<PAGE>
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
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AGENT
First Data Investor Services Group
Attn: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EATON VANCE
MUNICIPAL BOND FUND L.P.
24 FEDERAL STREET
BOSTON, MA 02110 T-MBSRC-2/97
EATON VANCE
MUNICIPAL BOND
FUND L.P.
[graphic omitted]
ANNUAL
SHAREHOLDER REPORT
DECEMBER 31, 1996
<PAGE>
To Shareholders
Eaton Vance Municipal Bond Fund L.P. had a total return of 4.8% during the year
ended December 31, 1996. That return was the result of a decline in net asset
value per share from $10.21 on December 31, 1995 to $10.07 on December 31, 1996,
and the reinvestment of $0.6015 in monthly income dividends. It does not include
the Fund's 3.75% maximum sales charge.
Based on the most recent dividend paid, and the Fund's net asset value per share
of $10.07 on December 31, 1996, the Fund's annualized distribution rate was
5.96%. To equal that rate, a couple in the 36% Federal tax bracket would have to
receive 9.31% from a taxable investment.
The municipal bond market was characterized by heightened volatility as
investors reacted to a seesaw interest rate environment and a politically-
charged debate over the possibility of a flat tax. At the outset of 1996, the
economy seemed poised for a slowdown and the Federal Reserve appeared ready to
revive growth through interest rate reductions. In January, the Fed lowered the
Federal Funds Rate - the rate banks charge each other for overnight loans and a
key short-term interest rate barometer - to 5.25%. However, it soon became
apparent that the economy was stronger than anticipated and that inflation,
while still at low levels, would bear further watching. In the ensuing months,
long-term bond yields climbed steadily higher, reaching their peak in mid-June.
- --------------------------------------------------------------------------------
Fund shares are not guaranteed by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
- --------------------------------------------------------------------------------
Investors were heartened by economic reports in the second half that showed a
scenario of slow growth, low inflation, and nearly-full employment. In addition,
the budget deficit - which had ballooned in the 1980s and had been so long the
bane of fixed-income investors - fell to just 1.5% of gross domestic product.
Against that favorable backdrop, the bond market rallied to close the year at
higher levels than at mid-year.
- ---------------------------------------------------
PORTFOLIO OVERVIEW
[graphic Percentage of total investments
omitted] as of December 31, 1996
Number of issues.....................66
Average quality.................................A
Investment grade.............................75.5%
Effective maturity (years)...................12.95
Largest sectors:
Escrowed..................................16.6%
Insured hospitals.........................12.8*
Transportation.............................8.6
Nursing homes..............................8.3
Lease revenues/COPs........................7.5
*Private insurance does not remove the market risks
associated with this investment.
- ---------------------------------------------------
We believe an investment in municipal bonds continues to represent good value.
With the equity markets having turned in two consecutive years of performances
well above historical averages, investors may look for alternatives within the
bond markets. And, with taxes still high for most investors, municipal bonds are
the last remaining vehicle for tax relief. For these reasons, we believe that
the municipal market will continue to be a favored avenue for tax-conscious
investors.
Sincerely,
[Photo of
Landon T. Clay] /s/ Landon T. Clay
Landon T. Clay
Chairman
February 21, 1997
<PAGE>
Management Discussion
An interview with Thomas J. Fetter, President and Portfolio Manager of the Eaton
Vance Municipal Bond Fund L.P.
Q. TOM, HOW WOULD YOU EVALUATE THE BOND MARKET IN 1996?
A. The broad bond market was troubled through much of the year by an economy
that surpassed most expectations. That awakened concerns among investors
that inflation - the factor most feared by bond investors - might once again
emerge as a defining force in the economy. While inflation has remained
relatively tepid, the threat of higher inflation was enough to upset the
markets. I think it's important to note that, in this volatile year, the
Fund's 4.8% total return outperformed the broad municipal market - as
represented by the Lehman Brothers Municipal Bond Index* - which rose 4.4%.
*It is not possible to invest directly in the Index.
Another factor was politics. Following the 1994 election, the bond market
had been rather comfortable with the idea of shared government - a Democrat
administration and a Republican-led Congress. As the 1996 election neared,
there were concerns that Congress might once again revert to Democrat
control and more tax-and-spend policies. In the aftermath of the November
elections and the continuance of shared government, the bond market
responded well and mounted a fairly impressive rally.
Q. TOM, IN ADDITION TO OUTPACING THE OVERALL MARKET, THE FUND EARNED AN OVERALL
FOUR-STAR RATING+ FROM MORNINGSTAR FOR THE PERIOD ENDED DECEMBER 31, 1996.
WHAT ACCOUNTED FOR THE FUND'S PERFORMANCE?
A. In a rising rate environment, we deemphasized par bonds in favor of bonds
with more defensive characteristics. That offered the Fund some insulation
from the threat of rising interest rates. In addition, with quality spreads
remaining narrow, we took advantage of some selected opportunities in
non-rated bonds.
