Partner") hereby makes, constitutes
and appoints (i) each person who is or shall hereafter become a General
Partner of the Fund from time to time and (ii) any substitute which any
such General Partner may hereafter appoint to act in his place (who need
not be a Partner of the Fund), the true and lawful attorney of, and in
the name, place and stead of, said Limited Partner, with the power from
time to time to sign, execute, acknowledge, make, swear to, verify,
deliver, file, record, and/or publish:
(1) the Partnership Agreement and any Certificate of Limited Partnership
filed or recorded under the laws of the State of California or any other
jurisdiction;
(2) any amendment to the Partnership Agreement or any amendment to any such
Certificate of Limited Partnership or any other document required to
reflect any action of the Partners provided for in the Partnership
Agreement, whether or not such Limited Partner voted in favor of or
otherwise consented to such action; and
(3) any other instrument, certificate or document as may be required by any
regulatory agency, the laws of the United States, any state or any other
jurisdiction in which the Fund is doing or intends to do business or
which the Director General Partners deem advisable to file or record,
provided such instrument, certificate or document is consistent with the
terms of the Partnership Agreement as then in effect.
Each Limited Partner acknowledges and agrees that the terms of the Partnership
Agreement permit certain amendments of the Partnership Agreement to be effected
and certain other actions to be taken or omitted by or with respect to the Fund,
in each case either (a) with the approval of less than all the Limited Partners,
provided that the Partners holding a specified percentage of Shares shall have
voted in favor of or otherwise consented to such action, or (b) without the
approval of the Limited Partners. Such actions include, without limitation,
admission of new General Partners duly elected at meetings of the Partners. If,
as and when (i) an amendement of the Partnership Agreement is proposed or an
action is proposed to be taken or omitted by or with respect to the Fund which
requires, under the terms of the Partnership Agreement, the approval of the
Partners holding a specified percentage (but less than all) of the Shares, (ii)
the Partners holding the percentage of Shares specified in the Partnership
Agreement as being required for such amendment or action have approved such
amendment or action in the manner contemplated by the Partnership Agreement, and
(iii) a Limited Partner has failed or refused to approve such amendment or
action (hereinafter referred to as a non-consenting Limited Partner), each
non-consenting Limited Partner hereby consents to such amendment or action and
agrees that each special attorney specified above, with full power of
substitution, is hereby authorized and empowered to execute, acknowledge, make,
swear to, verify, deliver, record, file and/or publish, for and on behalf of
such non-consenting Limited Partner, and in his name, place and stead, any and
all instruments and documents which may be necessary or appropriate to permit
such amendment to be lawfully made or action lawfully taken or omitted. Each
Limited Partner is fully aware that he and each other Limited Partner have
granted this special power of attorney, and that all Partners will rely on the
effectiveness of such powers with a view to the orderly administration of the
Fund's affairs.
The foregoing grant of authority (i) is a Special Power-of-Attorney coupled with
an interest in favor of the General Partners, or substitute appointed to act in
place thereof, and as such shall be irrevocable and shall survive the death or
insanity (or, in the case of a Limited Partner that is a corporation,
association, partnership, joint venture, trust or other entity, shall survive
the merger, dissolution or other termination of the existence) of the Limited
Partner, (ii) may be exercised for the Limited Partner by a facsimile signature
of any General Partner of the Fund or substitute therefor or by listing all of
the Limited Partners, including such Limit Partner, or stating that all Limited
Partners, while not specifically named, are executing any instrument with a
single signature of any General Partner or substitute therefor acting as
attorney-in-fact for all of them, and (iii) shall survive the assignment or
redemption by the Limited Partner of the whole or any portion of his interest.
<PAGE>
APPENDIX
EATON VANCE MUNICIPAL BOND FUND L.P.
ASSET COMPOSITION INFORMATION
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
MOODY'S/S&P PERCENT OF NET ASSETS
Aaa or AAA .............. 38.7%
Aa or AA .............. 5.7%
A .............. 20.3%
Baa or BBB .............. 10.8%
Ba or BB ..............
-----
Unrated .............. 24.5%
Short-Term Obligations, Cash,
Interest Receivable ..............
-----
Total .............. 100.0%
The chart above indicates the weighted average composition of the Fund's
portfolio for the fiscal year ended December 31, 1996, with the debt securities
rated by Moody's or S&P separated into the indicated categories. The weighted
average indicated above was calculated on a dollar weighted basis and was
computed as at the end of each month during the fiscal year. The chart does not
necessarily indicate what the composition of the Fund's portfolio will be in the
current and subsequent fiscal years.
For a detailed description of Moody's and S&P's ratings of municipal bonds, see
the Appendix to the Statement of Additional Information.
<PAGE>
[logo]
EATON VANCE
MUNCIPAL BOND
FUND L.P.
PROSPECTUS
MAY 1, 1997
EATON VANCE
MUNCIPAL BOND FUND L.P.
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
MBP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1997
EATON VANCE MUNICIPAL BOND FUND L.P.
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
TABLE OF CONTENTS Page
Additional Information about Investment Policies ............ 2
Investment Restrictions ..................................... 7
Management .................................................. 9
Control Persons and Principal Holders of Securities ......... 11
Investment Adviser .......................................... 11
Custodian ................................................... 13
Services for Accumulation ................................... 13
Service for Withdrawal ...................................... 14
Determination of Net Asset Value ............................ 14
Investment Performance ...................................... 14
Taxes ....................................................... 16
Principal Underwriter ....................................... 19
Portfolio Security Transactions ............................. 20
Summary of Partnership Agreement ............................ 21
Independent Certified Public Accountants .................... 24
Financial Statements ........................................ 24
Tax Equivalent Yield Table .................................. 25
Appendix .................................................... 26
Amended and Restated Agreement of Limited Partnership ....... Exhibit A
- --------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION (SOMETIMES REFERRED TO AS THE
"SAI") IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE CURRENT PROSPECTUS OF EATON
VANCE MUNICIPAL BOND FUND L.P. (THE "FUND") DATED MAY 1, 1997, AS SUPPLEMENTED
FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS SAI SHOULD BE
READ IN CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED
WITHOUT CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL
UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
Capitalized terms used in this SAI and not otherwise defined have the
meanings given them in the Fund's Prospectus.
MUNICIPAL BONDS
Municipal Bonds are issued to obtain funds for various public and private
purposes. Such obligations include bonds as well as tax-exempt commercial paper,
project notes and municipal notes such as tax, revenue and bond anticipation
notes of short maturity, generally less than three years. In general, there are
three categories of municipal obligations, the interest of which is exempt from
all types of federal income taxes applicable to individuals: (i) certain "public
purpose" obligations (whenever issued), which include obligations issued
directly by state and local governments or their agencies to fulfill essential
governmental functions; (ii) certain obligations issued before August 8, 1986
for the benefit of non-governmental persons or entities; and (iii) certain
"private activity bonds" issued after August 7, 1986 which include "qualified
Section 501(c)(3) bonds" or refundings of certain obligations included in the
second category. In assessing the federal income tax treatment of interest on
any Municipal Bond, the Fund will generally rely on an opinion of counsel (when
available) obtained by the issuer and will not undertake any independent
verification of the basis for the opinion. The two principal classifications of
municipal bonds are "general obligation" and "revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from regular federal income tax but such interest (including a
distribution by the Fund derived from such interest) is treated as a tax
preference item which could subject the recipient to or increase the recipient's
liability for the AMT. For corporate shareholders, the Fund's distributions
derived from interest on all municipal obligations (whenever issued) is included
in "adjusted current earnings" for purposes of the AMT as applied to
corporations (to the extent not already included in alternative minimum taxable
income as income attributable to private activity bonds).
Any recognized gain or income attributable to market discount on long-term
tax-exempt municipal obligations (i.e., obligations with a term of more than one
year) purchased in the secondary market after April 30, 1993 other than, in
general, at their original issue is taxable as ordinary income. A long-term debt
obligation is generally treated as acquired at a market discount if purchased at
its original issue at a price less than (i) the stated principal amount payable
at maturity, in the case of an obligation that does not have original issue
discount or (ii) in the case of an obligation that does have original issue
discount, the sum of the issue price and any original issue discount that
accrued before the obligation was purchased, subject to a de minimis exclusion.
Issuers of general obligation bonds include states, counties, cities, towns
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water, sewer and solid waste disposal systems; highways, bridges
and tunnels; port, airport and parking facilities; transportation systems;
housing facilities; colleges and universities and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may be used to
make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security including partially or fully
insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without legal obligation) to make up deficiencies in the debt service
reserve fund. Lease rental revenue obligations issued by a state or local
authority for capital projects are normally secured by annual lease rental
payments from the state or locality to the authority sufficient to cover debt
service on the authority's obligations. Such payments are usually subject to
annual appropriations by the state or locality.
Industrial development and pollution control bonds, although nominally
issued by municipal authorities, are in most cases revenue bonds and are
generally not secured by the taxing power of the municipality, but are usually
secured by the revenues derived by the authority from payments by the industrial
user or users.
The Fund may on occasion acquire revenue bonds which carry warrants or
similar rights covering equity securities. Such warrants or rights may be held
indefinitely, but if exercised, the Fund anticipates that it would, under normal
circumstances, dispose of any equity securities so acquired within a reasonable
period of time.
While most Municipal Bonds pay a fixed rate of interest semi-annually in
cash, there are exceptions. Some bonds pay no periodic cash interest, but rather
make a single payment at maturity representing both principal and interest.
Bonds may be issued or subsequently offered with interest coupons materially
greater or less than those prevailing, with price adjustments reflecting such
deviation.
The obligations of any person or entity to pay the principal of and interest
on a municipal obligation, are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Act, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that as a result of litigation or
other conditions the power or ability of any one or more issuers to pay when due
principal of and interest on its or their Municipal Bonds may be materially
affected. There have been recent instances of defaults and bankruptcies
involving municipal obligations which were not foreseen by the financial and
investment communities. The Fund will also take whatever action as it considers
appropriate in the event of anticipated financial difficulties, default or
bankruptcy of either the issuer of any municipal obligation or of the underlying
source of funds for debt service. Such action may include retaining the services
of various persons and firms (including affiliates of the Investment Adviser) to
evaluate or protect any real estate, facilities or other assets securing any
such obligation or acquired by the Fund as a result of any such event and the
Fund may also manage (or engage other persons to manage) or otherwise deal with
any real estate, facilities or other assets so acquired. The Fund anticipates
that real estate consulting and management services may be required with respect
to properties securing various Municipal Bonds in its portfolio or subsequently
acquired by the Fund. The Fund will incur additional expenditures in taking
protective action with respect to portfolio obligations in default and assets
securing such obligations.
The yields on Municipal Bonds are dependent on a variety of factors,
including purpose of issue and source of funds for repayment, general money
market conditions, general conditions of the Municipal Bond market, size of a
particular offering, the maturity of the obligation and rating of the issue. The
ratings of Moody's, S&P and Fitch represent their opinions as to the quality of
the Municipal Bonds which they undertake to rate. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, Municipal Bonds with the same maturity, coupon and rating may have
different yields while Bonds of the same maturity and coupon with different
ratings may have the same yield. In addition, the market price of Municipal
Bonds will normally fluctuate with changes in interest rates, and therefore the
net asset value of the Fund's shares will be affected by such changes.
RISKS OF CONCENTRATION
The Fund may invest 25% or more of its total assets in municipal obligations
whose issuers are located in the same state or in municipal obligations of the
same type. There could be economic, business or political developments which
might affect all municipal obligations of a similar type. In particular,
investments in the industrial revenue bonds might involve (without limitation)
the following risks.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible federal legislation limiting the rates of increse
of hospital charges.
Electric utilities face problems in financing large construction programs in
an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear facilities),
difficulty in obtaining fuel at reasonable prices and in achieving timely and
adequate rate relief from regulatory commissions, effect of energy conservation
and limitations on the capacity of the capital market to absorb utility debt.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style and,
if needed, the comprehensive care of nursing home services. Bonds to finance
these facilities have been issued by various state and local authorities. Since
the bonds are normally secured only by the revenues of each facility and not by
state or local government tax payments, they are subject to a wide variety of
risks. Primarily, the projects must maintain adequate occupancy levels to be
able to provide revenues sufficient to meet debt service payments. Moreover,
since a portion of housing, medical care and other services may be financed by
an initial deposit, it is important that the facility maintain adequate
financial reserves to secure estimated actuarial liabilities. The ability of
management to accurately forecast inflationary cost pressures is an important
factor in this process. The facilities may also be affected adversely by
regulatory cost restrictions applied to health care delivery in general,
particularly state regulations or changes in Medicare and Medicaid payments or
qualifications, or restrictions imposed by medical insurance companies. They may
also face competition from alternative health care or conventional housing
facilities in the private or public sector.
MUNICIPAL LEASES
The Fund may invest in municipal leases and participations therein, which
arrangements frequently involve special risks. Municipal leases are obligations
in the form of a lease or installment purchase arrangement which is issued by
state or local governments to acquire equipment and facilities. Interest income
from such obligations is generally exempt from local and state taxes in the
state of issuance. "Participations" in such leases are undivided interests in a
portion of the total obligation. Participations entitle their holders to receive
a pro rata share of all payments under the lease. A trustee is usually
responsible for administering the terms of the participation and enforcing the
participants' rights in the underlying lease. Leases and installment purchase or
conditional sale contracts (which normally provide for title to the leased
assets to pass eventually to the governmental issuer) have evolved as a means
for governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. State
debt-issuance limitations are deemed to be inapplicable to these arrangements
because of the inclusion in many leases or contracts of "non-appropriation"
clauses that provide that the governmental issuer has no obligation to make
future payments under the lease or contract unless money is appropriated for
such purpose by the appropriate legislative body on a yearly or other periodic
basis. Such arrangements are, therefore, subject to the risk that the
governmental issuer will not appropriate funds for lease payments.
Certain municipal lease obligations owned by the Fund may be deemed illiquid
for the purpose of the Fund's 15% limitation on investments in illiquid
securities, unless determined by the Investment Adviser, pursuant to guidelines
adopted by the Director General Partners of the Fund, to be liquid securities
for the purpose of such limitation. In determining the liquidity of municipal
lease obligations, the Investment Adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades and quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Investment Adviser will consider factors unique to particular lease obligations
affecting the marketability thereof. These include the general creditworthiness
of the municipality, the importance of the property covered by the lease to the
municipality, and the likelihood that the marketability of the obligation will
be maintained throughout the time the obligation is held by the Fund. In the
event the Fund acquires an unrated municipal lease obligation, the Investment
Adviser will be responsible for determining the credit quality of such
obligation on an on-going basis, including an assessment of the likelihood that
the lease may or may not be cancelled.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon bonds benefit
the issuer by mitigating its need for cash to meet debt service, but also
require a higher rate of return to attract investors who are willing to defer
receipt of such cash.
INSURANCE
Insured municipal obligations held by the Fund (if any) will be insured as
to their scheduled payment of principal and interest under either (i) an
insurance policy obtained by the issuer or underwriter of the obligation at the
time of its original issuance or (ii) an insurance policy obtained by the Fund
or a third party subsequent to the obligation's original issuance (which may not
be reflected in the obligation's market value. In either event, such insurance
may provide that in the event of non-payment of interest or principal when due
with respect to an insured obligation, the insurer is not required to make such
payment until a specified time has lapsed (which may be 30 days or more after
notice).
CREDIT QUALITY
The Fund is dependent on the Investment Adviser's judgment, analysis and
experience in evaluating the quality of Municipal Bonds. In evaluating the
credit quality of a particular issue, whether rated or unrated, the Investment
Adviser will normally take into consideration, among other things, the financial
resources of the issuer (or, as appropriate, of the underlying source of funds
for debt service), its sensitivity to economic conditions and trends, any
operating history of and the community support for the facility financed by the
issue, the ability of the issuer's management and regulatory matters. The
Investment Adviser will attempt to reduce the risks of investing in the lowest
investment grade, below investment grade and comparable unrated obligations
through active portfolio management, credit analysis and attention to current
developments and trends in the economy and the financial markets.
SHORT-TERM TRADING
The Fund may sell (and later purchase) securities in anticipation of a
market decline (a rise in interest rates) or purchase (and later sell)
securities in anticipation of a market rise (a decline in interest rates). In
addition, a security may be sold and another purchased at approximately the same
time to take advantage of what the Fund believes to be a temporary disparity in
the normal yield relationship between the two securities. Yield disparities may
occur for reasons not directly related to the investment quality of particular
issues or the general movement of interest rates, such as changes in the overall
demand for or supply of various types of municipal obligations or changes in the
investment objectives of investors. Such trading may be expected to increase the
portfolio turnover rate, which may increase capital gains and the expenses
incurred in connection with such trading. The Fund anticipates that its annual
portfolio turnover rate will generally not exceed 100% (excluding turnover of
securities having a maturity of one year or less). A 100% annual turnover rate
would occur, for example, if all the securities held by the Fund were replaced
once in a period of one year. A high turnover rate (100% or more) necessarily
involves greater expenses to the Fund. The Fund engages in portfolio trading
(including short-term trading) if it believes that a transaction including all
costs will help in achieving its investment objective.
WHEN-ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-
issued" basis, that is, delivery and payment for the securities normally taking
place within a specified number of days after the date of the Fund's commitment
and are subject to certain conditions such as the issuance of satisfactory legal
opinions. The Fund may also purchase securities on a when- issued basis pursuant
to refunding contracts in connection with the refinancing of an issuer's
outstanding indebtedness. Refunding contracts generally require the issuer to
sell and the Fund to buy such securities on a settlement date that could be
several months or several years in the future.
The Fund will make commitments to purchase when-issued securities only with
the intention of actually acquiring the securities, but may sell such securities
before the settlement date if it is deemed advisable as a matter of investment
strategy. The payment obligation and the interest rate that will be received on
the securities are fixed at the time the Fund enters into the purchase
commitment. When the Fund commits to purchase a security on a when- issued basis
it records the transaction and reflects the value of the security in determining
its net asset value. Securities purchased on a when-issued basis and the
securities held by the Fund are subject to changes in value, based upon the
perception of the creditworthiness of the issuer and changes in the level of
interest rates (i.e., appreciation when interest rates decline and depreciation
when interest rates rise). Therefore, to the extent that the Fund remains
substantially fully invested at the same time that it has purchased securities
on a when-issued basis, there will be greater fluctuations in the Fund's net
asset value than if it solely set aside cash to pay for when-issued securities.
VARIABLE RATE OBLIGATIONS
The Fund may purchase variable rate obligations. Variable rate instruments
provide for adjustments in the interest rate at specified intervals (weekly,
monthly, semi-annually, etc.). The revised rates are usually set at the issuer's
discretion in which case the investor normally enjoys the right to "put" the
security back to the issuer or his agent. Rate revisions may alternatively be
determined by formula or in some other contractual fashion. Variable rate
obligations normally provide that the holder can demand payment of the
obligation on short notice at par with accrued interest and which are frequently
secured by letters of credit or other support arrangements provided by banks. To
the extent that such letters of credit or other arrangements constitute an
unconditional guarantee of the issuer's obligations, the banks may be treated as
the issuer of a security for the purposes of complying with the diversification
requirements set forth in Section 5(b) of the Investment Company Act of 1940, as
amended, (the "1940 Act") and Rule 5b-2 thereunder. The Fund would anticipate
using these bonds as cash equivalents pending longer term investment of its
funds.
REDEMPTION, DEMAND AND PUT FEATURES
Most municipal bonds have a fixed final maturity date. However, it is
commonplace for the issuer to reserve the right to call the bond earlier. Also,
some bonds may have "put" or "demand" features that allow early redemption by
the bondholder. Longer term fixed-rate bonds may give the holder a right to
request redemption at certain times (often annually after the lapse of an
intermediate term). These bonds are more defensive than conventional long term
bonds (protecting to some degree against a rise in interest rates) while
providing greater opportunity than comparable intermediate term bonds, since the
Fund may retain the bond if interest rates decline. By acquiring these kinds of
obligations the Fund obtains the contractual right to require the issuer of the
security or some other person (other than a broker or dealer) to purchase the
security at an agreed upon price, which right is contained in the obligation
itself rather than in a separate agreement with the seller or some other person.
Since this right is assignable with the security, which is readily marketable
and valued in the customary manner, the Fund will not assign any separate value
to such right.
LIQUIDITY AND PROTECTIVE PUT OPTIONS
The Fund may also enter into a separate agreement with the seller of the
security or some other person granting the Fund the right to put the security to
the seller thereof or some other person at an agreed upon price. The Fund
intends to limit this type of transaction to institutions (such as banks or
securities dealers) which the Investment Adviser believes present minimum credit
risks, and would engage in this type of transaction to facilitate portfolio
liquidity or (if the seller so agrees) to hedge against rising interest rates.
There is no assurance that this kind of put option will be available to the Fund
or that selling institutions will be willing to permit the Fund to exercise a
put to hedge against rising interest rates. A separate put option may not be
marketable or otherwise assignable, and sale of the security to a third party or
lapse of time with the put unexercised may terminate the right to exercise the
put. The Fund does not expect to assign any value to any separate put option
which may be acquired to facilitate portfolio liquidity, inasmuch as the value
(if any) of the put will be reflected in the value assigned to the associated
security; any put acquired for hedging purposes would be valued in good faith
under methods or procedures established by or under the direction of the
Director General Partners after consideration of all relevant factors, including
its expiration date, the price volatility of the associated security, the
difference between the market price of the associated security and the exercise
price of the put, the creditworthiness of the issuer of the put and the price
action of comparable put options. Interest income generated by certain bonds
having put features may not qualify as tax-exempt interest.
SECURITIES LENDING
The Fund may seek to increase its income by lending portfolio securities to
broker-dealers or other institutional borrowers. Under present regulatory
policies of the Commission, such loans are required to be secured continuously
by collateral in cash, cash equivalents or U.S. Government securities held by
the Fund's custodian and maintained on a current basis at an amount at least
equal to the market value of the securities loaned, which will be marked to
market daily. Cash equivalents include short-term municipal obligations as well
as taxable certificates of deposit, commercial paper and other short-term money
market instruments. The Fund would have the right to call a loan and obtain the
securities loaned at any time on up to five business days' notice. During the
existence of a loan, the Fund will continue to receive the equivalent of the
interest paid by the issuer on the securities loaned and will also receive a
fee, or all or a portion of the interest on investment of the collateral, if
any. However, the Fund may pay lending fees to such borrowers. The Fund would
not have the right to vote any securities having voting rights during the
existence of the loan, but would call the loan in anticipation of an important
vote to be taken among holders of the securities or the giving or withholding of
their consent on a material matter affecting the investment. As with other
extensions of credit there are risks of delay in recovery or even loss of rights
in the securities loaned if the borrower of the securities fails financially.
