-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PGymJlsqsVAZEkugnO2Ze9qdQGpWI15qmrs9raeUzljJ1O3Ns/N/nxfFJeC6zgt1 5jAasM8XWcjw3hHa/pBV1A== 0000950135-99-000298.txt : 19990127 0000950135-99-000298.hdr.sgml : 19990127 ACCESSION NUMBER: 0000950135-99-000298 CONFORMED SUBMISSION TYPE: N-2/A PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19990126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EATON VANCE MUNICIPAL INCOME TRUST CENTRAL INDEX KEY: 0001074540 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-2/A SEC ACT: SEC FILE NUMBER: 333-68719 FILM NUMBER: 99513204 FILING VALUES: FORM TYPE: N-2/A SEC ACT: SEC FILE NUMBER: 811-09141 FILM NUMBER: 99513205 BUSINESS ADDRESS: STREET 1: 24 FEDERAL ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6174828260 MAIL ADDRESS: STREET 1: 24 FEDERAL ST STREET 2: 11TH FLOOR CITY: BOSTON STATE: MA ZIP: 02110 N-2/A 1 EATON VANCE MUNICIPAL INCOME TRUST 1 1933 ACT FILE NO. 333-68719 1940 ACT FILE NO. 811-09141 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/ PRE-EFFECTIVE AMENDMENT NO. 1 /X/ POST-EFFECTIVE AMENDMENT NO. / / AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/ AMENDMENT NO. 2 /X/ (CHECK APPROPRIATE BOX OR BOXES) Eaton Vance Municipal Income Trust (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) 24 Federal Street, Boston, Massachusetts 02110 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (617) 482-8260 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ALAN R. DYNNER 24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110 (NAME AND ADDRESS OF AGENT FOR SERVICE) ------------- COPY TO: MARK P. GOSHKO, ESQ. THOMAS A. HALE, ESQ. KIRKPATRICK & LOCKHART LLP SKADDEN, ARPS, SLATE, MEAGHER ONE INTERNATIONAL PLACE & FLOM LLP (ILLINOIS) BOSTON, MASSACHUSETTS 02110 333 WACKER DRIVE CHICAGO, ILLINOIS 60606 Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement. If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. / / 2 CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- ------------------------------------------------------------------------------------------------------------------------- PROPOSED PROPOSED MAXIMUM AMOUNT MAXIMUM AGGREGATE AMOUNT OF TITLE OF SECURITIES BEING OFFERING PRICE OFFERING REGISTRATION BEING REGISTERED REGISTERED(2) PER UNIT(1) PRICE(1)(2) FEE(1)(2) - ------------------------------------------------------------------------------------------------------------------------- Common Shares of Beneficial Interest 15,300,000 $15.00 $229,500,000 $63,801* - -------------------------------------------------------------------------------------------------------------------------
*$11,120 has been previously paid. (1) Estimated solely for the purpose of calculating the registration fee. (2) Includes 1,995,652 shares which may be offered by the Underwriters pursuant to an option to cover over-allotments. 3 EATON VANCE MUNICIPAL INCOME TRUST CROSS REFERENCE SHEET ITEMS REQUIRED BY FORM N-2
PART A ITEM NO. ITEM CAPTION PROSPECTUS CAPTION 1...................... Outside Front Cover Front Cover Page 2...................... Inside Front and Outside Back Cover Page Front and Back Cover Page 3...................... Fee Table and Synopsis Prospectus Summary; Trust Expenses 4...................... Financial Highlights Not Applicable 5...................... Plan of Distribution Front Cover Page; Prospectus Summary; Underwriting; Dividend Reinvestment Plan 6...................... Selling Shareholders Not Applicable 7...................... Use of Proceeds Use of Proceeds; Investment Objective, Policies and Risks 8...................... General Description of the Registrant Management of the Trust; Investment Objective, Policies and Risks; Description of Capital Structure 9...................... Management Management of the Trust; Shareholder Servicing Agent, Custodian and Transfer Agent 10...................... Capital Stock, Long-Term Debt, Distributions and Taxes; Dividend and Other Securities Reinvestment Plan; Description of Capital Structure 11...................... Defaults and Arrears on Senior Not Applicable Securities 12...................... Legal Proceedings Not Applicable 13...................... Table of Contents of the Table of Contents of the Statement of Additional Statement of Additional Information Information
PART B STATEMENT OF ITEM NO. ITEM CAPTION ADDITIONAL INFORMATION CAPTION 14...................... Cover Page Cover Page 15...................... Table of Contents Table of Contents 16...................... General Information and History Not Applicable 17...................... Investment Objective and Additional Investment Information and Policies Restrictions 18...................... Management Trustees and Officers; Investment Advisory and Other Services 19...................... Control Persons and Principal Other Information Holders of Securities 20...................... Investment Advisory and Other Investment Advisory and Other Services Services 21...................... Brokerage Allocation and Other Portfolio Trading Practices 22...................... Tax Status Taxes 23...................... Financial Statements Financial Statements
4 [EATON VANCE LOGO] SHARES EATON VANCE MUNICIPAL INCOME TRUST ------------------------ Eaton Vance Municipal Income Trust (the "Trust") is a newly organized closed-end fund. The Trust's investment objective is to provide current income exempt from regular federal income tax. This income will be earned by investing primarily in investment grade municipal securities. The Trust may also invest a portion of its assets in higher risk, higher yielding municipal securities of lesser quality. The Trust's net asset value and distribution rate will vary, and may be affected by several factors, including changes in interest rates and the credit quality of municipal issuers. Fluctuations in net asset value may be magnified as a result of the Trust's use of leverage, which may be a speculative investment technique. An investment in the Trust may not be appropriate for all investors, particularly those subject to the federal alternative minimum tax. Closed-end fund shares often trade at a discount to their net asset value. There is no assurance that the Trust will achieve its investment objective. See "Investment Objective, Policies and Risks" beginning at page 9. The Trust's investment adviser is Eaton Vance Management ("Eaton Vance" or the "Adviser"). Eaton Vance manages 45 different municipal bond funds with combined assets of about $7.5 billion. (continued on the following page)
Per Share Total --------- ----- Public Offering Price.............................. $15.00 $ Underwriting Discounts............................. None None Proceeds, before expenses, to the Trust............ $15.00 $
Eaton Vance or an affiliate will pay all Trust offering expenses that exceed $0.03 per Share. It is expected that delivery of the Shares will be made in New York City on or about January 29, 1999. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ PAINEWEBBER INCORPORATED A.G. EDWARDS & SONS, INC. PRUDENTIAL SECURITIES INCORPORATED SALOMON SMITH BARNEY DAIN RAUSCHER WESSELS A DIVISION OF DAIN RAUSCHER INCORPORATED EVEREN SECURITIES, INC. ------------------------ THE DATE OF THIS PROSPECTUS IS JANUARY 26, 1999. 5 (continued from cover page) The Trust is offering shares of beneficial interest, par value $0.01 per share ("Shares"). The Underwriters may also purchase up to an additional Shares at the public offering price within 45 days from the date of this Prospectus. Assuming these additional Shares are purchased, the total proceeds to the Trust would be $ . Eaton Vance Management or an affiliate (not the Trust) from its own assets will pay a commission to the Underwriters in the amount of 4.50% of the Public Offering Price per Share for the sale of the Shares. Offering expenses of $ ($ if the Underwriters' over-allotment option is exercised in full) will be deducted from net proceeds. Offering expenses include $ payment to the Underwriters in partial reimbursement of their expenses. Eaton Vance or an affiliate will pay all Trust offering expenses that exceed $0.03 per Share. Prior to this offering, there has been no market for the Shares. The Shares have been approved for listing, subject to notice of issuance, on the New York Stock Exchange under the symbol "EVN." The shares of closed-end investment companies, such as the Trust, have frequently traded at a discount to their net asset values. Investors in this offering should note that the Shares may likewise trade at a discount to net asset value. This risk may be greater for investors who sell their Shares in a relatively short period after completion of the public offering. The Trust expects to use financial leverage through the issuance of preferred shares, initially equal to approximately 35% of its total assets (including the amount obtained through leverage). The Trust intends to use leverage if it is expected to result in higher income to Shareholders over time. Use of financial leverage creates an opportunity for increased income but, at the same time, creates special risks. There can be no assurance that a leveraging strategy will be successful. SEE "INVESTMENT OBJECTIVE, POLICIES AND RISKS -- USE OF LEVERAGE AND RELATED RISKS" AT PAGE 12 AND "DESCRIPTION OF CAPITAL STRUCTURE" AT PAGE 21. This Prospectus sets forth concisely information you should know before investing in the Shares of the Trust. Please read and retain this Prospectus for future reference. A Statement of Additional Information dated January 26, 1999, has been filed with the Securities and Exchange Commission ("SEC") and can be obtained without charge by calling 1-800-225-6265 or by writing to the Trust. A table of contents to the Statement of Additional Information is located at page 29 of this Prospectus. This Prospectus incorporates by reference the entire Statement of Additional Information. The Statement of Additional Information is available along with other Trust-related materials at the SEC's internet web site (http://www.sec.gov).The Trust's address is 24 Federal Street, Boston, Massachusetts 02110 and its telephone number is 1-800-225-6265. The Trust's Shares do not represent a deposit or obligation of, and are not 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. TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................... 1 Trust Expenses........................ 8 The Trust............................. 9 Use of Proceeds....................... 9 Investment Objective, Policies and Risks............................... 9 Management of the Trust............... 17 Distributions and Taxes............... 18 Dividend Reinvestment Plan............ 19 Description of Capital Structure...... 21
PAGE ---- Underwriting.......................... 25 Shareholder Servicing Agent, Custodian and Transfer Agent.................. 26 Legal Opinions........................ 27 Additional Information................ 27 Table of Contents for the Statement of Additional Information.............. 28 Trustees of the Trust................. 28
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NEITHER THE TRUST NOR THE UNDERWRITERS HAVE AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. NEITHER THE TRUST NOR THE UNDERWRITERS ARE MAKING AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE AS OF THE DATE ON THE FRONT COVER ONLY. ii 6 PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information included elsewhere in this Prospectus and the Statement of Additional Information. THE TRUST..................... Eaton Vance Municipal Income Trust (the "Trust") is a newly organized closed-end fund. The Trust offers investors the opportunity to receive current income exempt from regular federal income tax through a professionally managed portfolio of municipal obligations. Investments are based on Eaton Vance Management's ("Eaton Vance" or the "Adviser") research and ongoing credit analysis, the underlying materials for which are generally not available to individual investors. An investment in the Trust may not be appropriate for all investors, particularly those subject to the federal alternative minimum tax. There is no assurance that the Trust will achieve its investment objective. THE OFFERING.................. The Trust is offering shares of beneficial interest, par value $0.01 per share (the "Shares"), through a group of underwriters (the "Underwriters") led by PaineWebber Incorporated, A.G. Edwards & Sons, Inc., Prudential Securities Incorporated, Salomon Smith Barney Inc., Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, and EVEREN Securities, Inc. The Underwriters have been granted an option to purchase up to additional Shares solely to cover over-allotments, if any. The initial public offering price is $15.00 per share. The minimum purchase in this offering is 100 Shares ($1,500). NO SALES CHARGE............... The Shares will be sold in the initial public offering without any sales load or underwriting discounts payable by investors or the Trust. Eaton Vance or an affiliate (not the Trust) from its own assets will pay a commission to the Underwriters in connection with sales of the Shares in this offering. See "Underwriting." INVESTMENT OBJECTIVE AND POLICIES.................... The Trust's investment objective is to provide current income exempt from regular federal income tax. Securities will be purchased and sold in an effort to maintain a competitive yield and to enhance return based upon the relative value of the securities available in the marketplace. During normal market conditions substantially all of the Trust's total assets (at least 80%) will be invested in debt obligations issued by or on behalf of states, territories and possessions of the United States, and the District of Columbia and their political subdivisions, agencies or instrumentalities, the interest on which is exempt from regular federal income tax ("municipal obligations"). At least 65% of the Trust's total assets normally will be invested in municipal obligations rated at least investment grade at the time of investment (which are those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB or higher by either Standard & Poor's Ratings Group ("S&P") or by Fitch IBCA ("Fitch")), or, if unrated, determined by Eaton Vance to be of at least investment grade quality. From time to time, the Trust may hold a significant number of municipal obligations not rated by a nationally recognized statistical rating organization ("Rating 1 7 Agency"). When the Trust invests in unrated municipal obligations it may be more dependent on Eaton Vance's research capabilities than when it invests in rated municipal obligations. The Trust may invest up to 35% of its total assets in municipal obligations rated below investment grade (but not, with respect to more than 30% of total assets, lower than B by all Rating Agencies rating the obligation) and unrated municipal obligations considered to be of comparable quality by Eaton Vance. Investment in municipal obligations of below investment grade quality involves special risks as compared with investment in higher grade municipal obligations. These risks include greater sensitivity to a general economic downturn, greater market price volatility and less secondary market trading. Securities rated below investment grade are commonly known as "junk bonds." Such securities are regarded, on balance, as predominantly speculative with respect to the issuer's ability to pay interest and repay principal owed. The Trust may invest to a significant extent in residual interest municipal bonds known as inverse floaters. Compared to similar fixed rate municipal bonds, the value of these bonds will fluctuate to a greater extent in response to changes in prevailing long-term interest rates. Moreover, the income earned on residual interest municipal bonds will fluctuate in response to changes in prevailing short-term interest rates. Thus, when such bonds are held by the Trust, an increase in short- or long-term market interest rates will adversely affect the income received from such bonds or the net asset value of Trust shares. To the extent the Trust has preferred shares outstanding, an increase in short-term rates would also result in an increased cost of leverage, which would adversely affect the Trust income available for distribution. Although the Trust is not limited with respect to its investment in residual interest municipal bonds, the Trust does not intend initially to invest more than 10% of its total assets in such bonds. The Trust may purchase and sell various kinds of financial futures contracts and related options, including futures contracts and related options based on various debt securities and securities indices, to seek to hedge against changes in interest rates, as a substitute for the purchase of securities or for other risk management purposes. Interest income from certain types of municipal obligations may be a tax preference item for purposes of the federal alternative minimum tax (the "AMT") for individual investors. Distributions to corporate investors of certain interest income may also be indirectly subject to the AMT. The Trust may not be suitable for investors subject to the AMT. LISTING....................... The Shares have been approved for listing, subject to notice of issuance, on the New York Stock Exchange under the symbol "EVN." LEVERAGE...................... The Trust expects to use financial leverage through the issuance of preferred shares. The Trust intends initially to use financial leverage of approximately 35% of its total assets (including the amount 2 8 obtained through leverage). The Trust generally will not use leverage if it anticipates that it would result in a lower return to Shareholders over time. Use of financial leverage creates an opportunity for increased income for Shareholders but, at the same time, creates special risks (including the likelihood of greater volatility of net asset value and market price of the Shares), and there can be no assurance that a leveraging strategy will be successful during any period in which it is employed. See "Investment Objective, Policies and Risks -- Use of Leverage and Related Risks." INVESTMENT ADVISER AND ADMINISTRATOR............... Eaton Vance, a wholly-owned subsidiary of Eaton Vance Corp., is the Trust's investment adviser and administrator. The Adviser manages 3 national municipal funds, 32 single state municipal funds, 10 limited maturity municipal funds and 1 money market municipal fund with combined assets of about $7.5 billion. (All but 1 of these funds are open-end.) Among such funds, Eaton Vance currently sponsors Eaton Vance National Municipals Fund ("National Municipals Fund") which is an open-end fund that invests primarily in investment grade municipal obligations. The National Municipals Fund is managed by the same portfolio manager employed by the Adviser who will manage the Trust's assets. See "Management of the Trust." SHAREHOLDER SERVICING AGENT... PaineWebber Incorporated has been retained by the Administrator to act as the Shareholder Servicing Agent of the Trust. See "Shareholder Servicing Agent, Custodian and Transfer Agent." DISTRIBUTIONS................. The Trust's policy will be to make monthly distributions to Shareholders. Distributions to Shareholders cannot be assured, and the amount of each monthly distribution will vary. The initial distribution to Shareholders is expected to be paid approximately 60 days after the completion of this offering. See "Distributions and Taxes," "Dividend Reinvestment Plan" and "Use of Proceeds." DIVIDEND REINVESTMENT PLAN.... The Trust has established a Dividend Reinvestment Plan (the "Plan"). Under the Plan, all dividend and capital gain distributions will be automatically reinvested in additional Shares either purchased in the open market, or newly issued by the Trust if the Shares are trading at or above their net asset value, in either case unless a Shareholder elects to receive cash. Shareholders who intend to hold their Shares through a broker or nominee should contact such broker or nominee to determine whether or how they may participate in the Plan. See "Dividend Reinvestment Plan." CLOSED-END STRUCTURE.......... Closed-end funds differ from open-end management investment companies (commonly referred to as mutual funds) in that closed- end funds generally list their shares for trading on a securities exchange and do not redeem their shares at the option of the shareholder. By comparison, mutual funds issue securities redeemable at net asset value at the option of the shareholder and typically engage in a continuous offering of their shares. Mutual funds are subject to continuous asset in-flows and out-flows that can complicate portfolio management, whereas closed-end funds generally can stay more fully invested in securities consistent with the 3 9 closed-end fund's investment objective and policies. In addition, in comparison to open-end funds, closed-end funds have greater flexibility in the employment of financial leverage and in the ability to make certain types of investments, including investments in illiquid securities. However, shares of closed-end funds frequently trade at a discount from their net asset value. In recognition of the possibility that the Shares might trade at a discount to net asset value and that any such discount may not be in the interest of Shareholders, the Trust's Board of Trustees (the "Board"), in consultation with Eaton Vance, from time to time may review possible actions to reduce any such discount. The Board might consider open market repurchases or tender offers for Shares at net asset value. There can be no assurance that the Board will decide to undertake any of these actions or that, if undertaken, such actions would result in the Shares trading at a price equal to or close to net asset value per Share. The Board might also consider the conversion of the Trust to an open-end mutual fund. The Board of Trustees believes, however, that the closed-end structure is desirable, given the Trust's investment objective and policies. Investors should assume, therefore, that it is highly unlikely that the Board would vote to convert the Trust to an open-end investment company. See "Description of Capital Structure." SPECIAL RISK CONSIDERATIONS... No Operating History. The Trust is a closed-end investment company with no history of operations and is designed for long-term investors and not as a trading vehicle. Interest Rate and Market Risk. The prices of municipal obligations tend to fall as interest rates rise. Securities that have longer maturities tend to fluctuate more in price in response to changes in market interest rates. A decline in the prices of the municipal obligations owned by the Trust would cause a decline in the net asset value of the Trust, which could adversely affect the trading price of the Trust's Shares. This risk is usually greater among municipal obligations with longer maturities or durations and when residual interest municipal bonds are held by the Trust. Although the Trust has no policy governing the maturities or durations of its investments, the Trust expects that it will invest in a portfolio of longer-term securities. This means that the Trust will be subject to greater market risk (other things being equal) than a fund investing solely in shorter-term securities. Market risk is often greater among certain types of debt securities, such as zero-coupon bonds, which do not make regular interest payments. As interest rates change, these bonds often fluctuate in price more than higher quality bonds that make regular interest payments. Because the Trust may invest in these types of debt securities, it may be subject to greater market risk than a fund that invests only in current interest paying securities. Income Risk. The income investors receive from the Trust is based primarily on the interest it earns from its investments, which can vary widely over the short and long-term. If interest rates drop, investors' income from the Trust over time could drop as well if the Trust purchases securities with lower interest coupons. This risk is 4 10 magnified when prevailing short-term interest rates increase and the Trust holds residual interest municipal bonds. Call Risk. If interest rates fall, it is possible that issuers of callable bonds with high interest coupons will "call" (or prepay) their bonds before their maturity date. If a call were exercised by the issuer during a period of declining interest rates, the Trust is likely to replace such called security with a lower yielding security. If that were to happen, it would decrease the Trust's dividends. Credit Risk. Credit risk refers to an issuer's ability to make payments of principal and interest when they are due. Because the Trust may invest up to 35% of its total assets in below investment grade securities, it will be subject to a high level of credit risk. The credit quality of such securities is considered speculative by Rating Agencies with respect to the issuer's ability to pay interest or principal. The prices of lower grade securities are more sensitive to negative developments, such as a decline in the issuer's revenues, or adverse economic conditions, such as a recession, than are the prices of higher grade securities. Securities that have longer maturities also fluctuate more in price in response to negative economic or other news. Therefore, lower grade securities may experience high default rates, which would mean that the Trust may lose some of its investment in such securities, which would adversely affect the Trust's net asset value and ability to make distributions. Liquidity Risk. The Trust may invest in securities for which there is no readily available trading market or which are otherwise illiquid, which includes residual interest municipal bonds. The Trust may not be able to readily dispose of such securities at prices that approximate those at which the Trust could sell such securities if they were more widely traded and, as a result of such illiquidity, the Trust may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations. In addition, the limited liquidity could affect the market price of the securities, thereby adversely affecting the Trust's net asset value and ability to make dividend distributions. Municipal Bond Market. Many obligations in which the Trust will invest may not be rated by a Rating Agency, will not be registered with the Securities and Exchange Commission or any state securities commission, and will not be listed on any national securities exchange. Therefore, the