+Morningstar's Proprietary ratings reflect historical risk-adjusted performance
through 12/31/96 and are subject to change. For the 3-year period ended
12/31/96, the Fund received 3 stars among 1129 Muni Bond funds; for the 5-year
period, 3 stars among 580 funds; and for the 10-year period, 4 stars among 257
funds. Past performance is no guarantee of future results. Funds are assigned
ratings from 1 star (lowest) to 5 stars (highest). Ratings are calculated from
the funds' 3-, 5-, and 10-year returns (with fee adjustment) in excess of
90-day Treasury bill returns. The top 10% of the funds in a category receive 5
stars. The next 22.5%, 4 stars; the next 35%, three stars; the next 22.5%, 2
stars; and the final 10%, 1 star.
[Photo of Thomas J. Fetter]
Q. SO IT WAS A RELATIVELY VOLATILE MARKET?
A. Yes. The employment reports in March and April showed relatively robust job
creation. But, no sooner had the market digested that information than we
began to see anecdotal signs of weakness in the economy. Amid all of the
uncertainty, the market reverted to Fed-watching, monitoring the central
bank for future monetary policy. While indicating a bias for higher rates,
the Fed chose to hold its ground on interest rates throughout the remainder
of the year. Actually, the threat of a Fed rate hike from chairman Greenspan
was enough to provoke an adjustment in the markets.
Q. WHERE HAVE YOU BEEN FOCUSING THE FUND'S INVESTMENTS?
A. Once again, the Fund's two largest sector weightings were escrowed bonds and
insured healthcare issues. The market has become increasingly generic in the
past year. By that, I mean that narrow yield spreads among investment grade
bonds have made it difficult to find value in that segment of the market.
Thus, as I indicated earlier, we've redoubled our efforts to find value in
non-rated bonds, a theme that we have pursued for some time.
It's important to note that non-rated bonds require an especially rigorous
analysis. We've therefore been fortunate to be able to take advantage of
Eaton Vance's enhanced research efforts in the non-rated sector.
Q. COULD YOU GIVE AN EXAMPLE OF ONE OF THE FUND'S INVESTMENTS?
A. Yes. Consistent with our efforts to add value to the Fund through non-rated
bonds, the Fund owns a nursing home facility bond issued by Tarrant County,
Texas Health Facilities Corporation. In the past, the local hospital system
has had some difficulties and was consequently downgraded by Moody's.
However, more recently, the system has improved its fundamentals and turned
in solid operating results. As a result, the bonds, with an unusually
attractive coupon, offered good value to investors. In the recent difficult
market conditions, they have held their value well.
Q. LOOKING AHEAD, TOM, WHAT IS YOUR MARKET OUTLOOK FOR 1997?
A. The economy continues to register modest growth, with few visible signs of
inflation. That's a clear positive. Moreover, with the election-year
posturing behind us, we may begin to see real progress toward a balanced
budget. Meanwhile, according to the Public Securities Association, the
supply of municipal bonds, which hit a record $290 billion as recently as
1993, fell to $183 billion in 1996 and is expected to be in the same range
in 1997. That means that supply will remain modest, another favorable sign
for the municipal market.
Finally, it's important to remember that Federal taxes still take a large
bite from the average paycheck. For many taxpayers, tax-exempt yields remain
at extremely attractive levels relative to taxable yields. While past
performance is, naturally, no guarantee of future trends, we believe that
municipal bonds should retain their value and their appeal among
tax-conscious investors.
<PAGE>
- -------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN EATON VANCE
MUNICIPAL BOND FUND L.P., AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
From December 31, 1986, through December 31, 1996
- -------------------------------------------------------------------------------
AVERAGE ANNUAL 1 5 10 Value at
RETURNS Year Years Years 12/31/96
- -------------------------------------------------------------------------------
With Max. Sales Charge 0.8% 6.3% 7.5% $20,575
- -------------------------------------------------------------------------------
Without Max. Sales Charge 4.8% 7.1% 7.9% $21,375
- -------------------------------------------------------------------------------
[line chart graphic omitted -- plot points follow]
Eaton Vance Fund, including Lehman Bros.