However, the loans will be made only to organizations deemed by the Fund's
management to be of good standing and when, in the judgment of the Fund's
management, the consideration which can be earned from securities loans of this
type justifies the attendant risk. Securities lending involves administration
expenses, including finders' fees. Distributions by the Fund of any income
realized from securities loans will be taxable. If the management of the Fund
decides to make securities loans, it is intended that the value of the
securities loaned would not exceed 30% of the Fund's total assets. The Fund has
no present intention of engaging in securities lending.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
A change in the level of interest rates may affect the value of the
securities held by the Fund (or of securities that the Fund expects to
purchase). To hedge against changes in rates, the Fund may enter into (i)
futures contracts for the purchase or sale of debt securities and (ii) futures
contracts on securities indices. All futures contracts entered into by the Fund
are traded on exchanges or boards of trade that are licensed and regulated by
the Commodity Futures Trading Commission ("CFTC") and must be executed through a
futures commission merchant or brokerage firm which is a member of the relevant
exchange. The Fund may purchase and write call and put options on futures
contracts which are traded on a United States board of trade. The Fund will be
required, in connection with transactions in futures contracts and the writing
of options on futures, to make margin deposits, which will be held by the Fund's
custodian for the benefit of the futures commission merchant through whom the
Fund engages in such futures and options transactions.
Some futures contracts and options thereon may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit transactions in an exchange-traded instrument,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or futures option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.
The Fund will engage in futures and related options transactions only for
bona fide hedging purposes as defined in or permitted by CFTC regulations. The
Fund will determine that the price fluctuations in the futures contracts and
options on futures are substantially related to price fluctuations in securities
held by the Fund or which it expects to purchase. The Fund's futures
transactions will be entered into for traditional hedging purposes -- that is,
futures contracts will be sold to protect against a decline in the price of
securities that the Fund owns, or futures contracts will be purchased to protect
the Fund against an increase in the price of securities it intends to purchase.
As evidence of this hedging intent, the Fund expects that on 75% or more of the
occasions on which it takes a long futures (or option) position (involving the
purchase of futures contracts), the Fund will have purchased, or will be in the
process of purchasing, equivalent amounts of related securities in the cash
market at the time when the futures (or option) position is closed out. However,
in particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated (or an option may expire) without the
corresponding purchase of securities. The Fund will engage in transactions in
futures and related options contracts only to the extent such transactions are
consistent with the requirements of the Internal Revenue Code for maintaining
qualification of the Fund as a regulated investment company for federal income
tax purposes (see "Taxes").
ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities or futures contracts and
options (other than options that the Fund has purchased) expose the Fund to an
obligation to another party. The Fund will not enter into any such transactions
unless it owns either (1) an offsetting ("covered") position in securities or
other options or futures contracts or (2) cash or liquid securities with a value
sufficient at all times to cover its potential obligations not covered as
provided in (1) above. The Fund will comply with Commission guidelines regarding
cover for these instruments and, if the guidelines so require, set aside cash or
liquid securities in a segregated account with its custodian in the prescribed
amount. The securities in the segregated account will be marked to market daily.
Assets used as cover or held in a segregated account with the Fund's
custodian cannot be sold while the position requiring coverage or segregation is
outstanding unless they are replaced with other appropriate assets. As a result,
the commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
INVESTMENT RESTRICTIONS
The following investment limitations (1) through (15) are designated as
fundamental policies and as such may not be changed unless authorized by the
vote of a "majority of the outstanding voting securities" of the Fund, which
term means the vote of the lesser of (i) 67% or more of the units of partnership
interest ("Shares") of the Fund present at a meeting, if the holders of more
than 50% of the shares of the Fund are present or represented by proxy, or (ii)
more than 50% of the shares of the Fund. The Fund may not:
(1) Purchase the securities (except securities issued or guaranteed by the
United States Government or any of its agencies or instrumentalities) of any
issuer if as a result of such purchase more than 5% of its total assets would be
invested in the securities of such issuer having the same security provisions
(without regard to priority of lien). For the purpose of this limitation, (i)
project notes of local housing authorities or other obligations secured or
backed by agreements between the local issuing authorities and the United States
Government or any of its agencies or instrumentalities shall be considered
securities guaranteed by the United States Government or its agency or
instrumentality, (ii) each government entity, i.e., state, county, municipality,
each subdivision, agency or instrumentality thereof and each multi-state agency
of which each state is a member, is considered a separate issuer, (iii) the Fund
shall be entitled to purchase Municipal Bonds of an issuer without considering
as being subject to this limitation the securities of the same issuer held in
its portfolio which are to be refunded by such Municipal Bonds so purchased, and
(iv) the determination of the "issuer" of a Municipal Bond which is not a
general obligation bond will be made by the Fund's investment adviser on the
basis of the characteristics of the obligation and other relevant factors, the
most significant of which is the source of funds committed to meeting interest
and principal payments of such Bond.
(2) Borrow money, except (a) from a bank as a temporary measure for
extraordinary or emergency purposes or to facilitate the orderly disposition of
portfolio investments to accommodate redemption requests or (b) by entering into
reverse repurchase agreements, provided that the Fund's combined borrowings
under (a) and (b) do not exceed an amount equal to one-third of the current
value of its total assets (including the amount borrowed) less liabilities (not
including the amount borrowed) at the time the borrowing is made. Any such
borrowings may be secured or unsecured. The Fund may issue securities (including
senior securities) appropriate to evidence the indebtedness, including reverse
repurchase agreements, which the Fund is permitted to incur.
(3) Pledge its assets, except that the Fund may pledge not more than one-third
of its total assets (taken at current value) to secure borrowings made in
accordance with investment limitation (2) above. For the purpose of this
limitation the deposit of cash, cash equivalents, portfolio securities or other
assets in a segregated account with the Fund's custodian, subcustodian or
transfer agent in connection with any of the Fund's investment transactions is
not considered to be a pledge of assets.
(4) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities).
(5) Make short sales of securities, unless at all times when a short sale
position is open the Fund either owns an equal amount of such securities or owns
securities convertible into or exchangeable for securities of the same issue as,
and equal in amount to, the securities sold short.
(6) Underwrite securities issued by other persons, except insofar as it may
technically be deemed to be an underwriter under the Securities Act of 1933 in
selling or disposing of a portfolio security.
(7) Purchase or sell real estate in the ordinary course of its business,
although the Fund may purchase and sell securities which are secured by real
estate or interests therein, securities for which real estate or interests
therein provide a source for payment of principal and interest and securities of
companies which invest or deal in real estate or interests therein; the Fund
reserves the freedom of action to hold, manage (or engage other persons to
manage), deal with in any manner, and sell or otherwise dispose of any real
estate or interests therein directly or indirectly acquired by the Fund as a
result of the ownership of securities.
(8) Purchase or sell physical commodities or contracts for the purchase or sale
of physical commodities.
(9) Make loans to other persons, except by (a) the acquisition of Municipal
Bonds, money market instruments, debt securities and other obligations in which
the Fund is authorized to invest in accordance with its investment objective and
policies, (b) entering into repurchase agreements, and (c) lending its portfolio
securities.
(10) Participate on a joint or a joint and several basis in any trading
account in securities.
(11) Purchase or retain the securities of any issuer other than the securities
of the Fund, if those Director General Partners of the Fund, or those officers
and directors of the Fund's investment adviser, who individually own
beneficially more than 1/2 of 1% of the outstanding securities of such issuer,
together own beneficially more than 5% of such outstanding securities.
(12) Purchase securities issued by any other open-end investment company or
trust, except as they may be acquired as a part of a merger, consolidation or
requisition of assets.
(13) Invest more than 5% of its total assets (taken at current value) in
industrial revenue bonds where the payment of principal and interest thereon is
the responsibility of a company (including predecessors) with less than three
years operating history unless such bonds are rated at the time of purchase
within the three highest grades assigned by a nationally recognized rating
service.
(14) Invest more than 5% of its total assets (taken at market value) in
securities with legal or contractual restrictions on resale (except for
repurchase agreements).
(15) With respect to portfolio investments other than Municipal Bonds, the Fund
will not purchase securities (other than securities issued or guaranteed by the
United States Government or any of its agencies or instrumentalities) if, as a
result of such purchase, 25% or more of the Fund's total assets would be
invested in any one industry, nor enter into a repurchase agreement if, as a
result thereof, more than 10% of its total assets would be subject to repurchase
agreements maturing in more than seven days.
For the purpose of investment limitations (2), (3) and (4), the arrangements
(including escrow, margin and collateral arrangements) made by the Fund with
respect to its transactions in all types of options, futures contracts, options
on futures contracts and forward contracts shall not be considered to be (i) a
borrowing of money or the issuance of securities (including senior securities)
by the Fund, (ii) a pledge of its assets, or (iii) the purchase of a security on
margin.
The purchase of Municipal Bonds and temporary investments by the Fund in
accordance with its investment objective, policies and limitations, which may
include the purchase of non-publicly issued debt securities, shall be deemed to
be permissible loan transactions.
For the purpose of the Fund's investment restrictions, the identification of
the "issuer" of a Municipal Bond which is not a general obligation bond is made
by the Fund's investment adviser on the basis of the characteristics of the
obligation and other relevant factors, the most significant of which is the
source of funds committed to meeting interest and principal payments of such
Bond.
Subsequent to its purchase by the Fund, an issue of an industrial revenue
bond referred to in limitation (13) above may cease to be rated or its rating
may be reduced below the minimum grade referred to in limitation (13). Neither
event requires the elimination of such obligation from the Fund's portfolio, but
the Investment Adviser will consider such an event in its determination of
whether the Fund should continue to hold such obligation in its portfolio. To
the extent that the ratings accorded by S&P, Moody's or Fitch for Municipal
Bonds or temporary investments may change as a result of changes in such
organizations, or changes in their rating systems, the Investment Adviser will
attempt to use comparable ratings as standards in making portfolio investments
for the Fund.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's acquisition of such security or
asset. Accordingly, any later increase or decrease resulting from a change in
values, assets or other circumstances, other than a subsequent rating change
below investment grade made by a rating service, will not compel the Fund to
dispose of such security or other asset. Notwithstanding the foregoing, the Fund
and Portfolio must always be in compliance with the borrowing policies set forth
above.
MANAGEMENT
DIRECTOR GENERAL PARTNERS AND OFFICERS
The Director General Partners and officers of the Fund are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Director General Partner and officer is 24 Federal
Street, Boston, Massachusetts 02110, which is also the address of the Investment
Adviser, Eaton Vance; Eaton Vance's wholly-owned subsidiary, Boston Management
and Research ("BMR"); Eaton Vance's parent, Eaton Vance Corp. ("EVC") and of
Eaton Vance's and BMR's trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV
are both wholly-owned subsidiaries of EVC. Those Director General Partners who
are "interested persons" of the Fund, as defined in the 1940 Act, by virtue of
their affiliation with any one or more of Eaton Vance, BMR, EVC or EV are
indicated by an asterisk (*).
LANDON T. CLAY (70), Chairman and Director General Partner*
Chairman of Eaton Vance, BMR, EVC and EV and a Director of EVC and EV.
Director, Trustee and officer of various investment companies managed by Eaton
Vance or BMR.
DONALD R. DWIGHT (66), Director General Partner
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of the Board of Newspapers of New England, Inc. Director
or Trustee of various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (62), Director General Partner
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Director General Partner
President and Director -- United Asset Management Corporation (a holding company
owning institutional investment management firms). Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Alternative Chairman and Director General Partner
Formerly Director, Fiduciary Company Incorporated. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (67), Director General Partner
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
THOMAS J. FETTER (53), President
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Fetter was elected President of
the Fund on December 13, 1993.
JAMES L. O'CONNOR (51), Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies in the Eaton Vance group of funds.
THOMAS OTIS (65), Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (61), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the Fund on
March 27, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly associate attorney
at Dechert, Price & Rhoads. Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Woodbury was elected Assistant Secretary on June 19,
1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Director General Partners of the Fund. The purpose of the
Special Committee is to consider, evaluate and make recommendations to the
Director General Partners concerning (i) all contractual arrangements with
service providers to the Fund, including investment advisory, administrative,
transfer agency, custodial and fund accounting and distribution services, and
(ii) all other matters in which Eaton Vance or its affiliates has any actual or
potential conflict of interest with the Fund or investors therein.
The Nominating Committee is comprised of four Director General Partners who
are not "interested persons" as that term is defined under the 1940 Act
("noninterested Director General Partners"). The Committee has four-year
staggered terms, with one member rotating off the Committee to be replaced by
another noninterested Director General Partner. The purpose of the Committee is
to recommend to the Director General Partners nominees for the position of
noninterested Director General Partners and to assure that at least a majority
of the Director General Partners are independent of Eaton Vance and its
affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Director General Partners. The Audit Committee's functions include making
recommendations to the Director General Partners regarding the selection of the
independent public accountants, and reviewing matters relative to trading and
brokerage policies and practices, accounting and auditing practices and
procedures, accounting records, internal accounting controls, and the functions
performed by the custodian, transfer agent and dividend disbursing agent of the
Fund.
The fees and expenses of the noninterested Director General Partners are
paid by the Fund. (The Director General Partners of the Fund who are members of
the Eaton Vance organization receive no compensation from the Fund.) During the
fiscal year ended December 31, 1996, the noninterested Director General Partners
of the Fund earned the following compensation in their capacities as Director
General Partners from the Fund and funds in the Eaton Vance fund complex:(1)
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FUND AND
NAME FROM FUND AND FUND COMPLEX
- ---- ------------ -------------------
Donald R. Dwight ..... $1,146(2) $145,000(5)
Samuel L. Hayes, III . 1,411(3) 157,500(6)
Norton H. Reamer ..... 1,332 145,000
John L. Thorndike .... 1,440(4) 150,000(7)
Jack L. Treynor ...... 1,369 150,000
- ----------
(1) The Eaton Vance fund complex consists of 212 registered investment companies
or series thereof.
(2) Includes $471 of deferred compensation.
(3) Includes $253 of deferred compensation.
(4) Includes $375 of deferred compensation.
(5) Includes $45,000 of deferred compensation.
(6) Includes $20,429 of deferred compensation.
(7) Includes $28,125 of deferred compensation.
Director General Partners of the Fund who 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 a Director General Partner Deferred
Compensation Plan (the "Plan"). Under the Plan, an eligible Director General
Partner may elect to have his deferred fees invested by the Fund in the shares
of one or more funds in the Eaton Vance Family of Funds, and the amount paid to
the Director General Partner under the Plan will be determined based upon the
performance of such investments. Deferral of Director General Partner fees in
accordance with the Plan will have a negligible effect on the Fund's assets,
liabilities, and net income per share, and will not obligate the Fund to retain
the services of any Director General Partner or obligate the Fund to pay any
particular level of compensation to the Director General Partner. The Fund does
not have a retirement plan for its Director General Partners.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 1997, to the knowledge of the Fund no person owned of record
or beneficially 5% or more of the Fund's outstanding shares.
INVESTMENT ADVISER
The Fund engages Eaton Vance as its investment adviser pursuant to an
investment advisory contract originally made on December 22, 1988 and re-
executed on November 1, 1990. Eaton Vance or its affiliates act as investment
adviser to investment companies and various individual and institutional clients
with combined assets under management of over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment- grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds, and
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features an
experienced team of investment professionals that began working together in the
mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent, Russia
and Eastern Europe, Latin America, Australia and New Zealand from offices in
Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George manage over
$18 billion in assets. Eaton Vance mutual funds are distributed by the Principal
Underwriter both within the United States and offshore.
Eaton Vance Distributors believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell or persevere
with your investments.
Eaton Vance offers single-state tax-free portfolios in more states than any
other sponsor of mutual funds. There are 32 long-term state portfolios, 5
national portfolios and 10 limited maturity portfolios, which serve as
investment vehicles for over 100 mutual funds with varying pricing options. A
staff of 32 (including 9 portfolio managers and 9 credit specialists) is
responsible for the day-to-day management of over 3,500 issues in 47 mutual fund
portfolios. Assets managed by the municipal investment group are currently over
$9.1 billion. The investment philosophy of the municipal investment group is to:
seek value by avoiding unnecessary credit risk; build portfolios one security at
a time; and take a long-term approach to managing market risk. Over the
long-term, the group seeks to maximize tax-free income by keeping portfolios
fully invested (rather than trying to "time the market" for short-term results)
and reduce potential capital losses due to poor credit quality. Diligent and
continuing research and analysis are a critical component of the municipal
investment group's investment philosophy and long-term strategy.
Eaton Vance manages the investments and affairs of the Fund, subject to the
supervision of the Director General Partners of the Fund. Eaton Vance furnishes
to the Fund, investment advice and assistance, administrative services, office
space and equipment and clerical personnel for servicing the investments of the
Fund and compensates all officers and Director General Partners of the Fund who
are members of the Eaton Vance organization and all personnel of Eaton Vance
performing services relating to research and investment activities. The Fund is
responsible for all expenses not expressly stated to be payable by Eaton Vance
under the investment advisory contract, including without limitation, the fees
and expenses of its custodian and transfer agent, including those incurred for
determining the Fund's net asset value and keeping its books; the cost of share
certificates; membership dues in investment company organizations; brokerage
commissions and fees; fees and expenses of registering shares; expenses of
reports to shareholders, proxy statements, and other expenses of shareholders'
meetings; insurance premiums; printing and mailing expenses; interest; taxes and
corporate fees; legal and accounting expenses; and compensation and expenses of
Trustees not affiliated with Eaton Vance. The Fund will also bear expenses
incurred in connection with litigation which the Fund is a party and any legal
obligation the Fund may have to indemnify its Director General Partners with
respect thereto, to the extent not covered by insurance.
For a description of the compensation Eaton Vance receives under the
investment advisory agreement, see the Fund's current Prospectus. As at December
31, 1996, the Fund had net assets of $88,183,659. During the fiscal year ended
December 31, 1996, the Fund paid Eaton Vance an advisory fee of $460,753,
equivalent to 0.51% of the Fund's average daily net assets for such fiscal year.
For the fiscal years ended December 31, 1995 and 1994, the Fund paid Eaton Vance
advisory fees of $480,694 and $523,944, respectively.
The investment advisory contract (the "Contract") may be continued from year
to year so long as such continuance is approved at least annually (i) by the
vote of a majority of the noninterested Director General Partners cast in person
at a meeting specifically called for the purpose of voting on such approval and
(ii) by the Director General Partners of the Fund or by vote of a majority of
the outstanding voting securities of the Fund. The Contract may be terminated at
any time without penalty on sixty days' written notice by the Director General
Partners of the Fund, by Eaton Vance or by vote of a majority of the outstanding
voting securities of the Fund, and the contract will terminate automatically in
the event of its assignment. The contract provides that Eaton Vance may render
services to others. The contract also provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties under the contract on the part of Eaton Vance, Eaton Vance shall not be
liable to the Fund or to any partner of the Fund for any act or omission in the
course of or connected with rendering services or for any losses sustained in
the purchase, holding or sale of any investment, provided that Eaton Vance acted
in good faith and in a manner that it reasonably believed to be in the best
interest of the Fund.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of EV are Landon T. Clay, M. Dozier Gardner, James B. Hawkes and
Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons and
John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner is
vice chairman and Mr. Hawkes is president and chief executive officer of EVC,
Eaton Vance, BMR and EV. All of the issued and outstanding shares of Eaton
Vance and EV are owned by EVC. All of the issued and outstanding shares of BMR
are owned by Eaton Vance. All shares of the outstanding Voting Common Stock of
EVC are deposited in a Voting Trust which expires on December 31, 1997, the
Voting Trustees of which are Messrs. Clay, Gardner, Hawkes and Rowland and
Thomas E. Faust, Jr. The Voting Trustees have unrestricted voting rights for
the election of Directors of EVC. All of the voting trust receipts issued
under said Voting Trust are owned by certain of the officers of Eaton Vance
and BMR who are also officers or officers and Directors of EVC and EV. As of
April 30, 1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such voting
trust receipts, and Messrs. Rowland and Faust owned 15% and 13%, respectively,
of such voting trust receipts. Mr. Clay, a Director General Partner of the
Fund and Mr. Otis, an officer of the Fund are members of the EVC, Eaton Vance,
BMR and EV organizations.
EVC owns all of the stock of Energex Energy Corporation which is engaged in
oil and gas exploration and development. Eaton Vance owns all the stock of
Northeast Properties, Inc. which is engaged in real estate investment. EVC owns
all the stock of Fulcrum Management, Inc. and MinVen, Inc., which are engaged in
precious metal mining venture investment and management. EVC also owns 22% of
the Class A shares of Lloyd George Management (B.V.I.) Limited, a registered
investment adviser. EVC, Eaton Vance, BMR and EV may also enter into other
businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the Fund's custodian, IBT. It is
Eaton Vance's opinion that the terms and conditions of such transactions were
not and will not be influenced by existing or potential custodial or other
relationships between the Fund and such bank.
CUSTODIAN
IBT acts as custodian for the Fund. IBT has the custody of all cash and
securities of the Fund, maintains the Fund's general ledger and computes the
daily per share net asset value. In such capacity it attends to details in
connection with the sale, exchange, substitution, transfer or other dealings
with the Fund's investments, receives and disburses all funds and performs
various other ministerial duties upon receipt of proper instructions from the
Fund. IBT charges fees which are competitive within the industry. A portion of
the fee relates to custody, bookkeeping and valuation services and is based upon
a percentage of Fund net assets and a portion of the fee relates to activity
charges, primarily the number of portfolio transactions. These fees are then
reduced by a credit for cash balances of the particular investment company at
the custodian equal to 75% of the 91-day U.S. Treasury Bill auction rate applied
to the particular investment company's average daily collected balances for the
week. Landon T. Clay, a director of EVC and an officer, Trustee or Director of
other entities in the Eaton Vance organization, owns approximately 13% of the
voting stock of Investors Financial Services Corp., the holding company parent
of IBT. In view of Mr. Clay's interest in IBT, the Fund is treated as a
self-custodian pursuant to Rule 17f-2 under the Investment Company Act of 1940,
and the Fund's investments held by IBT as custodian are thus subject to the
additional examinations by the Fund's independent certified public accountants
as called for by such Rule. For the fiscal year ended December 31, 1996, the
Fund paid IBT $19,856 under these arrangements.