amount of public information available about portfolio securities will be limited, and the performance of the Trust is more dependent on the analytical abilities of Eaton Vance than would be the case for an investment company that invests primarily in more widely rated, registered or exchange- listed securities. Concentration. The Trust may invest 25% or more of its total assets in municipal obligations of issuers located in the same state (or U.S. territory) or in the same economic sector, such as revenue obligations of health care facilities or hospitals, airport revenue obligations or industrial development bonds. This may make the 5 11 Trust more susceptible to adverse economic, political or regulatory occurrences affecting a particular state or economic sector. Effects of Leverage. The use of leverage through issuance of preferred shares by the Trust creates an opportunity for increased net income, but, at the same time, creates special risks. There can be no assurance that a leveraging strategy will be successful during any period in which it is employed. The Trust intends to use leverage to provide the holders of Shares with a potentially higher return. Leverage creates risks for holders of Shares, including the likelihood of greater volatility of net asset value and market price of the Shares and the risk that fluctuations in dividend rates on any preferred shares may affect the return to Shareholders. It is anticipated that preferred share dividends will be based on the yields of short-term municipal obligations, while the proceeds of any preferred share offering will be invested in longer-term municipal obligations, which typically have higher yields. To the extent the income derived from securities purchased with funds received from leverage exceeds the cost of leverage, the Trust's return will be greater than if leverage had not been used. Conversely, if the income from the securities purchased with such funds is not sufficient to cover the cost of leverage, the return to the Trust will be less than if leverage had not been used, and therefore the amount available for distribution to Shareholders as dividends and other distributions will be reduced. In the latter case, Eaton Vance in its best judgment may nevertheless determine to maintain the Trust's leveraged position if it deems such action to be appropriate in the circumstances. Investment by the Trust in residual interest municipal bonds may amplify the effects of leverage and, during periods of rising short-term interest rates, may adversely affect the Trust's income and distributions to Shareholders. In addition, under current federal income tax law, the Trust is required to allocate a portion of any net realized capital gains or other taxable income to holders of preferred shares. The terms of any preferred shares are expected to require the Trust to pay to any preferred shareholders additional dividends intended to compensate the preferred shareholders for taxes payable on any capital gains or other taxable income allocated to the preferred shares. Any such additional dividends will reduce the amount available for distribution to the Shareholders. As discussed under "Management of the Trust," the fee paid to Eaton Vance will be calculated on the basis of the Trust's gross assets, including proceeds from the issuance of preferred shares, so the fees will be higher when leverage is utilized. See "Investment Objective, Policies and Risks -- Use of Leverage and Related Risks." The Trust currently intends to seek an investment grade rating on any preferred shares from a Rating Agency. The Trust may be subject to investment restrictions of the Rating Agency as a result. These restrictions may impose asset coverage or portfolio composition requirements that are more stringent than those imposed on the Trust by the Investment Company Act of 1940, as amended (the "Investment Company Act" or "1940 Act"). It is not anticipated that these covenants or guidelines will impede Eaton Vance 6 12 in managing the Trust's portfolio in accordance with its investment objective and policies. See "Description of Capital Structure -- Preferred Shares." Financial leverage may also be achieved through the purchase of certain derivative instruments. The Trust's use of residual interest municipal bonds and futures contracts expose the Trust to special risks. Such transactions may result in the Trust earning taxable income or gains. See "Investment Objective, Policies and Risks." Market Price of Shares. The shares of closed-end investment companies often trade at a discount from their net asset value, and the Trust's Shares may likewise trade at a discount from net asset value. The trading price of the Trust's Shares may be less than the public offering price. This risk may be greater for investors who sell their Shares in a relatively short period after completion of the public offering. Non-Diversification. The Trust has registered as a "non-diversified" investment company under the 1940 Act. For federal income tax purposes the Trust, with respect to up to 50% of its total assets, will be able to invest more than 5% (but not more than 25%) of the value of its total assets in the obligations of any single issuer. To the extent the Trust invests a relatively high percentage of its assets in obligations of a limited number of issuers, the Trust may be more susceptible than a more widely diversified investment company to any single economic, political or regulatory occurrence. Alternative Minimum Tax and Other Tax Considerations. Interest on certain "private activity" municipal obligations is treated as a tax preference item for purposes of the AMT. In addition, for corporations income subject to the AMT includes interest on all tax-exempt obligations. There is no specific limitation on the amount of the Trust's assets that may be invested in municipal obligations that pay interest that is treated as a tax preference item. Accordingly, an investment in the Trust may not be appropriate for investors who are already subject to the AMT who would become subject thereto as a result of owning Shares. Moreover, distributions of any taxable net investment income and net short-term capital gain are taxable as ordinary income. See "Distributions and Taxes." Anti-Takeover Provisions. The Trust's Agreement and Declaration of Trust includes provisions that could have the effect of limiting the ability of other persons or entities to acquire control of the Trust or to change the composition of its Board of Trustees. See "Description of Capital Structure -- Anti-Takeover Provisions in the Declaration of Trust." 7 13 TRUST EXPENSES The following tables are intended to assist investors in understanding the various costs and expenses that an investor in the Trust will bear, directly or indirectly.
NET ASSETS WITH LEVERAGE(1) ----------- SHAREHOLDER TRANSACTION EXPENSES Sales Load................................................ None Dividend Reinvestment Plan Fees........................... None ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO SHARES)(1) Investment Advisory Fee................................... 1.07% Dividend Payments on Preferred Shares..................... 1.71% Other Expenses (including administration fee of 0.31%)(2).............................................. 0.61% ---- Total Annual Operating Expenses........................... 3.39% ====
- --------------- (1) The Trust intends to utilize leverage only if the Adviser believes that it would result in higher income to Shareholders over time. See "Investment Objective, Policies and Risks -- Use of Leverage and Related Risks." Assumes preferred shares outstanding of approximately 35% of total assets (including preferred shares) at a dividend rate of 3.20%, which is based upon the Trust's estimation of current market conditions. At times when the Trust does not utilize leverage, the estimated annual operating expenses would be: Investment Advisory Fee................................... 0.70% Dividend Payments on Preferred Shares..................... None Other Expenses (including administration fee of 0.20%)(2).............................................. 0.36% ---- Total Annual Operating Expenses........................... 1.06% ====
(2) Reflects estimated amounts for the Trust's first year of operations, including organizational expenses. After the first year, total annual operating expenses (assuming no leverage) are expected to be 1.04% per annum. EXAMPLE An investor would pay the following expenses on a $1,000 investment in the Trust, assuming a 5% annual return:
ONE YEAR(*) THREE YEARS FIVE YEARS TEN YEARS ----------- ----------- ---------- --------- Assuming No Leverage.......................... $11 $ 34 $ 58 $129 Assuming 35% Leverage......................... $34 $104 $176 $368
- --------------- * This Example assumes that all dividends and other distributions are reinvested at net asset value and that the percentage amounts listed under Total Annual Operating Expenses remain the same in the years shown, except for amounts for the Three Years, Five Years and Ten Years periods which are after the deduction of organization expenses in the first year. The above tables and the assumption in the Example of a 5% annual return and reinvestment at net asset value are required by regulations of the SEC; the assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of Trust Shares. THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES, AS THE TRUST'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. 8 14 THE TRUST Eaton Vance Municipal Income Trust (the "Trust") is a newly organized, non-diversified, closed-end management investment company that was organized as a Massachusetts business trust on December 10, 1998 and has no operating history. The Trust's principal office is located at 24 Federal Street, Boston, MA 02110 and its telephone number is 1-800-225-6265. This Prospectus relates to the initial public offering of the Trust's shares of beneficial interest, $.01 par value (the "Shares"). The Shares will be sold during the initial public offering without any sales load or underwriting discounts payable by investors or the Trust. Eaton Vance Management (the "Adviser" or "Eaton Vance") or an affiliate (not the Trust) from its own assets will pay a commission to the Underwriters in connection with sales of the Shares in this offering. See "Underwriting." USE OF PROCEEDS The proceeds of this offering, before deduction of offering expenses, estimated to be $ (or $ assuming exercise of the Underwriters' over-allotment option in full), will be invested in accordance with the Trust's investment objective and policies as soon as practicable, but in no event, under normal market conditions, later than three months after the receipt thereof. Pending such investment, the proceeds may be invested in high-quality, short-term municipal debt securities. Eaton Vance has agreed to pay all offering expenses of the Trust that exceed $0.03 per Share. INVESTMENT OBJECTIVE, POLICIES AND RISKS INVESTMENT OBJECTIVE The Trust's investment objective is to provide current income exempt from regular federal income tax. This income will be earned by investing primarily in investment grade municipal obligations. Securities will be purchased and sold in an effort to maintain a competitive yield and to enhance return based upon the relative value of the securities available in the marketplace. Investments are based on Eaton Vance's research and ongoing credit analysis, the underlying materials for which are generally not available to individual investors. Eaton Vance seeks to find municipal obligations of high quality that have been undervalued in the marketplace. Eaton Vance's research specialists examine credit histories, revenue sources, total debt histories, capital structures and other data. This research capability is important because many obligations in which the Trust will invest will not be rated or listed on a national securities exchange, and the amount of public information available about such securities will be limited. The Trust intends to emphasize the research that is critical to discovering value while avoiding undue credit risk. The Trust will attempt to enhance performance opportunities by seeking to remain fully invested. INVESTMENT POLICIES -- GENERAL COMPOSITION OF THE TRUST During normal market conditions, substantially all of the Trust's total assets (at least 80%) will be invested in debt obligations issued by or on behalf of states, territories and possessions of the United States, and the District of Columbia and their political subdivisions, agencies or instrumentalities, the interest on which is exempt from regular federal income tax ("municipal obligations"). At least 65% of the Trust's total assets will normally be invested in municipal obligations rated at least investment grade at the time of investment (which are those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB or higher by either Standard & Poor's Ratings Group ("S&P") or by Fitch IBCA ("Fitch")), or, if unrated, determined by Eaton Vance to be of at least investment grade quality. From time to time, the Trust may hold a significant amount of municipal obligations not rated by a nationally recognized statistical rating organization ("Rating Agency"). When the Trust invests in unrated municipal obligations, it may be more dependent on Eaton Vance's research capabilities than when it invests in rated municipal obligations. 9 15 The Trust may invest up to 35% of its total assets in municipal obligations rated below investment grade (but not, with respect to more than 30% of total assets, lower than B by all Rating Agencies rating the obligation) and unrated municipal obligations considered to be of comparable quality by Eaton Vance. No such securities will be in default at the time of purchase. Investment in municipal obligations of below investment grade quality involves special risks as compared with investment in higher grade municipal obligations. These risks include greater sensitivity to a general economic downturn, greater market price volatility and less secondary market trading. Securities rated below investment grade are commonly known as "junk bonds". Such securities are regarded, on balance, as predominantly speculative with respect to the issuer's ability to pay interest and repay principal owed. See "-- Additional Risk Considerations." For a description of municipal obligation ratings, see Appendix A to the Statement of Additional Information. The foregoing credit quality policies apply only at the time a security is purchased, and the Trust is not required to dispose of a security in the event that a Rating Agency downgrades its assessment of the credit characteristics of a particular issue. In determining whether to retain or sell such a security, Eaton Vance may consider such factors as Eaton Vance's assessment of the credit quality of the issuer of such security, the price at which such security could be sold and the rating, if any, assigned to such security by other Rating Agencies. Municipal obligations include bonds, notes and commercial paper issued by a municipality for a wide variety of both public and private purposes, the interest on which is, in the opinion of issuer's counsel (or on the basis of other reliable authority), exempt from regular federal income tax. Public purpose municipal bonds include general obligation and revenue bonds. 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. 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. Some of the securities in which the Trust 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 that 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 Trust is required to take into account income from zero-coupon bonds on a current basis, even though it does not receive that income currently in cash, and the Trust is required to distribute substantially all of its income for each taxable year. Thus, the Trust may have to sell other investments to obtain cash needed to make income distributions. The Trust may invest in residual interest municipal bonds 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 Trust when short-term interest rates rise, and increase the interest paid to the Trust when short-term interest rates fall. Inverse floaters have varying degrees of liquidity, and the market for these securities is relatively new and 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 rate 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, coupon, call provisions 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 rates if exercised at an opportune time. Investment in inverse floaters may amplify the effects of the Trust's use of leverage. Should short-term interest rates rise, the combination of the Trust's investment in inverse floaters and the use of leverage likely will adversely affect the Trust's income and distributions to Shareholders. Although the Trust is not limited with respect to its investment in residual interest municipal bonds, the Trust does not intend initially to invest more than 10% of its assets in such bonds. 10 16 The Trust 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 Trust'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 feature does not guarantee the market value of the insured obligations or the net asset value of the Trust's shares. Interest income from certain types of municipal obligations may be a tax preference item for purposes of the federal alternative minimum tax (the "AMT") for individual investors. Distributions to corporate investors of certain interest income may also be indirectly subject to the AMT. The Trust may not be suitable for investors subject to the AMT. The Trust has adopted certain fundamental investment restrictions set forth in the Statement of Additional Information which may not be changed without a Shareholder vote. Except for such restrictions and the 80% requirement set forth above, the investment objective and policies of the Trust may be changed by the Board of Trustees without Shareholder action. Based on available market data, the Adviser believes that the average yield on 20-year tax-exempt municipal bonds that make up the General Obligation Municipal Bond Buyer Index has historically represented approximately 85% of the yields on 30-year U.S. Treasury bonds. As of November 30, 1998, such representative municipal bonds had an average yield of 5.01%, or approximately 99% of the taxable yield of a 30-year U.S. Treasury bond, which had a yield of 5.07% (Source: FactSet). Based on a maximum federal income tax rate of 39.6%, a tax-exempt municipal yield of 5.00% is equivalent to a yield of 8.28% from a taxable investment. The General Obligation Municipal Bond Buyer Index is unmanaged and contains 20 general obligation municipal bonds. Unlike the Trust, this index carries no management fees, account charges or other expenses. U.S. Treasury bonds offer a government guarantee as to the timely payment of interest and repayment of principal at maturity. It is not possible to invest directly in an index. The Adviser also believes that the closed-end structure of the Trust provides an effective way of investing in municipal obligations. The average annual total return on 93 national leveraged and non-leveraged closed-end municipal funds tracked by CDA Weisenberger as of November 27, 1998 was 10.57%, 10.34%, 7.18% and 7.89% for one, three, five and ten years, and on 82 national open-end funds tracked by Lipper Analytical Services as of November 25, 1998 was 6.95%, 6.74%, 5.94% and 8.12% for one, three, five and ten years. In addition, the average annualized yield on such closed-end municipal funds and its taxable equivalent (assuming a maximum 39.6% federal income tax rate only) were 5.64% and 9.34%, whereas for such open-end municipal funds the average annualized yield and its taxable equivalent were 4.71% and 7.80%. The yield on a 30-year U.S. Treasury bond as of November 30, 1998 was 5.07%. The Trust will not seek to match the performance or composition of any index or average. ADDITIONAL INVESTMENT PRACTICES When-Issued Securities. The Trust may purchase securities on a "when-issued" basis, which means that payment and delivery occur on a future settlement date. The price and yield of such securities 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 Trust agreed to pay for them. The Trust may be required to maintain a segregated account of liquid assets equal to outstanding purchase commitments. The Trust may also purchase instruments that give the Trust the option to purchase a municipal obligation when and if issued. Futures Transactions. The Trust may purchase and sell various kinds of financial futures contracts and options thereon to seek to hedge against changes in interest rates or as a substitute for the purchase of securities. For example, futures contracts may sometimes be used to seek to reduce the additional long-term interest rate risk the Trust bears by holding residual interest municipal bonds. Futures contracts may be based on various debt securities 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 11 17 in securities prices, which may exceed the Trust's initial investment in these contracts. The Trust will only purchase or sell futures contracts or related options in compliance with the rules of the Commodity Futures Trading Commission. These transactions involve transaction costs. There can be no assurance that Eaton Vance's use of futures will be advantageous to the Trust. Distributions by the Trust of any gains realized on the Trust's transactions in futures and options on futures will be taxable. Rating agency guidelines on any preferred shares issued by the Trust may limit use of these transactions. Investment Company Securities. The Trust may purchase common shares of closed-end investment companies that have a similar investment objective and policies to the Trust. In addition to providing tax-exempt income, such securities may provide capital appreciation. Such investments, which may also be leveraged and subject to the same risks as the Trust, will not exceed 10% of total assets, and no such company will be affiliated with Eaton Vance. These companies bear fees and expenses that the Trust will incur indirectly. USE OF LEVERAGE AND RELATED RISKS The Trust expects to use leverage through the issuance of preferred shares. The Trust initially intends to use leverage of approximately 35% of its total assets (including the amount obtained from leverage). The Trust generally will not use leverage if the Adviser anticipates that it would result in a lower return to Shareholders for any significant amount of time. The Trust also may borrow money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of securities transactions which otherwise might require untimely dispositions of Trust securities. Leverage creates risks for holders of the Shares, including the likelihood of greater volatility of net asset value and market price of the Shares. There is a risk that fluctuations in the dividend rates on any preferred shares may adversely affect the return to the holders of the Shares. If the income from the securities purchased with such funds is not sufficient to cover the cost of leverage, the return on the Trust will be less than if leverage had not been used, and therefore the amount available for distribution to Shareholders as dividends and other distributions will be reduced. The Adviser in its best judgment nevertheless may determine to maintain the Trust's leveraged position if it deems such action to be appropriate in the circumstances. Investment by the Trust in residual interest municipal bonds may amplify the effects of leverage and, during periods of rising short-term interest rates, may adversely affect the Trust's income and distributions to Shareholders. As discussed under "Management of the Trust," during periods in which the Trust is using leverage the fees paid to Eaton Vance for investment advisory and administrative services will be higher than if the Trust did not use leverage because the fees paid will be calculated on the basis of the Trust's gross assets, including proceeds from the issuance of preferred shares. Capital raised through leverage will be subject to dividend payments which may exceed the income and appreciation on the assets purchased. The issuance of preferred shares involves offering expenses and other costs and may limit the Trust's freedom to pay dividends on Shares or to engage in other activities. The issuance of a class of preferred shares having priority over the Trust's Shares creates an opportunity for greater return per Share, but at the same time such leveraging is a speculative technique in that it will increase the Trust's exposure to capital risk. Unless the income and appreciation, if any, on assets acquired with offering proceeds exceed the cost of issuing additional classes of securities (and other Trust expenses), the use of leverage will diminish the investment performance of the Trust's Shares compared with what it would have been without leverage. The Trust may be subject to certain restrictions on investments imposed by guidelines of one or more Rating Agencies which may issue ratings for any preferred shares issued by the Trust. These guidelines may impose asset coverage or Trust composition requirements that are more stringent than those imposed on the Trust by the Investment Company Act of 1940 (the "Investment Company Act" or "1940 Act"). It is not anticipated that these covenants or guidelines will impede the Adviser from managing the Trust's portfolio in accordance with the Trust's investment objective and policies. Under the Investment Company Act, the Trust is not permitted to issue preferred shares unless immediately after such issuance the net asset value of the Trust's portfolio is at least 200% of the liquidation 12 18 value of the outstanding preferred shares (i.e., such liquidation value may not exceed 50% of the Trust's total assets). In addition, the Trust is not permitted to declare any cash dividend or other distribution on its Shares unless, at the time of such declaration, the net asset value of the Trust's portfolio (determined after deducting the amount of such dividend or other distribution) is at least 200% of such liquidation value. If preferred shares are issued, the Trust intends, to the extent possible, to purchase or redeem preferred shares from time to time to maintain coverage of any preferred shares of at least 200%. In addition, under current federal income tax law, the Trust is required to allocate a portion of any net realized capital gains or other taxable income to holders of preferred shares. The terms of any preferred shares are expected to require the Trust to pay to any preferred shareholders additional dividends intended to compensate the preferred shareholders for taxes payable on any capital gains or other taxable income allocated to the preferred shares. Any such additional dividends will reduce the amount available for distribution to the Shareholders. Normally, holders of the Shares will elect five of the Trustees of the Trust and holders of any preferred shares will elect two. In the event the Trust failed to pay dividends on its preferred shares for two years, preferred shareholders would be entitled to elect a majority of the Trustees until the dividends are paid. To qualify for federal income taxation as a "regulated investment company", the Trust must distribute in each taxable year at least 90% of its net investment income (including tax-exempt interest and net short-term gain). The Trust also will be required to distribute annually at least 98% of its taxable income and capital gain net income, if any, to avoid imposition of a nondeductible 4% federal excise tax. To the extent dividends on any preferred shares constitute less than 90% of such income and gains, the remainder must be distributed to the holders of the Shares. If the Trust is precluded from making distributions on the Shares because of any applicable asset coverage requirements, the terms of the preferred shares may provide that any amounts so precluded from being distributed, but required to be distributed for the Fund to meet the distribution requirements for federal tax purposes, will be paid to the holders of the preferred shares as a special dividend. This dividend can be expected to decrease the amount that holders of preferred shares would be entitled to receive upon redemption or liquidation of the shares. The Trust's willingness to issue new securities for investment purposes, and the amount the Trust will issue, will depend on many factors, the most important of which are market conditions and interest rates. Successful use of a leveraging strategy may depend on the Adviser's ability to predict correctly interest rates and market movements, and there is no assurance that a leveraging strategy will be successful during any period in which it is employed. Assuming the utilization of leverage in the amount of 35% of the Trust's total assets and an annual dividend rate on preferred shares of 3.20% payable on such leverage based on market rates as of the date of this Prospectus, the additional income that the Trust must earn (net of expenses) in order to cover such dividend payments would be 1.12%. The Trust's actual cost of leverage will be based on market rates at the time the Trust undertakes a leveraging strategy, and such actual cost of leverage may be higher or lower than that assumed in the previous example. The following table is designed to illustrate the effect on the return to a holder of the Trust's Shares of leverage in the amount of approximately 35% of the Trust's total assets, assuming hypothetical annual returns of the Trust's portfolio of minus 10% to plus 10%. As the table shows, leverage generally increases the return to Shareholders when portfolio return is positive and greater than the cost of leverage and decreases the return when the portfolio return is negative or less than the cost of leverage. The figures appearing in the table are hypothetical and actual returns may be greater or less than those appearing in the table. Assuming Portfolio Return (net of expenses)...... (10)% (5)% 0% 5% 10% Corresponding Share Return Assuming 35% Leverage....................................... (17.11)% (9.42)% (1.72)% 5.97% 13.66%