Municipal 3.75% maximum Municipal
Date Bond Fund L.P. sales charge Bond Index
- -------- -------------- --------------- ------------
12/31/86 $10,000 $9,626 $10,000
1/31/87 10,234 9,851 10,301
2/28/87 10,359 9,972 10,352
3/31/87 10,288 9,903 10,242
4/30/87 9,730 9,365 9,728
5/31/87 9,680 9,317 9,680
6/30/87 9,842 9,473 9,964
7/31/87 9,870 9,500 10,065
8/31/87 9,898 9,528 10,088
9/30/87 9,470 9,116 9,716
10/31/87 9,568 9,210 9,751
11/30/87 9,793 9,427 10,005
12/31/87 9,997 9,623 10,150
1/31/88 10,413 10,023 10,512
2/28/88 10,524 10,131 10,623
3/31/88 10,317 9,931 10,499
4/30/88 10,371 9,983 10,579
5/31/88 10,401 10,012 10,549
6/30/88 10,588 10,192 10,703
7/31/88 10,679 10,279 10,772
8/31/88 10,710 10,309 10,782
9/30/88 10,937 10,528 10,977
10/31/88 11,204 10,784 11,171
11/30/88 11,060 10,646 11,069
12/31/88 11,280 10,858 11,182
1/31/89 11,425 10,998 11,413
2/28/89 11,343 10,918 11,283
3/31/89 11,324 10,900 11,256
4/30/89 11,664 11,228 11,523
5/31/89 11,904 11,458 11,762
6/30/89 12,079 11,627 11,922
7/31/89 12,177 11,722 12,085
8/31/89 12,039 11,588 11,967
9/30/89 11,992 11,544 11,930
10/31/89 12,186 11,730 12,077
11/30/89 12,394 11,930 12,288
12/31/89 12,481 12,014 12,388
1/31/90 12,325 11,864 12,330
2/28/90 12,468 12,002 12,440
3/31/90 12,489 12,022 12,444
4/30/90 12,275 11,815 12,354
5/31/90 12,657 12,184 12,623
6/30/90 12,790 12,311 12,734
7/31/90 13,022 12,535 12,922
8/31/90 12,675 12,200 12,734
9/30/90 12,710 12,235 12,741
10/31/90 12,889 12,407 12,973
11/30/90 13,272 12,775 13,234
12/31/90 13,351 12,852 13,291
1/31/91 13,534 13,027 13,470
2/28/91 13,629 13,119 13,587
3/31/91 13,636 13,126 13,591
4/30/91 13,837 13,319 13,773
5/31/91 13,975 13,452 13,895
6/30/91 13,934 13,412 13,882
7/31/91 14,164 13,634 14,051
8/31/91 14,396 13,857 14,236
9/30/91 14,599 14,052 14,421
10/31/91 14,741 14,189 14,551
11/30/91 14,791 14,237 14,592
12/31/91 15,152 14,585 14,905
1/31/92 15,125 14,559 14,939
2/28/92 15,129 14,562 14,944
3/31/92 15,148 14,581 14,949
4/30/92 15,279 14,707 15,082
5/31/92 15,540 14,958 15,260
6/30/92 15,834 15,241 15,516
7/31/92 16,339 15,727 15,981
8/31/92 16,068 15,467 15,825
9/30/92 16,138 15,534 15,929
10/31/92 15,798 15,207 15,772
11/30/92 16,265 15,657 16,055
12/31/92 16,502 15,885 16,219
1/31/93 16,691 16,066 16,408
2/28/93 17,316 16,668 17,001
3/31/93 17,152 16,511 16,821
4/30/93 17,361 16,711 16,991
5/31/93 17,502 16,847 17,086
6/30/93 17,830 17,163 17,372
7/31/93 17,833 17,166 17,394
8/31/93 18,199 17,518 17,756
9/30/93 18,497 17,805 17,959
10/31/93 18,535 17,841 17,993
11/30/93 18,326 17,641 17,835
12/31/93 18,733 18,032 18,211
1/31/94 18,948 18,239 18,419
2/28/94 18,416 17,727 17,942
3/31/94 17,470 16,817 17,211
4/30/94 17,528 16,872 17,358
5/31/94 17,747 17,083 17,508
6/30/94 17,622 16,962 17,406
7/31/94 17,934 17,263 17,720
8/31/94 18,046 17,371 17,781
9/30/94 17,716 17,053 17,520
10/31/94 17,365 16,715 17,209
11/30/94 16,920 16,287 16,898
12/31/94 17,372 16,722 17,270
1/31/95 17,977 17,305 17,764
2/28/95 18,548 17,854 18,280
3/31/95 18,664 17,965 18,490
4/30/95 18,685 17,986 18,512
5/31/95 19,226 18,507 19,103
6/30/95 18,997 18,286 18,936
7/31/95 19,078 18,364 19,115
8/31/95 19,237 18,517 19,358
9/30/95 19,319 18,596 19,480
10/31/95 19,717 18,979 19,763
11/30/95 20,117 19,364 20,091
12/31/95 20,400 19,636 20,284
1/31/96 20,523 19,755 20,437
2/28/96 20,422 19,658 20,299
3/31/96 20,098 19,345 20,040
4/30/96 20,016 19,267 19,983
5/31/96 20,036 19,287 19,976
6/30/96 20,160 19,406 20,193
7/31/96 20,388 19,625 20,376
8/31/96 20,367 19,604 20,371
9/30/96 20,722 19,947 20,656
10/31/96 21,037 20,250 20,890
11/30/96 21,438 20,636 21,272
12/31/96 21,375 20,575 21,182
Past performance is not indicative of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Source: Towers Data Systems,
Bethesda, MD.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
In accordance with Securities and Exchange Commission guidelines, we are
including a performance chart that compares your Fund's total return with that
of a broad-based securities market index. The lines on the chart represent the
total returns of $10,000 hypothetical investments in the Fund and the unmanaged
Lehman Brothers Municipal Bond Index.
TOTAL RETURN FIGURES
The solid red line on the chart represents the Fund's performance. The Fund's
total return figure also reflects fund expenses and portfolio transaction costs,
and assumes the reinvestment of income dividends and capital gain distributions.
The dotted red line represents the performance of the Fund, including the Fund's
3.75% maximum sales charge.