IBT also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission, for which
it receives a separate fee.
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge, other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
INTENDED QUANTITY INVESTMENT --STATEMENT OF INTENTION. If it is anticipated that
$50,000 or more of Fund shares and shares of the other continuously offered
open-end funds listed under "The Eaton Vance Exchange Privilege" in the current
Prospectus of the Fund will be purchased within a 13-month period, a Statement
of Intention should be signed so that shares may be obtained at the same reduced
sales charge as though the total quantity were invested in one lump sum. Shares
held under Right of Accumulation (see below) as of the date of the Statement
will be included toward the completion of the Statement. The Statement
authorizes the Transfer Agent to hold in escrow sufficient shares (5% of the
dollar amount specified in the Statement) which can be redeemed to make up any
difference in sales charge on the amount intended to be invested and the amount
actually invested. Execution of a Statement does not obligate the Partner to
purchase or the Fund to sell the full amount indicated in the Statement, and
should the amount actually purchased during the 13-month period be more or less
than that indicated on the Statement, price adjustments will be made. For sales
charges and other information on quantity purchases, see "How to Buy Fund
Shares" in the Fund's current Prospectus. Any investor considering signing a
Statement of Intention should read it carefully.
RIGHT OF ACCUMULATION -- CUMULATIVE QUANTITY DISCOUNT. The applicable sales
charge level for the purchase of Fund shares is calculated by taking the dollar
amount of the current purchase and adding it to the value (calculated at the
maximum current offering price) of the shares the Partner owns in his account(s)
in the Fund and in the other continuously offered open-end funds listed under
"The Eaton Vance Exchange Privilege" in the current Prospectus of the Fund. The
sales charge on the shares being purchased will then be at the rate applicable
to the aggregate. For sales charges on quantity purchases, see "How to Buy Fund
Shares" in the Fund's current Prospectus. Shares purchased (i) by an individual,
his spouse and their children under the age of twenty-one, and (ii) by a
trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge levels.
For any such discount to be made available, at the time of purchase a
purchaser or an Authorized Firm must provide the Principal Underwriter (in the
case of a purchase made through an Authorized Firm) or the Transfer Agent (in
the case of an investment made by mail) with sufficient information to permit
verification that the purchase order qualifies for the accumulation privilege.
Confirmation of the order is subject to such verification. The Right of
Accumulation privilege may be amended or terminated at any time as to purchases
occurring thereafter.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the Partner regular monthly or quarterly
payments of any permitted amount designated by the Partner (see "Eaton Vance
Shareholder Services -- Withdrawal Plan" in the Fund's current Prospectus) based
upon the value of the shares held. Income dividends and capital gains
distributions in connection with withdrawal accounts will be credited at net
asset value as of the record date for each distribution. Continued withdrawals
in excess of current income will eventually use up principal, particularly in a
period of declining market prices. A Partner may not have a withdrawal plan in
effect at the same time he has authorized Bank Automated Investing or is
otherwise making regular purchases of Fund Shares. The Partner, the Transfer
Agent or the Principal Underwriter will be able to terminate the withdrawal plan
at any time without penalty.
DETERMINATION OF NET ASSET VALUE
Inasmuch as the market for municipal obligations is a dealer market with no
central trading location or continuous quotation system, it is not feasible to
obtain last transaction prices for most municipal obligations in the Fund's
portfolio and such obligations, including those issued on a when-issued basis,
will normally be valued on the basis of valuations furnished by a pricing
service. The pricing service uses information with respect to transactions in
bonds, quotations from bond dealers, market transactions in comparable
securities, various relationships between securities, and yield to maturity in
determining value. Taxable obligations for which price quotations are readily
available normally will be valued at the mean between the latest available bid
and asked prices. Open futures positions on debt securities are valued at the
most recent settlement prices, unless such price does not reflect the fair value
of the contract, in which case the positions will be valued by or under the
direction of the Director General Partners. Other assets are valued at fair
market value using methods determined in good faith by the Director General
Partners. The Fund will be closed for business and will not price its shares on
the following business holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
INVESTMENT PERFORMANCE
The average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes the maximum sales charge is deducted from the initial $1,000 purchase
order and that all dividends and distributions are reinvested at net asset value
on the reinvestment dates during the period. The Fund's average annual total
returns for the one-, five- and ten-year periods ended December 31, 1996 appear
below.
Yield is computed pursuant to a standardized formula by dividing its net
investment income per share earned during a recent thirty-day period by the
maximum offering price (which includes the maximum sales charge) per share on
the last day of the period and annualizing the resulting figure. Net investment
income per share is calculated from the yields to maturity of all debt
obligations in the Fund's portfolio based on the prescribed methods, reduced by
accrued expenses for the period, with the resulting number being divided by the
average daily number of shares outstanding and entitled to receive dividends
during the period. Yield calculations assume a maximum sales charge equal to
3.75% of the public offering price. Actual yield may be affected by variations
in sales charges on investments. For the thirty-day period ended December 31,
1996 the yield was 5.26%. The yield required of a taxable security that would
produce an after-tax yield equivalent to that earned by the Fund of 5.26% would
be 7.62%, assuming a tax rate of 31%.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or its effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized, by the current maximum offering price per share. The
Fund's effective distribution rate is computed by dividing the distribution rate
by the ratio (the days in the year divided by the accrual days of the monthly
period) used to annualize the most recent monthly distribution and reinvesting
the resulting amount for a full year on the basis of such ratio. The effective
distribution rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. Investors should note that the
Fund's yield is calculated using a standardized formula, the income component of
which is computed from the yields to maturity of all debt obligations in the
Fund's portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a settlement
date basis), whereas the distribution rate is based on the Fund's last monthly
distribution which tends to be relatively stable and may be more or less than
the amount of net investment income and short-term capital gain actually earned
by the Fund during the month.
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the one-, five- and
ten-year periods ended December 31, 1996.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT -------------------------- ----------------------------
PERIOD DATE INVESTMENT* ON 12/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
10 Years ended 12/31/96 12/31/86 $962.58 $2,057.46 113.75% 7.89% 105.75% 7.48%
5 Years ended 12/31/96 12/31/91 $962.49 $1,357.70 41.06% 7.12% 35.77% 6.31%
1 Year ended 12/31/96 12/31/95 $962.50 $1,008.29 4.78% 4.78% 0.83% 0.83%
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more or
less than their orginal cost.
- ----------
*Initial investment less the current maximum sales charge of 3.75%.
The Fund's total return may be compared to relevant indices, including but
not limited to the Consumer Price Index, the domestic securities indices of the
Bond Buyer 25 Revenue Bond Index and the Lehman Brothers Municipal Bond Index,
which may be used in advertisements and in information furnished to present or
prospective shareholders.
Information about the Fund's portfolio allocation and holdings at a
particular date (including ratings assigned by independent ratings services such
as Moody's, S&P and Fitch) may be included in advertisements and other material
furnished to present and prospective shareholders. Such information may be
stated as a percentage of the Fund's bond holdings on such date. Information,
charts and illustrations relating to inflation and the effects of inflation on
the dollar may also be included in advertisements and other material furnished
to present or prospective shareholders.
Comparative information about the yield or distribution rate of the Fund and
about average rates of return on certificates of deposit, bank money market
deposit accounts, money market mutual funds and other short-term investments may
also be included in advertisements, supplemental sales literature or
communications of the Fund. Such information may also compare the taxable
equivalent yield (or value) of the Fund to the after-tax yield (or value) of
such other investment vehicles. A bank certificate of deposit, unlike the Fund's
shares, pays a fixed rate of interest and entitles the depositor to receive the
face amount of the certificate of deposit at maturity. A bank money market
deposit account is a form of savings account which pays a variable rate of
interest. Unlike the Fund's shares, bank certificates of deposit and bank money
market deposit accounts are insured by the Federal Deposit Insurance
Corporation. A money market mutual fund is designed to maintain a constant value
of $1.00 per share and, thus, a money market fund's shares are subject to less
price fluctuation than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghue's Money Fund Averages,
RateGram or The Wall Street Journal.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated
cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in municipal bond
funds. Such information may describe the following advantages of investing in a
municipal bond mutual fund versus individual municipal bonds: regular monthly
income; free reinvestment of distributions; potential for increased income; bond
diversification; liquidity; low-cost easy access; and active management and in
depth credit analysis by investment professionals. In addition, by investing in
a municipal bond fund instead of individual bonds, and investor can avoid
dealing with the complexities of the municipal bond market, while benefitting
from the market access and lower transactions costs enjoyed by municipal bond
funds.
The Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
TAXES
Federal Income Tax Aspects. The Fund received rulings in 1976 and 1977 from the
Internal Revenue Service (the "IRS") and a supplementary opinion of counsel in
1988 to the effect that:
(1) For federal income tax purposes, the Fund will be classified as a
partnership, and not an association taxable as a corporation;
(2) General Partners, Limited Partners and assignees of Limited Partners who
duly become substituted Limited Partners, as defined in the Partnership
Agreement, will be treated as partners of the Fund for federal income tax
purposes;
(3) Income received by the Fund which is excludable from gross income under the
Code will retain its status as income exempt from federal income tax when
allocated to the Fund's partners;
(4) The adjusted basis of a partner's interest in the Fund will be determined
pursuant to Section 705(a) of the Code and will be equal to the aggregate
adjusted basis of all Shares of the Fund held by a partner.
These rulings, as well as the statements which follow, are based upon the
existing provisions of the Code, the existing regulations thereunder and current
administrative rulings and practice in existence at the time the rulings were
issued. No assurance can be given that legislative or administrative changes may
not be forthcoming which would modify such statements. Any such changes may be
retroactive. Recent changes in federal tax law, effective January 1, 1998, will
eventually cause the Fund to be taxed as a corporation for federal tax purposes.
Prior to the time this legislation would apply to cause the Fund to be taxed as
a corporation, the Director General Partners will take appropriate steps to
avoid such tax, for example by electing to have the Fund taxed under Subchapter
M of the Code which, upon satisfaction of certain conditions, eliminates federal
income taxation at the corporate level and permits qualifying corporations to
distribute the tax-exempt interest they receive as "exempt-interest dividends"
treated by shareholders as exempt from federal income taxation.
As a partnership, the Fund is not an entity subject to federal income tax.
Its status as a partnership, rather than a corporate entity subject to federal
income tax, under the IRS rulings and opinion of counsel is subject to the
condition that the General Partners have and maintain substantial assets (other
than their partnership interest in the Fund) which can be reached by creditors
of the Fund and that General Partners at all times have and maintain, in the
aggregate, an interest in each material item of Fund income, gain, loss,
deduction and credit equal to at least 1% of each such item. The initial General
Partners in effect have met this requirement by purchasing in the aggregate as
General Partners more than 1% of the total Shares outstanding, and to insure
continued satisfaction of this requirement the initial General Partners will not
redeem or assign their Shares and/or elect to receive in cash any distributions
of income on their Shares so long as they continue as General Partners if such
transaction and/or election would result in a violation of this requirement. In
addition to the Shares owned by the Director General Partners, Eaton Vance has
undertaken that at all times while serving as Advisor General Partner to the
Fund it will own 1% of the Fund's outstanding Shares, that it will not withdraw
as Advisor General Partner except on two years' notice, and that it will stand
for election as Advisor General Partner at each election so long as its duties
and obligations as investment adviser to the Fund have not been terminated. The
Fund's investment advisory contract with Eaton Vance reflects this undertaking,
and provides that in the event the Fund terminates the obligations and duties of
Eaton Vance as investment adviser to the Fund, Eaton Vance will remain as a
General Partner and continue to own 1% of the outstanding Shares for one year or
until a successor General Partner is appointed, whichever is earlier.
The Director General Partners will supervise compliance with the foregoing
conditions. However, in the event of failure to meet the requirements referred
to in the two preceding paragraphs, the IRS may take the position the Fund is to
be classified as a corporation rather than a partnership and that tax-exempt
interest received by the Fund will be taxable as a dividend when distributed to
holders of Fund Shares. It is impossible to predict the ultimate disposition of
any controversy in this respect. If such an IRS position were maintained and
ultimately sustained, or should the Fund become taxable as a corporation for any
other reason, with the result that tax-exempt interest received by the Fund
would be taxable as a dividend when distributed, the Director General Partners
would consider whether or not the Fund should be continued in its present form.
Interest earned by the Fund on Municipal Bonds is not includable by the
holders of Shares in their respective gross incomes for regular federal income
tax purposes. Interest income received by the Fund from certain temporary
investments (such as certificates of deposit, commercial paper and obligations
of the United States Government, its agencies and instrumentalities) and net
short-term capital gains realized by the Fund, if any, will be taxable to
holders of Shares as ordinary income and short-term capital gains, respectively,
and will not qualify for the 70% deduction for dividends received by corporate
holders of Shares. Net long-term capital gains realized by the Fund, if any,
will be taxable to holders of Shares as long-term capital gains regardless of
the length of time an investor has held such Shares. An allocable portion of net
capital losses realized by the Fund may be deducted by a holder of Shares to the
extent that such losses do not exceed the holder's adjusted basis for his
Shares.
Investments in lower rated or unrated securities may present special tax
issues for the Fund to the extent actual or anticipated defaults may be more
likely with respect to such securities. Tax rules are not entirely clear about
issues such as when the Fund may cease to accrue interest, original issue
discount, or market discount; when and to what extent deductions may be taken
for bad debts or worthless securities; how payments received on obligations in
default should be allocated between principal and income; and whether exchanges
of debt obligations in a workout context are taxable.
The Fund's transactions in options and futures contracts will be subject to
tax rules which may affect the amount, timing and character of capital gains
allocated to holders of Shares by accelerating gains to the Fund, deferring Fund
losses, causing adjustments in the holding periods of Fund securities and
converting short-term capital losses into long-term capital losses. For example,
the tax treatment of futures contracts entered into by the Fund (as well as many
of its options transactions) will be governed by Section 1256 of the Code.
Absent a tax election for "mixed straddles" (see below), each such position held
by the Fund will be marked to market (i.e., treated as if it were closed out) on
the last business day of each taxable year of the Fund, and all resulting gain
or loss will be treated as 60% long-term and 40% short-term capital gain or
loss, with subsequent adjustments made to any gain or loss realized upon an
actual disposition of such positions. When the Fund holds an option or contract
governed by Section 1256 which substantially diminishes the Fund's risk of loss
with respect to another position of the Fund (as might occur with some hedging
transactions), this combination of positions could be a "mixed straddle" which
is generally subject to certain loss deferral and other rules of Section 1092 of
the Code in addition to being subject in part to Section 1256. Certain tax
elections may be made for mixed straddles which may alter the operation of these
rules.
For federal income tax purposes, while there can be no assurance that
allocations made by the Fund will be respected by the IRS, allocations of items
of income, gain, loss, deduction or credit are made in a manner intended to
reflect each holder's respective interest, as a limited partner, in the Fund as
required by applicable Treasury regulations. Such allocations are made monthly
on the basis of the average weighted number of Shares owned by the holder during
each month. The Fund's method of allocation may result in allocation of gains
and losses to a holder of Shares for tax purposes which do not necessarily
reflect the appreciation or depreciation in the Fund's portfolio securities
during the holder's period of investment in the Fund or actual distributions
received by such holder. One reason for such discrepancy may be the fact that
gains or losses which would have been allocable to a redeeming holder had he not
redeemed his Shares remain gains or losses of the Fund and must be allocated
among all holders of Shares at the time the gains or losses are actually
realized by the Fund. Another reason may be the fact that gains or losses
allocable to a holder of Shares may reflect appreciation or depreciation in the
assets of the Fund prior to such holder's purchase of Shares.
The holder's adjusted basis for all Fund Shares in his account (his
partnership interest in the Fund) will be the aggregate prices paid therefor,
increased by the amounts of such holder's distributive share of items of income
(including interest income exempt from federal income tax) and realized net gain
of the Fund, and reduced, but not below zero, by (i) the amounts of such
holder's distributive share of items of Fund loss, and (ii) the amount of any
cash distributions (including distributions of interest income exempt from
federal income tax and cash distributed on redemption or repurchase of Shares)
received by such holder. Cash distributions in excess of a holder's adjusted
basis in his Shares immediately prior thereto generally will result in the
recognition of gain to such holder in the amount of such excess. For federal
income tax consequences on a redemption or purchase of shares, see "Taxes" in
the Fund's current Prospectus.
Interest on indebtedness incurred by Partners to purchase or carry Shares of
the Fund will not be deductible for federal income tax purposes. In addition,
under rules used by the IRS for determining when the borrowed funds are
considered used for the purpose of purchasing or carrying particular assets, the
purchase of Shares may be considered to have been made with borrowed funds even
though the borrowed funds are not directly traceable to the purchase of Shares.
Further, entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development bonds
should consult their tax advisers before purchasing shares of the Fund.
"Substantial user" is defined in applicable Treasury regulations to include a
"non-exempt person" who regularly uses in trade or business a part of a facility
financed from the proceeds of industrial development bonds and would likely be
interpreted to include private activity bonds issued to finance similar
facilities.
Interest on certain Municipal Bonds is treated as a tax preference item for
individuals and corporations in computing their AMT liability, if any, and
interest on other Municipal Bonds that is not a tax preference item is included
in "adjusted current earnings" for purposes of the alternative minimum tax
applicable to corporations. Partners are required to report tax-exempt interest
on their federal income tax returns.
The Fund intends to take the position that it is the owner of any municipal
obligations acquired subject to a put option and that tax-exempt interest earned
with respect to such municipal obligations will be tax-exempt in its hands. The
Director General Partners understand that the IRS has issued a revenue ruling to
the effect that, under specified circumstances, an entity is the owner of
tax-exempt obligations acquired simultaneously with a put option on the
obligations. The Director General Partners believe the Fund's transactions
should be governed by the principles contained in the ruling. The Service has
subsequently announced that it will not ordinarily issue advance ruling letters
on this subject.
STATE AND LOCAL TAX ASPECTS. Partnerships are not treated as separate taxable
entities under most state and local tax laws, and the income of a partnership is
considered to be income of the partners both in timing and in character. The
exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or tax laws of any state or
local taxing authority. The laws of the several states and local taxing
authorities vary with respect to the taxation of such interest income, and each
holder of Shares of the Fund is advised to consult his own tax adviser in that
regard as well as to the status of his partnership interest under state and
local tax laws. It is possible that some states will exempt from tax that
portion of the exempt interest income which represents interest received by the
Fund on that state's securities. The Fund will report annually to the holders of
Shares the percentage of interest income received by the Fund during the
preceding year on Municipal Bonds, indicating on a state-by-state basis the
source of such income.
While a non-resident is ordinarily not subject to the taxing laws of a state
or locality simply because of his ownership of an interest in an entity which
may have some activities in such state or locality, under certain circumstances,
usually dependent upon the nature and extent of the Fund's activities in a
particular state, the Fund and/or the holders of Shares may be subject to the
tax laws of such state or locality. The Fund has received a ruling from the
Franchise Tax Board of the State of California to the effect that, based on its
proposed method of operation, non-resident holders of Shares will not be subject
to California personal income tax by reason of their being holders of Shares.
The Fund has received a ruling from the Massachusetts Department of Revenue to
the effect that neither the Fund nor non-resident holders of Shares, by reason
of their being holders of Shares, will be subject to Massachusetts income tax.
ORGANIZATIONAL FACTORS. The Fund was organized in partnership form rather than
in the form of a corporation or business trust, because:
1. A partnership is not subject to federal income tax, and therefore
does not have to comply with the restrictive provisions of Subchapter M of
the Code to avoid tax at the entity level, as does an investment company in
corporate or trust form. (See information on federal tax legislation under
"Federal Income Tax Aspects".)
2. Partnerships are not normally subject to state income taxes, and the
income of a partnership is considered to be the income of the partners both
in timing and in character.
3. The tax-exempt character of interest income which is exempt from
regular federal income tax is retained when such income is allocated or
distributed to the holders of Shares of a partnership regardless of the
percentage of its assets comprised of Municipal Bonds.
4. A holder of Shares may deduct his allocable portion of Fund losses up
to his adjusted basis for his partnership interest in the Fund in computing
his federal income tax liability without redeeming any Shares. It is
expected that such losses will not constitute "passive activity" losses
under the Code.
5. On redemption of Shares the holder may receive cash distributions
from the Fund in payment therefor without federal income tax consequences so
long as such cash redemption proceeds do not exceed such holder's adjusted
basis of his partnership interest in the Fund.
The Director General Partners have given careful consideration to a
recommendation of Eaton Vance that the Fund be continued in partnership form
rather than be converted to corporate or trust form and concluded that the Fund
should, for the time being, be continued in partnership form as recommended by
Eaton Vance. The Director General Partners are cognizant of the fact that most
municipal bond funds are organized in corporate or trust form and they may from
time to time again review the question of whether the structure of the Fund
should be changed to corporate or trust form. In the event that the Director
General Partners determine that there are no longer significant advantages to
being a partnership, they will recommend to the Partners that the form of
organization be changed to a corporation or trust, which the Fund believes can
be done with no adverse federal tax consequences under present law.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to financial service firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under Federal and state securities laws
are borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the plan relating to such payments are included in
the Distribution Agreement. The Distribution Agreement is renewable annually by
the Fund's Director General Partners (including a majority of its Director
General Partners who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Fund's
Distribution Plan or the Distribution Agreement), may be terminated on sixty
days' notice either by such Trustees or by vote of a majority of the outstanding
voting securities of the Fund or on six months' notice by the Principal
Underwriter and is automatically terminated upon assignment. The Principal
Underwriter currently distributes Fund shares on a "best efforts" basis under
which it is required to take and pay for only such shares as may be sold.
The total sales charges for sale of shares of the Fund during the fiscal
years ended December 31, 1996, 1995 and 1994 were $44,913, $83,694 and $170,491,
respectively, of which $135, $5,565 and $27,048, respectively, was received by
the Principal Underwriter. For the fiscal years ended December 31, 1996, 1995
and 1994, Authorized Firms received approximately $44,778, $78,129 and $143,443,
respectively, from the total sales charges.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing Shares and paid the Principal Underwriter $437.50 for the fiscal
year ended December 31, 1996 (being $2.50 for each repurchase transaction
handled by the Principal Underwriter). The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Fund will
exceed the amounts paid therefor by the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security transactions,
including the selection of the market and the executing firm, are made by Eaton
Vance. Eaton Vance is also responsible for the execution of transactions for all
other accounts managed by it.