Until the Trust issues preferred shares, the Shares will not be leveraged, and the risks and special considerations related to leverage described in this Prospectus will not apply. Such leveraging of the Shares cannot be achieved until the proceeds resulting from the use of leverage have been invested in accordance with the Trust's investment objective and policies. 13 19 ADDITIONAL RISK CONSIDERATIONS Interest Rate and Market Risk. The prices of municipal obligations tend to fall as interest rates rise. Securities that have longer maturities tend to fluctuate more in price in response to changes in market interest rates. A decline in the prices of the municipal obligations owned by the Trust would cause a decline in the net asset value of the Trust, which could adversely affect the trading price of the Trust's Shares. This risk is usually greater among municipal obligations with longer maturities or durations and when residual interest municipal bonds are held by the Trust. Although the Trust has no policy governing the maturities or durations of its investments, the Trust expects that it will invest in a portfolio of longer term securities. This means that the Trust will be subject to greater market risk (other things being equal) than a fund investing solely in shorter-term securities. Market risk is often greater among certain types of income securities, such as zero-coupon bonds, which do not make regular interest payments. As interest rates change, these bonds often fluctuate in price more than higher quality bonds that make regular interest payments. Because the Trust may invest in these types of income securities, it may be subject to greater market risk than a fund that invests only in current interest paying securities. The Trust may invest to a significant extent in residual interest municipal bonds known as inverse floaters. Compared to similar fixed rate municipal bonds, the value of these bonds will fluctuate to a greater extent in response to changes in prevailing long-term interest rates. Moreover, the income earned on residual interest municipal bonds will fluctuate in response to changes in prevailing short-term interest rates. Thus, when such bonds are held by the Trust, an increase in short- or long-term market interest rates will adversely affect the income received from such bonds or the net asset value of Trust shares. To the extent that the Trust has preferred shares outstanding, an increase in short-term rates would also result in an increase cost of leverage, which would adversely affect the Trust's income available for distribution. Income Risk. The income investors receive from the Trust is based primarily on the interest it earns from its investments, which can vary widely over the short and long-term. If interest rates drop, investors' income from the Trust over time could drop as well if the Trust purchases securities with lower interest coupons. This risk is magnified when prevailing short-term interest rates increase and the Trust holds residual interest municipal bonds. Call Risk. If interest rates fall, it is possible that issuers of callable bonds with high interest coupons will "call" (or prepay) their bonds before their maturity date. If a call were exercised by the issuer during a period of declining interest rates, the Trust is likely to replace such called security with a lower yielding security. If that were to happen, it would decrease the Trust's dividends. Credit Risk. Municipal debt obligations are subject to the risk of non-payment of scheduled interest and/or principal. Such non-payment would result in a reduction of income to the Trust, a reduction in the value of the security experiencing non-payment and a potential decrease in the net asset value of the Trust. Securities rated below investment grade or unrated securities of comparable quality ("lower quality securities") 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 price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity ("market risk"). The prices of lower quality securities are also more likely to react to real or perceived developments affecting market and credit risk than are prices of investment grade quality securities ("higher quality securities"), which react primarily to movements in the general level of interest rates. The investments in the Trust's portfolio will have speculative characteristics. As indicated above, the Trust may invest up to 35% of its total assets in municipal obligations rated below investment grade (but not, with respect to more than 30% of its total assets, lower than B by all Rating Agencies rating the obligation) and comparable unrated obligations. Such obligations are commonly called "junk bonds" and 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. Eaton Vance seeks to minimize the risks of investing in below investment grade securities through professional investment analysis, attention to current developments in interest rates and economic conditions, and industry and geographic diversification (if 14 20 practicable). When the Trust invests in lower rated or unrated municipal obligations, the achievement of the Trust's goals is more dependent on the Eaton Vance's ability than would be the case if the Trust were investing in municipal obligations in the higher rating categories. In evaluating the credit quality of a particular issue, whether rated or unrated, Eaton Vance 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. Eaton Vance 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. Increases in interest rates and changes in the economy may adversely affect the ability of issuers of lower grade municipal securities to pay interest and to repay principal, to meet projected financial goals and to obtain additional financing. In the event that an issuer of securities held by the Trust experiences difficulties in the timely payment of principal or interest and such issuer seeks to restructure the terms of its borrowings, the Trust may incur additional expenses and may determine to invest additional assets with respect to such issuer or the project or projects to which the Trust's portfolio securities relate. Further, the Trust may incur additional expenses to the extent that it is required to seek recovery upon a default in the payment of interest or the repayment of principal on its portfolio holdings, and the Trust may be unable to obtain full recovery thereof. To the extent that there is no established retail market for some of the lower grade municipal securities in which the Trust may invest, trading in such securities may be relatively inactive. The Adviser is responsible for determining the net asset value of the Trust, subject to the supervision of the Board of Trustees of the Trust. During periods of reduced market liquidity and in the absence of readily available market quotations for lower grade municipal securities held in the Trust's portfolio, the ability of the Adviser to value the Trust's securities becomes more difficult and the Adviser's use of judgment may play a greater role in the valuation of the Trust's securities due to the reduced availability of reliable objective data. The effects of adverse publicity and investor perceptions may be more pronounced for securities for which no established retail market exists as compared with the effects on securities for which such a market does exist. Further, the Trust may have more difficulty selling such securities in a timely manner and at their stated value than would be the case for securities for which an established retail market does exist. Municipal obligations held by the Trust that are of below investment grade quality but which, subsequent to the assignment of such rating, are backed by escrow accounts containing U.S. Government obligations may be determined by Eaton Vance to be of investment grade quality for purposes of the Trust's investment policies. The Trust may retain in its portfolio an obligation that declines in quality, including defaulted obligations, if such retention is considered desirable by Eaton Vance. In the case of a defaulted obligation, the Trust may incur additional expense seeking recovery of its investment. Changes in the credit quality of the issuers of municipal obligations held by the Trust will affect the principal value of (and possibly the income earned on) such obligations. In addition, the value of such securities are affected by changes in general economic conditions and business conditions affecting the relevant economic sectors. Changes by Rating Agencies 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 Trust's investments. The amount of information about the financial condition of an issuer of municipal obligations may not be as extensive as that made available by corporations whose securities are publicly traded. The Trust 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. Concentration. The Trust may invest 25% or more of its total assets in municipal obligations of issuers located in the same state (or U.S. territory) or in municipal obligations in the same economic sector, including 15 21 without limitation the following: lease rental obligations of state and local authorities; obligations dependent on annual appropriations by a state's legislature for payment; obligations of state and local housing finance authorities, municipal utilities systems or public housing authorities; obligations of hospitals or life care facilities; or industrial development or pollution control bonds issued for electric utility systems, steel companies, paper companies or other purposes. This may make the Trust more susceptible to adverse economic, political, or regulatory occurrences affecting a particular state or economic sector. For example, health care related issuers are susceptible to Medicaid reimbursement policies, and national and state health care legislation. As concentration increases, so does the potential for fluctuation in the net asset value of Trust Shares. Liquidity Risk. At times, a substantial portion of the Trust's assets may be invested in securities as to which the Trust, by itself or together with other accounts managed by Eaton Vance and its affiliates, holds a major portion of 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 Trust could find it more difficult to sell such securities when Eaton Vance believes it is 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 Trust's net asset value. The secondary market for some municipal obligations is less liquid than that for taxable debt obligations or other more widely traded municipal obligations. These include residual interest municipal bonds. No established resale market exists for certain of the municipal obligations in which the Trust 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 Trust 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. A secondary market may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods. The Trust has no limitation on the amount of its assets which may be invested in securities which are not readily marketable or are subject to restrictions on resale. The risks associated with illiquidity are particularly acute in situations where the Trust's operations require cash, such as if the Trust tenders for its Shares, and may result in the Trust borrowing to meet short-term cash requirements. Closed-End Funds. The Trust is a closed-end investment company with no history of operations and is designed primarily for long-term investors and not as a trading vehicle. The shares of closed-end investment companies often trade at a discount from their net asset value, and the Shares may likewise trade at a discount from net asset value. The trading price of the Trust's Shares may be less than the initial public offering price, creating a risk of loss for investors purchasing in the initial public offering of the Shares. This market price risk may be greater for investors who sell their Shares within a relatively short period after completion of this offering. Non-Diversification. The Trust has registered as a "non-diversified" investment company under the 1940 Act so that, subject to its investment restrictions and applicable federal income tax diversification requirements, with respect to 50% of its total assets, it will be able to invest more than 5% (but not more than 25%) of the value of its total assets in the obligations of any single issuer. To the extent the Trust invests a relatively high percentage of its assets in obligations of a limited number of issuers, the Trust will be more susceptible than a more widely diversified investment company to any single corporate, economic, political or regulatory occurrence. Year 2000 Compliance. The Trust could be adversely affected if the computer systems used by the Adviser and other service providers do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Problem." Eaton Vance is taking steps that it believes are reasonably designed to address the Year 2000 Problem with respect to computer systems that it uses and to obtain reasonable assurances that comparable steps are being taken by the Trust's other major service providers. At this time, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Trust. 16 22 In addition, it is possible that the markets for municipal securities in which the Trust invests may be detrimentally affected by computer failures throughout the financial services industry beginning on or before January 1, 2000. Improperly functioning trading systems may result in settlement problems and liquidity issues. In addition, corporate and governmental data processing errors may result in production problems for individual issuers and overall economic uncertainties. Earnings of individual issuers will be affected by remediation costs, which may be substantial and may be reported inconsistently in financial statements. Accordingly, the Trust's investments may be adversely affected. The statements above are subject to the Year 2000 Information and Readiness Disclosure Act, which may limit the legal rights regarding the use of such statements in the case of a dispute. MANAGEMENT OF THE TRUST BOARD OF TRUSTEES The management of the Trust, including general supervision of the duties performed by the Adviser under the Advisory Agreement (as defined below), is the responsibility of the Trust's Board of Trustees under the laws of The Commonwealth of Massachusetts and the Investment Company Act. THE ADVISER Eaton Vance Management acts as the Trust's investment adviser under an Investment Advisory Agreement (the "Advisory Agreement"). The Adviser's principal office is located at 24 Federal Street, Boston, MA 02110. Eaton Vance, its affiliates and predecessor companies have been managing assets of individuals and institutions since 1924 and of investment companies since 1931. Eaton Vance (or its affiliates) currently serves as the investment adviser to investment companies and various individual and institutional clients with combined assets under management of over $31 billion, of which approximately $28 billion is in investment companies. 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. Eaton Vance employs 24 personnel in its municipal bond department, including six portfolio managers, two traders and eleven credit analysts. Eaton Vance was one of the first advisory firms to manage a registered municipal bond investment company, and has done so continuously since 1978. Eaton Vance currently manages 3 national municipal investment companies, 33 single state municipal investment companies, 10 limited maturity municipal investment companies and 1 money market municipal investment company, with assets of about $7.5 billion. (All but 1 of which are open-end.) Among such funds, Eaton Vance currently offers Eaton Vance National Municipals Fund -- Class A ("National Municipals Fund"), which is an open-end fund that invests primarily in investment grade municipal obligations. Morningstar, Inc. awarded National Municipals Fund four stars for the three-year period ended December 31, 1998. Morningstar is an independent evaluator of public investment companies and publishes proprietary ratings reflecting historical risk-adjusted performance. Morningstar ratings are calculated from a fund's annual returns in excess of the 90-day U.S. Treasury bill returns, with appropriate fee adjustments a risk factor that reflects fund performance below 90-day Treasury bill returns. National Municipals Fund is in the Morningstar Municipal Bond Fund category, which includes 1,577 other investment companies (for such three year period). A fund receives four stars if its risk-adjusted performance is in the top 32.5% of its rating category. Ratings are subject to change every month. Although this fund has substantially similar investment objectives and policies as the Trust, certain investment policies and restrictions of National Municipals Fund differ from those of the Trust. For example, such fund has not employed financial leverage for investment purposes, can hold no more than 15% of its net assets in illiquid securities and cannot invest in obligations of below B in credit quality. Moreover, such fund is continuously offered and makes daily redemptions so it has not been fully invested at all times. The portfolio holdings and investment performance of such fund will differ from those of the Trust. Past performance of such fund is not indicative of the Trust's performance. 17 23 Under the general supervision of the Trust's Board of Trustees, the Adviser will carry out the investment and reinvestment of the assets of the Trust, will furnish continuously an investment program with respect to the Trust, will determine which securities should be purchased, sold or exchanged, and will implement such determinations. The Adviser will furnish to the Trust investment advice and office facilities, equipment and personnel for servicing the investments of the Trust. The Adviser will compensate all Trustees and officers of the Trust who are members of the Adviser's organization and who render investment services to the Trust, and will also compensate all other Adviser personnel who provide research and investment services to the Trust. In return for these services, facilities and payments, the Trust has agreed to pay the Adviser as compensation under the Advisory Agreement a fee in the amount of .70% of the average weekly gross assets of the Trust. Gross assets of the Trust shall be calculated by deducting accrued liabilities of the Trust not including the amount of any preferred shares outstanding. Thomas M. Metzold is the portfolio manager of the Trust and is responsible for day-to-day management of the Trust's investments. Mr. Metzold has been an employee of Eaton Vance since 1987 and a Vice President of Eaton Vance since 1991. Mr. Metzold, a Chartered Financial Analyst, is a member of the Boston Security Analysts Society, the Association for Investment Management & Research, the Boston Municipal Analysts Forum, and the National Federation of Municipal Analysts. He currently manages four municipal bond investment companies (including National Municipals Fund) with combined assets of over $2.8 billion. The Trust and the Adviser have adopted Codes of Ethics relating to personal securities transactions. The Codes permit Adviser personnel to invest in securities (including securities that may be purchased or held by the Trust) for their own accounts, subject to certain pre-clearance, reporting and other restrictions and procedures contained in such Codes. The Trust has engaged Eaton Vance to act as its administrator under an Administration Agreement (the "Administration Agreement"). Under the Administration Agreement, Eaton Vance is responsible for managing the business affairs of the Trust, subject to the supervision of the Trust's Board of Trustees. Eaton Vance will furnish to the Trust all office facilities, equipment and personnel for administering the affairs of the Trust. Eaton Vance's administrative services include recordkeeping, preparation and filing of documents required to comply with federal and state securities laws, supervising the activities of the Trust's custodian and transfer agent, providing assistance in connection with the Trustees' and shareholders' meetings, providing service in connection with any repurchase offers and other administrative services necessary to conduct the Trust's business. In return for these services, facilities and payments, the Trust is authorized to pay Eaton Vance as compensation under the Administration Agreement a fee in the amount of .20% of the average weekly gross assets of the Trust. Eaton Vance has agreed to bear all ordinary and organizational expenses of the Trust that exceed 5% of average weekly net assets (taking into account the deduction of any preferred shares and related expenses) for the Trust's first fiscal year. In return for this arrangement, the Trust may reimburse Eaton Vance over the first year of operations for organizational expenses of the Trust initially borne by Eaton Vance. DISTRIBUTIONS AND TAXES The Trust intends to make monthly distributions of net investment income, after payment of any dividends on any outstanding preferred shares. The Trust will distribute annually any net short-term capital gain and any net capital gain (which is the excess of net long-term capital gain over net short-term capital loss). Distributions to Shareholders cannot be assured, and the amount of each monthly distribution is likely to vary. Initial distributions to Shareholders are expected to be paid approximately 60 days after the completion of this offering. While there are any preferred shares outstanding, the Trust might not be permitted to declare any cash dividend or other distribution on its Shares in certain circumstances. See "Description of Capital Structure." Each dividend distribution, whether paid in cash or reinvested in additional Shares, ordinarily will constitute income exempt from regular federal income tax. Distributions of interest on certain municipal obligations, however, are a tax preference item under the AMT. Moreover, distributions of any taxable net 18 24 investment income and net short-term capital gain are taxable as ordinary income. Finally, distributions of the Trust's net capital gain ("capital gain dividends"), if any, are taxable to Shareholders as long-term capital gains, regardless of the length of time Shares have been held by Shareholders. Distributions, if any, in excess of the Trust's earnings and profits will first reduce the adjusted tax basis of a holder's Shares and, after that basis has been reduced to zero, will constitute capital gains to the Shareholder (assuming the Shares are held as a capital asset). See below for a summary of the maximum tax rates applicable to capital gains (including capital gain dividends). The Trust will inform Shareholders of the source and tax status of all distributions promptly after the close of each calendar year. Selling Shareholders will generally recognize gain or loss in an amount equal to the difference between the Shareholder's adjusted tax basis in the Shares and the amount received. If the Shares are held as a capital asset, the gain or loss will be a capital gain or loss. The maximum tax rate applicable to net capital gains recognized by individuals and other non-corporate taxpayers is (i) the same as the maximum ordinary income tax rate for gains recognized on the sale of capital assets held for one year or less or (ii) 20% for gains recognized on the sale of capital assets held for more than one year (as well as capital gain dividends). Any loss recognized on a disposition of Shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends received with respect to those Shares. For purposes of determining whether Shares have been held for six months or less, the holding period is suspended for any periods during which the Shareholder's risk of loss is diminished as a result of holding one or more other positions in substantially similar or related property, or through certain options or short sales. Any loss realized on a sale or exchange of Shares will be disallowed to the extent those Shares are replaced by other Shares within a period of 61 days beginning 30 days before and ending 30 days after the date of disposition of the Shares (which could occur, for example, if the Shareholder is a participant in the Plan (as defined below)). In that event, the basis of the replacement Shares will be adjusted to reflect the disallowed loss. An investor should be aware that if Shares are purchased shortly before the record date for any taxable dividend (including a capital gain dividend), the purchase price likely will reflect the value of the dividend and the investor then would receive a taxable distribution likely to reduce the trading value of such Shares, in effect resulting in a taxable return of some of the purchase price. Taxable distributions to individuals and certain other non-corporate Shareholders, including those who have not provided their correct taxpayer identification number and other required certifications, may be subject to "backup" federal income tax withholding at the rate of 31%. The foregoing briefly summarizes some of the important federal income tax consequences to Shareholders of investing in Shares, reflects the federal tax law, as of the date of this Prospectus, and does not address special tax rules applicable to certain types of investors, such as corporate and foreign investors. There may be other federal, state or local tax considerations applicable to a particular investor, including state alternative minimum tax. Investors should consult their tax advisers. DIVIDEND REINVESTMENT PLAN Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"), unless a Shareholder otherwise elects, all distributions of dividends (including all capital gain dividends) will be automatically reinvested in Shares. First Data Investor Services Group (the "Plan Agent") serves as agent for the Shareholders in administering the Plan. Shareholders who elect not to participate in the Plan will receive all distributions of dividends in cash paid by check mailed directly to the Shareholder of record (or if the Shares are held in Street or other nominee name, then to the nominee) by First Data Investor Services Group as disbursing agent. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by written notice if received by the Plan Agent not less than ten days prior to any dividend record date. Shares will be acquired by the Plan Agent or an independent broker-dealer for the participants' accounts, depending upon the circumstances described below, either (i) through receipt of additional previously authorized but unissued Shares from the Trust ("newly issued Shares") or (ii) by purchase of outstanding 19 25 Shares on the open market ("open-market purchases") on the New York Stock Exchange or elsewhere. If on the payment date for the dividend, the net asset value per Share is equal to or less than the market price per Share plus estimated brokerage commissions (such condition being referred to herein as "market premium"), the Plan Agent will invest the dividend amount in newly issued Shares on behalf of the participants. The number of newly issued Shares to be credited to each participant's account will be determined by dividing the dollar amount of the dividend by the net asset value per Share on the date the Shares are issued, provided that the maximum discount from the then current market price per Share on the date of issuance may not exceed 5%. If on the dividend payment date the net asset value per Share is greater than the market value plus estimated brokerage commissions (such condition being referred to herein as "market discount"), the Plan Agent will invest the dividend amount in Shares acquired on behalf of the participants in open-market purchases. In the event of a market discount on the dividend payment date, the Plan Agent will have up to 30 days after the dividend payment date to invest the dividend amount in Shares acquired in open-market purchases. If, before the Plan Agent has completed its open-market purchases, the market price of a Share exceeds the net asset value per Share, the average per Share purchase price paid by the Plan Agent may exceed the net asset value of the Trust's Shares, resulting in the acquisition of fewer Shares than if the dividend had been paid in newly issued Shares on the dividend payment date. Therefore, the Plan provides that if the Plan Agent is unable to invest the full dividend amount in open-market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent will cease making open-market purchases and will invest the uninvested portion of the dividend amount in newly issued Shares. The Plan Agent maintains all Shareholders' accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by Shareholders for tax records. Shares in the account of each Plan participant will be held by the Plan Agent on behalf of the Plan participant, and each Shareholder proxy will include those Shares purchased or received pursuant to the Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote proxies for Shares held pursuant to the Plan in accordance with the instructions of the participants. In the case of Shareholders such as banks, brokers or nominees that hold Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Shares certified from time to time by the record Shareholder's name and held for the account of beneficial owners who participate in the Plan. There will be no brokerage charges with respect to Shares issued directly by the Trust as a result of dividends payable either in Shares or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open-market purchases in connection with the reinvestment of dividends. Shareholders participating in the Plan may receive benefits not available to Shareholders not participating in the Plan. If the market price (plus commissions) of the Trust's Shares is above their net asset value, participants in the Plan will receive Shares of the Trust at less than they could otherwise purchase them and will have Shares with a cash value greater than the value of any cash distribution they would have received on their Shares. If the market price plus commissions is below the net asset value, participants will receive distributions in Shares with a net asset value greater than the per Share value of any cash distribution they would have received on their Shares. However, there may be insufficient Shares available in the market to make distributions in Shares at prices below the net asset value. Also, since the Trust does not redeem its Shares, the price on resale may be more or less than the net asset value. Experience under the Plan may indicate that changes are desirable. Accordingly, the Trust reserves the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the Trust reserves the right to amend the Plan to include a service charge payable by the participants. All correspondence concerning the Plan should be directed to the Plan Agent at P. O. Box 8030, Boston, MA 02266-8030. Please call 1-800-331-1710 between the hours of 9:00 a.m. and 5:00 p.m. Eastern Standard Time if you have questions regarding the Plan. 20 26 DESCRIPTION OF CAPITAL STRUCTURE The Trust is an unincorporated business trust established under the laws of the Commonwealth of Massachusetts by an Agreement and Declaration of Trust dated December 10, 1998 (the "Declaration of Trust"). The Declaration of Trust provides that the Trustees of the Trust may authorize separate classes of shares of beneficial interest. The Trustees have authorized an unlimited number of Shares. The Trust intends to hold annual meetings of Shareholders in compliance with the requirements of the New York Stock Exchange. Shares. The Declaration of Trust permits the Trust to issue an unlimited number of full and fractional Shares of beneficial interest, $0.01 par value per Share. Each Share represents an equal proportionate interest in the assets of the Trust with each other Share in the Trust. Holders of Shares will be entitled to the payment of dividends when, as and if declared by the Board of Trustees. The 1940 Act or the terms of any borrowings or preferred shares may limit the payment of dividends to the holders of Shares. Each whole Share shall be entitled to one vote as to matters on which it is entitled to vote pursuant to the terms of the Declaration of Trust on file with the SEC. Upon liquidation of the Trust, after paying or adequately providing for the payment of all liabilities of the Trust and the liquidation preference with respect to any outstanding preferred shares, and upon receipt of such releases, indemnities and refunding agreements as they deem necessary for their protection, the Trustees may distribute the remaining assets of the Trust among the holders of the Shares. The Declaration of Trust provides that Shareholders are not liable for any liabilities of the Trust, requires inclusion of a clause to that effect in every agreement entered into by the Trust and indemnifies shareholders against any such liability. Although shareholders of an unincorporated business trust established under Massachusetts law, in certain limited circumstances, may be held personally liable for the obligations of the Trust as though they were general partners, the provisions of the Declaration of Trust described in the foregoing sentence make the likelihood of such personal liability remote. While there are any borrowings or preferred shares outstanding, the Trust may not be permitted to declare any cash dividend or other distribution on its Shares, unless at the time of such declaration, (i) all accrued dividends on preferred shares or accrued interest on borrowings have been paid and (2) the value of the Trust's total assets (determined after deducting the amount of such dividend or other distribution), less all liabilities and indebtedness of the Trust not represented by senior securities, is at least 300% of the aggregate amount of such securities representing indebtedness and at least 200% of the aggregate amount of securities representing indebtedness plus the aggregate liquidation value of the outstanding preferred shares (expected to equal the aggregate original purchase price of the outstanding preferred shares plus redemption premium, if any, together with any accrued and unpaid dividends thereon, whether or not earned or declared and on a cumulative basis). In addition to the requirements of the 1940 Act, the Trust may be required to comply with other asset coverage requirements as a condition of the Trust obtaining a rating of the preferred shares from a Rating Agency. These requirements may include an asset coverage test more stringent than under the 1940 Act. This limitation on the Trust's ability to make distributions on its Shares could in certain circumstances impair the ability of the Trust to maintain its qualification for taxation as a regulated investment company. The Trust intends, however, to the extent possible to purchase or redeem preferred shares from time to time to maintain compliance with such asset coverage requirements and may pay special dividends to the holders of the preferred shares in certain circumstances in connection with any such impairment of the Trust's status as a regulated investment company. See "Investment Objective, Policies and Risks" and "Distributions and Taxes." Depending on the timing of any such redemption or repayment, the Trust may be required to pay a premium in addition to the liquidation preference of the preferred shares to the holders thereof. The Trust has no present intention of offering additional Shares, except as described herein. Other offerings of its Shares, if made, will require approval of the Board of Trustees. Any additional offering will not be sold at a price per Share below the then current net asset value (exclusive of underwriting discounts and commissions) except in connection with an offering to existing Shareholders or with the consent of a majority of the Trust's outstanding Shares. The Shares have no preemptive rights. 21 27 The Trust generally will not issue Share certificates. However, upon written request to the Trust's transfer agent, a share certificate will be issued for any or all of the full Shares credited to an investor's account. Share certificates which have been issued to an investor may be returned at any time. Repurchase of Shares and Other Discount Measures. Because shares of closed-end management investment companies frequently trade at a discount to their net asset values, the Board of Trustees has determined that from time to time it may be in the interest of Shareholders for the Trust to take corrective actions. The Board of Trustees, in consultation with Eaton Vance, will review at least annually the possibility of open market repurchases and/or tender offers for the Shares and will consider such factors as the market price of the Shares, the net asset value of the Shares, the liquidity of the assets of the Trust, effect on the Trust's expenses, whether such transactions would impair the Trust's status as a regulated investment company or result in a failure to comply with applicable asset coverage requirements, general economic conditions and such other events or conditions which may have a material effect on the Trust's ability to consummate such transactions. There are no assurances that the Board of Trustees will, in fact, decide to undertake either of these actions or if undertaken, that such actions will result in the Trust's Shares trading at a price which is equal to or approximates their net asset value. In recognition of the possibility that the Shares might trade at a discount to net asset value and that any such discount may not be in the interest of Shareholders, the Board of Trustees, in consultation with Eaton Vance, from time to time may review possible actions to reduce any such discount. Preferred Shares. The Declaration of Trust authorizes the issuance of an unlimited number of shares of beneficial interest with preference rights, including preferred shares (the "Preferred Shares"), having a par value of $0.01 per share, in one or more series, with rights as determined by the Board of Trustees, by action of the Board of Trustees without the approval of the Shareholders. Under the requirements of the 1940 Act, the Trust must, immediately after the issuance of any Preferred Shares, have an "asset coverage" of at least 200%. Asset coverage means the ratio which the value of the total assets of the Trust, less all liability and indebtedness not represented by senior securities (as defined in the 1940 Act), bears to the aggregate amount of senior securities representing indebtedness of the Trust, if any, plus the aggregate liquidation preference of the Preferred Shares. If the Trust seeks a rating of the Preferred Shares, asset coverage requirements, in addition to those set forth in the 1940 Act, may be imposed. The liquidation value of the Preferred Shares is expected to equal their aggregate original purchase price plus redemption premium, if any, together with any accrued and unpaid dividends thereon (on a cumulative basis), whether or not earned or declared. The terms of the Preferred Shares, including their dividend rate, voting rights, liquidation preference and redemption provisions, will be determined by the Board of Trustees (subject to applicable law and the Trust's Declaration of Trust) if and when it authorizes the Preferred Shares. The Trust may issue Preferred Shares that provide for the periodic redetermination of the dividend rate at relatively short intervals through an auction or remarketing procedure, although the terms of the Preferred Shares may also enable the Trust to lengthen such intervals. At times, the dividend rate as redetermined on the Trust's Preferred Shares may approach or exceed the Trust's return after expenses on the investment of proceeds from the Preferred Shares and the Trust's leverage structure would result in a lower rate of return to Shareholders than if the Trust were not so structured. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Trust, the terms of any Preferred Shares may entitle the holders of Preferred Shares to receive a preferential liquidating distribution (expected to equal the original purchase price per share plus redemption premium, if any, together with accrued and unpaid dividends, whether or not earned or declared and on a cumulative basis) before any distribution of assets is made to holders of Shares. After payment of the full amount of the liquidating distribution to which they are entitled, the Preferred Shareholders would not be entitled to any further participation in any distribution of assets by the Trust. Holders of Preferred Shares, voting as a class, shall be entitled to elect two of the Trust's Trustees. Under the 1940 Act, if at any time dividends on the Preferred Shares are unpaid in an amount equal to two full years' dividends thereon, the holders of all outstanding Preferred Shares, voting as a class, will be allowed to elect a majority of the Trust's Trustees until all dividends in default have been paid or declared and set apart for 22 28 payment. In addition, if required by the Rating Agency rating the Preferred Shares or if the Board of Trustees determines it to be in the best interests of the common shareholders, issuance of the Preferred Shares may result in more restrictive provisions than required by the 1940 Act being imposed. In this regard, holders of the Preferred Shares may be entitled to elect a majority of the Trust's Board of Trustees in other circumstances, for example, if one payment on the Preferred Shares is in arrears. The Trust currently intends to seek an investment grade rating for the Preferred Shares from one Rating Agency. The Trust intends that, as long as Preferred Shares are outstanding, the composition of its portfolio will reflect guidelines established by such Rating Agency. Although, as of the date hereof, no such Rating Agency has established guidelines relating to the Preferred Shares, based on previous guidelines established by such Rating Agencies for the securities of other issuers, the Trust anticipates that the guidelines with respect to the Preferred Shares will establish a set of tests for portfolio composition and asset coverage that supplement (and in some cases are more restrictive than) the applicable requirements under the 1940 Act. Although, at this time, no assurance can be given as to the nature or extent of the guidelines which may be imposed in connection with obtaining a rating of the Preferred Shares, the Trust currently anticipates that such guidelines will include asset coverage requirements which are more restrictive than those under the 1940 Act, restrictions on certain portfolio investments and investment practices, requirements that the Trust maintain a portion of its assets in short-term, high-quality, fixed-income securities and certain mandatory redemption requirements relating to the Preferred Shares. No assurance can be given that the guidelines actually imposed with respect to the Preferred Shares by such Rating Agency will be more or less restrictive than as described in this Prospectus. Anti-Takeover Provisions in the Declaration of Trust. The Declaration of Trust includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Trust or to change the composition of its Board of Trustees, and could have the effect of depriving Shareholders of an opportunity to sell their Shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Trust. These provisions may have the effect of discouraging attempts to acquire control of the Trust, which attempts could have the effect of increasing the expenses of the Trust and interfering with the normal operation of the Trust. The Board of Trustees is divided into three classes, with the term of one class expiring at each annual meeting of Shareholders. At each annual meeting, one class of Trustees is elected to a three-year term. This provision could delay for up to two years the replacement of a majority of the Board of Trustees. A Trustee may be removed from office only for cause by a written instrument signed by the remaining Trustees or by a vote of the holders of at least two-thirds of the class of Shares of the Trust that elected such Trustee and is entitled to vote on the matter. In addition, the Declaration of Trust requires the favorable vote of the holders of at least 75% of the outstanding shares of each class of the Trust, voting as a class, then entitled to vote to approve, adopt or authorize certain transactions with 5%-or-greater holders of a class of shares and their associates, unless the Board of Trustees shall by resolution have approved a memorandum of understanding with such holders, in which case normal voting requirements would be in effect. For purposes of these provisions, a 5%-or-greater holder of a class of shares (a "Principal Shareholder") refers to any person who, whether directly or indirectly and whether alone or together with its affiliates and associates, beneficially owns 5% or more of the outstanding shares of any class of beneficial interest of the Trust. The transactions subject to these special approval requirements are: (i) the merger or consolidation of the Trust or any subsidiary of the Trust with or into any Principal Shareholder; (ii) the issuance of any securities of the Trust to any Principal Shareholder for cash; (iii) the sale, lease or exchange of all or any substantial part of the assets of the Trust to any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period); or (iv) the sale, lease or exchange to the Trust or any subsidiary thereof, in exchange for securities of the Trust, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period). The Board of Trustees has determined that provisions with respect to the Board and the 75% voting requirements described above, which voting requirements are greater than the minimum requirements under 23 29 Massachusetts law or the 1940 Act, are in the best interest of Shareholders generally. Reference should be made to the Declaration of Trust on file with the SEC for the full text of these provisions. Conversion to Open-End Fund. The Trust may be converted to an open-end investment company at any time if approved by the lesser of (i) 2/3 or more of the Trust's then outstanding Shares and Preferred Shares (if any), each voting separately as a class, or (ii) more than 50% of the then outstanding Shares and Preferred Shares (if any), voting separately as a class if such conversion is recommended by at least 75% of the Trustees then in office. If approved in the foregoing manner, conversion of the Trust could not occur until 90 days after the Shareholders' meeting at which such conversion was approved and would also require at least 30 days' prior notice to all Shareholders. The composition of the Trust's portfolio likely would prohibit the Trust from complying with regulations of the SEC applicable to open-end investment companies. Accordingly, conversion likely would require significant changes in the Trust's investment policies and liquidation of a substantial portion of its relatively illiquid portfolio. Conversion of the Trust to an open-end investment company also would require the redemption of any outstanding Preferred Shares and could require the repayment of borrowings, which would eliminate the leveraged capital structure of the Trust with respect to the Shares. In the event of conversion, the Shares would cease to be listed on the New York Stock Exchange or other national securities exchange or market system. The Board of Trustees believes, however, that the closed-end structure is desirable, given the Trust's investment objective and policies. Investors should assume, therefore, that it is unlikely that the Board of Trustees would vote to convert the Trust to an open-end investment company. Shareholders of an open-end investment company may require the company to redeem their shares at any time (except in certain circumstances as authorized by or under the 1940 Act) at their net asset value, less such redemption charge, if any, as might be in effect at the time of a redemption. The Trust expects to pay all such redemption requests in cash, but intends to reserve the right to pay redemption requests in a combination of cash or securities. If such partial payment in securities were made, investors may incur brokerage costs in converting such securities to cash. If the Trust were converted to an open-end fund, it is likely that new Shares would be sold at net asset value plus a sales load. 24 30 UNDERWRITING The underwriters named below (the "Underwriters"), acting through PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York, as lead representative, and A.G. Edwards & Sons, Inc., Prudential Securities Incorporated, Salomon Smith Barney Inc., Dain Rauscher Wessels, a division of Dain Rauscher Incorporated and EVEREN Securities, Inc., as their representatives (together with PaineWebber Incorporated, the "Representatives"), have severally agreed, subject to the terms and conditions of the Underwriting Agreement with the Trust and Eaton Vance (the "Underwriting Agreement"), to purchase from the Trust the number of Shares set forth opposite their respective names. The Underwriters are committed to purchase all of such Shares if any are purchased.