The black line represents the performance of the Lehman Brothers Municipal Bond
Index, a broad based, widely recognized, unmanaged index of municipal bonds. The
Index's total return does not reflect any commissions or expenses that would be
incurred if an investor individually purchased or sold securities represented in
the Index. It is not possible to invest directly in the Index.
<PAGE>
----------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100.0%
- -----------------------------------------------------------------------------------------------------------------------------------
RATINGS (UNAUDITED)
- --------------
PRINCIPAL
STANDARD AMOUNT
MOODY'S & POOR'S (000 OMITTED) SECURITY VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
ASSISTED LIVING - 3.6%
NR NR $1,000 Bell County, TX Health Facilities -- Elder Care Project, 9.00%, 11/1/24 $ 1,088,020
NR NR 1,000 North Syracuse, NY Housing Authority, AJM SR Housing Inc. --
Janus Park Project, 8.00%, 6/1/24 1,004,840
NR NR 1,000 St. Paul, MN -- Highland Park Project, 8.75%, 11/1/24 1,077,620
-----------
$ 3,170,480
-----------
ESCROWED - 16.6%
Aaa AAA $1,000 Austin, Texas Combined Utility System, 11.125%, 11/15/09 $ 1,180,140
Aaa NR 2,500 Boston City Hospital, FHA Insured, 7.625%, 2/15/21 2,817,800
Aaa AAA 8,000 Colorado Health Facilities Authority, Liberty Heights, FSA Insured,
0%, 7/15/24 1,252,960
Aaa NR 19,000 Dawson Ridge Colorado Met. Dist. 0%, 10/1/22 3,356,920
Baa AAA 1,000 Denver, CO City and County Airport 7.50%, 11/15/12 1,162,680
Aaa NR 685 Massachusetts IFA, Cape Cod Hospital, 8.40%, 11/15/08 779,653
Aaa NR 5,000 Mississippi Housing Finance Corp, SFMR, 0%, 6/1/15 1,739,650
Aaa BBB 665 North Carolina Eastern Municipal Power, 6.50%, 1/1/18 757,994
Aaa NR 6,000 Savannah, Georgia Economic Development Authority, 0%, 12/1/21 1,145,820
NR NR 480 Vermont Education & Health Building Authority Northwestern
Medical Facility, 9.75%, 9/1/18 531,840
-----------
$14,725,457
-----------
HOSPITALS - 7.3%
Aa3 AA- $1,500 Greenville, SC Hospital System, 5.25%, 5/1/23 $ 1,389,210
A2 A 500 Illinois Health & Education Facilities, Victory Memorial, 7.875%, 12/1/18 535,500
NR BBB 2,000 Louisiana PFA General Health System Project, 6.80%, 11/1/16 2,043,740
Baa1 BBB+ 830 New York State, Medical Care Facility Finance Agency, 7.875%, 8/15/20 917,648
Baa BBB 1,550 New York State, Medical Care Facility, Brookdale Medical Center,
6.85%, 2/15/17(3) 1,625,873
-----------
$ 6,511,971
-----------
HOUSING - 6.6%
NR AA $ 560 Arkansas Development Finance Authority, SFMR, 8.00%, 8/15/11(3) $ 601,720
Aa NR 810 Colorado Housing Finance Authority, 7.90%, 12/1/24 912,797
Aa AA 275 North Carolina Single Family Mortgage Revenue, 8.125%, 9/1/19 284,793
NR NR 1,290 Lake Creek Affordable Housing Corporation, Eagle County,
Colorado, 8.00%, 12/1/23 1,337,098
NR A 1,000 Maricopa County, Arizona, Industrial Development Authority,
8.625%, 1/1/27 1,006,270
NR A 1,650 Travis County Texas Housing Finance Corp., Travis Station
Apartments Project, 6.75%, 4/1/19(3) 1,716,396
-----------
$ 5,859,074
-----------
INDUSTRIAL DEVELOPMENT & POLLUTION CONTROL REVENUE - 5.1%
NR NR $ 900 Florence County, SC IDR - Stone Container Project, 7.375%, 2/1/07 $ 942,687
NR BB- 1,000 New Hampshire Business Finance Authority, Crown Paper,
7.75%, 1/1/22 1,052,860
NR BBB- 2,450 Port Camas-Washougan, Washington, James River Project,
6.70%, 4/1/23 2,488,318
-----------
$ 4,483,865
-----------
INSURED - EDUCATION - 2.0%
Aaa AAA $2,000 University of California -- Multiple Projects (AMBAC), 4.875%, 9/1/19 $ 1,800,800
-----------
INSURED - GENERAL - 2.1%
Aaa AAA $2,000 Massachusetts Turnpike Authority Revenue (FGIC), 5.125%, 1/1/23 $ 1,862,960
-----------
INSURED - HOSPITALS - 12.8%
Aaa AAA $2,750 Colorado Health Facilities, Sisters of Charity Health Care (MBIA),
5.25%, 5/15/14 $ 2,670,525
Aaa AAA 2,000 Franklin, OH Hospital for Riverside United Methodist, 5.75%, 5/15/20
(AMBAC) 2,018,300