Eaton Vance places the portfolio security transactions of the Fund and of
all other accounts managed by it for execution with many firms. Eaton Vance uses
its best efforts to obtain execution of portfolio security transactions at
prices which are advantageous to the Fund and at reasonably competitive spreads
or (when a disclosed commission is being charged) at reasonably competitive
commission rates. In seeking such execution, Eaton Vance will use its best
judgment in evaluating the terms of a transaction, and will give consideration
to various relevant factors, including without limitation the size and type of
the transaction, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the general execution and operational capabilities of the executing
firm, the reputation, reliability, experience and financial condition of the
firm, the value and quality of the services rendered by the firm in this and
other transactions, and the reasonableness of the spread or commission, if any.
Municipal obligations purchased and sold by the Fund are generally traded in the
over-the-counter market on a net basis (i.e., without commission) through
broker-dealers and banks acting for their own account rather than as brokers, or
otherwise involve transactions directly with the issuer of such obligations.
Such firms attempt to profit from such transactions by buying at the bid price
and selling at the higher asked price of the market for such obligations, and
the difference between the bid and asked price is customarily referred to as the
spread. The Fund may also purchase municipal obligations from underwriters, the
cost of which may include undisclosed fees and concessions to the underwriters.
While it is anticipated that the Fund will not pay significant brokerage
commissions in connection with such portfolio security transactions, on occasion
it may be necessary or appropriate to purchase or sell a security through a
broker on an agency basis, in which case the Fund will incur a brokerage
commission. Although spreads or commissions on portfolio security transactions
will, in the judgment of Eaton Vance, be reasonable in relation to the value of
the services provided, spreads or commissions exceeding those which another firm
might charge may be paid to firms who were selected to execute transactions on
behalf of the Fund and Eaton Vance's other clients for providing brokerage and
research services to Eaton Vance.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Fund may
receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if Eaton
Vance determines in good faith that such compensation was reasonable in relation
to the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which Eaton Vance and its affiliates have for
accounts over which they exercise investment discretion. In making any such
determination, Eaton Vance will not attempt to place a specific dollar value on
the brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement); and
the "Research Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealers
which execute portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements. Consistent with
this practice, Eaton Vance receives Research Services from many broker-dealer
firms with which Eaton Vance places the Fund's portfolio transactions and from
third parties with which these broker-dealers have arrangements. These Research
Services, include such matters as general economic and market reviews, industry
and company reviews, evaluations of securities and portfolio strategies and
transactions and recommendations as to the purchase and sale of securities and
other portfolio transactions, financial, industry and trade publications, news
and information services, pricing and quotation equipment and services, and
research oriented computer hardware, software, data bases and services. Any
particular Research Service obtained through a broker-dealer may be used by
Eaton Vance in connection with client accounts other than those accounts which
pay commissions to such broker-dealer. Any such Research Service may be broadly
useful and of value to Eaton Vance in rendering investment advisory services to
all or a significant portion of its clients, or may be relevant and useful for
the management of only one client's account or of a few clients' accounts, or
may be useful for the management of merely a segment of certain clients'
accounts, regardless of whether any such account or accounts paid commissions to
the broker-dealer through which such Research Service was obtained. The advisory
fee paid by the Fund is not reduced because Eaton Vance receives such Research
Services. Eaton Vance evaluates the nature and quality of the various Research
Services obtained through broker-dealer firms and attempts to allocate
sufficient commissions to such firms to ensure the continued receipt of Research
Services which Eaton Vance believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek to execute Fund portfolio security transactions at advantageous prices and
at reasonably competitive commission rates or spreads, Eaton Vance is authorized
to consider as a factor in the selection of any broker-dealer firm with whom
Fund portfolio orders may be placed the fact that such firm has sold or is
selling Shares of the Fund or of other investment companies sponsored by Eaton
Vance. This policy is not inconsistent with a rule of the National Association
of Securities Dealers, Inc. (the "NASD"), which rule provides that no firm which
is a member of the NASD shall favor or disfavor the distribution of shares of
any particular investment company or group of investment companies on the basis
of brokerage commissions received or expected by such firm from any source.
Obligations considered as investments for the Fund may also be appropriate
for other investment accounts managed by Eaton Vance or its affiliates. Whenever
decisions are made to buy or sell securities by the Fund and one or more of such
other accounts simultaneously, Eaton Vance will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may be
instances where the Fund will not participate in a transaction that is allocated
among other accounts. If an aggregated order cannot be filled completely,
allocations will generally be made on a pro rata basis. An order may not be
allocated on a pro rata basis where, for example: (i) consideration is given to
portfolio managers who have been instrumental in developing or negotiating a
particular investment; (ii) consideration is given to an account with
specialized investment policies that coincide with the particulars of a specific
investment; (iii) pro rata allocation would result in odd-lot or de minimis
amounts being allocated to a portfolio or other client; or (iv) where Eaton
Vance reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Fund from time to time, it is the opinion of the Director General Partners and
the Fund that the benefits from the Eaton Vance organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
During the fiscal year ended December 31, 1996, the Fund paid brokerage
commissions of $29,650 on portfolio securities transactions of $271,621,661 to
firms which provide some research services to Eaton Vance or its affiliates
(although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities). During the
fiscal years ended December 31, 1995 and 1994 the Fund paid no brokerage
commissions on portfolio transactions.
SUMMARY OF PARTNERSHIP AGREEMENT
The text of the Amended and Restated Agreement of Limited Partnership (the
"Partnership Agreement") is set forth as Exhibit "A" to this Statement of
Additional Information. The following statements, together with statements made
elsewhere in this Statement of Additional Information and in the Fund's current
prospectus, summarize and explain certain provisions of the Partnership
Agreement and are qualified in their entirety by the terms of the Partnership
Agreement.
VOTING RIGHTS OF PARTNERS
The Partners have the voting, approval, consent or similar rights required
under the 1940 Act, for voting security holders. Partners have one vote for each
Share held by them. The Fund is not required to hold annual meetings of the
Partners, and does not intend to do so. However the Fund will hold meetings to
elect new General Partners. In addition to meetings of the Partners held from
time to time to elect new General Partners, the Fund will continue to hold
meetings of the Partners when necessary: (i) to remove a General Partner; (ii)
to approve an investment advisory contract or a distribution plan; (iii) to act
upon such matters as may be required by the Partnership Agreement or by the
California limited partnership act or by the 1940 Act (such as a change in a
fundamental investment policy or fundamental investment limitation); or (iv) to
act upon any other matter which the Director General Partners believe
appropriate for consideration by the Partners.
Partners may vote in person or by proxy. The presence in person or by proxy
of more than 50% of the outstanding Shares on the record date constitutes a
quorum at any meeting. In the absence of such a quorum, the Director General
Partners or their delegate may adjourn such meeting to such time or times as
determined by the Director General Partners without additional notice to the
Partners. Other than the election of General Partners and the termination of the
Fund, actions of the Partners will require the vote of the lesser of (i) a
majority of the outstanding Shares or (ii) the vote of Partners holding 67% or
more of the Shares represented in person or by proxy at a meeting at which
Partners holding a majority of the outstanding Shares are present in person or
by proxy. In the election of General Partners, those candidates receiving the
highest number of votes cast, up to the number of General Partners to be
elected, shall be elected to serve until their successors are elected and
qualified. Limited Partners having more than 10% of the outstanding Shares may
require the calling of a meeting of the Partners. The Director General Partners
shall promptly call a meeting of the Partners for the purpose of voting upon the
question of removal of any General Partner when requested in writing to do so by
persons who are listed as Partners and who are holders of record of not less
than 10% of the outstanding Shares on the books of record of the Fund and, in
that connection, the Director General Partners will assist communications of the
holders of Shares to the extent provided for by Section 16(c) of the 1940 Act.
GENERAL PARTNERS
The General Partners are divided into two classes: Director General Partners
and Advisor General Partner. Only individuals may act as Director General
Partners and all individual General Partners shall act as Director General
Partners. Except as otherwise provided under the terms of the Partnership
Agreement, the Director General Partners have complete and exclusive control
over the management, conduct and operation of the Fund's business. The Director
General Partners act by majority vote, and no single Director General Partner
(unless authorized by the Director General Partners) has authority to act on
behalf of the Fund or to bind the Fund. Subject to the requirements of the
Investment Company Act of 1940, the Director General Partners by majority vote
may delegate to any one of their number their authority to approve particular
matters or take particular actions on behalf of the Fund. The Advisor General
Partner (currently Eaton Vance) as such is not permitted to participate in the
management of the Fund except when engaged as investment adviser of the Fund,
and then only to manage the Fund on the terms set forth in the investment
advisory contract between the Fund and Eaton Vance, subject to the supervision
of the Director General Partners. Otherwise, the Advisor General Partner will be
permitted to participate in the management of the Fund only in the event that no
Director General Partner remains to elect to continue the business of the Fund,
and then only for the limited period of time (not in excess of 120 days)
necessary to convene a meeting of the Limited Partners for the purpose of making
such election.
The Director General Partners are in a fiduciary relationship with respect
to the Limited Partners similar to that of the directors of a corporation to its
shareholders.
All General Partners are subject to election and removal by vote of the
Partners. The Director General Partners shall determine from time to time the
number of persons to be elected as General Partners, provided, however, that if
at any time the number of Director General Partners is reduced to less than
three, the remaining Director General Partners shall, within 120 days, call a
meeting of the Partners for the purpose of electing an additional Director
General Partner or Director General Partners so as to restore the number of
Director General Partners to at least three.
The Partnership Agreement provides that the General Partners are not
personally liable to any holder of Shares or Limited Partner for the repayment
of any amounts standing in the account of a holder of Shares or a Limited
Partner and that any such payment shall be solely from the assets of the Fund.
The Partnership Agreement also provides that the General Partners will not be
liable to any holder of Shares or Limited Partner by reason of any change in the
Federal income tax laws applicable to the Fund so long as the General Partners
act in good faith and in a manner reasonably believed to be in the best
interests of the Limited Partners. A General Partner is entitled to
indemnification by the Fund against liability and expenses as a result of claims
filed against him in his capacity as a General Partner unless the liability is
due to willful misfeasance, gross negligence or other bad faith on his part.
LIMITED PARTNERS
Limited Partners generally are not personally liable for liabilities of the
Fund. However, if the Fund were unable to pay its liabilities, recipients of
distributions from the Fund could be liable to certain creditors of the Fund to
the extent of such distributions, plus interest. Each Limited Partner, by
becoming a Limited Partner, consents to pro rata distributions to holders of
Shares which may constitute, in whole or in part, returns of contributions with
respect to such Shares.
A Limited Partner has no right to and takes no part in control of the Fund
business, but may exercise the rights and powers of a Limited Partner under the
Partnership Agreement, including, without limitation, the voting rights and the
giving of consents and approvals provided for in the Partnership Agreement. The
Partnership Agreement authorizes Limited Partners of the Fund to exercise the
right to vote on certain matters, including the right to elect new General
Partners or remove General Partners, in reliance upon certain provisions
contained in The Uniform Limited Partnership Act of California which have not
been adopted by most other states. Although no absolute assurance can be given,
due to the lack of specific statutory authority expressly covering certain of
the voting rights given to Limited Partners, including the right to terminate
the employment of the independent public accountants of the Fund, and the fact
that there are no authoritative judicial decisions on the matter, it is the
opinion of California counsel that the existence or exercise of the voting
rights provided for in the Partnership Agreement does not subject the Limited
Partners to liability as General Partners under the California Act. However, it
is possible that because of the existence or exercise of such rights the Limited
Partners might be found to be subject to such liability by the courts of another
state.
The Fund believes it is unlikely that Limited Partners will receive
distributions which have to be returned or that they will be subject to
liability as General Partners because of the nature of its business, the assets
and insurance of the Fund and of the General Partners and the Fund's ability to
contract with third parties to prevent any such party from seeking recovery from
any Limited Partner. The Fund intends to include in all material contracts a
provision limiting the claims of creditors to Fund assets and intends to carry
insurance in amounts which the Director General Partners consider adequate to
cover such risks as may be appropriate in their judgment. In any event, the
assets of the Fund should at all times be sufficient to satisfy the amount of
any potential claims against the Fund. In the event that a Limited Partner
should be found to be liable as a General Partner as a result of the factors set
forth above, then, to the extent the assets and insurance of the Fund and of the
General Partners are insufficient to reimburse a Limited Partner, he would be
required to satisfy personally such a claim.
TRANSFERABILITY OF SHARES
Shares of the Fund may be purchased at the public offering price through
investment dealers who have sales agreements with the Principal Underwriter. A
purchaser or assignee of Shares has no rights to receive distributions with
respect to the Shares until such purchase or assignment has been recorded on the
Fund's record books maintained for this purpose either by the Fund or its
transfer agent.
Admission of an assignee as a Limited Partner requires the consent of the
General Partners. The General Partners, while recognizing that they have the
right to withhold their consent, have stated that they generally intend to give
such consent as a matter of course. A Limited Partner ceases to be a Limited
Partner in the case of redemption or repurchase of all of the Shares owned by
such Limited Partner. In the case of an assignment, a Limited Partner will
continue as such until the assignee of his Shares is substituted as a Limited
Partner in his place.
TERM OF EXISTENCE--DISSOLUTION
The Fund will continue in existence until December 31, 2052, unless sooner
terminated by the happening of one of the following events:
(1) The Fund disposes of all of its assets.
(2) The death, withdrawal, retirement, dissolution, assignment for the
benefit of creditors, filing of a petition for bankruptcy, adjudication
of bankruptcy, insanity or incompetency of any of the General Partners,
except as hereinafter otherwise provided.
(3) Partners holding a majority of the outstanding Shares in the Fund vote
to terminate the Fund.
In the event of the death, withdrawal, retirement, dissolution, assignment
for the benefit of creditors, filing of a petition for bankruptcy, adjudication
of bankruptcy, insanity or incompetency of any General Partner, the Fund shall
be terminated and dissolved unless the remaining General Partners elect to
continue the business of the Fund.
In the event that all General Partners die, withdraw, retire, dissolve, make
an assignment for the benefit of creditors, file a petition for bankruptcy, are
adjudicated to be bankrupt or become insane or incompetent, the remaining
Limited Partners, by a vote of the "majority of the outstanding voting
securities of the Fund" as that term is defined by the 1940 Act, shall have the
right to elect successor General Partners who may elect to continue the business
of the Fund. The successor General Partners shall have and be subject to all of
the rights, powers, duties and obligations which a General Partner has under the
terms of the Partnership Agreement.
Except by requiring the Fund to redeem Shares as described in the Fund's
current Prospectus, Limited Partners have no right to the return of any part of
their contributions from the Fund until dissolution of the Fund. Except for
payments to the Director General Partners, distributions by the Fund, whether
upon redemption, dissolution or otherwise, will be in proportion to the number
of Shares held, without regard to the dollar amount contributed to the Fund or
the amount of any profits of the Fund received.
USE OF THE NAME "EATON VANCE"
Inasmuch as EVC, the parent of Eaton Vance, controls the use of the words
"Eaton Vance" in the Fund's name, the Partnership Agreement expressly reflects
the fact that EVC has consented to the use by the Fund of the identifying words
"Eaton Vance" in the name of the Fund. The Partnership Agreement provides that
EVC may use the words "Eaton Vance" in other connections and for other purposes
(including, without limitation, in the names of other investment companies,
corporations or businesses which it may manage, advise, sponsor or own or in
which EVC may have a financial interest), and that if EVC or a subsidiary or
affiliate of EVC for any reason shall no longer serve as investment adviser of
the Fund, then EVC may require the Fund to cease using the words "Eaton Vance"
in the name of the Fund.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche, LLP, 125 Summer Street, Boston, Massachusetts 02110 are
the independent certified public accountants for the Fund, providing audit
services, tax return preparation and assistance and consultation with respect to
the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The audited financial statements of, and the independent auditors' report
for, the Fund appear in the Fund's most recent annual report to shareholders and
are incorporated by reference into this SAI. A copy of the annual report
accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Fund for the fiscal year ended December 31, 1996 (Accession No.
0000950156-97-000172), as previously filed with the Commission.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields to those of tax-exempt bonds
yielding from 4% to 7% under the regular federal income tax laws and tax rates
applicable to 1997.
<TABLE>
<CAPTION>
MARGINAL
SINGLE RETURN JOINT RETURN INCOME TAX-EXEMPT YIELD
- --------------------- ------------------- TAX --------------------------------------------------------------------------
(TAXABLE INCOME)* BRACKET 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------------------------ ----------- --------------------------------------------------------------------------
Equivalent Taxable Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 59,751-$124,650 $ 99,601-$151,750 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$124,651-$271,050 $151,751-$271,050 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $271,050 Over $271,050 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
- ------------------------------------------ ----------- --------------------------------------------------------------------------
</TABLE>
*Net amount subject to federal personal income tax after deductions and
exemptions.
Note: The above indicated federal income tax brackets do not take into account
the effect of a reduction in the deductibility of itemized deductions for
taxpayers with adjusted gross income in excess of $121,200. The tax brackets
also do not show the effects of phase out of personal exemptions for single
filers with adjusted gross incomes in excess of $121,200 and joint filers with
adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax, other income received by the Portfolio and allocated
to the Fund may be taxable. The table does not take into account state or local
taxes, if any, payable on Fund distributions. It should also be noted that the
interest earned on certain "private activity bonds" issued after August 7, 1986,
while exempt from the regular federal income tax, is treated as a tax preference
item which could subject the recipient to the federal alternative minimum tax.
The illustrations assume that the federal alternative minimum tax is not
applicable and do not take into account any tax credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
APPENDIX
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors affecting
the liquidity of the borrower and short term cyclical elements are critical in
short term ratings, while other factors of major importance in bond risk, long
term secular trends for example, may be less important over the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as VMIG,
SG or if the demand feature is not rated, NR. A short term rating on issues with
demand features are differentiated by the use of the VMIG symbol to reflect such
characteristics as payment upon periodic demand rather than fixed maturity dates
and payment relying on external liquidity. Additionally, investors should be
alert to the fact that the source of payment may be limited to the external
liquidity with no or limited legal recourse to the issuer in the event the
demand is not met.
STANDARD & POOR'S RATING GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
PROVISIONAL RATINGS: The letter "P" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Saving & Loan Insurance Corp. or the Federal Deposit Insurance Corp.
and interest is adequately collateralized. In the case of certificates of
deposit the letter "L" indicates that the deposit, combined with other deposits,
being held in the same right and capacity will be honored for principal and
accrued pre-default interest up to the federal insurance limits within 30 days
after closing of the insured institution or, in the event that the deposit is
assumed by a successor insured institution, upon maturity.
NR: NR indicates no public rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
Standard & Poor's note ratings reflect the liquidity concerns and market access
risks unique to notes. Notes due in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note)
-- Sources of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.)
Note rating symbols are as follows:
SP-1: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus(+) designation;
SP-2: Satisfactory capacity to pay principal and interest; with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in actual or imminent default of interest and/or
principal payments. Such bonds are extremely speculative and should be valued on
the basis of their ultimate recovery value in liquidation or reorganization of
the obligor. "DDD" represents the highest potential for recovery on these bonds,
and "D" represents the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change is likely to cause these securities to be rated below
investment grade.
* * * * * * * *
NOTES: Debt which is unrated exposes the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Fund is dependent on the Investment Adviser's
judgment, analysis and experience in the evaluation of such debt.
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
- ------------
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which would be given to these securities on the
date of the Trust's fiscal year end.
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
EATON VANCE MUNICIPAL BOND FUND L.P.
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (hereinafter
sometimes referred to as this "Agreement") has been executed and delivered by
and among the General Partners and Limited Partners hereinafter named for the
purpose of amending and restating in full the Restated Certificate and
Agreement of Limited Partnership of Vance, Sanders Municipal Bond Fund, Ltd.
originally dated October 12, 1977 as subsequently amended and restated and
filed with the County Recorder in the County of Los Angeles in the State of
California pursuant to The Uniform Limited Partnership Act as enacted in the
State of California as the same may be amended from time to time (the
"Partnership Act"). The limited partnership formed pursuant to the Partnership
Act shall be governed by and subject to the following terms and conditions
from and after the date hereof:
I. NAME
The name of the limited partnership is EATON VANCE MUNICIPAL BOND FUND
L.P. (hereinafter referred to as the "Fund").
II. CHARACTER OF BUSINESS OF FUND
The Fund is authorized and empowered to operate and will operate and carry
on the business of an open-end, diversified management investment company
under the Investment Company Act of 1940, as amended, or as it may hereafter
be amended (the "1940 Act"). The investment objectives, policies and
restrictions of the Fund shall be the investment objectives, policies and
restrictions set forth in the Fund's then current prospectus or statement of
additional information (hereinafter referred to collectively as the
"Prospectus"). Except as specifically stated otherwise in the Prospectus, the
investment objectives, policies and restrictions of the Fund may be changed
from time to time by the Director General Partners without obtaining the
authorization or approval of the Limited Partners.
The Fund shall have full power and authority to buy, own, hold for
investment or otherwise, and to sell or otherwise dispose of, securities,
obligations and other evidences of indebtedness of all types and kinds,
however named or described; to deposit or maintain any assets of the Fund in
or with any bank, trust company, banking institution, custodian, subcustodian,
securities depository or book-entry system, whether domestic or foreign, or
retain any such assets in cash; to issue obligations and other evidences of
indebtedness in connection with the business of the Fund; to purchase or sell
(write) options on securities, indices, futures contracts and other financial
instruments and enter into closing transactions in connection therewith; to
enter into all types of commodities contracts, including without limitation
the purchase and sale of futures contracts on securities, indices and other
financial instruments; to engage in "when issued" and delayed delivery
transactions; to enter into repurchase agreements and reverse repurchase
agreements; to employ all types and kinds of hedging techniques and investment
management strategies; to join or become a partner in limited or general
partnerships; and to exercise any and all of the powers that a natural person
could do or exercise and which now or hereafter may be lawfully done or
exercised by a California limited partnership.