UNDERWRITER NUMBER OF SHARES ----------- ---------------- PaineWebber Incorporated.................................... A.G. Edwards & Sons, Inc.................................... Prudential Securities Incorporated.......................... Salomon Smith Barney Inc.................................... Dain Rauscher Wessels....................................... EVEREN Securities, Inc...................................... ---------- Total............................................. ==========
The Trust has granted to the Underwriters an option, exercisable for 45 days from the date of this Prospectus to purchase up to an additional Shares to cover over-allotments, if any, at the initial offering price. The Underwriters may exercise such option solely for the purpose of covering over-allotments incurred in the sale of the Shares offered hereby. To the extent that the Underwriters exercise this option, each of the Underwriters will have a firm commitment, subject to certain conditions, to purchase an additional number of Shares proportionate to such Underwriter's initial commitment. The Shares are offered by the Underwriters, subject to prior sale, when, as and if delivered to and accepted by the Underwriters and subject to their right to reject orders in whole or in part. As set forth in the notes to the table on the cover page of this Prospectus, Eaton Vance or an affiliate (not the Trust) from its own assets has agreed to pay a commission to the Underwriters in the amount of $0.45 per Share (4.50% of the public offering price per Share) or an aggregate amount of $ ($ assuming full exercise of the over-allotment option) for all Shares covered by this Prospectus. Such payment will be the legal obligation of Eaton Vance or an affiliate and made out of its own assets and will not in any way represent an obligation of the Trust or its Shareholders. The Representatives have advised the Trust that the Underwriters may pay up to $0.30 per Share from such payment received from Eaton Vance to selected dealers who sell the Shares and that the Underwriters and such dealers may reallow a concession of up to $ per Share to certain other dealers who sell Shares. Eaton Vance (or an affiliate) has agreed to pay all offering expenses of the Trust that exceed $0.03 per share. Offering expenses include $ payment to the Underwriters in partial reimbursement of their expenses. Prior to this offering, there has been no public market for the Shares or any other securities of the Trust. Shares have been approved for listing on the New York Stock Exchange under the symbol "EVN." In order to meet the requirements for listing the Shares on the New York Stock Exchange, the Underwriters have undertaken to sell lots of 100 or more Shares to a minimum of 2,000 beneficial holders. The minimum investment requirement is 100 Shares ($1,500). The Trust and Eaton Vance have each agreed to indemnify the several Underwriters for or to contribute to the losses arising out of certain liabilities, including liabilities under the Securities Act of 1933, as amended. The Trust has agreed not to offer or sell any additional Shares of the Trust, other than as contemplated by this Prospectus, for a period of 180 days after the date of the Underwriting Agreement without the prior written consent of the Underwriters. 25 31 The Representatives have informed the Trust that the Underwriters do not intend to confirm sale to any accounts over which they exercise discretionary authority. In connection with this offering, the underwriters may purchase and sell Shares in the open market. These transactions may include over-allotment and stabilizing transactions and purchases to cover syndicate short positions created in connection with this offering. Stabilizing transactions consist of certain bids or purchases for the purpose of preventing or retarding a decline in the market price of the Shares and syndicate short positions involve the sale by the underwriters of a greater number of Shares than they are required to purchase from the Trust in this offering. The underwriters also may impose a penalty bid, whereby selling concessions allowed to syndicate members or other broker-dealers in respect of the Shares sold in this offering for their account, may be reclaimed by the syndicate if such Shares are repurchased by the syndicate in stabilizing or covering transactions. These activities may stabilize, maintain or otherwise affect the market price of the Shares, which may be higher than the price that might otherwise prevail in the open market; and these activities, if commenced, may be discontinued at any time without notice. These transactions may be effected on the New York Stock Exchange or otherwise. Under the terms of and subject to the conditions of the Underwriting Agreement, the Underwriters are committed to purchase and pay for all Shares offered hereby if any are purchased. The Underwriting Agreement provides that it may be terminated at or prior to the closing date for the purchase of the Shares if, in the judgement of the Representatives, payment for the delivery of the Shares is rendered impracticable or inadvisable because (1) trading in the equity securities of the Trust is suspended by the SEC, by an exchange that lists the Shares, or by the National Association of Securities Dealers Automated Quotation National Market System ("NASDAQ"), (2) trading in securities generally on the New York Stock Exchange or NASDAQ shall have been suspended or limited or minimum or maximum prices shall have been generally established on such exchange or over-the-counter market, (3) additional material governmental restrictions, not in force on the date of the Underwriting Agreement, have been imposed upon trading in securities generally or trading in securities generally has been suspended on any U.S. securities exchange, (4) a general banking moratorium has been established by federal or New York authorities, or (5) any material adverse change in the financial or securities markets in the United States or in political, financial or economic conditions in the United States or any outbreak or material escalation of hostilities or other calamity or crisis occurs, the effect of which is such as to make it impracticable to market any or all of the Shares. The Underwriting Agreement also may be terminated if any of the conditions specified in the Underwriting Agreement have not been fulfilled when and as required by such agreement. The Trust anticipates that the Representatives and certain other Underwriters may from time to time act as brokers or dealers in connection with the execution of its Trust transactions after they have ceased to be Underwriters and, subject to certain restrictions, may act as such brokers while they are Underwriters. As described below under "Shareholder Servicing Agent, Custodian and Transfer Agent," PaineWebber Incorporated will provide shareholder services to the Trust pursuant to a Shareholder Servicing Agreement with Eaton Vance. Eaton Vance will pay a monthly fee for such services on an annual basis equal to .10% of the average weekly gross assets of the Trust. SHAREHOLDER SERVICING AGENT, CUSTODIAN AND TRANSFER AGENT Pursuant to a Shareholder Servicing Agreement between PaineWebber Incorporated (the "Shareholder Servicing Agent") and Eaton Vance, the Shareholder Servicing Agent will (i) undertake to make public information pertaining to the Trust on an ongoing basis and to communicate to investors and prospective investors the Trust's features and benefits (including periodic seminars or conference calls, responses to questions from current or prospective shareholders and specific shareholder contact where appropriate); (ii) make available to investors and prospective investors market price, net asset value, yield and other information regarding the Trust, if reasonably obtainable, for the purpose of maintaining the visibility of the Trust in the investor community; (iii) at the request of Eaton Vance, provide certain economic research and statistical information and reports, if reasonably obtainable, on behalf of the Trust, and consult with representatives and Trustees of the Trust in connection therewith, which information and reports shall include: 26 32 (a) statistical and financial market information with respect to the Trust's market performance and (b) comparative information regarding the Trust and other closed-end management investment companies with respect to (1) the net asset value of their respective shares, (2) the respective market performance of the Trust and such other companies and (3) other relevant performance indicators; and (iv) at the request of Eaton Vance, provide information to and consult with the Board of Trustees with respect to applicable modifications to dividend policies or capital structure, repositioning or restructuring of the Trust, conversion of the Trust to an open-end investment company, liquidation or merger; provided, however, that under the terms of the Shareholder Servicing Agreement, the Shareholder Servicing Agent is not obligated to render any opinions, valuations or recommendations of any kind or to perform any such similar services. For these services, Eaton Vance will pay the Shareholder Servicing Agent a fee equal on an annual basis to .10% of the Trust's average weekly gross assets, payable in arrears at the end of each calendar month. Under the terms of the Shareholder Servicing Agreement, the Shareholder Servicing Agent is relieved from liability to Eaton Vance for any act or omission in the course of its performances under the Shareholder Servicing Agreement in the absence of gross negligence or willful misconduct by the Shareholder Servicing Agent. The Shareholder Servicing Agreement will continue for an initial term of two years and thereafter for successive one-year periods unless terminated by either party upon 60 days written notice. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 02116 is the custodian of the Trust and will maintain custody of the securities and cash of the Trust. IBT maintains the Trust's general ledger and computes net asset value per share at least weekly. IBT also attends to details in connection with the sale, exchange, substitution, transfer and other dealings with the Trust's investments, and receives and disburses all funds. IBT also assists in preparation of shareholder reports and the electronic filing of such reports with the SEC. First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 is the transfer agent and dividend disbursing agent of the Trust. LEGAL OPINIONS It is expected that certain legal matters in connection with the Shares offered hereby will be passed upon for the Trust by Kirkpatrick & Lockhart LLP, and for the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliated entities. ADDITIONAL INFORMATION The Prospectus and the Statement of Additional Information do not contain all of the information set forth in the Registration Statement that the Trust has filed with the SEC. The complete Registration Statement may be obtained from the SEC upon payment of the fee prescribed by its rules and regulations. The Statement of Additional Information can be obtained without charge by calling 1-800-225-6265. Statements contained in this Prospectus as to the contents of any contract or other documents referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement of which this Prospectus forms a part, each such statement being qualified in all respects by such reference. 27 33 TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
PAGE ------ Additional Investment Information and Restrictions.......... B-2 Trustees and Officers....................................... B-7 Investment Advisory and Other Services...................... B-10 Determination of Net Asset Value............................ B-11 Portfolio Trading........................................... B-11 Taxes....................................................... B-13 Other Information........................................... B-15 Auditors.................................................... B-16 Financial Statements........................................ B-17 Independent Auditors' Report................................ B-19 Appendix A: Ratings of Municipal Bonds...................... B-20 Appendix B: Tax Equivalent Yield Table...................... B-25 Appendix C: U.S. Territory Information...................... B-26
TRUSTEES OF THE TRUST JESSICA M. BIBLIOWICZ President and Chief Operating Officer of John A. Levin & Co. DONALD R. DWIGHT President of Dwight Partners, Inc. JAMES B. HAWKES Chairman, President and Chief Executive Officer of Eaton Vance Corp. SAMUEL L. HAYES, III Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University Graduate School of Business Administration NORTON H. REAMER Chairman and Chief Executive Officer of United Asset Management Corporation LYNN A. STOUT Professor of Law, Georgetown University Law Center JACK L. TREYNOR Investment Adviser and Consultant 28 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SHARES EATON VANCE MUNICIPAL INCOME TRUST --------------------- --------------------- [EATON VANCE LOGO] ---------------------- PROSPECTUS ---------------------- PAINEWEBBER INCORPORATED A.G. EDWARDS & SONS, INC. PRUDENTIAL SECURITIES INCORPORATED SALOMON SMITH BARNEY DAIN RAUSCHER WESSELS A DIVISION OF DAIN RAUSCHER INCORPORATED EVEREN SECURITIES, INC. ------------------------ JANUARY 26, 1999 UNTIL , 1999, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. CE-MITP - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 35 STATEMENT OF ADDITIONAL INFORMATION JANUARY 26, 1999 EATON VANCE MUNICIPAL INCOME TRUST 24 FEDERAL STREET BOSTON, MASSACHUSETTS 02110 (800) 225-6265 - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- Additional Investment Information and Restrictions.......... B-2 Trustees and Officers....................................... B-7 Investment Advisory and Other Services...................... B-10 Determination of Net Asset Value............................ B-11 Portfolio Trading........................................... B-11 Taxes....................................................... B-13 Other Information........................................... B-15 Auditors.................................................... B-15 Financial Statements........................................ B-16 Independent Auditors' Report................................ B-18 Appendix A: Ratings of Municipal Bonds...................... B-19 Appendix B: Tax Equivalent Yield Table...................... B-24 Appendix C: U.S. Territory Information...................... B-25
- -------------------------------------------------------------------------------- THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE PROSPECTUS OF EATON VANCE MUNICIPAL INCOME TRUST (THE "TRUST") DATED JANUARY 26, 1999, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING YOUR FINANCIAL INTERMEDIARY OR CALLING THE TRUST AT 1-800-225-6265. 36 Capitalized terms used in this Statement of Additional Information and not otherwise defined have the meanings given them in the Trust's Prospectus. ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS Municipal Obligations. Municipal obligations are issued to obtain funds for various public and private purposes. Municipal obligations include long-term obligations, which are often called municipal 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. Market rates of interest available with respect to municipal obligations may be lower than those available with respect to taxable securities, although such differences may be partially or wholly offset by the effects of federal income tax on income derived from such taxable securities. While most municipal bonds pay a fixed rate of interest semi-annually in cash, some bonds pay no periodic cash interest but instead make a single payment at maturity representing both principal and interest. Municipal obligations may be issued or subsequently offered with interest coupons materially greater or less than those then prevailing, with price adjustments reflecting such deviation. In general, there are three categories of municipal obligations the interest on which is exempt from federal income tax and is not a tax preference item for purposes of the AMT: (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. Interest on certain "private activity bonds" issued after August 7, 1986 is exempt from regular federal income tax, but is treated as a tax preference item that could subject the recipient to or increase the recipient's liability for the AMT. For corporate shareholders, the Trust'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). In assessing the federal income tax treatment of interest on any such obligation, the Trust will rely on an opinion of the issuer's counsel (when available) obtained by the issuer or other reliable authority and will not undertake any independent verification thereof. The two principal classifications of municipal bonds are "general obligation" and "revenue" bonds. 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. Revenue bonds are generally secured by 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 bonds 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 B-2 37 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 of the industrial user or users. The Trust 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 Trust anticipates that it would, under normal circumstances, dispose of any equity securities so acquired within a reasonable period of time. 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 person or entity to pay when due principal of and interest on a municipal obligation 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 Trust will take whatever action 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 or firms (including affiliates of the Adviser) to evaluate or protect any real estate, facilities or other assets securing any such obligation or acquired by the Trust as a result of any such event, and the Trust may also manage (or engage other persons to manage) or otherwise deal with any real estate, facilities or other assets so acquired. The Trust anticipates that real estate consulting and management services may be required with respect to properties securing various municipal obligations in its portfolio or subsequently acquired by the Trust. The Trust will incur additional expenditures in taking protective action with respect to portfolio obligations in default and assets securing such obligations. To enforce its rights in the event of a default in the payment of interest or repayment of principal, or both, the Trust may take possession of and manage the assets or have a receiver appointed to collect and disburse pledged revenues securing the issuer's obligations on such securities, which may increase the operating expenses and adversely affect the net asset value of the Trust. Any income derived from the ownership of operation of such assets may not be tax-exempt. In addition, the Trust's intention to qualify as a "regulated investment company" ("RIC") under the Code may limit the extent to which the Trust may exercise its rights by taking possession of such assets, because as a RIC, the Trust is subject to certain limitations on its investments and on the nature of its income. The yields on municipal obligations are dependent on a variety of factors, including purposes of issue and source of funds for repayment, general money market conditions, general conditions of the municipal bond market, size of a particular offering, 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 obligations which they undertake to rate. It should be emphasized, however, that ratings are based on judgment and are not absolute standards of quality. Consequently, municipal obligations with the same maturity, coupon and rating may have different yields while obligations of the same maturity and coupon with different ratings may have the same yield. In addition, the market price of municipal obligations will normally fluctuate with changes in interest rates, and therefore the net asset value of the Trust will be affected by such changes. State Concentration. The Trust may invest 25% or more of its total assets in municipal obligations of issuers located in the same state. When the Trust does so, it will be sensitive to factors affecting that state, such as changes in the economy, decreases in tax collection or the tax base, legislation which limits taxes and changes in issuer credit ratings. Economic Sector Concentration. The Trust may invest 25% or more of its total assets in municipal obligations of issuers in the same economic sector. There could be economic, business or political developments which might affect all municipal obligations in a particular economic sector. In particular, investments in the industrial revenue bonds listed above 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 B-3 38 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 increase 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, effects of energy conservation and limitations on the capacity of the capital market to absorb utility debt. Bonds to finance life care facilities 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 Trust 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. 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. Certain municipal lease obligations are illiquid. 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 take place within a specified number of days after the date of the Trust's commitment and are subject to certain conditions such as the issuance of satisfactory legal opinions. The Trust 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 Trust to buy such securities on a settlement date that could be several months or several years in the future. The Trust may also purchase instruments that give the Trust the option to purchase a municipal obligation when and if issued. The Trust 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 Trust enters into the purchase commitment. When the Trust 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 Trust 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 Trust 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 Trust's net asset value than if it set aside cash to pay for when-issued securities. B-4 39 Redemption, Demand and Put Features, and Put Options. Issuers of municipal obligations reserve the right to call (redeem) the bond. If an issuer redeems securities held by the Trust during a time of declining interest rates, the Trust may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. 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 because they may protect to some degree against a rise in interest rates. Liquidity and Protective Put Options. The Trust may also enter into a separate agreement with the seller of a security or some other person granting the Trust the right to put the security to the seller thereof or the other person at an agreed upon price. Such agreements are subject to the risk of default by the other party, although the Trust intends to limit this type of transaction to institutions (such as banks or securities dealers) which the Adviser believes present minimal credit risks. The Trust 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 Trust or that selling institutions will be willing to permit the Trust to exercise a put to hedge against rising interest rates. The Trust 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 the Trustees of the Trust 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 market prices of comparable put options. Interest income generated by certain bonds having put or demand features may be taxable. Illiquid Obligations. At times, a substantial portion of the Trust's assets may be invested in securities as to which the Trust, by itself or together with other accounts managed by the 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 Trust could find it more difficult to sell such securities when the 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 Trust's net asset value. The secondary market for some municipal obligations issued within a state (including issues which are privately placed with the Trust) 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 Trust 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 Trust 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. 