Aaa AAA 1,000 Fredericksburg, Virginia Industrial Development Authority (FGIC),
"INFLOS", Variable, 8/15/23(1) 1,202,220
Aaa AAA 1,000 Illinois Health Facilities Authority Rush-Presbyterian -- St. Lukes
Medical Center (MBIA), "INFLOS", Variable, 10/1/24(1) 1,163,710
Aaa AAA 1,000 King County, Washington, Public Hospital District No. 1 (AMBAC),
6.00%, 9/1/20 1,014,930
Aaa AAA 1,000 Rhode Island Health & Educational Facility, Rhode Island Hospital
(FGIC),"INFLOS", Variable, 8/15/21(1) 1,169,290
Aaa AAA 1,000 Salt Lake City, Utah IHC Hospitals Inc., "INFLOS" (AMBAC), Variable,
5/15/20(1) 1,155,470
Aaa AAA 1,000 Scottsdale, AZ IDA Hospital Forward Delivery, 6.125%, 9/1/17
(AMBAC)(2) 1,011,760
-----------
$11,406,205
-----------
INSURED - HOUSING - 2.5%
Aaa AAA $1,000 SCA MFMR Springfield, Missouri (FSA), 7.10%, 1/1/30 $ 1,089,440
Aaa AAA 1,000 SCA MFMR Burnsville, Minnesota (FSA), 7.10%, 1/1/30 1,089,440
-----------
$ 2,178,880
-----------
INSURED - TAX REVENUE - 1.4%
Aaa AAA $1,500 Culver City California Redevelopment Finance Authority (AMBAC), $ 1,284,555
4.60%, 11/1/20 -----------
INSURED - TRANSPORTATION - 1.2%
Aaa AAA $1,000 Triborough Bridge and Tunnel Authority of New York, "RITES" $ 1,108,830
(AMBAC), Variable, 1/1/12(1) -----------
INSURED - UTILITY - 1.0%
Aaa AAA $ 800 Puerto Rico Electric Power Authority STRIPES (FSA), Variable, $ 886,976
7/1/03(1) -----------
LEASE REVENUE/CERTIFICATES OF PARTICIPATION - 7.5%
A A $3,000 California Public Works Board, California State University Projects,
5.50%, 12/1/18 $ 2,867,520
A A 3,565 Indiana Transportation Authority Airport Facilities, 6.25%, 11/1/16 3,810,878
-----------
$ 6,678,398
-----------
LIFE CARE - 4.5%
NR NR $1,060 Loudon County Virginia IDA, Falcons Landing Project, 8.75%, 11/1/24 $ 1,118,989
NR NR 655 New Hampshire Higher Education, River Woods at Exeter,
9.00%, 3/1/23 714,755
NR NR 1,000 New Jersey EDA, Keswick Pines Project, 8.75%, 1/1/24 1,063,620
NR NR 1,000 Vermont IDA, Wake Robin Corp. Project, 1993-A, 8.75%, 4/1/23 1,090,500
-----------
$ 3,987,864
-----------
MISCELLANEOUS - 3.0%
NR NR $1,500 New Jersey Sports & Exposition Authority, Monmouth Park Project,
8.00%, 1/1/25 $ 1,669,350
NR NR 1,000 Santa Fe, New Mexico, Crow Hobbs, 8.50%, 9/1/16 1,020,010
-----------
$ 2,689,360
-----------
NURSING HOMES - 8.3%
NR NR $1,470 Bell County, Texas Health Facilities, Normandy Terrace Project,
9.00%, 4/1/23 $ 1,621,895
NR NR 475 Covington Allegheny, VA IDA -- Beverly Enterprises, 9.375%, 9/1/01 533,045
NR NR 975 Greene County, OH -- Fairview Extended Care, 10.125%, 1/1/11 1,104,529
NR NR 1,100 Massachussetts IFA Health Care Fac-Age Institute of Mass. Proj.,
8.05%, 11/1/25 1,117,842
NR NR 1,265 Montgomery, Pennsylvania, IDA, Health Care Facility -- Geriatric
Health Care Institute, 8.375%, 7/1/23 1,337,396
NR NR 390 Okaloosa County Florida, Beverly Enterprises, 10.75%, 10/1/03 411,988
NR NR 680 Tarrant County Texas Health Facilities Development Corp.,
10.25%, 9/1/19 709,587
NR NR 500 Wisconsin Health Facilities, Villa Clement, 8.75%, 6/1/12 504,315
-----------
$ 7,340,597
-----------
SOLID WASTE - 1.0%
Aa3 AA- $ 750 Delaware County Pennsylvania Industrial Revenue, $ 784,508
8.10%, 12/1/13(3) -----------
SPECIAL TAX REVENUE - 1.9%
Baa1 A $1,750 Puerto Rico Highway & Transportation Authority, 5.50%, 7/1/36 $ 1,681,995
-----------
TRANSPORTATION - 8.6%
A1 A+ $5,500 Massachusetts Turnpike Authority, 5.00%, 1/1/20 $ 5,016,605
NR NR 2,500 San Joaquin Hills, California Transportation Agency, 0%, 1/1/14 892,000
NR NR 10,000 San Joaquin Hills, California Transportation Agency, 0%, 1/1/25 1,743,300
-----------
$ 7,651,905
-----------
UTILITIES - 3.0%
Aa AA $1,000 Colorado Springs Utility System, 6.75%, 11/15/21 $ 1,104,000
Baa BBB+ 1,500 Massachusetts Municipal Wholesale Electric Co., 6.75%, 7/1/11 1,602,644
-----------
$ 2,706,644
-----------
TOTAL INVESTMENTS (identified cost, $81,592,813) $88,801,324
===========
<FN>
(1) The above designated securities have been issued as inverse floater bonds.