III. PLACE OF BUSINESS
The location of the Fund's principal place of business in California is
355 South Grand Avenue, Thirty-Fifth Floor, Los Angeles, California. The
location of the Fund's principal executive office is 24 Federal Street,
Boston, Massachusetts. The Director General Partners may change the location
of the Fund's principal place of business in California and principal
executive office and may establish additional places of business of the Fund
or enter into such contracts or hire such agents in such other locations,
inside and outside of the State of California, as they deem necessary or
desirable to the conduct of the Fund's business, including places of business
for activities relating to its investments, the location and holding of its
assets, the execution of its portfolio transactions and other operations.
IV. GENERAL PARTNERS
(a) Number and Identity. The General Partners shall consist of Director
General Partners and an Advisor General Partner (collectively "General
Partners"). Only individuals may serve as Director General Partners and all
individual General Partners shall serve as Director General Partners. The
names and addresses of the General Partners are set forth in the Certificate
of Limited Partnership on Form LP-1 or amendments thereto on Form LP-2
subsequently filed with the Office of the California Secretary of State. The
General Partners are listed therein separately as Director General Partner or
as Advisor General Partner. The Director General Partners may from time to
time fix the number of persons to be the General Partners of the Fund. The
Director General Partners may from time to time recommend that one or more
additional persons be elected as new General Partners at a meeting of the
Partners, or that some or all of those persons who are serving as General
Partners be re-elected as General Partners at any such meeting. If at any time
the number of Director General Partners is reduced to less than three, the
remaining Director General Partners shall, within 120 days, call a meeting of
the General Partners and Limited Partners for the purpose of electing an
additional Director General Partner or Director General Partners so as to
restore the number of Director General Partners to at least three. At each
election of General Partners, each person standing for election or re-election
as a Director General Partner or as Adviser General Partner shall be elected
or re-elected to hold office until his or its successor is elected and
qualified. Any General Partner may be removed by the Partners pursuant to
Section VI(a)(1) below.
(b) Contributions. Each General Partner, as such, shall make a
contribution to the Fund sufficient to purchase at least one Share of
Partnership Interest ("Shares") and shall continue to own at least one such
Share at all times while serving as a General Partner. The Advisor General
Partner, as such, shall be obligated to contribute in the aggregate to the
Fund through the purchase of Shares from time to time amounts sufficient to
enable the General Partners, when such purchased Shares are added to the
Shares owned by the Director General Partners in the aggregate, to maintain in
the aggregate an interest in each material item of partnership income, gain,
loss, deduction or credit equal to at least 1% of each such item at all times
during the existence of the Fund (or such lesser percentage as may be required
by the Internal Revenue Service). If, upon termination of the Fund, the
General Partners have a negative balance in their Capital Accounts, they shall
in their capacity as General Partners be obligated to make additional capital
contributions in cash equal to the lesser of (i) the negative balance in their
respective Capital Accounts or (ii) the amount, if any, by which 1.01% of the
total capital contributions of the Limited Partners exceeds the total capital
contributions of the General Partners, in each case taken immediately prior to
such termination. The contributions of the General Partners shall be made in
cash. Each of the initial General Partners contributed $10.00, the initial net
asset value, in cash to the Partnership for each Share purchased. Additional
Shares thereafter issued to the General Partners after the formation of the
Fund shall be sold at the net asset value of the Shares in effect at the time
the Shares are purchased. Each Share held by a General Partner shall be held
by such person as a General Partner and not as a Limited Partner, and each
such Share shall be unassignable, except to another person who already is a
General Partner, and then only with the consent of the Director General
Partners, and shall be redeemable by the Fund only in the event that (i) the
holder thereof has ceased to be a General Partner of the Fund or (ii) in the
opinion of counsel for the Fund redemption of Shares held by a General Partner
would not jeopardize the status of the Fund as a partnership for Federal
income tax purposes under the conditions of the then effective ruling received
from the Internal Revenue Service.
(c) Management and Control by Director General Partners. Subject to the
terms of this Agreement (particularly subsection (d) below), the Fund will be
managed by the Director General Partners who will have complete and exclusive
control over the management, conduct and operation of the Fund's business and,
except as otherwise specifically provided in this Agreement, the Director
General Partners shall have the rights, powers and authority, on behalf of the
Fund and in its name, to exercise all of the rights, powers and authority of
partners of a partnership without limited partners under the Uniform
Partnership Act of the State of California. The Director General Partners may
adopt a code of procedures governing the operation of the Fund. Subject always
to the continuing supervision of the Director General Partners, the Fund may
contract with one or more banks, trust companies or other investment advisers
(including General or Limited Partners or any affiliates thereof) for
performance of such functions as the Director General Partners shall
determine, including, but not by way of limitation, the investment and
reinvestment of all or part of the Fund's assets, execution of portfolio
transactions and any or all administrative functions. The Director General
Partners may also appoint agents and/or officers to perform such duties on
behalf of the Fund as the Director General Partners deem desirable. Such
agents may be, but need not be, General or Limited Partners. The Director
General Partners shall devote themselves to the Fund's business to the extent
they may determine necessary for the efficient conduct thereof, which need
not, however, occupy their full time. General Partners may also engage in
other businesses or activities, whether or not similar in nature to the
business or activities of the Fund, subject to the limitations of the 1940
Act. The Director General Partners shall procure and maintain insurance
concerning the Fund's activities in an amount and covering such risks as may
be appropriate in the judgment of the Director General Partners.
(d) Management and Control by Advisor General Partner. The Advisor General
Partner as such shall have no power to engage in the management, conduct or
operation of the Fund's business nor to exercise any of the rights, powers and
authority of a partner of a partnership without limited partners under the
Uniform Partnership Act of the State of California except as specifically
provided as follows:
(1) If the Advisor General Partner is engaged as investment adviser of
the Fund, then the Advisor General Partner shall manage the investment and
reinvestment of the assets of the Fund, for the period and on the terms
set forth in the investment advisory contract between the Fund and the
Advisor General Partner.
(2) In the event that no Director General Partner shall remain for the
purpose of electing whether to continue the business of the Fund, then the
Advisor General Partner shall promptly call a meeting of the Limited
Partners to be held within 120 days of the date the last Director General
Partner ceased to act in such capacity for the purpose of determining
whether to elect to continue the business of the Fund and, if the business
is to be continued, the election of Director General Partners. For the
period of time during which no Director General Partner shall remain, the
Advisor General Partner subject to the terms and provisions of this
Agreement, shall be permitted to engage in the management, conduct and
operation of the business of the Fund to the same extent as a Director
General Partner.
The services of the Advisor General Partner to the Fund are not to be
deemed to be exclusive, the Advisor General Partner being free to render
services to others and engage in other business activities.
(e) Limitations on the Authority of the General Partners. The General
Partners shall have no authority without the written consent or ratification
of all of the Limited Partners to:
(1) do any act in contravention of this Agreement, as it may be
amended from time to time;
(2) do any act which would make it impossible to carry on the ordinary
business of the Fund;
(3) confess a judgment against the Fund;
(4) possess Fund property, or assign their rights in specific Fund
property, for other than a partnership pur-
pose;
(5) admit a person as a General Partner, except in accordance with
Section VI(a)(2);
(6) admit a person as a Limited Partner, except in accordance with
this Agreement; or
(7) continue the business with Fund property on the death, retirement
or insanity of a Director General Partner, except in accordance with
Section IX(b) below or Section IV(d) above.
Nothing herein shall preclude dissolution of the Fund in accordance with
this Agreement. In addition, certain matters may be submitted to a vote of the
Partners at a meeting of the Partners as provided in Section VI below.
(f) Action by the General Partners. No single Director General Partner
shall have the power to act on behalf of the Fund or to bind the Fund. The
Director General Partners shall act by majority vote at a meeting duly called
or by unanimous written consent without a meeting, unless the 1940 Act
requires that a particular action be taken only at a meeting of the Director
General Partners. The Director General Partners may participate in a meeting
of Director General Partners by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at such meeting; provided, however, that
for the purposes of Section 15(c) of the 1940 Act only the votes of those
Director General Partners who are physically present at a meeting of Director
General Partners shall be deemed to be cast in person at such meeting. At any
meeting of the Director General Partners, a majority of the Director General
Partners shall constitute a quorum. Meetings of the Director General Partners
may be called orally or in writing by the Chairman elected in accordance with
Section IV(g) below or by any two other Director General Partners. Notice of
the time, date and place of all meetings of the Director General Partners
shall be given by the party calling the meeting to each Director General
Partner by telephone or telegram sent to his home or business address at least
twenty-four hours in advance of the meeting or by written notice mailed to his
home or business address at least seventy-two hours in advance of the meeting.
Except as provided in the 1940 Act, notice need not be given to any Director
General Partner who attends the meeting without objecting to the lack of
notice or who executes either before or after the meeting a written waiver of
notice with respect to the meeting. Subject to the requirements of the 1940
Act, the Director General Partners by majority vote may delegate to any one of
their number their authority to approve particular matters or take particular
actions on behalf of the Fund.
(g) Chairman. The Director General Partners shall elect one of their
number to be Chairman and one to be his alternate. The Chairman shall preside
at all meetings of Director General Partners at which he is present, shall be
responsible for the execution of policies established by the Director General
Partners and the administration of the Fund and may be the chief executive,
financial and accounting officer of the Fund. The alternate Chairman shall
serve in his absence.
(h) Reimbursement and Indemnification.
(1) General Partners will be reimbursed for all reasonable out-of-
pocket expenses incurred in performing their duties hereunder, provided
that the Advisor General Partner shall be reimbursed for such expenses
only when incurred in the management of the affairs of the Fund pursuant
to Section IV(d)(2) above.
(2) Subject to the exceptions and limitations contained in
subparagraphs (c) and (d) below:
(a) each General Partner of the Fund (including officers and/or
directors of a corporate General Partner) shall be indemnified by the
Fund to the fullest extent permitted by law against liability and
against all expenses reasonably incurred or paid by him in connection
with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been
a General Partner and against amounts paid or incurred by him in the
settlement thereof;
(b) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened, and the words
"liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(c) No indemnification shall be provided hereunder to a General
Partner:
(i) against any liability to the Fund or its Partners by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office;
(ii) with respect to any matter unless the General Partner
acted in good faith and in the reasonable belief that his action
was in the best interest of the Fund and in the case of a criminal
proceeding had no reasonable cause to believe that his conduct was
unlawful;
(iii) in the event of a settlement unless there has been a
determination that such General Partner did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office and that he acted
in good faith and in the reasonable belief that his action was in
the best interest of the Fund;
(A) by the court or other body approving the settlement;
or
(B) by vote of a majority of those Director General
Partners, constituting at least a majority of the Director
General Partners of the Fund, who are not themselves involved
in the claim, action, suit or proceeding; or
(C) by written opinion of independent counsel;
provided, however, that any Partner may, by appropriate legal
proceedings, challenge any such determination by the Director General
Partners or by independent counsel.
(d) No indemnification shall be provided under this paragraph (2)
to the Advisor General Partner acting as investment adviser of the
Fund in connection with the performance of its duties under the
investment advisory contract referred to in Section IV(d)(1) above.
(i) Termination of Authority and Interest of Director General Partners.
The interest of a person as a Director General Partner shall terminate and
such person or his successors in interest (exclusive of other Director General
Partners) shall have no further right or power to act as a General Partner if
he:
(1) dies;
(2) becomes insane;
(3) voluntarily retires upon not less than 180 days' written notice to
the other General Partners unless all such other General Partners waive
such notice; or
(4) is removed or stands for re-election at a meeting of the Partners
and is not re-elected by the General Partners and Limited Partners as
provided in Section VI below.
(j) Termination of Interest of Advisor General Partner as a General
Partner. The interest of an Advisor General Partner as a General Partner shall
terminate and such Advisor General Partner shall have no further power to act
as a General Partner upon the occurrence of any of the following events:
(1) the Advisor General Partner resigns upon not less than 180 days'
written notice to the other General Partners unless all such other General
Partners waive such notice;
(2) the Advisor General Partner is dissolved, liquidated or otherwise
forfeits its right to conduct business, provided that a merger,
consolidation, reorganization or other change for business reasons in the
organizational structure of the Advisor General Partner shall not be
deemed to terminate its interest as a General Partner;
(3) a petition in bankruptcy is filed by the Advisor General Partner;
(4) an involuntary petition in bankruptcy is filed against the Advisor
General Partner and a receiver is appointed and confirmed after an
opportunity for a hearing;
(5) the Advisor General Partner makes an assignment for the benefit of
creditors of substantially all of its assets;
(6) the Advisor General Partner is removed or stands for re-election
at a meeting of the Partners and is not re-elected by the General Partners
and Limited Partners as provided in Section VI below.
(k) Additional or Successor General Partners. A person may be added or
substituted as a General Partner only upon his election by the Partners as
provided herein. Each General Partner, by becoming a General Partner, consents
to the admission as an added or substituted General Partner of any person
elected by the Partners in accordance with this Agreement. Any General Partner
who is elected at a meeting of the Partners in accordance with Section VI(b)
below, and who shall not be serving as a General Partner at the time of such
election, shall be admitted to the Fund as a General Partner effective as of
the date of such election. Any serving General Partner who stands for re-
election at a meeting of the Partners and is not re-elected at any such
meeting in the manner specified in Section VI(b) below, shall be deemed to
have withdrawn as of the date of such election in accordance with the
provisions of Section IV(i) or (j) above.
(l) Right of General Partners to Become Limited Partners. A General
Partner may also become a Limited Partner and thereby become entitled to all
of the rights of a Limited Partner to the extent of the Shares so acquired,
and the consent of the Limited Partners need not be obtained. Such event would
not, however, be deemed to reduce any of the General Partner's liability
hereunder.
Termination of a person's status as a General Partner shall not affect his
status, if any, as a Limited Partner. A General Partner shall not be entitled
to any special payment from the Fund as a result of termination of his status
as General Partner. Subject to Section IV(b) above, a withdrawing General
Partner may, if he chooses to do so, redeem his Shares in accordance with
Section V(g) below, or retain his Shares as a Limited Partner.
(m) No Agency. Nothing in this Agreement shall be construed as
establishing any General Partner as an agent of any Limited Partner.
(n) Voting of Shares Owned by General Partners. In accordance with Section
VI below, the General Partners shall have the right to vote any Shares which
they own.
V. LIMITED PARTNERS
(a) Identity and Contributions of Limited Partners. The names of the
Limited Partners, their post-office addresses and the number of Shares owned
by them shall be set forth in the records maintained by the Fund or by its
appointed transfer agent.
(b) Admission of Limited Partners. The Fund may offer new Shares at net
asset value, as determined at the time of such offering, plus any sales charge
as may be applicable to the purchase of Shares. The Fund may also offer new
Shares upon such other terms as may be determined from time to time by the
Director General Partners. An investor who purchases Shares shall be
automatically admitted as a Limited Partner by the General Partners and shall
become a Limited Partner of the Fund without any further action on his part
following receipt by the Fund of (i) full payment for such Shares, and (ii)
the name and post-office address of such investor so that he can be recorded
on the books of record of the Fund as a Limited Partner and a holder of record
of such Shares. In no event shall the consent or approval of any of the
Limited Partners be required to effectuate such admission. Any investor who
purchases Shares irrespective of whether he executed an account application or
any other document shall be deemed to have consented to and be bound by all of
the terms and conditions of this Agreement including, without limitation, the
power-of-attorney required of all Limited Partners as provided in Section X
below, and he shall also be deemed to have granted and executed said power-of-
attorney. Until such time as the purchaser's interest is recorded on the books
of record of the Fund maintained for such purpose either by the Fund or its
appointed transfer agent, no purchaser shall acquire as against the Fund any
right or interest in the Shares which shall have been sold, including but not
limited to any right to distributions with respect to such Shares.
(c) Other Admission of Limited Partners. A person who purchases a Share
and who has not already been admitted as a Limited Partner of the Fund under
the conditions set forth in Section V(b) above, may be admitted as a Limited
Partner by the Director General Partners in accordance with such other
procedures as they may establish from time to time. A person to whom an
outstanding Share is assigned or a person who succeeds to the interest of a
Limited Partner, and who has not become a Limited Partner under the conditions
set forth in Section VIII below, shall not become a Limited Partner or a
Substituted Limited Partner of the Fund except upon satisfaction of the
conditions set forth in Section VIII below.
(d) Contributions of the Limited Partners. The contributions of the
Limited Partners shall be made in cash or such other property which is
approved by the Director General Partners. The initial Limited Partner
contributed $10.00, the initial net asset value, in cash to the Partnership
for each Share purchased. Additional Shares issued after the formation of the
Fund shall be sold (i) at the net asset value (plus such sales charge as may
be applicable to the purchase of the Shares) next computed after receipt of
the order or (ii) upon such other terms as may be determined from time to time
by the Director General Partners, all in accordance with the Fund's
registration statement under the Securities Act of 1933 in effect at the time
the order is received. The net asset value per Share of the Fund shall be
determined as of the close of the New York Stock Exchange on each day the
Exchange is open for trading or as of such other time or times as the Director
General Partners may determine in accordance with the provisions of the 1940
Act. The net asset value per Share is computed by dividing the total value of
the assets of the Fund, less its liabilities, by the total number of Shares
outstanding (including Shares held by General Partners). Portfolio securities
will be valued at their fair value using methods determined in good faith by
the Director General Partners.
(e) Additional Contributions of Limited Partners; Assessments. No Limited
Partner has agreed to make any additional contributions to or to lend
additional funds to the Fund, and no Limited Partner shall be liable for any
additional assessment therefor.
(f) Use of Contributions. The aggregate of all capital contributions shall
be, and hereby is agreed to be, available to the Fund to carry out the objects
and purposes of the Fund.
(g) Redemption by Limited Partners. The Fund will redeem from any Limited
Partner all or any portion of the Shares owned by him provided that the
Limited Partner delivers to the Fund or its designated agent notice of such
redemption, stating the number of Shares to be redeemed, and either his
certificates or a stock power, if no certificates have been issued, in good
order for transfer. The Limited Partner shall be entitled to payment of the
net asset value of his Shares as set forth in Section V(d) above next computed
after such delivery, provided that the amount of the payment is in accordance
with and does not exceed his positive Capital Account balance. Any
distribution to a Limited Partner upon redemption pursuant to this Section V
(g) shall, in accordance with Section VII(d) below, constitute a return in
full of the redeeming Limited Partner's contribution attributable to the
Shares which are redeemed regardless of the amount distributed with respect to
such Shares. No consent of any of the Partners shall be required for such
withdrawal or return of a Partner's contribution. The Director General
Partners shall have sole discretion to determine the amount of cash and/or
securities to be distributed to such withdrawing Partner.
The right to redeem may be suspended and the payment of the redemption
price deferred during any period when the New York Stock Exchange is closed,
other than customary week-end and holiday closings, during periods when
trading on the Exchange is restricted as determined by the Securities and
Exchange Commission, or during any emergency, as determined by the Commission,
which makes it impracticable for the Fund to dispose of its securities or
value its assets, or during any other period permitted by order of the
Commission for the protection of investors.
Notwithstanding the foregoing, no Partner shall be entitled to receive the
return of any part of the contribution with respect to his Shares unless all
liabilities of the Fund, except liabilities to General Partners and to Limited
Partners on account of their contributions, have been paid or there remains
property of the Fund sufficient to pay them.
(h) Limited Liability. No Limited Partner shall be liable for any debts or
obligations of the Fund; provided, however, that the contributions of a
Limited Partner shall be subject to the risks of the business of the Fund and
subject to the claims of the Fund's creditors, and provided further, that
after any Limited Partner has received the return of any part of his
contribution, he will be liable to the Fund for:
(1) any money or other property wrongfully distributed to him; and
(2) any sum, not in excess of the amount of such returned contribution
plus interest thereon, necessary to discharge any liabilities of the Fund
to creditors who extended credit or whose claims arose before such returns
were made.
The General Partners shall not have any personal liability to any holder
of Shares or to any Limited Partner for the repayment of any amounts standing
in the account of a Limited Partner including, but not limited to,
contributions with respect to such Shares. Any such payment shall be solely
from the assets of the Fund. The General Partners shall not be liable to any
holder of Shares or to any Limited Partner by reason of change in the Federal
income tax laws as they apply to the Fund and the Limited Partners, whether
such change occurs through legislative, judicial or administrative action, so
long as the General Partners have acted in good faith and in a manner
reasonably believed to be in the best interest of the Limited Partners.
(i) No Power to Control Business. A Limited Partner shall have no right to
and shall take no part in control of the Fund's business but may exercise the
rights and powers of a Limited Partner under this Agreement, including without
limitation, the voting rights and the giving of consents and approvals
provided for in Section VI below. The exercise of such rights and powers are
deemed to be matters affecting the basic structure of the Fund and not the
control of its business.
VI. MATTERS AFFECTING THE BASIC STRUCTURE OF THE FUND; MEETINGS OF THE
PARTNERS
(a) Right of Limited Partners to Vote at a Meeting of the Partners. The
Limited Partners entitled to vote shall have the right to vote, to the extent
required by the Partnership Act or by the 1940 Act or by this Agreement or
otherwise to the extent permitted at the discretion of the Director General
Partners, at a meeting of the Partners in accordance with the provisions of
Section VI(b), only upon the following matters affecting the basic structure
of the Fund which are submitted to the meeting, which includes the voting,
approval, consent or similar rights required under the 1940 Act for voting
security holders:
(1) the right to remove General Partners, as provided in Section IV(a)
above;
(2) the right to elect new General Partners, and if the matter is
submitted for vote at a meeting of the Partners, the right to re-elect
those persons who are serving as General Partners and who are standing for
re-election at such meeting, as provided in Sections IV(a) and IV(k)
above;
(3) the right to approve or disapprove the sale of all or
substantially all of the assets of the Fund (including, without
limitation, a transfer to a corporation or trust in exchange for stock or
securities of such corporation or trust);
(4) the right to approve any investment advisory contract or to
terminate any such existing contract;
(5) the right to approve any distribution plan of the Fund pursuant to
Rule 12b-1 under the 1940 Act or any successor rule or to terminate any
such existing plan;
(6) the right to terminate the employment of the independent public
accountants of the Fund, and if the matter is submitted for vote at a
meeting of the Partners, the right to ratify or reject the selection of
such accountants;
(7) if the matter is submitted for vote at a meeting of the Partners,
the right to approve amendments to this Agreement, including, without
limitation, the right to approve or disapprove proposed changes in the
nature of the Fund's business as such business is described herein;
provided, however, that no such amendment shall conflict with the 1940 Act
or the rules and regulations thereunder so long as the Fund intends to
remain registered thereunder, nor affect the liability of the General
Partners without their consent nor the limited liability of the Limited
Partners as provided under Section V(h) above; and
(8) the right to terminate the Fund, as provided in Section IX(b)(3)
below.