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 Trust (or of securities that the Trust expects to purchase). To hedge against changes in rates or as a substitute for the purchase of securities, the Trust 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 Trust 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 Trust may purchase and write call and put options on futures contracts which are traded on a United States or foreign exchange or board of trade. The Trust 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 Trust's custodian for the benefit of the futures commission merchant through whom the Trust 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. B-5 40 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 Trust from closing out positions and limiting its losses. The Trust will engage in futures and related options transactions for bona fide hedging purposes or non-hedging purposes as defined in or permitted by CFTC regulations. The Trust will determine that the price fluctuations in the futures contracts and options on futures used for hedging purposes are substantially related to price fluctuations in securities held by the Trust or which it expects to purchase. The Trust will engage in transactions in futures and related options contracts only to the extent such transactions are consistent with the requirements of the Code for maintaining its qualification as a RIC for federal income tax purposes. Investment Restrictions. The following investment restrictions of the Trust are designated as fundamental policies and as such cannot be changed without the approval of the holders of a majority of the Trust's outstanding voting securities, which as used in this Statement of Additional Information means the lesser of (a) 67% of the shares of the Trust present or represented by proxy at a meeting if the holders of more than 50% of the outstanding shares are present or represented at the meeting or (b) more than 50% of the outstanding shares of the Trust. As a matter of fundamental policy the Trust may not: (1) Borrow money, except as permitted by the 1940 Act; (2) Issue senior securities, as defined in the 1940 Act, other than (i) preferred shares which immediately after issuance will have asset coverage of at least 200%, (ii) indebtedness which immediately after issuance will have asset coverage of at least 300%, or (iii) the borrowings permitted by investment restriction (1) above; (3) Purchase securities on margin (but the Trust may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities). The purchase of investment assets with the proceeds of a permitted borrowing or securities offering will not be deemed to be the purchase of securities on margin; (4) 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 investment; (5) Make loans to other persons, except by (a) the acquisition of loan interests, debt securities and other obligations in which the Trust is authorized to invest in accordance with its investment objective and policies, (b) entering into repurchase agreements, and (c) lending its portfolio securities; (6) Purchase or sell real estate, although it may purchase and sell securities which are secured by interests in real estate and securities of issuers which invest or deal in real estate. The Trust reserves the freedom of action to hold and to sell real estate acquired as a result of the ownership of securities; (7) Purchase or sell physical commodities or contracts for the purchase or sale of physical commodities. Physical commodities do not include futures contracts with respect to securities, securities indices or other financial instruments; or (8) Invest more than 25% of its total assets in securities of issuers in any one industry. For purposes of the Trust's investment restrictions, the determination of the "issuer" of a municipal obligation which is not a general obligation bond will be made by the 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 obligation. For purposes of construing restriction(8), securities of the U.S. Government, its agencies, or instrumentalities, and securities, including municipal obligations, backed by the credit of a governmental entity are not considered to represent industries. However, municipal obligations backed only by the assets and revenues on non-governmental users may for this purpose be deemed to be issued by such non-governmental users. Thus, the 25% limitation would apply to such obligations. As discussed previously in this section and in the Prospectus, it is nonetheless possible that the Trust may invest more than 25% of its total assets in a broader B-6 41 economic sector of the market for municipal obligations, such as revenue obligations of hospitals and other health care facilities or electrical utility revenue obligations. The Trust reserves the right to invest more than 25% of its assets in industrial development bonds and private activity securities. The Trust has adopted the following nonfundamental investment policy which may be changed by the Trustees without approval of the Trust's shareholders. As a matter of nonfundamental policy, the Trust may not make short sales of securities or maintain a short position, unless at all times when a short position is open it either owns an equal amount of such securities or owns securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short. Upon Board of Trustee approval the Trust may invest more than 10% of its total assets in one or more other management investment companies (or may invest in affiliated investment companies) to the extent permitted by the 1940 Act and rules thereunder. Whenever an investment policy or investment restriction set forth in the Prospectus or this Statement of Additional Information 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 Trust's acquisition of such security or asset. Accordingly, any later increase or decrease resulting from a change in values, assets or other circumstances will not compel the Trust to dispose of such security or other asset. Notwithstanding the foregoing, the Trust must always be in compliance with the borrowing policies set forth above. TRUSTEES AND OFFICERS The Trust's Trustees and officers 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 Trustee and officer is 24 Federal Street, Boston, Massachusetts 02110. Those Trustees who are "interested persons" of the Trust as defined in the 1940 Act by virtue of their affiliation with Eaton Vance, BMR, EVC or EV, are indicated by an asterisk(*). JESSICA M. BIBLIOWICZ (38), TRUSTEE (1) President and Chief Operating Officer of John A. Levin & Co. (a registered investment advisor) (since July 1997) and a Director of Baker, Fentress & Company which owns John A. Levin & Co. (since July 1997). Formerly Executive Vice President of Smith Barney Mutual Funds (from July 1994 to June 1997). Trustee of various investment companies managed by Eaton Vance or BMR since October 30, 1998. Address: One Rockefeller Plaza, New York, New York 10020 DONALD R. DWIGHT (67), TRUSTEE (1) President of Dwight Partners, Inc. (a corporate relations and communications company). Trustee of various investment companies managed by Eaton Vance or BMR. Address: Clover Mill Lane, Lyme, New Hampshire 03768 JAMES B. HAWKES (57), VICE PRESIDENT AND TRUSTEE* (2) Chairman, President and Chief Executive Officer of Eaton Vance, BMR and their corporate parent and trustee (EVC and EV). Director of EVC and EV. Trustee and officer of various investment companies managed by Eaton Vance or BMR. SAMUEL L. HAYES, III (63), TRUSTEE (2) Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University Graduate School of Business Administration. Trustee of Kobrick-Cendant Investment Trust (mutual funds). Trustee of various investment companies managed by Eaton Vance or BMR. Address: 345 Nahatan Road, Westwood, Massachusetts 02090 B-7 42 NORTON H. REAMER (63), TRUSTEE (3) Chairman of the Board and Chief Executive Officer, United Asset Management Corporation (a holding company owning institutional investment management firms); Chairman, President and Director of UAM Funds (mutual funds). Trustee of various investment companies managed by Eaton Vance or BMR. Address: One International Place, Boston, Massachusetts 02110 LYNN A. STOUT (41), TRUSTEE (3) Professor of Law, Georgetown University Law Center. Trustee of various investment companies managed by Eaton Vance or BMR since October 30, 1998. Address: 600 New Jersey, NW, Washington, DC 20001. JACK L. TREYNOR (68), TRUSTEE (3) Investment Adviser and Consultant. Trustee of various investment companies managed by Eaton Vance or BMR. Address: 504 Via Almar, Palos Verdes Estates, California 90274 THOMAS J. FETTER (55), PRESIDENT Vice President of Eaton Vance and BMR. Officer of various investment companies managed by Eaton Vance or BMR. ROBERT B. MACINTOSH (41), VICE PRESIDENT Vice President of Eaton Vance and BMR. Officer of various investment companies managed by Eaton Vance or BMR. THOMAS M. METZOLD (39), VICE PRESIDENT Vice President of Eaton Vance and BMR. Officer of various investment companies managed by Eaton Vance or BMR. JAMES L. O'CONNOR (53), TREASURER Vice President of Eaton Vance and BMR. Officer of various investment companies managed by Eaton Vance or BMR. ALAN R. DYNNER (58), SECRETARY Vice President and Chief Legal Officer of Eaton Vance, BMR, EVC and EV since November 1, 1996. Previously, he was a Partner of the law firm of Kirkpatrick & Lockhart LLP, New York and Washington, D.C., and was Executive Vice President of Neuberger & Berman Management, Inc., a mutual fund management company. Officer of various investment companies managed by Eaton Vance or BMR. JANET E. SANDERS (62), ASSISTANT TREASURER AND ASSISTANT SECRETARY Vice President of Eaton Vance and BMR. Officer of various investment companies managed by Eaton Vance or BMR. A. JOHN MURPHY (35), ASSISTANT SECRETARY Vice President of Eaton Vance and BMR. Officer of various investment companies managed by Eaton Vance or BMR. ERIC G. WOODBURY (41), ASSISTANT SECRETARY Vice President of Eaton Vance and BMR. Officer of various investment companies managed by Eaton Vance or BMR. - --------------- (1) Class I Trustee whose term expires after 1999. (2) Class II Trustee whose term expires after 2000. (3) Class III Trustee whose term expires after 2001. B-8 43 Messrs. Hayes (Chairman) and Reamer and Ms. Stout are members of the Special Committee of the Board of Trustees of the Trust. The purpose of the Special Committee is to consider, evaluate and make recommendations to the full Board of Trustees concerning (i) all contractual arrangements with service providers to the Trust, 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 Trust or its shareholders. The Nominating Committee of the Board of Trustees of the Trust is comprised of four Trustees who are not "interested persons" as that term is defined under the 1940 Act ("noninterested Trustees"). The Committee has four-year staggered terms, with one member rotating off the Committee to be replaced by another noninterested Trustee. The purpose of the Committee is to recommend to the Board nominees for the position of noninterested Trustee and to assure that at least a majority of the Board of Trustees is independent of Eaton Vance and its affiliates. Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of the Board of Trustees of the Trust. The Audit Committee's functions include making recommendations to the Trustees regarding the selection of the independent certified 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 Trust. Trustees of the Trust who are not affiliated with the Adviser may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of a Trustees Deferred Compensation Plan (the "Trustees' Plan"). Under the Trustees' Plan, an eligible Trustee may elect to have his deferred fees invested by the Trust in the shares of one or more funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees under the Trustees' Plan will be determined based upon the performance of such investments. Deferral of Trustees' fees in accordance with the Trustees' Plan will have a negligible effect on the Trust's assets, liabilities, and net income per share, and will not obligate the Trust to retain the services of any Trustee or obligate the Trust to pay any particular level of compensation to the Trustee. The Trust does not have a retirement plan for its Trustees. The fees and expenses of the noninterested Trustees of the Trust are paid by the Trust. (The Trustees of the Trust who are members of the Eaton Vance organization receive no compensation from the Trust.) During the year ended December 31, 1998, the noninterested Trustees of the Trust earned the compensation set forth below in their capacities as Trustees from the funds in the Eaton Vance fund complex(1). It is estimated that the noninterested Trustees will receive from the Trust the amounts set forth below for the fiscal year ending November 30, 1999.
ESTIMATED TOTAL COMPENSATION COMPENSATION FROM NAME FROM TRUST FUND COMPLEX ---- ------------- ------------------ Jessica M. Bibliowicz.................................. $385 N/A Donald R. Dwight....................................... 385 $156,250(2) Samuel L. Hayes, III................................... 381 166,250(3) Norton H. Reamer....................................... 374 156,250 Lynn A. Stout.......................................... 385 N/A Jack L. Treynor........................................ 422 165,000
- --------------- (1) As of January 1, 1999 the Eaton Vance fund complex consisted of 143 registered investment companies or series thereof. (2) Includes $56,250 of deferred compensation. (3) Includes $41,563 of deferred compensation. B-9 44 INVESTMENT ADVISORY AND OTHER SERVICES Eaton Vance, its affiliates and its predecessor companies have been managing assets of individuals and institutions since 1924 and of 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 a family of mutual funds, and individual and various institutional accounts, including corporations, hospitals, retirement plans, universities, foundations and trusts. The Trust will be responsible for all of its costs and expenses not expressly stated to be payable by Eaton Vance under the Advisory Agreement or Administration Agreement. Such costs and expenses to be borne by the Trust include, without limitation: custody and transfer agency fees and expenses, including those incurred for determining net asset value and keeping accounting books and records; expenses of pricing and valuation services; the cost of share certificates; membership dues in investment company organizations; expenses of acquiring, holding and disposing of securities and other investments; fees and expenses of registering under the securities laws, stock exchange listing fees and governmental fees; rating agency fees and preferred share remarketing expenses; 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; compensation and expenses of Trustees not affiliated with Eaton Vance; expenses of conducting repurchase offers for the purpose of repurchasing Trust shares; and investment advisory and administration fees. The Trust will also bear expenses incurred in connection with any litigation in which the Trust is a party and any legal obligation to indemnify its officers and Trustees with respect thereto, to the extent not covered by insurance. The Advisory Agreement with the Adviser continues in effect to February 28, 2000 and from year to year so long as such continuance is approved at least annually (i) by the vote of a majority of the noninterested Trustees of the Trust or of the Adviser cast in person at a meeting specifically called for the purpose of voting on such approval and (ii) by the Board of Trustees of the Trust or by vote of a majority of the outstanding interests of the Trust. The Trust's Administration Agreement continues in effect from year to year so long as such continuance is approved at least annually by the vote of a majority of the Trust's Trustees. Each agreement may be terminated at any time without penalty on sixty (60) days' written notice by the Trustees of the Trust or Eaton Vance, as applicable, or by vote of the majority of the outstanding shares of the Trust. Each agreement will terminate automatically in the event of its assignment. Each agreement provides that, in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations or duties to the Trust under such agreements on the part of Eaton Vance, Eaton Vance shall not be liable to the Trust for any loss incurred, to the extent not covered by insurance. BMR and Eaton Vance are business trusts organized under Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee of BMR and Eaton Vance. BMR, Eaton Vance and EV are wholly-owned subsidiaries of Eaton Vance Corporation ("EVC"), a Maryland corporation and publicly-held holding company. EVC through its subsidiaries and affiliates engages primarily in investment management, administration and marketing activities. The Directors of EVC are James B. Hawkes, Benjamin A. Rowland, Jr., John G.L. Cabot, John M. Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson. All of the issued and outstanding shares of Eaton Vance 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, the Voting Trustees of which are Messrs. Hawkes, Rowland, and Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Duncan Richardson, William M. Steul and Wharton P. Whitaker. The Voting Trustees have unrestricted voting rights for the election of Directors of EVC. All of the outstanding voting trust receipts issued under said Voting Trust are owned by certain of the officers of BMR and Eaton Vance who are also officers, or officers and Directors of EVC and EV. As indicated under "Trustees and Officers", all of the officers of the Trust (as well as Mr. Hawkes who is also a Trustee) hold positions in the Eaton Vance organization. EVC and its affiliates and their officers and employees from time to time have transactions with various banks, including the custodian of the Trust, 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 Trust and such banks. B-10 45 DETERMINATION OF NET ASSET VALUE The net asset value per Share of the Trust is determined no less frequently than weekly, generally on the last day of the week that 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 Trust's net asset value per Share is determined by IBT, in the manner authorized by the Trustees of the Trust. Net asset value is computed by dividing the value of the Trust's total assets, less its liabilities by the number of shares outstanding. 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 held by the Trust, and such obligations, including those purchased 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 at the direction of the Trustees. Other assets are valued at fair value using methods determined in good faith by the Trustees. PORTFOLIO TRADING Decisions concerning the execution of portfolio security transactions, including the selection of the market and the executing firm, are made by the Adviser. The Adviser is also responsible for the execution of transactions for all other accounts managed by it. The Adviser places the portfolio security transactions of the Trust and of all other accounts managed by it for execution with many firms. The Adviser uses its best efforts to obtain execution of portfolio security transactions at prices which are advantageous to the Trust and at reasonably competitive spreads or (when a disclosed commission is being charged) at reasonably competitive commission rates. In seeking such execution, the Adviser will use its best judgment in evaluating the terms of a transaction, and will give consideration to various relevant factors, including without limitation the full range and quality of the executing firm's services, the value of the brokerage and research services provided, the responsiveness of the firm to the Adviser, 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, including state obligations, purchased and sold by the Trust 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 Trust may also purchase municipal obligations from underwriters, and dealers in fixed price offerings, the cost of which may include undisclosed fees and concessions to the underwriters. 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 Trust will incur a brokerage commission. Although spreads or commissions on portfolio security transactions will, in the judgment of the Adviser, 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 Trust and the Adviser's other clients for providing brokerage and research services to the Adviser. 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 Trust 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 the Adviser B-11 46 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 that particular transaction or on the basis of overall responsibilities which the Adviser and its affiliates have for accounts over which they exercise investment discretion. In making any such determination, the Adviser 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; 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, analytical, 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-dealer firms 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, the Adviser receives Research Services from many broker-dealer firms with which the Adviser places the Trust's transactions and from third parties with which these broker-dealers have arrangements. These Research Services include such matters as general economic, political, business and market information, industry and company reviews, evaluations of securities and portfolio strategies and transactions, proxy voting data and analysis services, technical analysis of various aspects of the securities market, 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 the Adviser 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 the Adviser 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 Trust is not reduced because the Adviser receives such Research Services. The Adviser evaluates the nature and quality of the various Research Services obtained through broker-dealer firms and attempts to allocate sufficient portfolio security transactions to such firms to ensure the continued receipt of Research Services which the Adviser believes are useful or of value to it in rendering investment advisory services to its clients. The Trust and the Adviser may also receive Research Services from underwriters and dealers in fixed-price offerings, which Research Services are reviewed and evaluated by the Adviser in connection with its investment responsibilities. The investment companies sponsored by the Adviser or BMR may allocate trades in such offerings to acquire information relating to the performance, fees and expenses of such companies and other mutual funds, which information is used by the Trustees of such companies to fulfill their responsibility to oversee the quality of the services provided by various entities, including the Adviser, to such companies. Such companies may also pay cash for such information. Subject to the requirement that the Adviser shall use its best efforts to seek and execute portfolio security transactions at advantageous prices and at reasonably competitive spreads or commission rates, the Adviser is authorized to consider as a factor in the selection of any broker-dealer firm with whom portfolio orders may be placed the fact that such firm has sold or is selling shares of the Trust or of other investment companies sponsored by the Adviser. This policy is not inconsistent with a rule of the National Association of Securities Dealers, Inc. ("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. Municipal obligations considered as investments for the Trust may also be appropriate for other investment accounts managed by the Adviser or its affiliates. Whenever decisions are made to buy or sell B-12 47 securities by the Trust and one or more of such other accounts simultaneously, the Adviser 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 Trust 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 the Adviser 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 Trust from time to time, it is the opinion of the Trustees of the Trust that the benefits from the Adviser's organization outweigh any disadvantage that may arise from exposure to simultaneous transactions. TAXES The Trust has elected to be, and intends to qualify for treatment each year, as a RIC under the Code. Accordingly, the Trust intends to satisfy certain requirements relating to sources of its income and diversification of its assets and to distribute substantially all of its net investment income (including tax- exempt income) and net capital gains in accordance with the timing requirements imposed by the Code, so as to maintain its RIC status. By doing so, the Trust will avoid any federal income tax on any income and gains it distributes to its shareholders. If the Trust failed to qualify as a RIC for any taxable year, it would be taxed on the full amount of its taxable income for that year without being able to deduct the distributions it makes to its shareholders and the shareholders would treat all distributions, including those that otherwise would qualify as "exempt-interest dividends" (described below), as dividends (that is, ordinary income) to the extent of the Trusts' earnings and profits. To avoid incurring a federal excise tax obligation, the Trust must distribute (or be deemed to have distributed) each calendar year (i) at least 98% of its ordinary income (not including tax-exempt income) for that year, (ii) at least 98% of its capital gain net income (which is the excess of its realized capital gains over its realized capital losses), generally computed on the basis of the one-year period ending on October 31 of that year, after reduction by any available capital loss carryforwards and (iii) 100% of certain other amounts. Under current law, provided that the Trust qualifies as a RIC, it should not be liable for any income, corporate excise or franchise tax in the Commonwealth of Massachusetts. The Trust's investment in zero coupon and certain other securities will cause it to realize income prior to the receipt of cash payments with respect to these securities. The Trust may be required to liquidate securities that it might otherwise have continued to hold in order to generate cash to enable it to distribute that income to Trust shareholders and thereby remain qualified for treatment as a RIC and avoid imposition of the excise tax described above. Investments in lower-rated or unrated securities may present special tax issues for the Trust to the extent that the issuers of these securities default on their obligations pertaining thereto. The federal tax law is not entirely clear regarding the consequences of the Trust's taking certain positions in connection with ownership of distressed securities. For example, there is uncertainty regarding: (i) when the Trust may or must cease to accrue interest, original issue discount, or market discount on these securities; (ii) when and to what extent deductions may be taken for bad debts or worthless securities; (iii) how payments received on obligations in default should be allocated between principal and income; and (iv) whether exchanges of debt obligations in a workout context are taxable. Distributions by the Trust of net tax-exempt interest income that are properly designated as "exempt-interest dividends" may be treated by shareholders as interest excludable from gross income under Section 103(a) of the Code. For the Trust to be able to pay exempt-interest dividends, the Trust must, and intends to, satisfy the requirement that, at the close of each quarter of its taxable year, at least 50% of the value of its total assets consists of obligations the interest on which is exempt from regular federal income tax under B-13 48 Code Section 103(a). The portion of exempt-interest dividends attributable to interest on certain municipal obligations is treated as a tax preference item for purposes of the AMT. Shareholders are required to report tax-exempt interest dividends on their federal income tax returns. If the Trust issues preferred shares, the Trust will designate distributions made to holders of Shares and to holders of those preferred shares in accordance with each class's proportionate share of each item of Trust income (such as tax-exempt interest, net capital gains and other taxable income). A portion of exempt-interest dividends paid by the Trust will not be tax-exempt to any shareholder who is a "substantial user" of the facilities financed by tax-exempt obligations held by the Trust or "related persons" of such substantial users. Any recognized gain or other income attributable to market discount on long-term tax-exempt municipal obligations (i.e., obligations with a term of more than one year) other than, in general, at their original issue, is taxable as ordinary income. Such an obligation is generally treated as acquired at a market discount if purchased after 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. 