(2) The above designated securities have been issued as when-issued securities.
(3) The above designated securities have been designated as collateral for when-issued securities.
</FN>
At December 31, 1996, the concentration of the Fund's investments in the various states, determined as a percentage of total
investments, is as follows:
Massachusetts 15%
Colorado 13%
California 10%
Others, representing less
than 10% individually 62%
</TABLE>
The Fund invests primarily in debt securities issued by municipalities. The
ability of the issuers of the debt securities to meet their obligations may be
affected by economic developments in a specific industry or municipality. In
order to reduce the risk associated with such economic developments, at
December 31, 1996, 24.5% of the securities in the portfolio of investments are
backed by bond insurance of various financial institutions and financial
guaranty assurance agencies. The aggregate percentage by financial institution
range from 3.2% to 10.6% of total investments.
<PAGE>
----------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1996
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A)
(identified cost, $81,592,813) $88,801,324
Cash 21
Receivable for investments sold 1,110,829
Receivable for shares of partnership interest sold 5,677
Interest receivable 1,451,586
-----------
Total assets $91,369,437
LIABILITIES:
Demand note payable (Note 5) $ 328,000
Payable for investments purchased 1,855,666
Payable for when-issued securities (Note 1I) 965,950
Payable for shares of partnership interest
purchased 22,403
Payable to affiliate --
Director General Partners' fees (Note 4) 1,737
Accrued expenses 12,022
---------
Total liabilities 3,185,778
-----------
NET ASSETS for 8,754,500 shares of partnership
interest outstanding $88,183,659
===========
NET ASSETS APPLICABLE TO SHARES OF PARTNERSHIP
INTEREST OWNED BY:
Limited Partners (8,618,178 shares) $86,810,493
General Partners --
Director partners (2,564 shares) $ 25,828
Adviser partners (133,758 shares) 1,347,338 1,373,166
---------- -----------
NET ASSETS (8,754,500 shares) $88,183,659
===========
SOURCES OF NET ASSETS:
Proceeds from sales of shares of partnership interest
(including shares issued to partners electing to
receive payment of distributions in shares), less
cost of shares of partnership interest redeemed $73,271,779
Accumulated net realized gain on investment and
financial futures transactions (computed on the
basis of identified cost) 7,781,522
Unrealized appreciation of investments and
financial futures contracts (computed on the
basis of identified cost) 7,208,511
Accumulated distributions in excess of net
investment income (78,153)
-----------
Total $88,183,659
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE OF
PARTNERSHIP INTEREST $10.07
======
COMPUTATION OF OFFERING PRICE: Offering price per
share ($100/96.25 of $10.07) $10.46
======
On sales of $50,000 or more the offering price is reduced.
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest income (Note 1B) $ 6,253,348
Expenses --
Investment management fee earned by Adviser
General Partner (Note 4) $ 460,753
Compensation of Director General Partners
not members of the Adviser General
Partner's organization (Note 4) 6,816
Custodian fee 51,688
Transfer and dividend disbursing agent fees 21,974
Printing and postage 37,459
Legal and accounting services 48,616
Registration fees 29,077
Miscellaneous 52,940
-----------
Total expenses $ 709,323
Deduct reduction of custodian fee (Note 1F) 31,832
-----------
Net expenses 677,491
-----------
Net investment income $ 5,575,857
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions
computed on the basis of identified cost $ 659,005
Net realized loss on financial futures contracts (750,632)
-----------
Net realized loss on investment and
financial futures transactions $ (91,627)
Change in unrealized appreciation of investments
and financial futures contracts (1,303,829)
-----------
Net realized and unrealized loss on investments (1,395,456)
-----------
Net increase in net assets resulting from operations $ 4,180,401
===========
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995
---- ----
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 5,575,857 $ 5,846,830
Net realized loss on investments (91,627) (2,249,975)
Change in unrealized appreciation
(depreciation) of investments (1,303,829) 11,515,682
----------- -----------
Increase in net assets from operations $ 4,180,401 $15,112,537
----------- -----------
Distributions to partners --
From net investment income $(5,457,518) $(5,846,830)
In excess of net investment income (78,153) (118,339)
----------- -----------
Total distributions $(5,535,671) $(5,965,169)
----------- -----------
Net decrease from transactions in shares of
partnership interest (Note 2) $(6,871,077) $(3,539,812)
----------- -----------
Net decrease in net assets $(8,226,347) $(5,607,556)
NET ASSETS:
At beginning of year 96,410,006 90,802,450
----------- -----------
At end of year (including distributions in
excess of net investment income of
$78,153 and $118,339, respectively) $88,183,659 $96,410,006
=========== ===========
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $10.210 $ 9.260 $ 10.630 $ 9.950 $ 9.750
------- ------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 0.605 $ 0.604 $ 0.611 $ 0.614 $ 0.639
Net realized and unrealized gain
(loss) on investments (0.143) 0.962 (1.369) 0.692 0.195
------- ------- -------- -------- --------
Total income (loss) from operations $ 0.462 $ 1.566 $ (0.758) $ 1.306 $ 0.834
------- ------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $(0.594) $(0.604) $ (0.611) $ (0.619) $ (0.634)
In excess of net investment income (0.008) (0.012) (0.001) (0.007) --
------- ------- -------- -------- --------
Total distributions $(0.602) $(0.616) $ (0.612) $ (0.626) $ (0.634)
------- ------- -------- -------- --------
NET ASSET VALUE, end of year $10.070 $10.210 $ 9.260 $ 10.630 $ 9.950
======= ======= ======== ======== ========
TOTAL RETURN(1) 4.78% 17.40% (7.27%) 13.52% 8.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's omitted) $88,184 $96,410 $ 90,802 $114,425 $103,208
Ratio of expenses to average daily net
assets(2) 0.78% 0.76% 0.80% 0.72% 0.74%
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%
PORTFOLIO TURNOVER 30% 58% 58% 86% 60%
<FN>
(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. Dividends and distributions, if any, are
assumed to be reinvested at the net asset value on the payable date. Total investment return is not computed
on an annualized basis.