Notwithstanding the foregoing,
(i) the right of Limited Partners to vote with the General Partners at a
meeting of the Partners on matters affecting the basic structure of the Fund
as indicated above in this Section VI(a) shall not be construed as a
requirement that all such matters be submitted to the Limited Partners for
their approval or be so approved to the extent such approval is not required
by the Partnership Act or by the 1940 Act or by this Agreement; and
(ii) no vote, approval or other consent of the Limited Partners shall be
required to amend this Agreement (i) to change the procedures for the purchase
or redemption of Shares or for the admission as a Limited Partner of a
purchaser or assignee of Shares or of a successor in interest of a Limited
Partner, (ii) to reflect any change in the amount or character of the
contribution by any Partner, (iii) to reflect the termination of the interest
of the Advisor General Partner as a General Partner as permitted by Section IV
(j) above, (iv) to change the name of the Fund or its principal place of
business in California or the location of its principal executive office, (v)
to correct any false or erroneous statement, or to make a change in any
statement in order that such statement shall accurately represent the
agreement among the General and Limited Partners in this Agreement, (vi) to
add any omitted provision or to amend any provision to cure, correct or
supplement any ambiguous, defective or inconsistent provision of this
Agreement, or (vii) in any manner as may be considered necessary or
appropriate by the Director General Partners to conform this Agreement to the
requirements of the Partnership Act, the 1940 Act, the Internal Revenue Code
of 1986, as amended (or corresponding provisions of subsequent revenue laws),
or any other law or regulation applicable to the Fund.
The Limited Partners shall have no right or power to cause the termination
and dissolution of the Fund except as set forth in this Agreement. No Limited
Partner shall have the right to bring an action for partition against the
Fund.
(b) Action of the Partners at a Meeting. Matters which are submitted to
the vote of the Partners under Section VI(a) of this Agreement shall be acted
upon at a meeting of both the General and Limited Partners. All such meetings
shall be held within the State of California or at such other place as the
Director General Partners shall designate. The Partners may vote at any such
meeting in person or by proxy. Other than in the election or re-election of
General Partners and in the termination of the Fund pursuant to Section IX(b)
(3), all action of the Partners taken at such meetings shall require the
lesser of (i) the vote of Partners holding a majority of the then outstanding
Shares or (ii) the vote of Partners holding 67% or more of the Shares
represented in person or by proxy at a meeting at which Partners holding a
majority of outstanding Shares are present in person or by proxy. The presence
in person or by proxy of more than 50% of the outstanding Shares on the record
date constitutes a quorum at any meeting. In the absence of such a quorum, the
Director General Partners or their delegate may adjourn such meeting to such
time or times as determined by the Director General Partners without
additional notice to the Partners. See Section VI(h) below. In the election or
re-election of General Partners, those candidates receiving the highest
numbers of votes cast, at a meeting at which Partners owning a majority of
outstanding Shares are present in person or by proxy, up to the number of
General Partners proposed to be elected or re-elected, shall be elected or
re-elected as General Partners of the Fund to hold office until their successors
are elected and qualified.
(c) Call of Meetings of the Partners. Meetings of the Partners for the
purpose of taking any action which the Limited Partners are permitted to take
under this Agreement may be called by a majority vote of the Director General
Partners or by Limited Partners representing 10% of the outstanding Shares.
The Director General Partners shall promptly call a meeting of the Partners
for the purpose of voting upon the question of removal of any General Partner
when requested in writing to do so by persons who are listed as Partners and
who are holders of record of not less than 10% of the outstanding Shares on
the books of record of the Fund and, in that connection, the Director General
Partners will assist communications of the holders of Shares to the extent
provided for by Section 16(c) of the 1940 Act.
(d) Notice of Meetings of the Partners. Written notice of each meeting of
the Partners indicating briefly the object or objects thereof shall be mailed
by the Fund to each Partner entitled to vote at such meeting at his last known
post-office address as shown on the books of the Fund not less than 10 days
before the date of the meeting. Failure to receive notice of such meeting on
the part of any Partner shall not affect the validity of any act or proceeding
at such meeting, provided there is a lawful quorum present thereat. Only
matters set forth in the notice of meeting may be voted on by the Partners at
such meeting.
(e) Voting Lists and Partners Entitled to Vote. The Fund shall establish a
record date pursuant to Section XI(b) not exceeding sixty (60) days prior to
the date of any meeting of the Partners for purposes of determining
eligibility to vote at such meeting and the number of votes to which each
Partner will be entitled, and shall prepare, at least ten (10) days prior to
said meeting, a list setting forth the name of each Partner and the number of
votes he will be entitled to cast. This list will be available for examination
at the principal office of the Fund during regular business hours, and upon
compliance with Section XIII(a) below a copy of such list may be obtained by
each Partner. Only such persons who are listed as Partners and holders of
record of Shares on the books of record of the Fund, maintained for such
purpose either by the Fund or its appointed transfer agent, on the record date
so established shall be entitled to vote at the meeting of Partners.
(f) Proxies. A Partner may vote at any meeting of the Partners by a proxy
executed in writing by the Partner. All such proxies shall be filed with the
Fund before or at the time of the meeting. No such proxy shall be valid after
eleven months from the date of its execution. The law of California pertaining
to corporate proxies will govern all Fund proxies. Notwithstanding that a
valid proxy is outstanding, powers of the proxy holder will be suspended if
the person executing the proxy is present at the meeting and elects to vote in
person.
(g) Number of Votes. All Shares shall have equal voting rights at any
meeting of the Partners. Each Partner shall have the right to vote the number
of Shares standing of record in such Partner's name as of the record date set
forth in the notice of meeting.
(h) Adjournment. In the event that sufficient votes in favor of any
proposal or motion of the Director General Partners are not received at any
session of a meeting of the Partners, the Director General Partners or their
delegate may adjourn the meeting from time to time to permit further
solicitation of proxies or for any other lawful purpose. When a meeting of the
Partners is adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place thereof are announced at the
session of the meeting at which the adjournment is taken. At the adjourned
meeting the Partners may transact any business which might have been
transacted at the original session of the meeting.
VII. DISTRIBUTIONS AND ALLOCATION OF PROFITS AND LOSSES
(a) Fees of Director General Partners. As compensation for services
rendered to the Fund, each Director General Partner may be paid an annual fee,
which fee shall be fixed by the Director General Partners from time to time;
provided, however, that any Director General Partner who is affiliated with an
Advisor General Partner or is a member of an organization which acts as
investment advisor of the Fund shall not receive any compensation from the
Fund under this subsection (a). Payment of compensation to a Director General
Partner under this subsection (a) shall not be deemed a distribution for
purposes of subsection (d) below nor shall such payment affect such person's
right to receive any distribution to which he would otherwise be entitled as a
holder of Shares.
(b) Distributions of Income and Gains. Subject to the provisions of the
Partnership Act and the terms of subsection (d) below, the Director General
Partners shall determine the amounts to be distributed to holders of Shares
and the time or times when such distributions shall be made. Distributions of
income, unless otherwise elected, shall be in additional Shares of the Fund.
With respect to capital gains, the Director General Partners will determine
annually what portion, if any, of the Fund's capital gain will be distributed.
Any such distribution shall be made, at the discretion of the Director General
Partners, in cash or Shares or some combination thereof to holders of Shares.
(c) Allocation of Fund Income, Gains, Losses, Deductions and Credits.
Effective as of January 1, 1988 Fund income, gains, losses, deductions and
credits shall be allocated for book purposes equally among the outstanding
Shares of the Fund on the same basis as for tax purposes (see Section VII(f)
below). A holder of a Share shall be allocated the proportionate part of such
items actually realized by the Fund during any month in which such Share was
owned by such holder in accordance with the weighted monthly averaging method
used for tax purposes. A person shall be deemed to be a holder of a Share on a
specific day if he is the holder of record of such Share on such day.
(d) Returns of Contributions. Except upon dissolution of the Fund by
expiration of its term or otherwise pursuant to Section IX below (which shall
be the time for return to a Limited Partner of his contributions, subject to
the priorities therein), and except upon redemption of Shares of the Fund as
provided in Section V, no Partner has the right to demand return of any part
of his contribution. The Director General Partners may, however, from time to
time, elect to make partial returns of contributions to holders of Shares,
provided that:
(1) all liabilities of the Fund to persons other than General and
Limited Partners have been paid or, in the good faith determination of the
Director General Partners, there remains property of the Fund sufficient
to pay them; and
(2) the consent, expressed or implied, of all of the General and Limited
Partners is obtained.
In the event that the Director General Partners elect to make a partial return
of contributions to holders of Shares, the condition of subpart (2) shall have
been satisfied if such distribution is made pro rata to all of the holders of
Shares in accordance with their positive Capital Account balances. Each
General and Limited Partner, by becoming such, consents to any such pro rata
distribution theretofore or thereafter duly authorized and made in accordance
with such provisions and to any distribution through redemption of Shares
pursuant to Section V(g) above. All distributions to holders of Shares,
whether upon dissolution or otherwise, shall be in accordance with their
positive Capital Account balances.
(e) Capital Accounts. In addition to any capital accounts required to be
maintained for accounting purposes in accordance with generally accepted
accounting principles, the Fund shall maintain a Capital Account for each
General and Limited Partner for Federal income tax purposes in accordance with
the requirements of Treasury Regulations Section 1.704-1(b). On a daily basis,
each such Capital Account shall be credited with the Partner's capital
contributions (including the fair market value of any contributed property),
shall be charged with the Partner's share of distributions and withholding
taxes (if any) and shall otherwise appropriately reflect transactions of the
Fund and the Partners. Capital Accounts shall not be adjusted to reflect
unrealized appreciation or depreciation in Fund assets except in cases
mandated by Treasury Regulations Section 1.704-1(b). At the end of each day,
each Partner's Capital Account shall be adjusted to reflect any purchases and
redemptions of Shares by such Partner. On a monthly basis, each such Capital
Account shall be adjusted to take into account the Partner's allocated share
of items of income (including tax-exempt income), gain, loss, deduction or
credit as computed under Section VII(f) below. A substituted Limited Partner
shall be deemed to succeed to the Capital Account of the Partner whom such
substituted Limited Partner replaced.
(f) Allocations for Tax Purposes.
(1) Allocations of Income, Gains, Losses, Deductions and Credits.
(i) Effective as of January 1, 1988 for each fiscal year, items of
income, gain, loss, deduction or credit realized by the Fund shall be
allocated for Federal income tax purposes in accordance with the
weighted monthly averaging method described in (ii) below. Each
Partner's Capital Account shall be adjusted to reflect the monthly
allocations of such items of income, gain, loss, deduction or credit.
(ii) Items of income, gain, loss, deduction or credit realized by
the Fund during any particular month shall be allocated to the
Partners in accordance with the weighted average number of Shares held
by the Partner during the month. The total amount of each such type of
item realized by the Fund during the month shall be multiplied by the
Partner's allocation percentage to derive the Partner's allocated
portion of such total amount. Each Partner's allocation percentage
shall be represented by a fraction, the numerator of which is the sum
of the numbers of Shares of the Fund held by the Partner on each day
during such month and the denominator of which is the sum of the total
numbers of outstanding Shares of the Fund on each day during the
month.
(2) Minimum Gain Chargeback. In the event that there is a net decrease
in the Fund's Minimum Gain, as hereinafter defined, during any taxable
year and any Partner has a negative Capital Account (after taking into
account reductions for items described in paragraphs (4), (5) and (6) of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d)) and such negative
balance exceeds the sum of (i) the amount (if any) that such Partner is
obligated to restore upon liquidation of the Fund and (ii) such Partner's
share of the Minimum Gain at the end of such taxable year, such Partner
shall be allocated Fund income (including gross income) and gain for such
year (and, if necessary, for subsequent years) in an amount necessary to
eliminate such excess negative balance as quickly as possible. Allocations
of Fund income and gain to such Partners having such excess negative
Capital Accounts shall be made in proportion to the amounts of such excess
negative Capital Account balances. The term "Minimum Gain" means the
excess of the outstanding balances of all nonrecourse indebtedness which
is secured by property of the Fund over the adjusted basis of such
property for Federal income tax purposes, as computed in accordance with
the provisions of Treasury Regulations Section 1.704-1(b)(4)(iv)(c). A
Partner's share of Minimum Gain shall be computed in accordance with
Treasury Regulations Section 1.704-1(b)(4)(iv)(f).
(3) Qualified Income Offset. Notwithstanding anything in Sections VII
(c) and VII(f) to the contrary, in the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)
(5) or 1.704-1(b)(2)(ii)(d)(6), items of Fund income (including gross
income) and gain shall be specially allocated to such Partner in an amount
and manner sufficient to eliminate the deficit balance in his Capital
Account (in excess of (i) the amount (if any) he is obligated to restore
upon liquidation of the Fund or upon liquidation of his interest in the
Fund and (ii) his share of the Minimum Gain, as defined in Section VII(f)
(2) above) created by such adjustments, allocations or distributions as
quickly as possible.
(4) Allocations to Limited Partners Contributing Property.
Notwithstanding anything in Sections VII(c) and VII(f) to the contrary, if
a Limited Partner contributes property other than cash to the Fund
pursuant to Section V(d) above and there is built-in gain (or loss) with
respect to the property (i.e., the fair market value of the property at
the time of the contribution exceeds (or is less than) the Limited
Partner's adjusted tax basis in the property), then any gain (or loss)
recognized by the Fund upon a subsequent disposition of the property (or,
at the election of the Fund and to the extent consistent with the
applicable Treasury Regulations, upon a subsequent disposition of any
property of the Fund), up to a maximum of the amount of built-in gain (or
loss) at the time the property was contributed to the Fund, shall be
allocated first to the contributing Limited Partner in accordance with the
requirements of Treasury Regulations Section 1.704-1(b)(1)(vi), provided
that the contributing Limited Partner is a Partner of the Fund at the time
of the disposition of such property (or other property) by the Fund. The
Capital Account of the contributing Limited Partner shall not be adjusted
to take into account any allocations made pursuant to this Section VII(f)
(4).
VIII. SALE AND ISSUANCE OF SHARES OF LIMITED PARTNERSHIP INTEREST: ASSIGNMENT
OF SHARES OF LIMITED PARTNERSHIP INTEREST AND SUBSTITUTION OF ASSIGNEE
(a) Sale and Issuance of Shares. The Fund may issue and sell its Shares at
net asset value (plus any sales charge as may be applicable to the purchase of
Shares) or upon such other terms as may be determined from time to time by the
Director General Partners, all in accordance with the Fund's registration
statement in effect under the Securities Act of 1933. Upon the sale of a Share
of the Fund to a purchaser who has been admitted as a Limited Partner under
the conditions set forth in Section V(b) or V(c) above, such purchaser shall
be deemed to have granted and executed the power-of-attorney required of all
Limited Partners as provided in Section X below. Each purchaser of a Share of
the Fund who becomes a Limited Partner shall be bound by all the terms and
conditions of this Agreement including, without limitation, the allocation of
income, gains, losses, deductions and credits as provided in Section VII(c)
above.
(b) Right to Assign. Subject to (c) below, a Limited Partner or other
holder of a Share of the Fund may assign all or any portion of the Shares
representing his interest in the Fund.
(c) Substitution of Assignee. Any Limited Partner who assigns Shares of
the Fund, and any assignee of such Shares who subsequently assigns such
Shares, by virtue of such assignment confers upon his assignee:
(1) the right to receive distributions with respect to such Shares; and
(2) the right to be substituted as a Limited Partner if the General
Partners consent to such substitution;
subject, however, to the receipt by the Fund of (i) an executed instrument of
assignment in a form satisfactory to the Fund and (ii) the name and post-
office address of the assignee. Following such receipt and the consent to such
substitution by the General Partners (which consent may be evidenced by
designating the assignee as a Limited Partner upon the books of record of the
Fund), such assignee shall be admitted by the General Partners as a
Substituted Limited Partner of the Fund without any further action on his part
and he shall become a holder of record of the assigned Shares. In no event
shall the consent or approval of any of the Limited Partners be required to
effectuate such admission. Any assignee of Shares irrespective of whether he
executed an account application or any other document shall be deemed to have
consented to and be bound by all of the terms and conditions of this Agreement
including, without limitation, the power-of-attorney required of all Limited
Partners as provided in Section X below, and he shall also be deemed to have
granted and executed said power-of-attorney. Until such time as the assignee's
interest is recorded on the books of record of the Fund maintained for such
purpose either by the Fund or its appointed transfer agent, no assignee shall
acquire as against the Fund any rights or interest in the Shares which have
been assigned, including but not limited to any right to distributions with
respect to such Shares.
(d) Death, Insanity or Termination of the Existence of a Limited Partner.
In the event of the death or insanity of a Limited Partner (or, in the case of
a Limited Partner that is a corporation, association, partnership, joint
venture, trust or other entity, the merger, dissolution, liquidation or other
termination of the existence of such Limited Partner), the successor in
interest of such Limited Partner shall have:
(1) the right to redeem the Shares of the Limited Partner in
accordance with the provisions of Section V hereof;
(2) the right to receive distributions with respect to such shares;
and
(3) the right to be substituted as a Limited Partner if the General
Partners consent to such substitution;
subject, however, to the receipt by the Fund of (i) evidence satisfactory to
the Fund of such successor's right to succeed to the interest of the Limited
Partner, and (ii) the name and post-office address of such successor.
Following such receipt and the consent to such substitution by the General
Partners (which consent may be evidenced by designating the successor in
interest as a Limited Partner upon the books of record of the Fund), such
successor shall be admitted by the General Partners as a Substituted Limited
Partner of the Fund without any further action on his part and he shall become
a holder of record of the subject Shares. In no event shall the consent or
approval of any of the Limited Partners be required to effectuate such
admission. Any successor in interest irrespective of whether he executed an
account application or any other document shall be deemed to have consented to
and be bound by all of the terms and conditions of this Agreement including,
without limitation, the power-of-attorney required of all Limited Partners as
provided in Section X below, and he shall also be deemed to have granted and
executed said power-of-attorney. Until such time as the interest of any such
successor in interest is recorded on the books of record of the Fund
maintained for such purpose either by the Fund or its appointed transfer
agent, no such successor shall acquire as against the Fund any right or
interest in the subject Shares, including but not limited to any right to
distributions with respect to such Shares.
IX. DISSOLUTION AND WINDING UP OF THE FUND
(a) Term. The term of the Fund shall expire on December 31, 2052, on which
date it shall be dissolved, unless sooner dissolved as hereinafter provided.
(b) Dissolution of the Fund. The affairs of the Fund shall be wound up and
the Fund dissolved prior to the date of termination specified above, upon the
happening of any of the following events:
(1) The Fund disposes of all of its assets.
(2) The death, withdrawal, retirement, dissolution, assignment for the
benefit of creditors, filing of a petition for bankruptcy, adjudication of
bankruptcy, insanity or incompetency of any of the General Partners,
except as hereinafter otherwise provided.
(3) Partners holding a majority of the outstanding Shares in the Fund
vote to terminate the Fund.
In the event of the death, withdrawal, retirement, dissolution, assignment
for the benefit of creditors, filing of a petition for bankruptcy,
adjudication of bankruptcy, insanity or incompetency of any General Partner,
the Fund shall be terminated and dissolved unless the remaining General
Partners elect to continue the business of the Fund.
In the event that all General Partners die, withdraw, retire, dissolve,
make an assignment for the benefit of creditors, file a petition for
bankruptcy, are adjudicated to be bankrupt, or become insane or incompetent,
the remaining Limited Partners, by vote as set forth in Section VI(b) above,
shall have the right to elect successor General Partners who may elect to
continue the business of the Fund under its present name. The successor
General Partners shall have and be subject to all of the rights, powers,
duties and obligations which a General Partner has hereunder.
(c) Winding Up of the Fund. Upon the dissolution and termination of the
Fund, the Director General Partners or trustee, if one is appointed, shall
proceed to wind up the affairs of the Fund and to liquidate. The Partners
shall continue to share profits and losses during liquidation in the same
manner as before dissolution. The proceeds from such liquidation of the Fund
assets shall be applied and distributed in the following order or priority:
(1) To the payment of debts and liabilities of the Fund (other than
any loans or advances which may have been made by any of the Partners to
the Fund) and the expenses of liquidation.
(2) To the setting up of any reserve which the Director General
Partners or trustee may deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Fund arising out of or in
connection with the operation, dissolution or winding up of the Fund. Such
reserve shall be paid over by the Director General Partners or trustee to
a bank or trust company to act as escrow agent or to a reputable person
selected by the Director General Partners or trustee. Any such escrow
agent shall hold such reserves for payment of any of the aforementioned
contingencies, and, at the expiration of such period as the Director
General Partners or trustee designate, to distribute the balance
thereafter remaining in the manner hereinafter provided.
(3) To the repayment of any loans or advances that may have been made
by any of the Partners to the Fund, but if the amount available for such
repayment shall be insufficient, then pro rata on account thereof.
(4) Distribution of the remainder pro rata among the General and
Limited Partners in accordance with their positive Capital Account
balances.
(d) Accountant's Statement. Each of the Partners shall be furnished with a
statement prepared by the Fund's accountants which shall set forth the assets
and liabilities of the Fund as at the date of complete liquidation. When the
Director General Partners have complied with the foregoing distribution plan
(including payment over to the escrow agent), the Limited Partners shall cease
to be such, and the Director General Partners shall execute, acknowledge, and
cause to be filed an appropriate certificate reflecting the dissolution or
termination of the Fund.
(e) Gains or Losses in Process of Liquidation. Any gain or loss on
disposition of Fund properties in the process of liquidation shall be credited
or charged in accordance with Sections VII(e) and VII(f) above prior to the
distribution of any proceeds. Any property distributed in kind in the
liquidation shall be valued and treated as though the property were sold and
the cash proceeds were distributed.