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 certain types of municipal obligations, and it can be expected that similar proposals may be introduced in the future. If any such proposals were enacted, the availability of municipal obligations for investment by the Trust and the value of the securities it held may be affected. The Trust may realize some capital gains (and/or losses) as a result of market transactions, including sales of portfolio securities and rights to when-issued securities and options and futures transactions. The Trust may also realize taxable income from certain short-term taxable obligations, securities loans, a portion of discount with respect to certain stripped municipal obligations or their stripped coupons, and certain realized gains or income attributable to accrued market discount. Any distributions by the Trust of those capital gains or taxable income would be taxable to its shareholders. However, it is expected that such amounts, if any, would normally be insubstantial in relation to the tax-exempt interest earned by the Trust. Certain distributions declared in October, November or December and paid the following January may be taxed to shareholders as if received on December 31 of the year in which they are declared. The Trust's transactions in options and futures contracts will be subject to special tax rules that may affect the amount, timing and character of Trust distributions to shareholders. For example, certain positions held by the Trust on the last business day of each taxable year will be "marked to market" (i.e., treated as if closed out on that day), and any resulting gain or loss (in addition to gain or loss from actual dispositions of such positions) will generally be treated as 60% long-term and 40% short-term capital gain or loss. Certain positions held by the Trust that substantially diminish the Trust's risk of loss with respect to other positions in its portfolio may constitute "straddles," which are subject to tax rules that may cause deferral of Trust losses, adjustments in the holding period of portfolio securities, and conversion of short-term capital losses into long-term capital losses. The Trust may have to limit its activities in options and futures contracts in order to enable it to maintain its RIC status. Any loss realized upon the sale or exchange of Shares held by a Shareholder for six months or less will be disallowed to the extent the shareholder has received exempt-interest dividends with respect to those shares, and any such loss that exceeds the disallowed amount will be treated as a long-term capital loss to the extent of any distribution of net capital gain with respect to those shares. In addition, a loss realized on a sale of Shares will be disallowed to the extent the shareholder acquires other Shares (whether through the reinvestment of distributions or otherwise) within the period beginning 30 days before the sale and ending 30 days after the sale. Taxable dividends (including capital gain dividends) payable by the Trust to individuals and certain other non-corporate shareholders who have not provided the Trust with their correct taxpayer identification number B-14 49 ("TIN") and certain certifications required by the Internal Revenue Service ("IRS"), as well as shareholders with respect to whom the Trust has received certain notifications from the IRS are subject to "backup" withholding of federal income tax at a rate of 31%. An individual's TIN is generally his or her social security number. The Trust is not appropriate for non-U.S. investors or as a retirement plan investment. State and Local Taxes. 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. Shareholders of the Trust may be exempt from state and local taxes on distributions of tax-exempt interest income derived from obligations of the state and/or municipalities of the state in which they are resident, but taxable generally on income derived from obligations of other jurisdictions. The Trust will report annually to shareholders the percentages representing the proportionate ratio of its net tax-exempt income earned in each state. The foregoing discussion does not address the special tax rules applicable to certain classes of investors, such as insurance companies and financial institutions. Shareholders should consult their own tax advisers with respect to special tax rules that may apply in their particular situations, as well as the state or local tax consequences of investing in the Trust. OTHER INFORMATION The Trust is an organization of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, Shareholders of such a trust may, in certain circumstances, be held personally liable as partners for the obligations of the trust. The Declaration of Trust contains an express disclaimer of Shareholder liability in connection with the Trust property or the acts, obligations or affairs of the Trust. The Declaration of Trust also provides for indemnification out of the Trust property of any Shareholder held personally liable for the claims and liabilities to which a Shareholder may become subject by reason of being or having been a Shareholder. Thus, the risk of a Shareholder incurring financial loss on account of Shareholder liability is limited to circumstances in which the Trust itself is unable to meet its obligations. The Trust believes the risk of any Shareholder incurring any liability for the obligations of the Trust is remote. The Declaration of Trust provides that the Trustees will not be liable for errors of judgment or mistakes of fact or law; but nothing in the Declaration of Trust protects a Trustee against any liability to the Trust or its shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office. Voting rights are not cumulative, which means that the holders of more than 50% of the shares voting for the election of Trustees can elect 100% of the Trustees and, in such event, the holders of the remaining less than 50% of the shares voting on the matter will not be able to elect any Trustees. The Declaration of Trust provides that no person shall serve as a Trustee if shareholders holding two-thirds of the outstanding shares have removed him from that office either by a written declaration filed with the Trust's custodian or by votes cast at a meeting called for that purpose. The Declaration of Trust further provides that the Trustees of the Trust shall promptly call a meeting of the shareholders for the purpose of voting upon a question of removal of any such Trustee or Trustees when requested in writing so to do by the record holders of not less than 10 per centum of the outstanding shares. The Trust's Prospectus and this Statement of Additional Information do not contain all of the information set forth in the Registration Statement that the Fund has filed with the SEC. The complete Registration Statement may be obtained from the SEC upon payment of the fee prescribed by its Rules and Regulations. AUDITORS Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the independent accountants for the Trust, providing audit services, tax return preparation, and assistance and consultation with respect to the preparation of filings with the SEC. B-15 50 EATON VANCE MUNICIPAL INCOME TRUST STATEMENT OF ASSETS AND LIABILITIES JANUARY 21, 1999 ASSETS: Cash................................................... $100,000 Deferred initial offering expenses..................... 400,000 Receivable from Investment Adviser for expenses subject to expense reimbursement plan......................... 49,411 Receivable from Investment Adviser for expenses assumed by Investment Adviser................................. 589 -------- Total Assets...................................... $550,000 LIABILITIES: Initial offering expenses accrued...................... $400,000 Accrued expenses....................................... 50,000 -------- Total liabilities................................. $450,000 -------- Net assets applicable to 6,666.67 common shares of beneficial interest issued and outstanding................ $100,000 -------- NET ASSET VALUE AND OFFERING PRICE PER SHARE................ $ 15.00 --------
NOTE TO FINANCIAL STATEMENT Eaton Vance Municipal Income Trust was formed under an Agreement and Declaration of Trust dated December 10, 1998 and has been inactive since that date except for matters relating to its organization and registration as an investment company under the Investment Company Act of 1940 and the sale of 6,666.67 shares of its beneficial interest to Eaton Vance Management, the Fund's administrator. The initial offering expenses, including federal and state registration and qualification fees, will be deducted from net proceeds, and will not exceed $0.03 per share, as Eaton Vance Management or an affiliate will pay any such expenses in excess of $0.03 per share. The initial offering expenses reflected above assume the initial sale of 13,333,333.33 shares. B-16 51 EATON VANCE MUNICIPAL INCOME TRUST STATEMENT OF OPERATIONS FOR THE PERIOD FROM THE DATE OF ORGANIZATION DECEMBER 10, 1998 TO JANUARY 21, 1999 INCOME:..................................................... $ 0 -------- EXPENSES: Organization expenses..................................... $ 50,000 -------- Total Expenses.................................... $ 50,000 -------- Less: Preliminary reduction of expenses subject to expense reimbursement plan..................................... $(49,411) Assumption of expenses by Investment Adviser.............. $ (589) -------- Net Expenses................................................ $ 0 -------- Net Income.................................................. $ 0 --------
NOTE OF FINANCIAL STATEMENT Eaton Vance Management, the Trust's administrator, has agreed to bear all ordinary and organizational expenses of the Trust that exceed 5% of average weekly net assets (taking into account the deduction of any preferred shares and related expenses) for the Trust's first fiscal year. In return for this arrangement, the Trust may reimburse Eaton Vance over the first year of operations for organizational expenses of the Trust initially borne by the administrator. In addition, for the period from the date of organization, December 10, 1998, to January 21, 1999, Eaton Vance has agreed to voluntarily assume any expenses not covered by the expense reimbursement plan. B-17 52 INDEPENDENT AUDITORS' REPORT To the Trustees and Shareholder of Eaton Vance Municipal Income Trust: We have audited the accompanying statement of assets and liabilities of Eaton Vance Municipal Income Trust (the "Fund") as of January 21, 1999 and the related statement of operations for the period from the date of organization December 10, 1998, to January 21, 1999. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 audit provides a reasonable basis for our opinion. In our opinion, such financial statements referred to above presents fairly, in all material respects, the financial position of Eaton Vance Municipal Income Trust as of January 21, 1999, and the results of its operations for the stated period, in conformity with generally accepted accounting principles. Boston, Massachusetts January 22, 1999 B-18 53 APPENDIX A 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 fluctuation 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 the 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. - --------------- * The ratings indicated herein are believed to be the most recent ratings available at the date of this SAI 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. B-19 54 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 through B in its municipal bond rating system. 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 effecting 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 VMIG1, 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 VMIG1 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 RATINGS GROUP INVESTMENT GRADE AAA -- Debt rated AAA has the highest rating assigned by S&P. 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 exhibit 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. B-20 55 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 which 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 S&P 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. p -- 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 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 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. B-21 56 MUNICIPAL NOTES S&P 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 -- Strong capacity to pay principal and interest. Those issues determined to possess very strong 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 IBCA 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. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. 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. B-22 57 C -- Bonds are in imminent default in payment of interest or principal. DDD, DD, and D -- Bonds are in default on 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 generally 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 Strong 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 could cause these securities to be rated below investment grade. * * * * * * * * Notes -- Bonds which are unrated expose 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 Trust is dependent on the Investment Adviser's judgment, analysis and experience in the evaluation of such bonds. 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. B-23 58 APPENDIX B 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 equivalent to those of tax-exempt bonds yielding from 4% to 6% under the regular federal income tax law and tax rates applicable to individuals for 1999.
(TAXABLE INCOME*) MARGINAL --------------------------------- INCOME A FEDERAL TAX EXEMPT YIELD OF: SINGLE RETURN JOINT RETURN TAX BRACKET 4% 4.5% 5% 5.5% 6% ------------- ------------ ----------- --------------------------------------------- IS EQUIVALENT TO A FULLY TAXABLE YIELD OF: --------------------------------------------- Up to $ 25,750 Up to $ 43,050 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% $ 25,751 - $62,450 $ 43,051 - $104,050 28.00 5.56 6.25 6.94 7.64 8.33 $ 62,451 - $130,250 $104,051 - $158,550 31.00 5.80 6.52 7.25 7.97 8.70 $130,251 - $283,150 $158,551 - $283,150 36.00 6.25 7.03 7.81 8.59 9.38 Over $283,150 Over $283,150 39.60 6.62 7.45 8.28 9.11 9.93
- --------------- * Net amount subject to federal personal income tax after deductions and exemptions. The above indicated federal income tax brackets do not take into account the effect of a reduction in the deductibility of itemized deductions for individual taxpayers with adjusted gross income in excess of $126,600. The tax brackets also do not show the effects of phaseout of personal exemptions for single filers with adjusted gross income in excess of $126,600 and joint filers with adjusted gross income in excess of $189,950. The effective tax brackets and equivalent taxable yields of those taxpayers will be higher than those indicated above. Yields shown are for illustration purposes only and are not meant to represent the Trust's actual yield. No assurance can be given that the Trust will achieve any specific tax-exempt yield. While it is expected that the Trust will invest principally in obligations the interest from which is exempt from the regular federal income tax, other income received by the Trust may be taxable. The table does not take into account state or local taxes, if any, payable on Trust distributions. It should also be noted that the interest earned on certain "private activity bonds", while exempt from the regular federal income tax, is treated as a tax preference item which could subject the recipient to the AMT. The illustrations assume that the AMT 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 Statement of Additional Information. 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. B-24 59 APPENDIX C U.S. TERRITORY INFORMATION PUERTO RICO, THE U.S. VIRGIN ISLANDS AND GUAM Puerto Rico. Puerto Rico has a diversified economy dominated by the manufacturing and service sectors. The North American Free Trade Agreement ("NAFTA"), which became effective January 1, 1994, has led to loss of lower wage jobs such as textiles, but economic growth in other areas, particularly the high technology area has compensated for that loss. The Commonwealth of Puerto Rico differs from the states in its relationship with the federal government. Most federal taxes, except those such as social security taxes that are imposed by mutual consent, are not levied in Puerto Rico. However, in conjunction with the 1993 U.S. budget plan, Section 936 of the Code was amended and provided for two alternative limitations to the Section 936 credit. The first option limited the credit against such income to 40% of the credit allowable under then current law, with a five year phase-in period starting at 60% of the allowable credit. The second option was a wage and depreciation based credit. Additional amendments to Section 936 in 1996 imposed caps on these credits, beginning in 1998 for the first option and beginning in 2002 for the second option. More importantly, the 1996 amendments eliminated both options for taxable years beginning in 2006. The eventual elimination of tax benefits to those U.S. companies with operations in Puerto Rico may lead to slower growth in the future. There can be no assurance that this will not lead to a weakened economy, a lower rating on Puerto Rico's debt or lower prices for Puerto Rican bonds that may be held by the Portfolio in the long-term. Puerto Ricans have periodically considered conversion to statehood and such a vote is likely again in the future. The statehood proposal was again defeated in December, 1998. The U.S. Virgin Islands. The United States Virgin Islands (USVI) is heavily reliant on the tourism industry, with roughly 43% of non-agricultural employment in tourist-related trade and services. The tourism industry is economically sensitive and would likely be adversely affected by a recession in either the United States or Europe. An important component of the USVI revenue base is the federal excise tax on rum exports. Tax revenues rebated by the federal government to the USVI provide the primary security of many outstanding USVI bonds. Since more than 90% of the rum distilled in the USVI is distilled at one plant, any interruption in its operations (as occurred after Hurricane Hugo in 1989) would adversely affect these revenues. Consequently, there can be no assurance that rum exports to the United States and the rebate of tax revenues to the USVI will continue at their present levels. The preferential tariff treatment the USVI rum industry currently enjoys could be reduced under NAFTA. Increased competition from Mexican rum producers could reduce USVI rum imported to the U.S., decreasing excise tax revenues generated. The USVI is periodically hit by hurricanes. Several hurricanes have caused extensive damage, which has had a negative impact on revenue collections. There is currently no rated, unenhanced Virgin Islands debt outstanding (although there is unrated debt outstanding). Guam. The U.S. military is a key component of Guam's economy. The federal government directly comprises more than 10% of the employment base, with a substantial component of the service sector to support these personnel. The Naval Air Station, one of several U.S. military facilities on the island, has been slated for closure by the Defense Base Closure and Realignment Committee; however, the administration plans to use these facilities to expand the Island's commercial airport. Guam is also heavily reliant on tourists, particularly the Japanese. Guam's general obligation debt is rated BBB by S&P with a negative outlook. B-25 60 EATON VANCE MUNICIPAL INCOME TRUST STATEMENT OF ADDITIONAL INFORMATION JANUARY 26, 1999 - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR Eaton Vance Management 24 Federal Street Boston, MA 02110 CUSTODIAN Investors Bank & Trust Company 200 Clarendon Street Boston, MA 02116 TRANSFER AGENT First Data Investor Services Group P.O. Box 5123 Westborough, MA 01581-5123 (800) 262-1122 INDEPENDENT ACCOUNTANTS Deloitte & Touche LLP 125 Summer Street Boston, MA 02110 CE-MITSAI 61 EATON VANCE MUNICIPAL INCOME TRUST PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (1) FINANCIAL STATEMENTS: INCLUDED IN PART A: Not Applicable INCLUDED IN PART B: Statement of Assets and Liabilities as of January 21, 1999 Statement of Operations for the period from the date of organization, December 10, 1998, to January 21, 1999 Independent Auditors' Report (2) EXHIBITS: (a) Agreement and Declaration of Trust dated December 10, 1998 is incorporated herein by reference to the Registrant's initial Registration Statement on Form N-2 (File Nos. 333-68719 and 811-09141) as to the Registrant's common shares of beneficial interest ("Common Shares") filed with the Securities and Exchange Commission (the "Commission") on December 11, 1998 ("Initial Common Shares Registration Statement"). (b)(1) By-Laws are incorporated herein by reference to the Trust's Initial Common Shares Registration Statement. (2)Form of Amendment No. 1 to the By-Laws is incorporated herein by reference to the Registrant's initial Registration Statement on Form N-2 (File Nos. 333-70725 and 811-09141) as to the Registrant's auction preferred shares of beneficial interest ("Auction Preferred Shares") filed with the Commission on January 15, 1999. (c) Not applicable. (d)(1) Specimen Certificate representing the Registrant's Common Shares filed herewith. (2)Form of Specimen Certificate representing the Registrant's Auction Preferred Shares to be filed by amendment. (e) Dividend Reinvestment Plan filed herewith. (f) Not applicable. (g) Investment Advisory Agreement dated December 21, 1998 filed herewith. (h) (1) Form of Underwriting Agreement as to the offering of the Registrant's Common Shares dated as of January __, 1999 filed herewith. 62 (2)Master Agreement Among Underwriters as to the offering of the Registrant's Common Shares filed herewith. (3)Master Selected Dealers as to the offering of the Registrant's Common Shares filed herewith. (4)Form of Purchase Agreement as to the offering of the Registrant's Auction Preferred Shares to be filed by amendment. (i) The Commission has granted the Registrant an exemptive order that permits the Registrant to enter into deferred compensation arrangements with its independent Trustees. See In the Matter of Capital Exchange Fund, Inc., Release No. IC-20671 (November 1, 1994). (j) Custodian Agreement dated December 21, 1998 filed herewith. (k)(1) Transfer Agency and Services Agreement dated as of December 21, 1998 filed herewith. (2) Administration Agreement dated December 21, 1998 filed herewith. (3) Form of Shareholder Servicing Agreement dated as of January 29, 1999 filed herewith. (4) Form of Auction Agent Agreement between the Registrant and Bankers Trust Co. as to the Registrant's Auction Preferred Shares to be filed by amendment. (5) Form of Broker-Dealer Agreement as to the Registrant's Auction Preferred Shares to be filed by amendment. (6) Form of Letter of Representations as to the Registrant's Auction Preferred Shares to be filed by amendment. (l)(1) Opinion and consent of Kirkpatrick & Lockhart LLP as to Registrant's Common Shares filed herewith. (2) Opinion and consent of Counsel as to Registrant's Auction Preferred Shares to be filed by amendment. (m) Not applicable. (n)(1) Consent of Independent Auditors' dated January 22, 1999 filed herewith. (2) Consent of Standard & Poor's as to Registrant's Auction Preferred Shares to be filed by amendment. (o) Not applicable. (p) Letter Agreement with Eaton Vance Management dated January 21, 1999 filed herewith. (q) Not applicable. (r) Financial Data Schedule filed herewith. (s)(1) Power of Attorney dated December 21, 1998 filed herewith. (2) Power of Attorney dated January 15, 1999 filed herewith. ITEM 25. MARKETING ARRANGEMENTS See the Underwriting Agreement filed as Exhibit (h)(1). 2 63 ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the approximate expenses incurred in connection with the offerings of Registrant (some of which will be borne by the Investment Adviser): Registration fees.................................... $ 63,801 American Stock Exchange Listing Fee.................. $123,100 National Association of Securities Dealers, Inc. Fees $ 23,450 Printing (other than stock certificates)............. $265,000 Engraving and printing stock certificates............ $ 19,000 Accounting fees and expenses......................... $ 5,000 Legal fees and expenses.............................. $ 50,000 -------- Total.............................................. $549,351 ========