(2) 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.
</FN>
</TABLE>
See notes to financial statements
<PAGE>
---------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Fund is a limited partnership formed under the laws of the State of
California, and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. Under the
Partnership Agreement, all partnership interests, whether of a limited partner
or a general partner, are represented by shares of the same class. The following
is a summary of significant accounting policies consistently followed by the
Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Municipal bonds are normally valued on the basis of
valuations furnished by a pricing service. Taxable obligations, if any, for
which price quotations are readily available are normally valued at the mean
between the latest available bid and asked prices. Futures contracts and options
on financial futures contracts listed on commodity exchanges are valued at
closing settlement prices. Over-the-counter options on financial futures are
normally valued at the mean between the latest bid and asked prices.
Investments, if any for which there are no such valuations are valued at fair
value using methods determined in good faith by or at the direction of the
Director General Partners. Short-term obligations, maturing in sixty days or
less, are valued at amortized cost, which approximates value.
B. INCOME -- Interest income is determined on the basis of interest accrued and
discount earned, adjusted for amortization of premium or discount on long-term
debt securities when required for federal income tax purposes.
C. INCOME TAXES -- Interest income received by the Fund on investments in
municipal bonds, which is excludable from gross income under the Internal
Revenue Code, will retain its status as income exempt from federal income tax
when allocated to the Fund's partners. The portion of such interest, if any,
earned on private activity bonds issued after August 7, 1986, may be considered
a tax preference item for shareholders. No provision is made by the Fund for
federal or state taxes on any taxable income of the partnership because each
partner is individually responsible for the payment of any taxes on his share of
such taxable income.
D. FINANCIAL FUTURES CONTRACTS -- Upon the entering of a financial futures
contract, the Fund is required to deposit ("initial margin") either in cash or
securities an amount equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Fund ("margin maintenance") each day, dependent on the daily
fluctuations in the value of the underlying security, and are recorded for book
purposes as unrealized gains or losses by the Fund. The Fund's investment in
financial futures contracts is designed only to hedge against anticipated future
changes in interest rates. Should interest rates move unexpectedly, the Fund may
not achieve the anticipated benefits of the financial futures contracts and may
realize a loss.
E. OTHER -- Investment transactions are accounted for on a trade date basis.
Distributions to partners and shares of partnership interest issued in payment
thereof are recorded on the record date.
F. EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT) serves as custodian
of the Fund. Pursuant to the custodian agreement, IBT receives a fee reduced by
credits which are determined based on the average daily cash balances the Fund
maintains with IBT. All significant credit balances used to reduce the Fund's
custodian fees are reported as a reduction of expenses in the Statement of
Operations.
G. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those amounts.
H. PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS -- Upon the purchase of a put
option on a financial futures contract by the Fund, the premium paid is recorded
as an investment, the value of which is marked-to-market daily. When a purchased
option expires, the Fund will realize a loss in the amount of the cost of the
option. When the Fund enters into a closing sale transaction, the Fund will
realize a gain or loss depending on whether the sales proceeds from the closing
sale transaction are greater or less than the cost of the option. When the Fund
exercises a put option, settlement is made in cash. The risk associated with
purchasing options is limited to the premium originally paid.
I. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on trade date and maintains security positions such that sufficient
liquid assets will be available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis are
marked-to-market daily and begin accruing interest on settlement date.