X. FUND DOCUMENTATION: CERTIFICATE OF LIMITED PARTNERSHIP; AMENDMENT OF THIS
AGREEMENT; POWER-OF-ATTORNEY
(a) Certificates and Other Documentation. The Fund shall file or record a
Certificate of Limited Partnership to the extent required by local law, in the
appropriate place in each state in which the Fund may hereafter establish a
place of business. The Fund may also file, record or publish such statements
of fictitious business name and other notices, certificates, statements or
other instruments as are reasonably believed to be required by a provision of
any applicable law of the United States or any state or other jurisdiction
which governs the formation of the Fund or the conduct of its business from
time to time.
(b) Events Requiring Amendment of Certificate. The Fund filed a
Certificate of Limited Partnership on Form LP-1 with the office of the
California Secretary of State on October 15, 1984. Such Certificate shall be
promptly amended after the occurrence of any of the following events:
(1) a change in name of the Fund;
(2) a change in either of the following:
(A) the street address of the principal executive office of the
Fund, or
(B) if the principal executive office of the Fund is not in
California, the street address of the principal place of business of
the Fund in California;
(3) a change in the address of a General Partner, or a change in the
address of the agent for service of process, unless a corporate agent is
designated, or appointment of a new agent for service of process;
(4) the admission of a General Partner and that General Partner's
address or the cessation of a General Partner to be a General Partner; or
(5) the discovery by any of the General Partners of any false or
erroneous material statement contained in the Certificate or any amendment
thereto.
Such Certificate may also be amended at any time in any other respect that
the Director General Partners determine.
(c) Amendment of This Agreement. This Agreement may be amended or restated
from time to time pursuant to action by the Director General Partners taken in
accordance with Section V(f) by a written instrument signed by or on behalf of
any one or more of the Director General Partners. The execution of any such
amendment or restatement on behalf of a General Partner may be effected by his
attorney-in-fact. In the event any amendment or proposed amendment of this
Agreement is submitted to a vote of the Partners under Section VI(a), such
amendment shall not be effective unless it shall have been approved by the
affirmative vote of Partners holding the requisite percentage of Shares in
accordance with Section VI(b). Such amendments and votes shall have the same
force and effect as if they had received the unanimous approval of all
Partners, and any non-consenting Partner will be bound thereby. This Agreement
need not be amended upon the admission or withdrawal of any Partner.
(d) Documentation Requiring the Signatures of Partners: Power-of-Attorney.
In order to facilitate the preparation, execution and filing of instruments
and other documents and in connection with the business of the Fund, in
consideration of the granting of similar powers-of-attorney by each of the
other Limited Partners and in further consideration for being admitted by the
General Partners as a Limited Partner, each Limited Partner hereby makes,
constitutes and appoints (i) each person who is or shall hereafter become a
General Partner of the Fund from time to time and (ii) any substitute which
any such General Partner may hereafter appoint to act in his place (who need
not be a Partner of the Fund), the true and lawful attorney of, and in the
name, place and stead of, said Limited Partner, with the power from time to
time to sign, execute, acknowledge, make, swear to, verify, deliver, file,
record, and/or publish:
(1) this Agreement and any Certificate of Limited Partnership filed or
recorded under the laws of the State of California or any other
jurisdiction;
(2) any amendment to this Agreement or any amendment to any such
Certificate of Limited Partnership or any other document required to
reflect any action of the Partners provided for in this Agreement, whether
or not such Limited Partner voted in favor of or otherwise consented to
such action; and
(3) any other instrument, certificate or document as may be required
by any regulatory agency, the laws of the United States, any state or any
other jurisdiction in which the Fund is doing or intends to do business or
which the Director General Partners deem advisable to file or record,
provided such instrument, certificate or document is consistent with the
terms of this Agreement as then in effect.
Each Limited Partner acknowledges and agrees that the terms of this
Agreement permit certain amendments of this Agreement to be effected and
certain other actions to be taken or omitted by or with respect to the Fund,
in each case either (a) with the approval of less than all the Limited
Partners, provided that the Partners holding a specified percentage of Shares
shall have voted in favor of or otherwise consented to such action, or (b)
without the approval of the Limited Partners. Such actions include, without
limitation, admission of new General Partners duly elected at meetings of the
Partners. If, as and when (i) an amendment of this Agreement is proposed or an
action is proposed to be taken or omitted by or with respect to the Fund which
requires, under the terms of this Agreement, the approval of the Partners
holding a specified percentage (but less than all) of the Shares, (ii) the
Partners holding the percentage of Shares specified in this Agreement as being
required for such amendment or action have approved such amendment or action
in the manner contemplated by this Agreement, and (iii) a Limited Partner has
failed or refused to approve such amendment or action (hereinafter referred to
as a non-consenting Limited Partner), each non-consenting Limited Partner
hereby consents to such amendment or action and agrees that each special
attorney specified above, with full power of substitution, is hereby
authorized and empowered to execute, acknowledge, make, swear to, verify,
deliver, record, file and/or publish, for and on behalf of such non-consenting
Limited Partner, and in his name, place and stead, any and all instruments and
documents which may be necessary or appropriate to permit such amendment to be
lawfully made or action lawfully taken or omitted. Each Limited Partner is
fully aware that he and each other Limited Partner have granted this special
power-of-attorney, and that all Partners will rely on the effectiveness of
such powers with a view to the orderly administration of the Fund's affairs.
The foregoing grant of authority (i) is a Special Power-of-Attorney
coupled with an interest in favor of the General Partners, or substitute
appointed to act in place thereof, and as such shall be irrevocable and shall
survive the death or insanity (or, in the case of a Limited Partner that is a
corporation, association, partnership, joint venture, trust or other entity,
shall survive the merger, dissolution or other termination of the existence)
of the Limited Partner, (ii) may be exercised for the Limited Partner by a
facsimile signature of any General Partner of the Fund or substitute therefor
or by listing all of the Limited Partners, including such Limited Partner, or
stating that all Limited Partners, while not specifically named, are executing
any instrument with a single signature of any General Partner or substitute
therefor acting as attorney-in-fact for all of them, and (iii) shall survive
the assignment or redemption by the Limited Partner of the whole or any
portion of his interest.
As a condition to becoming a Limited Partner, each purchaser or assignee
of a Share and each successor in interest of a Limited Partner shall be deemed
to have granted to the General Partners and their substitutes a power-of-
attorney in accordance with the foregoing provisions of this subsection (d),
which shall similarly be irrevocable during the period specified above.
(e) Amendments Requiring Signature by Less than All Partners. Any
amendment to this Agreement shall be executed in accordance with Section X(c)
above. Any amendment to the Certificate of Limited Partnership need be signed
only by or on behalf of any one Director General Partner unless otherwise
required by law. The execution of any such amendment on behalf of a Director
General Partner may be effected by his attorney-in-fact.
XI. CERTAIN OPERATING POLICIES
(a) Fiscal Year. The fiscal year for the Fund shall be the calendar year.
(b) Record Dates. The Director General Partners may set in advance a date
for determining (i) the Partners entitled to notice of and to vote at any
meeting and (ii) the holders of record entitled to receive distributions.
Record dates with respect to voting shall be not less than ten (10) nor more
than sixty (60) days prior to the date of the meeting to which such record
date relates.
(c) Agent for Service of Process. The Director General Partners shall take
whatever action is necessary to designate an agent in California upon whom
service of process upon the Fund may lawfully be made.
XII. DEFINITIONS
The following terms shall have the following meanings when used herein:
(a) "General Partners" shall mean the initial General Partners and any
person who shall hereafter become a General Partner.
(b) "Holder of record" or "holder of a Share" or "holder of a share of
limited partnership interest" or "holder of partnership interests" shall
mean:
(1) a General Partner;
(2) a Limited Partner if he has not redeemed or assigned all of
his Shares of the Fund;
(3) an assignee of a Share or Shares of the Fund;
(4) a purchaser of a Share or Shares of the Fund; and
(5) the successor in interest of a Limited Partner under Section
VIII(d) above,
but only to the extent such person's interest is recorded on the books of
record of the Fund maintained for the purpose either by the Fund or by its
transfer agent.
(c) "Limited Partners" shall mean the original Limited Partner and all
other persons who shall hereafter be admitted to the Fund as additional
Limited Partners or Substituted Limited Partners, except those persons
who:
(1) have redeemed all Shares of the Fund owned by them; or
(2) have been replaced by a substituted Limited Partner to the
extent of their entire limited partnership interest.
Reference to a "Limited Partner" shall mean any one of the Limited
Partners.
(d) "Share" (including fractional Shares) shall mean a partnership
interest in the Fund. Reference to "Shares" shall be to more than one
Share. The value of each Partner's Shares shall represent his contribution
(s) to the Fund adjusted by his share of (1) Fund income, gain or loss,
(2) realized and unrealized income, gain or loss and (3) distributions.
The initial value of each Share on formation of the Fund was $10.00.
Thereafter the value of each Share shall be computed in accordance with
Section V(d).
(e) "Substituted Limited Partner" shall mean the assignee of Shares
held by a Limited Partner who has complied with the conditions set forth
in Section VIII(c) and the successor in interest of a Limited Partner who
has complied with the conditions set forth in Section VIII(d).
(f) All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural, as the identity of
the person or persons may require.
(g) "Person" means an individual, partnership, joint venture,
association, corporation, trust or other entity.
(h) "Capital Account" means a capital account maintained for Federal
income tax purposes pursuant to Section VII(e) hereof.
XIII. RECORDS, STATEMENTS AND INCOME TAX INFORMATION
(a) Records and Accounting. At all times during the continuance of the
Fund, books of account, which shall be adequate and appropriate for the Fund
business, shall be kept. Such books and records shall be kept on a basis
consistent with the accounting methods followed by the Fund for Federal income
tax purposes and, where deemed appropriate, in accordance with generally
accepted accounting principles and procedures applied in a consistent manner.
Such books and records shall include such separate and additional accounts for
each Partner as shall be necessary to reflect accurately the rights and
interests of the respective Partners and shall specifically reflect the name
and address of each Partner and the number of Shares held by him for the
purpose of determining recipients of distributions and notices. Such books of
account, together with a copy of this Agreement of Limited Partnership and any
amendments thereto, all documents relating to the ownership and condition of
title of Fund properties, and copies of all Fund tax returns shall at all
times be maintained by the Fund, and each Partner, and his duly authorized
representative, shall have access to them and the right to inspect and copy
them at all reasonable times. In addition, each Partner shall have the right
to receive by mail, upon written request to the Fund, a copy of a list of the
names and addresses of the Limited Partners and the number of Shares held by
each of them against reimbursement of the cost of duplicating and mailing the
same.
(b) Statements. The Fund shall cause certified annual and uncertified
semi-annual financial statements of the operations of the Fund to be prepared
and forwarded to the Partners. The annual statements shall include a balance
sheet, statement of operations, and such supporting statements as required by
law or by the Director General Partners.
(c) Income Tax Information. The Fund shall provide to each Partner
information regarding each class of income, gain, loss, deduction or credit
that is relevant to reporting Fund income on the Partner's Federal income tax
return. The information shall also show each Partner's allocated share of each
class of income, gain, loss, deduction or credit. This information shall be
furnished to the Partners as soon as practicable.
(d) Tax Matters and Notice Partner. The Director General Partners shall
designate one or more General Partners as the "Tax Matters Partner" and the
"Notice Partner" of the Fund in accordance with Sections 6231(a)(7) and (8) of
the Internal Revenue Code of 1986, as amended, and each such Partner shall
have no personal liability arising out of his good faith performance of his
duties in such capacity. The "Tax Matters Partner" is authorized, at the
Fund's sole cost and expense, to represent the Fund and each Limited Partner
in connection with all examinations of the Fund's affairs by tax authorities,
including any resulting administrative and judicial proceedings. Each Limited
Partner agrees to cooperate with the Director General Partners and to do or
refrain from doing any and all things reasonably required by the Director
General Partners to represent the Fund in such examinations or proceedings.
The Director General Partners shall have the right to settle any audits
without the consent of the Limited Partners.
XIV. GENERAL PROVISIONS
(a) Agreement in Counterparts. This Agreement may be executed in several
counterparts, and as executed shall constitute one Agreement, binding on all
of the parties hereto, notwithstanding that all the parties are not signatory
to the original or to the same counterpart.
(b) Principles of Construction; Severability. This Agreement shall be
construed to the maximum extent possible to comply with all of the terms and
conditions of the 1940 Act and the Partnership Act. If, nevertheless, it shall
be determined by a court of competent jurisdiction that any provision or
wording of this Agreement shall be invalid or unenforceable under the 1940
Act, the Partnership Act or other applicable law, such invalidity or
unenforceability shall not invalidate the entire Agreement. In that case, this
Agreement shall be construed so as to limit any term or provision so as to
make it enforceable or valid within the requirements of such law, and in the
event such term or provision cannot be so limited, this Agreement shall be
construed to omit such invalid or unenforceable provisions.
(c) Paragraph Headings. The paragraph headings in no way define, limit,
extent or interpret the scope of this Agreement or of any particular
paragraph.
(d) California Law. It is the intention of the parties that the internal
laws of the State of California and, in particular, the provisions of
California Corporation Code (S)(S)15501-15533 (except as to filing
requirements) and (S)(S)15621-15628 (relating to filing requirements), as the
same may be amended from time to time, shall govern the validity of this
Agreement, the construction of its terms and the interpretation of the rights
and duties of the parties.
(e) Integrated Agreement. This Agreement constitutes the entire
understanding and agreement among the parties hereto with respect to the
subject matter hereof, and, except for any other written agreements and
representations which the Director General Partners may require of the
Partners, there are no other agreements, understandings, restrictions,
representations or warranties among the parties other than those set forth
herein.
(f) Independent Activities. Each Partner reserves the right to conduct
activities similar to those conducted by the Fund, including buying or selling
securities for his own account or for others.
(g) Interested Partners. The fact that a General Partner or one or more of
the Limited Partners is directly or indirectly interested in or connected with
any company or person with which or with whom the Fund may have dealings,
including but not limited to the payment or investment advisory fees,
brokerage commissions and other expenses, shall not preclude such dealings or
make them void or voidable, and the Fund or any of the Partners shall not have
any rights in or to such dealings or any profits derived therefrom.
(h) Tax Election.
(1) No election shall be made by any Partner to be excluded from the
application of the provisions of Subchapter K of the Internal Revenue
Code, or from any similar provisions of state tax laws, and no such
election shall be made by the Fund.
(2) In the event of the partial or complete redemption or transfer of
a Partner's interest, or the death of a Partner, or the distribution of
any Fund property to any Partner or any other circumstance in which a tax
election may be available, the Director General Partners, on behalf of the
Fund, may, at their option, file an election, in accordance with
applicable Treasury Regulations, to cause the basis of the Fund's property
to be adjusted for Federal income tax purposes as provided in Sections
734, 743 and 754 of the Internal Revenue Code, as then in effect.
(i) Maintenance of Assets. The Fund shall place and maintain its
securities and similar investments in the custody of one or more of the
following:
(1) one or more banks, trust companies, banking institutions or other
qualified depositories,
(2) one or more companies each of which is a member of a national
securities exchange as defined in the Securities Exchange Act of 1934, or
(3) the Fund,
in each case subject to the Investment Company Act of 1940 and all applicable
rules, regulations and orders as the Securities and Exchange Commission may
from time to time prescribe, adopt or issue. Any such custodian may be
employed to keep all or any part of the books and accounts of the Fund, to
furnish clerical and accounting services to the Fund and to determine or
compute the net asset value of the shares of the Fund, and shall perform such
acts and services upon such terms and conditions as shall be approved from
time to time by the Director General Partners. The Fund may also employ one or
more subcustodians or authorize any such custodian to employ one or more
subcustodians, in each case to perform such acts and services upon such terms
and conditions as shall be approved from time to time by the Director General
Partners. Subject to the Investment Company Act of 1940 and all applicable
rules, regulations and orders as said Commission may from time to time
prescribe, adopt or issue, the Fund may (or permit any such custodian or
subcustodian to) deposit all or any part of the securities owned by the Fund
in one or more systems for the central handling of securities (including,
without limitation, securities depositories, clearing agencies and book-entry
systems), pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities.
(j) Notices. All notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been sufficiently
given for all purposes if delivered personally to the party to whom the same
is directed or if sent by first-class mail addressed (1) if to a Limited
Partner, to his last known post-office address as shown on the books of the
Fund and (2) if to the Fund or to a General Partner, to the Fund's principal
executive office in Boston, Massachusetts specified in Section III above. Any
Limited Partner may change his post-office address for purposes of this
Agreement by giving written notice of such change to the Fund in accordance
with this Section XIV(j).
(k) Benefits. Except as herein otherwise provided to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties
signatory hereto, and their respective heirs, executors, guardians,
representatives, successors and assigns.
(l) Nonrecourse Creditors. No creditor making a nonrecourse loan to the
Fund shall, by reason thereof, acquire any direct or indirect interest in the
profits, capital or property of the Fund other than as a secured creditor.
(m) Use of Name "Eaton Vance". Eaton Vance Corp. ("EVC"), which owns all
of the capital stock of the investment adviser of the Fund, has consented to
the use by the Fund of the identifying word "Eaton Vance" in the name of the
Fund. Such consent is expressly conditioned upon the employment of EVC or a
subsidiary or affiliate of EVC as investment adviser of the Fund. As between
the Fund and itself, EVC shall control the use of the name of the Fund insofar
as such name contains the identifying word "Eaton Vance." EVC may from time to
time use the identifying word "Eaton Vance" in other connections and for other
purposes, including, without limitation, in the names of other investment
companies, corporation, or businesses which it may manage, advise, sponsor or
own or in which EVC may have a financial interest. EVC may require the Fund to
cease using the indentifying word "Eaton Vance" in the name of the Fund if EVC
or a subsidiary or affiliate of EVC for any reason shall no longer serve as
investment adviser of the Fund.
-----------------------
SIGNATURE PAGES OMITTED
<PAGE>
[logo]
EATON VANCE
=================
Mutual Funds
EATON VANCE
MUNCIPAL BOND
FUND L.P.
STATEMENT OF
ADDITIONAL INFORMATION
MAY 1, 1997
EATON VANCE
MUNCIPAL BOND FUND L.P.
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
MBSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS:
INCLUDED IN PART A:
Financial Highlights for each of the ten years in the period ended
December 31, 1996
INCLUDED IN PART B:
INCORPORATED BY REFERENCE TO THE ANNUAL REPORT, DATED DECEMBER 31,
1996, FILED ELECTRONICALLY PURSUANT TO SECTION 30(b)(2) OF THE
INVESTMENT COMPANY ACT OF 1940, ARE THE FOLLOWING FINANCIAL
STATEMENTS (ACCESSION NO. 0000950156-97-000172):
Portfolio of Investments as of December 31, 1996
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statement of Changes In Net Assets for each of the two years ended
December 31, 1996
Financial Highlights for the five years ended December 31, 1996
Notes to Financial Statements
Independent Auditors' Report
<TABLE>
(b) EXHIBITS:
<S> <C>
(1) Amended and Restated Agreement of Limited Partnership dated December 22, 1988 filed as Exhibit (1)
to Post-Effective Amendment No. 15 and incorporated herein by reference.
(2) Not applicable
(3) Not applicable
(4) Specimen of each security issued by the registrant filed as Exhibit 4 to Post-Effective Amendment
No. 8 and incorporated herein by reference.
(5) Investment Advisory Contract with Eaton Vance Management dated November 1, 1990 filed as Exhibit 5
to Post-Effective Amendment No. 16 and incorporated herein by reference.
(6)(a) Distribution Agreement effective November 1, 1996 filed herewith.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc. and Authorized Dealers filed as
Exhibit (6)(b) to Post-Effective Amendment No. 61 to the Registration Statement of Eaton Vance
Growth Trust (File Nos. 2-22019, 811-1241) and incorporated by reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as Exhibit (6)(c) to Post-Effective Amendment
No. 20 and incorporated by reference.
(7) Not applicable
(8)(a) Custodian Agreement with Investors Bank & Trust Company dated December 17, 1990 filed as Exhibit 8
to Post-Effective Amendment No. 16 and incorporated herein by reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust Company dated October 23, 1995 filed
as Exhibit (8)(b) to Post-Effective Amendment No. 22 and incorporated herein by reference.
(9) Not applicable
(10) Opinion of Legal Counsel filed as Exhibit 10 to Post-Effective Amendment No. 5 and incorporated
herein by reference.
(11) Independent Auditors' Consent filed herewith.
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) Not applicable
(16) Schedule for Computation of Performance Quotations filed herewith.
(17) Power of Attorney dated April 14, 1994 filed as Exhibit 17 to Post-Effective Amendment No. 20 and
incorporated by reference.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
-------------- --------------
Units of 1,874
partnership interest as of March 31, 1997
ITEM 27. INDEMNIFICATION
Article IV of the Partnership's Amended and Restated Agreement of Limited
Partnership, dated December 22, 1988, provides for indemnification of the
Registrant's General Partners. Registrant's Director General Partners and
officers are insured under a standard mutual fund errors and omissions insurance
policy covering loss incurred by reason of negligent errors and omissions
committed in their capacities as such.
The distribution agreements of the Registrant also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Director
General Partners and officers, on the other.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the caption
"Management" in the Statement of Additional Information, which information is
incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
<TABLE>
<C> <C>
EV Classic Florida Limited Maturity Municipals Fund EV Marathon Asian Small Companies Fund
EV Classic Government Obligations Fund EV Marathon California Limited Maturity
EV Classic Greater China Growth Fund Municipals Fund
EV Classic Growth Fund EV Marathon California Municipals Fund
EV Classic High Income Fund EV Marathon Colorado Municipals Fund
EV Classic Information Age Fund EV Marathon Connecticut Limited Maturity
EV Classic Investors Fund Municipals Fund
EV Classic Massachusetts Limited Maturity EV Marathon Connecticut Municipals Fund
Municipals Fund EV Marathon Emerging Markets Fund
EV Classic National Limited Maturity Municipals Fund EV Marathon Florida Insured Municipals Fund
EV Classic National Municipals Fund EV Marathon Florida Limited Maturity
EV Classic New York Limited Maturity Municipals Fund
Municipals Fund EV Marathon Florida Municipals Fund
EV Classic Pennsylvania Limited Maturity EV Marathon Georgia Municipals Fund
Municipals Fund EV Marathon Government Obligations Fund
EV Classic Senior Floating-Rate Fund EV Marathon Greater China Growth Fund
EV Classic Strategic Income Fund EV Marathon Greater India Fund
EV Classic Special Equities Fund EV Marathon Growth Fund
EV Classic Stock Fund EV Marathon Hawaii Municipals Fund
EV Classic Tax-Managed Growth Fund EV Marathon High Income Fund
EV Classic Total Return Fund EV Marathon High Yield Municipals Fund
EV Marathon Alabama Municipals Fund EV Marathon Information Age Fund
EV Marathon Arizona Municipals Fund EV Marathon Investors Fund
EV Marathon Arkansas Municipals Fund EV Marathon Kansas Municipals Fund
<PAGE>
EV Marathon Kentucky Municipals Fund EV Traditional Emerging Markets Fund
EV Marathon Louisiana Municipals Fund EV Traditional Florida Insured Municipals Fund
EV Marathon Maryland Municipals Fund EV Traditional Florida Limited Maturity
EV Marathon Massachusetts Limited Maturity Municipals Fund
Municipals Fund EV Traditional Florida Municipals Fund
EV Marathon Massachusetts Municipals Fund EV Traditional Georgia Municipals Fund
EV Marathon Michigan Limited Maturity EV Traditional Government Obligations Fund
Municipals Fund EV Traditional Greater China Growth Fund
EV Marathon Michigan Municipals Fund EV Traditional Greater India Fund
EV Marathon Minnesota Municipals Fund EV Traditional Growth Fund
EV Marathon Mississippi Municipals Fund EV Traditional Hawaii Municipals Fund
EV Marathon Missouri Municipals Fund EV Traditional High Yield Municipals Fund
EV Marathon National Limited Maturity Eaton Vance Income Fund of Boston
Municipals Fund EV Traditional Information Age Fund
EV Marathon National Municipals Fund EV Traditional Investors Fund
EV Marathon New Jersey Limited Maturity EV Traditional Kansas Municipals Fund
Municipals Fund EV Traditional Kentucky Municipals Fund
EV Marathon New Jersey Municipals Fund EV Traditional Louisiana Municipals Fund
EV Marathon New York Limited Maturity EV Traditional Maryland Municipals Fund
Municipals Fund EV Traditional Massachusetts Municipals Fund
EV Marathon New York Municipals Fund EV Traditional Michigan Limited Maturity
EV Marathon North Carolina Municipals Fund Municipals Fund
EV Marathon Ohio Limited Maturity Municipals Fund EV Traditional Michigan Municipals Fund
EV Marathon Ohio Municipals Fund EV Traditional Minnesota Municipals Fund
EV Marathon Oregon Municipals Fund EV Traditional Mississippi Municipals Fund
EV Marathon Pennsylvania Limited Maturity EV Traditional Missouri Municipals Fund
Municipals Fund Eaton Vance Municipal Bond Fund L.P.
EV Marathon Pennsylvania Municipals Fund EV Traditional National Limited Maturity
EV Marathon Rhode Island Municipals Fund Municipals Fund
EV Marathon Strategic Income Fund EV Traditional National Municipals Fund
EV Marathon South Carolina Municipals Fund EV Traditional New Jersey Limited Maturity
EV Marathon Special Equities Fund Municipals Fund
EV Marathon Stock Fund EV Traditional New Jersey Municipals Fund
EV Marathon Tax-Managed Growth Fund EV Traditional New York Limited Maturity
EV Marathon Tennessee Municipals Fund Municipals Fund
EV Marathon Texas Municipals Fund EV Traditional New York Municipals Fund
EV Marathon Total Return Fund EV Traditional North Carolina Municipals Fund
EV Marathon Virginia Municipals Fund EV Traditional Ohio Limited Maturity
EV Marathon West Virginia Municipals Fund Municipals Fund
EV Marathon Worldwide Developing EV Traditional Ohio Municipals Fund
Resources Fund EV Traditional Oregon Municipals Fund
EV Marathon Worldwide Health Sciences Fund EV Traditional Pennsylvania Municipals Fund
EV Traditional Alabama Municipals Fund EV Traditional Rhode Island Municipals Fund
EV Traditional Arizona Municipals Fund EV Traditional South Carolina Municipals Fund
EV Traditional Arkansas Municipals Fund EV Traditional Special Equities Fund
EV Traditional Asian Small Companies Fund EV Traditional Stock Fund
EV Traditional California Limited Maturity EV Traditional Tax-Managed Growth Fund
Municipals Fund EV Traditional Tennessee Municipals Fund
EV Traditional California Municipals Fund EV Traditional Texas Municipals Fund
EV Traditional Colorado Municipals Fund EV Traditional Total Return Fund
EV Traditional Connecticut Limited Maturity EV Traditional Virginia Municipals Fund
Municipals Fund EV Traditional West Virginia Municipals Fund
EV Traditional Connecticut Municipals Fund EV Traditional Worldwide Developing
EV Traditional Emerging Growth Fund Resources Fund
<PAGE>
EV Traditional Worldwide Health Eaton Vance Prime Rate Reserves
Sciences Fund, Inc. Eaton Vance Short-Term Treasury Fund
Eaton Vance Cash Management Fund Eaton Vance Tax Free Reserves
Eaton Vance Liquid Assets Trust Massachusetts Municipal Bond Portfolio
Eaton Vance Money Market Fund
<CAPTION>
(b)
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS* WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
------------ ---------------- ------------
<S> <C> <C>
James B. Hawkes Vice President and Director None
William M. Steul Vice President and Director None
Wharton P. Whitaker President and Director None
Chris Berg Vice President None
Kate B. Bradshaw Vice President None
David B. Carle Vice President None
James S. Comforti Vice President None
Raymond Cox Vice President None
Mark P. Doman Vice President None
Alan R. Dynner Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Timothy D. McCarthy Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Thomas Otis Secretary and Clerk Secretary
George D. Owen, II Vice President None
F. Anthony Robinson Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, None
Treasurer and Director
John P. Rynne Vice President None
Kevin Schrader Vice President None
George V.F. Schwab, Jr. Vice President None
Cornelius J. Sullivan Vice President None
David M. Thill Vice President None
Chris Volf Vice President None
Sue Wilder Vice President None
- ----------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 89 South Street, Boston,
MA 02111, and its transfer agent, First Data Investor Services Group, 4400
Computer Drive, Westborough, MA 01581, with the exception of certain corporate
documents and portfolio trading documents which are in the possession and
custody of Eaton Vance Management, 24 Federal Street, Boston, MA 02110. The
Registrant is informed that all applicable accounts, books and documents
required to be maintained by registered investment advisers are in the custody
and possession of Eaton Vance Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the latest annual report to shareholders, upon request and
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston, and the
Commonwealth of Massachusetts, on the 21st day of April, 1997.
EATON VANCE MUNICIPAL BOND FUND L.P.
By /s/ THOMAS J. FETTER
----------------------------------
THOMAS J. FETTER, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President and Chief
/s/ THOMAS J. FETTER Executive Officer April 21, 1997
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal Financial
/s/ JAMES L. O'CONNOR and Accounting Officer April 21, 1997
- -----------------------------
JAMES L. O'CONNOR
Chairman and Director
/s/ LANDON T. CLAY General Partner April 21, 1997
- -----------------------------
LANDON T. CLAY
DONALD R. DWIGHT*
- ----------------------------- Director General Partner April 21, 1997
DONALD R. DWIGHT
SAMUEL L. HAYES, III*
- ----------------------------- Director General Partner April 21, 1997
SAMUEL L. HAYES, III
NORTON H. REAMER*
- ----------------------------- Director General Partner April 21, 1997
NORTON H. REAMER
JOHN L. THORNDIKE*
- ----------------------------- Director General Partner April 21, 1997
JOHN L. THORNDIKE
JACK L. TREYNOR*
- ----------------------------- Director General Partner April 21, 1997
JACK L. TREYNOR
*By: /s/ THOMAS J. FETTER
- -----------------------------
As Attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as a part of this amendment to the
Registration Statement pursuant to General Instructions E of Form N-1A.
<TABLE>
<CAPTION>
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
----------- ----------- ----------------
<S> <C> <C>
(6)(a) Distribution Agreement effective November 1, 1996
(11) Independent Auditors' Consent
(16) Schedule for Computation of Performance Quotations
</TABLE>
<PAGE>
Exhibit 99.6(a)
EATON VANCE MUNICIPAL BOND FUND L.P.
DISTRIBUTION AGREEMENT
----------------------
AGREEMENT effective November 1, 1996 between EATON VANCE MUNICIPAL BOND
FUND L.P., hereinafter called the "Fund," a California limited partnership
having its principal place of business in Boston in the Commonwealth of
Massachusetts, and EATON VANCE DISTRIBUTORS, INC., a Massachusetts corporation
having its principal place of business in said Boston and formerly named EV
Distributors, Inc., hereinafter sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Fund grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
the net asset value used in determining the public offering price on which such
orders were based. The Principal Underwriter shall notify Investors Bank & Trust
Company, Custodian of the Fund ("IBT"), and First Data Investor Services Group,
Transfer Agent of the Fund ("First Data"), or a successor transfer agent, at the
end of each business day, or as soon thereafter as the orders placed with it
have been compiled, of the number of shares and the prices thereof which the
Principal Underwriter is to purchase as principal for resale. The Principal
Underwriter shall take down and pay for shares ordered from the Fund on or
before the eleventh business day (excluding Saturdays) after the shares have
been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to said shares,
but not to exceed the net asset value at which the Principal Underwriter is to
purchase the shares, plus a sales charge not to exceed 7.25% of the public
offering price (the net asset value divided by .9275). If the resulting public
offering price does not come out to an even cent, the public offering price
shall be adjusted to the nearer cent.
The Principal Underwriter may also sell shares at the net asset value
at which the Principal Underwriter is to purchase such shares, provided such
sales are not inconsistent with the provisions of Section 22(d) of the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
and the rules thereunder, including any applicable exemptive orders or
administrative interpretations or "no-action" positions with respect thereto.
The net asset value of shares of the Fund shall be determined by the
Fund or IBT, as the agent of the Fund, as of the close of regular trading on the
New York Stock Exchange on each business day on which said Exchange is open, or
as of such other time on each such business day as may be determined by the
Director General Partners of the Fund, in accordance with the methodology and
procedures for calculating such net asset value authorized by the Director
General Partners. The Fund may also cause the net asset value to be determined
in substantially the same manner or estimated in such manner and as of such
other time or times as may from time to time be agreed upon by the Fund and
Principal Underwriter. The Fund will notify the Principal Underwriter each time
the net asset value of the Fund's shares is determined and when such value is so
determined it shall be applicable to transactions as set forth in the current
Prospectus and Statement of Additional Information (hereafter the "Prospectus")
relating to the Fund's shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Articles of
Organization, except to the Principal Underwriter, in the manner and upon the
terms above set forth to cover contracts of sale made by the Principal
Underwriter with its customers prior to any such suspension, and except as
provided in the last paragraph of paragraph 1 hereof. The Fund shall also have
the right to suspend the sale of the Fund's shares if in the judgment of the
Fund conditions obtaining at any time render such action advisable. The
Principal Underwriter shall have the right to suspend sales at any time, to
refuse to accept or confirm any order from an investor or financial service
firm, or to accept or confirm any such order in part only, if in the judgment of
the Principal Underwriter such action is in the best interests of the Fund.
3. The Fund covenants and agrees that it will, from time to time, but
subject to the necessary approval of the Fund's shareholders, take such steps as
may be necessary to register the Fund's shares under the federal Securities Act
of 1933, as amended from time to time (the "1933 Act"), to the end that there
will be available for sale such number of shares as the Principal Underwriter
may reasonably be expected to sell. The Fund covenants and agrees to indemnify
and hold harmless the Principal Underwriter and each person, if any, who
controls the Principal Underwriter within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares of the Fund,
which may be based upon the 1933 Act or on any other statute or at common law,
on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Fund in connection therewith by or on behalf of the
Principal Underwriter; provided, however, that in no case (i) is the indemnity
of the Fund in favor of the Principal Underwriter and any such controlling
person to be deemed to protect such Principal Underwriter or any such
controlling person against any liability to the Fund or its security holders to
which such Principal Underwriter or any such controlling person would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Principal Underwriter or any such controlling person
unless the Principal Underwriter or any such controlling person, as the case may
be, shall have notified the Fund in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon the Principal Underwriter or such controlling
person (or after such Principal Underwriter or such controlling person shall
have received notice of such service on any designated agent), but failure to
notify the Fund of any such claim shall not relieve it from any liability which
the Fund may have to the person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The Fund
shall be entitled to participate, at the expense of the Fund, in the defense,
or, if the Fund so elects, to assume the defense of any suit brought to enforce
any such liability, but if the Fund elects to assume the defense, such defense
shall be conducted by counsel chosen by it and satisfactory to the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit. In the event the Fund elects to assume the defense of any such suit and
retains such counsel, the Principal Underwriter or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, but, in case the Fund does not elect
to assume the defense of any such suit, the Fund shall reimburse the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit, for the reasonable fees and expenses of any counsel retained by them. The
Fund agrees promptly to notify the Principal Underwriter of the commencement of
any litigation or proceedings against it or any of its officers or Director
General Partners in connection with the issuance or sale of any of the Fund's
shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Fund and each of its Director
General Partners and officers and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act, against any loss, liability,
damages, claim or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, damages, claim or expense and reasonable
counsel fees incurred in connection therewith), arising by reason of any person
acquiring any shares of the Fund, which may be based upon the 1933 Act or any
other statute or at common law, on account of any wrongful act of the Principal
Underwriter or any of its employees (including any failure to conform with any
requirement of any state or federal law relating to the sale of such shares) or
on the ground that the registration statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, insofar as any such
statement or omission was made in reliance upon, and in conformity with
information furnished in writing to the Fund in connection therewith by or on
behalf of the Principal Underwriter, provided, however, that in no case (i) is
the indemnity of the Principal Underwriter in favor of any person indemnified to
be deemed to protect the Fund or any such person against any liability to which
the Fund or any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its or his
duties or by reason of its or his reckless disregard of its obligations and
duties under this Agreement, or (ii) is the Principal Underwriter to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Fund or any person indemnified unless the Fund or such
person, as the case may be, shall have notified the Principal Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon the
Fund, the Fund or upon such person (or after the Fund, the Fund or such person
shall have received notice of such service on any designated agent), but failure
to notify the Principal Underwriter of any such claim shall not relieve it from
any liability which it may have to the Fund or any person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Principal Underwriter shall be entitled to participate,
at its own expense, in the defense, or, if it so elects, to assume the defense
of any suit brought to enforce any such liability, but if the Principal
Underwriter elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to the Fund, or to its officers or
Director General Partners, or to any controlling person or persons, defendant or
defendants in the suit. In the event that the Principal Underwriter elects to
assume the defense of any such suit and retains such counsel, the Fund or such
officers or Director General Partners or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them or the Fund, but, in case the Principal
Underwriter does not elect to assume the defense of any such suit, it shall
reimburse the Fund, any such officers and Director General Partners or
controlling person or persons, defendant or defendants in such suit, for the
reasonable fees and expenses of any counsel retained by them or the Fund. The
Principal Underwriter agrees promptly to notify the Fund of the commencement of
any litigation or proceedings against it in connection with the issue and sale
of any of the Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Fund to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act (as said Registration Statement and Prospectus may be amended
or supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any financial service firm nor any other person is
authorized to act as agent for the Fund in connection with the offering or sale
of shares of the Fund to the public or otherwise. All such sales made by the
Principal Underwriter shall be made by it as principal, for its own account. The
Principal Underwriter may, however, act as agent in connection with the
repurchase of shares as provided in paragraph 6 below, or in connection with
"exchanges" between investment companies for which the Principal Underwriter (or
an affiliate thereof) acts as principal underwriter or investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
1940 Act, covering its shares and all amendments and supplements thereto, and
preparing and distributing periodic reports to shareholders (including the
expense of setting up in type any such Registration Statement, Prospectus or
periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) The cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder;
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder;
(v) the fees, costs and expenses of the registration or
qualification of shares of the Fund for sale in the various states, territories
or other jurisdictions (including without limitation the registering or
qualifying the Fund as a broker or dealer or any officer of the Fund as agent or
salesman in any state, territory or other jurisdiction); and
(vi) all payments to be made by the Fund pursuant to any
written plan approved in accordance with Rule 12b-1 under the 1940 Act or any
written service plan.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering.
(c) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges imposed in accordance with the Prospectus on
early redemptions of Fund shares.
6. The Fund hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Fund to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First
Data at the end of each business day, or as soon thereafter as the repurchases
in each pricing period have been compiled, of the number of shares repurchased
for the account of the Fund since the last previous report, together with the
prices at which such repurchases were made, and upon the request of any officer
or Director General Partners of the Fund shall furnish similar information with
respect to all repurchases made up to the time of the request on any day.
(b) The Fund reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Fund duly authorized by its Director General Partners. In the
event that the authorization of the Principal Underwriter is, by the terms of
such notice, suspended for more than twenty-four hours or until further notice,
the authorization given by this paragraph 6 shall not be revived except by
action of a majority of the Director General Partners of the Fund.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Fund thirty (30) days' written
notice thereof.
(d) The Fund agrees to authorize and direct IBT, to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent.
(f) The Fund agrees it will reimburse the Principal Underwriter, from
time to time on demand, for any reasonable expenses incurred in connection with
the repurchase of shares of the Fund pursuant to this paragraph 6.
7. If, at any time during the existence of this Agreement, the Fund
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Fund may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of this Agreement upon request by the Principal Underwriter, the Fund
fails (after a reasonable time) to make any changes in its Articles of
Organization, or in its methods of doing business which are necessary in order
to comply with any requirement of federal law or regulations of the Commission
or of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Fund.
8(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter covenants that it and its officers and
directors will comply with the Fund's Articles of Organization and By-Laws, and
the 1940 Act and the rules promulgated thereunder, insofar as they are
applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
9. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect for one year from the date of
its execution and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Director General Partners of
the Fund who are not interested persons of the Fund or of the Principal
Underwriter cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Director General Partners of the Fund or by vote of a
majority of the outstanding voting securities of the Fund; and
(b) that either party shall have the right to terminate this Agreement
on six (6) months' written notice thereof given in writing to the other.
10. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
11. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Fund and that of
the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
12. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other investment companies, and (b) engage
in other business and activities from time to time.
13. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
14. The Principal Underwriter expressly acknowledges the provisions of
the Fund's Declaration of Trust limiting the personal liability of shareholders
or the Director General Partners of the Fund. The Principal Underwriter hereby
agrees that it shall have recourse only to the assets of the Fund for payment of
claims or obligations as between the Fund and the Principal Underwriter arising
out of this Agreement and shall not seek satisfaction from any stockholders of
the Fund or from the Director General Partners or any Director General Partner
of the Fund.
15. This Agreement shall amend, replace and be substituted for the
distribution agreement dated September 13, 1982 between the Fund and the prior
principal underwriter, Eaton Vance Distributors, Inc., a separate Massachusetts
corporation that has served as principal underwriter prior to the effective date
of this Agreement as of the opening of business on November 1, 1996, and this
Agreement shall be effective as of such time.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
this 18th day of October, 1996.
EATON VANCE MUNICIPAL BOND FUND L.P.
By /s/ Thomas J. Fetter
----------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
----------------------------
Vice President
<PAGE>
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 23 to the
Registration Statement of Eaton Vance Municipal Bond Fund L.P. (1933 Act File
No. 2-60210) of our report dated January 31, 1997, which report is included in
the Annual Report to Shareholders for the year ended December 31, 1996, which
is incorporated by reference in the Statement of Additional Information.
We also consent to the references to us under the heading "The Fund's
Financial Highlights" appearing in the Prospectus and under the heading
"Independent Certified Public Accountants" in the Statement of Additional
Information of the Registration Statement.
/s/ DELOITTE & TOUCHE LLP
-----------------------------
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 17, 1997
<PAGE>
Exhibit 99.16
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE MUNICIPAL BOND FUND, L.P.
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 12/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/96 12/31/86 $962.58 $2,057.46 113.75% 7.89% 105.75% 7.48%
5 YEARS ENDED
12/31/96 12/31/91 $962.49 $1,357.70 41.06% 7.12% 35.77% 6.31%
1 YEAR ENDED
12/31/96 12/31/95 $962.30 $1,008.29 4.78% 4.78% 0.83% 0.83%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
EATON VANCE MUNICIPAL BOND FUND L.P.
TAX EQUIVALENT YIELD CALCULATION
For the 30 days ended 12/31/96:
Interest Income Earned: $458,417
Plus Dividend Income Earned:
--------
Equal Gross Income: $458,417
Minus Expenses: $54,922
--------
Equal Net Investment Income: $403,495
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 8,890,999
---------
Equal Net Investment Income Earned Per Share: $0.0454
Net Asset Value Per Share 12/31/96: $10.47
30 Day Yield*: 5.26%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 7.62%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0454/$10.47)+1)-1]
** Assuming a tax rate of 31%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000225977
<NAME>EATON VANCE MUNICIPAL BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 81,593
<INVESTMENTS-AT-VALUE> 88,801
<RECEIVABLES> 2,568
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 91,369
<PAYABLE-FOR-SECURITIES> 3,174
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12
<TOTAL-LIABILITIES> 3,186
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 73,272
<SHARES-COMMON-STOCK> 8,755
<SHARES-COMMON-PRIOR> 9,446
<ACCUMULATED-NII-CURRENT> (78)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,782
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,209
<NET-ASSETS> 88,184
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,253
<OTHER-INCOME> 0
<EXPENSES-NET> 677
<NET-INVESTMENT-INCOME> 5,576
<REALIZED-GAINS-CURRENT> (92)
<APPREC-INCREASE-CURRENT> (1,304)
<NET-CHANGE-FROM-OPS> 4,180
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,458
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 78
<NUMBER-OF-SHARES-SOLD> 311
<NUMBER-OF-SHARES-REDEEMED> 1,304
<SHARES-REINVESTED> 298
<NET-CHANGE-IN-ASSETS> (8,226)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 460
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 709
<AVERAGE-NET-ASSETS> 91,078
<PER-SHARE-NAV-BEGIN> 10.21
<PER-SHARE-NII> 0.605
<PER-SHARE-GAIN-APPREC> (0.143)
<PER-SHARE-DIVIDEND> 0.594
<PER-SHARE-DISTRIBUTIONS> 0.008
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.07
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