- -------------------------------------------------------------------------------
(2) SHARES OF PARTNERSHIP INTEREST
Transactions in shares of partnership interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
1996 1995
----------------------------------------------- ------------------------------------------------
GENERAL LIMITED GENERAL LIMITED
PARTNERS PARTNERS AMOUNT PARTNERS PARTNERS AMOUNT
-------- ---------- ------------ -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales -- 310,886 $ 3,090,691 -- 570,259 $ 5,610,100
Issued to partners electing to
receive payment of distributions
in shares 8,002 290,439 2,960,279 7,843 325,998 3,252,067
Redemptions -- (1,301,059) (12,922,047) -- (1,264,782) (12,401,979)
----- -------- ------------ ----- -------- -------------
Net increase (decrease) 8,002 (699,734) $ (6,871,077) 7,843 (368,525) $ (3,539,812)
===== ========= ============ ===== ======== =============
</TABLE>
- -------------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS
The Fund invests primarily in debt securities. The ability of the issuers of the
debt securities held by the Fund to meet their obligations may be affected by
economic developments in a specific industry or municipality. Purchases and
sales of investments, other than short-term obligations and put option
transactions, aggregated $27,036,311 and $34,729,956, respectively.
- -------------------------------------------------------------------------------
(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment management fee, computed at the monthly rate of 0.025% (0.300%
per annum) of average daily net assets and 3.00% of gross income (excluding net
realized gains on sales of securities) up to $500 million and at reduced rates
as daily net assets exceed that level, was earned by Eaton Vance Management
(EVM), the Adviser General Partner, as compensation for management and
investment advisory services rendered to the Fund. For the year ended December
31, 1996, the fee was equivalent to 0.51% (annualized) of the Fund's average net
assets for such period and amounted to $460,753. Except as to Director General
Partners who are not members of EVM's organization, officers and Director
General Partners receive remuneration for their services to the Fund out of such
investment management fee. Eaton Vance Distributors, Inc., a subsidiary of EVM
and the Fund's principal underwriter, received $135 as its portion of the sales
charge on sales of partnership interest in the Fund. Certain of the Director
General Partners of the Fund are directors/trustees and/or officers of the above
organizations. Director General Partners of the Fund that are not affiliated
with the Investment Advisor may elect to defer receipt of all or a percentage of
their annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the year ended December 31, 1996, no significant amounts
have been deferred.
- -------------------------------------------------------------------------------
(5) LINE OF CREDIT
The Fund participates with other portfolios and funds managed by EVM and
affiliates in a $120 million unsecured line of credit with a bank. Borrowings
will be made by the Portfolio or Fund solely to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Interest is charged
to each participating portfolio or fund based on its borrowings at the bank's
base rate or at an amount above either the bank's adjusted certificate of
deposit rate, a Eurodollar rate, or a federal funds effective rate. In addition,
a fee computed at an annual rate of 0.15% on the daily unused portion facility
is allocated among the participating funds and portfolios at the end of each
quarter. At December 31, 1996 the Fund had an outstanding balance pursuant to
the line of credit in the amount of $328,000. The Fund did not have any
significant borrowings or allocated fees during the year ended December 31,
1996.
- -------------------------------------------------------------------------------
(6) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at December 31, 1996, as computed on a federal income tax basis, were as
follows:
Aggregate cost $81,592,813
===========
Gross unrealized appreciation
$ 7,274,627
Gross unrealized depreciation (66,116)
-----------
Net unrealized appreciation $ 7,208,511
===========
- ------------------------------------------------------------------------------
(7) DISTRIBUTIONS
On January 2, 1997, the Director General Partners declared a distribution of
$0.050 per share payable January 15, 1997, to partners of record on January 2,
1997.
- ------------------------------------------------------------------------------
(8) FINANCIAL INSTRUMENTS
The Fund regularly trades in financial instruments with off-balance sheet risk
in the normal course of their investing activities to assist in managing
exposure to various market risks. These financial instruments include futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Fund has in particular classes of financial instruments and does
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. The Fund did not
have any open obligations under these financial instruments at December 31,
1996.
<PAGE>
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
TO THE PARTNERS OF
EATON VANCE MUNICIPAL BOND FUND L.P.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Eaton Vance Municipal Bond Fund L.P. as of
December 31, 1996, the related statement of operations for the year then ended,
the statement of changes in net assets for the years ended December 31, 1996 and
1995, and the financial highlights for each of the years in the five-year period
ended December 31, 1996. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other audit procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Eaton Vance
Municipal Bond Fund L.P. as of December 31, 1996, the results of its operations,
the changes in its net assets and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
BOSTON, MASSACHUSETTS
JANUARY 31, 1997
<PAGE>
-------------------------------
INVESTMENT MANAGEMENT
EATON VANCE DIRECTOR GENERAL PARTNERS OFFICERS
MUNICIPAL
BOND FUND L.P. LANDON T. CLAY LANDON T. CLAY
24 Federal Street Chairman, Eaton Vance Chairman
Boston, MA 02110 Management
JOHN L. THORNDIKE
DONALD R. DWIGHT Alternate Chairman
President, Dwight
Partners, Inc. THOMAS J. FETTER
Chairman, Newspapers of President and Portfolio
New England, Inc. Manager
SAMUEL L. HAYES, III JAMES L. O'CONNOR
Jacob H. Schiff Professor Treasurer
of Investment Banking,
Harvard University THOMAS OTIS
Graduate School of Secretary
Business Administration
NORTON H. REAMER
President and Director,
United Asset Management
Corporation
JOHN L. THORNDIKE
Director, Fiduciary
Company Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