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL None. ITEM 28. NUMBER OF HOLDERS OF SECURITIES
(1) (2) TITLE OF CLASS NUMBER OF RECORD HOLDERS Auction Preferred Shares of beneficial interest, 0 par value $.01 per share as of January 25, 1999 Common Shares of beneficial interest, 1 par value $.01 per share as of January 25, 1999
ITEM 29. INDEMNIFICATION The Registrant's By-Laws and Form of Amendment No. 1 incorporated herein, the Underwriting Agreement filed herewith and the Purchase Agreement to be filed contain provisions limiting the liability, and providing for indemnification, of the Trustees and officers under certain circumstances. Registrant's Trustees and officers are insured under a standard investment company errors and omissions insurance policy covering loss incurred by reason of negligent errors and omissions committed in their capacities as such. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant and the Adviser and any underwriter to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in such Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer, or controlling person or the Registrant and the Underwriters in connection with the successful defense of any action, suit or proceeding) is asserted against the Registrant by such trustee, officer or controlling person or the Underwriter in connection with the Common Shares being registered, the Registrant will, unless in the 3 64 opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in such Act and will be governed by the final adjudication of such issue. ITEM 30. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER Reference is made to: (i) the information set forth under the caption "Investment Advisory and Other Services" in the Statement of Additional Information; (ii) the Eaton Vance Corp. 10-K filed under the Securities Exchange Act of 1934 (File No. 1-8100); and (iii) the Form ADV of Eaton Vance Management (File No. 801-15930) filed with the Commission, all of which are incorporated herein by reference. ITEM 31. 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, 200 Clarendon Street, Boston, MA 02116, and its transfer agent, First Data Investor Services Group, 4400 Computer Drive, Westborough, MA 01581-5120, 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. 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 32. MANAGEMENT SERVICES None. ITEM 33. UNDERTAKINGS (1) Registrant undertakes to suspend offering of its Common Shares until it amends its prospectus if (a) subsequent to the effective date of its Registration Statement, the net asset value declines more than 10 percent from its net asset value as of the effective date of the Registration Statement, or (b) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus. (2) Not applicable (3) Not applicable (4) Not applicable (5) (a) For purpose of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 497(h) under the Securities Act of 1933, shall be deemed to be part of this Registration Statement as of the time it was declared effective. (b) For the purpose of determining any liability under the Securities Act of 1933, each post- 4 65 effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be initial bona fide offering thereof. (6) The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, its Statement of Additional Information. 5 66 NOTICE A copy of the Agreement and Declaration of Trust of Eaton Vance Municipal Income Trust is on file with the Secretary of State of the Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually, but are binding only upon the assets and property of the Registrant. 6 67 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant 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 Commonwealth of Massachusetts, on the 25th day of January, 1999. EATON VANCE MUNICIPAL INCOME TRUST By: Thomas J. Fetter* -------------------------------- Thomas J. Fetter, President Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- President (Chief Executive Thomas J. Fetter* Officer) January 25, 1999 - ------------------------ Thomas J. Fetter Treasurer (Principal James L. O'Connor* Financial and Accounting January 25, 1999 - ------------------------ James L. O'Connor Officer) Jessica M. Bibliowicz* Trustee January 25, 1999 - ------------------------ Jessica M. Bibliowicz Donald R. Dwight* Trustee January 25, 1999 - ------------------------ Donald R. Dwight James B. Hawkes* Trustee January 25, 1999 - ------------------------ James B. Hawkes Samuel L. Hayes, III* Trustee January 25, 1999 - ------------------------ Samuel L. Hayes, III Norton H. Reamer* Trustee January 25, 1999 - ------------------------ Norton H. Reamer Lynn A. Stout* Trustee January 25, 1999 - ------------------------ Lynn A. Stout Jack L. Treynor* Trustee January 25, 1999 - ------------------------ Jack L. Treynor *By: /s/ Alan R. Dynner ----------------------------------- Alan R. Dynner (As attorney-in-fact)
7 68 EXHIBIT INDEX
EXHIBITS DESCRIPTION - -------- ----------- (d)(1) Specimen Certificate representing Registrant's Common Shares filed herewith. (e) Dividend Reinvestment Plan filed herewith. (g) Investment Advisory Agreement dated December 21, 1998 filed herewith. (h)(1) Form of Underwriting Agreement as to the offering of the Registrant's Common Shares dated as of January __, 1999 filed herewith. (h)(2) Master Agreement Among Underwriters as to the offering of the Registrant's Common Shares filed herewith. (h)(3) Master Selected Dealers as to the offering of the Registrant's Common Shares filed herewith. (j) Custodian Agreement dated December 21, 1998 filed herewith. (k)(1) Transfer Agency and Services Agreement dated as of December 21, 1998 filed herewith. (k)(2) Administration Agreement dated December 21, 1998 filed herewith. (k)(3) Form of Shareholder Servicing Agreement dated as of January 29, 1999 filed herewith. (l)(1) Opinion and consent of Kirkpatrick & Lockhart LLP as to the Registrant's Common Shares filed herewith. (n)(1) Consent of Independent Auditors dated January 22, 1999 filed herewith. (p) Letter Agreement with Eaton Vance Management dated January 21, 1999 filed herewith. (r) Financial Data Schedule filed herewith. (s)(1) Power of Attorney dated December 21, 1998 filed herewith. (s)(2) Power of Attorney dated January 15, 1999 filed herewith.
8 EX-99.2(D)(1) 2 SPECIMEN CERTIFICATE 1 EXHIBIT 99.(d)(1) $.01 PAR VALUE COMMON SHARES OF BENEFICIAL INTEREST EATON VANCE MUNICIPAL INCOME TRUST ORGANIZED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS NUMBER SHARES CUSIP 27826U 10 8 SEE REVERSE FOR THIS CERTIFICATE IS TRANSFERABLE IN CERTAIN DEFINITIONS BOSTON, MA OR IN NEW YORK, NY THIS IS TO CERTIFY THAT IS THE OWNER OF COMMON SHARES OF BENEFICIAL INTEREST OF Eaton Vance Municipal Income Trust, a business trust established in accordance with the laws of the Commonwealth of Massachusetts under and subject to the provisions of an Agreement and Declaration of Trust executed as of the 10th day of December, 1998, as the same may be amended, and restated from time to time, and filed with the Secretary of the Commonwealth of Massachusetts. The common shares of said Trust evidenced by this certificate are issued under and subject to, and the rights and preferences of the holders hereof are subject to, said Declaration of Trust, and each common share of said Trust represents an equal proportionate interest in said Trust with each other outstanding common share of said Trust. The interest represented hereby is transferable only on the books of said Trust by the holder hereof in person or by duly authorized attorney upon surrender of this certificate, properly endorsed. This certificate is not valid until countersigned by the Transfer Agent and Registrar. WITNESS the facsimile signatures of the President and the Secretary of said Trust. ALAN R. DYNNER, SECRETARY THOMAS J. FETTER, PRESIDENT COUNTERSIGNED AND REGISTERED: FIRST DATA INVESTOR SERVICES GROUP, INC. BY TRANSFER AGENT AND REGISTRAR AUTHORIZED SIGNATURE 2 EXPLANATION OF ABBREVIATIONS The following abbreviations, when used in the form of ownership of the face of this certificate shall be construed as though they were written out in full according to applicable laws or regulations. Abbreviations in addition to those appearing below may be used. ABBREVIATION EQUIVALENT ABBREVIATION EQUIVALENT - ------------ ---------- ------------ ---------- JTTEN As joint tenants, TEN IN COM As tenants in common with right of TEN BY ENT As tenants by the survivorship and UNIF GIFT MIN ACT entireties Uniform Gift not as tenants to Minors in common ABBREVIATION EQUIVALENT ABBREVIATION EQUIVALENT - ------------ ---------- ------------ ---------- ADM Administrator(s) FDN Foundation Administratix PL Public Law AGMT Agreement TR (As) trustee(s), for, of CUST Custodian for UA Under Agreement EST Estate, Of estate of UW Under Will of, Of will of, EX Executor(s), Executrix Under last will & testament FBO For the benefit of Additional abbreviations may also be used though not in the above list. ================================================================================ TRANSFER FORM PLEASE INSERT SOCIAL SECURITY FOR VALUE RECEIVED______________ hereby sell, OR OTHER IDENTIFYING NUMBER (I/we) OF ASSIGNEE assign and transfer unto .......................... ................................................ Please print or typewrite name and address including postal zip code of assignee ................................................................................ ................................................................................ ..........................................................................Shares of the Common Shares of Beneficial interest represented by this Certificate and do hereby irrevocably constitute and appoint .......................................................................Attorney, to transfer said shares on the books of the Trust with full power of substitution in the premises. Dated: ............................................................ SIGNATURE GUARANTEED BY Signature(s)................................................ (The signature to this assignment must correspond with the name as written upon the face of this Certificate in every particular, without alteration or enlargement or any change whatsoever. If more than one owner, all must sign.) .................................... (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 an SEC regulation and acceptable to the Transfer Agent). 3 IMPORTANT NOTICE: When you sign your name to the Transfer Form without filling in the name of your "Assignee" this stock certificate becomes fully negotiable, similar to a check endorsed in blank. Therefore, to safeguard a signed certificate, it is recommended that you fill in the name of the new owner in the "Assignee" space. Alternatively, instead of using this Transfer Form, you may sign a separate "stock power" form and then mail the unsigned stock certificate and the signed "stock power" in separate envelopes. For added protection, use registered mail for a stock certificate. ================================================================================ REDEMPTION FORM The undersigned hereby tenders to the Trust the within Certificate properly endorsed with any requisite guarantee of signature and supporting papers and requests the redemption of ..........................................................................Shares (Indicate the number of shares to be redeemed. A new certificate will be issued for any unredeemed balance.) of the Common Shares of Beneficial Interest represented by the within Certificate in accordance with the terms of the Declaration of Trust of the Trust. 4 ================================================================================ Dated: ................. ............................................................ SIGNATURE Signature(s)................................................ GUARANTEED BY (The signature to this request for redemption must correspond with the name as written upon the face of this Certificate in every particular, without alteration or enlargement or any change whatsoever. If more than one owner, all must sign.) ................................. (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 an SEC regulation and acceptable to the Transfer Agent). ................................. Address ................................. EX-99.2(E) 3 DIVIDEND REINVESTMENT PLAN 1 EXHIBIT 99.(e) EATON VANCE MUNICIPAL INCOME TRUSTS TERMS AND CONDITIONS OF DIVIDEND REINVESTMENT PLAN Holders of common shares (the "Shares") of an Eaton Vance Municipal Income Trust (a "Trust") participating (the "Participants") in its Dividend Reinvestment Plan (the "Plan") are advised as follows: 1. THE PLAN AGENT. First Data Investor Services Group (the "Agent") will act as Agent for each Participant. The Agent will open an account for each Participant under the Plan in the same name as his or her outstanding Shares are registered. 2. CASH OPTION. Each Trust will declare its income dividends and capital gains distributions ("Distributions") payable in Shares, or, at the option of Shareholders, in cash. Therefore, each Participant not choosing cash distributions will receive Shares. 3. MARKET PREMIUM ISSUANCES. If on the payment date for a Distribution, the net asset value per Share is equal to or less than the market price per Share plus estimated brokerage commissions, the Agent shall receive newly issued Shares, including fractions, from a Trust for each Participant's account. The number of additional shares to be credited shall be determined by dividing the dollar amount of the Distribution by the greater of the net asset value per Share on the payment date, or 95% of the then current market price per Share on the payment date. 4. MARKET DISCOUNT PURCHASES. If the net asset value per Share exceeds the market price plus estimated brokerage commissions on the payment date for a Distribution, the Agent (or a broker-dealer selected by the Agent) shall endeavor, for a purchase period of 30 days, to apply the amount of such Distribution on each Participant's Shares (less their PRO RATA share of brokerage commissions incurred) to purchase Shares on the open market. The average price (including brokerage commissions) of all Shares purchased by the Agent as Agent shall be the price per Share allocable to each Participant. If, at the close of business on any day during the purchase period on which net asset value per Share is calculated such net asset value equals or is less than the market price per Share plus estimated brokerage commissions, the Agent will cease open-market purchases, and the uninvested portion of such Distribution shall be filled through the issuance of new Shares from a Trust at the price set forth in paragraph 3 above. Open-market purchases may be made on any securities exchange where Shares are traded, in the over-the-counter market or in negotiated transactions, and may be on such terms as to price, delivery and otherwise as the Agent shall determine. 2 5. VALUATION. The market price of Shares on a particular date shall be the last sales price on the Exchange where the Shares are listed on that date, or, if there is no sale on such Exchange on that date, then the mean between the closing bid and asked quotations on such Exchange on such date. The net asset value per Share on a particular date shall be the amount most recently calculated by or on behalf of a Trust as required by law. 6. LIABILITY OF AGENT. The Agent shall at all times act in good faith and agree to use its best efforts within reasonable limits to ensure the accuracy of all services performed under this Agreement and to comply with applicable law, but assumes no responsibility and shall not be liable for loss or damage due to errors unless such error is caused by the Agent's negligence, bad faith, or willful misconduct or that of its employees. Each Participant's uninvested funds held by the Agent will not bear interest. The Agent shall have no liability in connection with any inability to purchase Shares within the time provided, or with the timing of any purchases effected. The Agent shall have no responsibility for the value of Shares acquired. For the purpose of cash investments, the Agent may commingle Participants' funds (of the same Trust). 7. RECORDKEEPING. The Agent may hold each Participant's Shares acquired pursuant to the Plan together with the Shares of other shareholders of a Trust acquired pursuant to the Plan in noncertificated form in the Agent's name or that of the Agent's nominee. Upon a Participant's written request, the Agent will deliver to the Participant, without charge, a certificate or certificates for the full shares. Each Participant will be sent a confirmation by the Agent of each acquisition made for their account as soon as practicable but not later than 60 days after the date thereof. Although each Participant may from time to time have an undivided fractional interest (computed to three decimal places) in a share of a Trust, no certificates for a fractional share will be issued. Distributions on fractional shares will be credited to each Participant's account. In the event of termination of a Participant's account under the Plan, the Agent will adjust for any such undivided fractional interest in cash at the market value of Shares at the time of termination. Any share dividends or split shares distributed by a Trust on Shares held by the Agent for Participants will be credited to their accounts. In the event that a Trust makes available to its shareholders rights to purchase additional shares of other securities, the Shares held for each Participant under the Plan will be added to other shares held by the Participant in calculating the number of rights to be issued to each Participant. 8. PROXY MATERIALS. The Agent will forward to each Participant any proxy solicitation material; and will vote any shares so held for each Participant first in accordance with the instructions set forth on proxies returned by the Participant to a Trust, and then with respect to any proxies not returned by the Participant to a Trust in the same portion as the Agent votes proxies returned by the Participants to a Trust. 2 3 9. FEES. The Agent's service fee for handling Distributions will be paid by a Trust. Each Participant will be charged their PRO RATA share of brokerage commissions on all open-market purchases. If a Participant elects by written notice to the Agent to have the Agent sell part or all of his or her Shares and remit the proceeds, the Agent is authorized to deduct a $5.00 fee plus brokerage commissions from the proceeds. 10. TERMINATION IN THE PLAN. Each registered Participant may terminate his or her account under the Plan by notifying the Agent in writing at P.O. Box 8030, Boston, MA 02266-8030, or by telephone at 800-331-1710. Such termination will be effective with respect to a Distribution if the Participant's notice is received by the Agent at least ten days prior to the Distribution record date. The Plan may be terminated by the Agent or a Trust upon notice in writing mailed to each Participant at least 90 days prior to any record date for the payment of any Distribution. Upon any termination, the Agent will cause a certificate or certificates to be issued for the full shares held for each Participant under the Plan and cash adjustment for any fraction to be delivered to them without charge. 11. AMENDMENT OF THE PLAN. These terms and conditions may be amended by the Agent or a Trust at any time or times but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority, only by mailing to each Participant appropriate written notice at least 30 days prior to the effective date thereof. The amendment shall be deemed to be accepted by each Participant unless, prior to the effective date thereof, the Agent receives written notice of the termination of the Participant's account under the Plan. Any such amendment may include an appointment by the Agent of a successor Agent. 12. APPLICABLE LAW. These terms and conditions shall be governed by the laws of the Commonwealth of Massachusetts. 3 EX-99.2(G) 4 INVESTMENT ADVISORY AGREEMENT 1 EXHIBIT 99.(g) EATON VANCE MUNICIPAL INCOME TRUST INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 21st day of December, 1998, between Eaton Vance Municipal Income Trust, a Massachusetts business trust (the "Trust"), and Eaton Vance Management, a Massachusetts business trust (the "Adviser"). 1. DUTIES OF THE ADVISER. The Trust hereby employs the Adviser to act as investment adviser for and to manage the investment and reinvestment of the assets of the Trust and to administer its affairs, subject to the supervision of the Trustees of the Trust, for the period and on the terms set forth in this Agreement. The Adviser hereby accepts such employment, and undertakes to afford to the Trust the advice and assistance of the Adviser's organization in the choice of investments and in the purchase and sale of securities for the Trust and to furnish for the use of the Trust office space and all necessary office facilities, equipment and personnel for servicing the investments of the Trust and to pay the salaries and fees of all officers and Trustees of the Trust who are members of the Adviser's organization and all personnel of the Adviser performing services relating to research and investment activities. The Adviser shall for all purposes herein be deemed to be an independent contractor and shall, except as otherwise expressly provided or authorized, have no authority to act for or represent the Trust in any way or otherwise be deemed an agent of the Trust. The Adviser shall provide the Trust with such investment management and supervision as the Trust may from time to time consider necessary for the proper supervision of the Trust. As investment adviser to the Trust, the Adviser shall furnish continuously an investment program and shall determine from time to time what securities and other investments shall be acquired, disposed of or exchanged and what portion of the Trust's assets shall be held uninvested, subject always to the applicable restrictions of the Declaration of Trust, By-Laws and registration statement of the Trust. Should the Trustees of the Trust at any time, however, make any specific determination as to investment policy for the Trust and notify the Adviser thereof in writing, the Adviser shall be bound by such determination for the period, if any, specified in such notice or until similarly notified that such determination has been revoked. The Adviser shall take, on behalf of the Trust, all actions which it deems necessary or desirable to implement the investment policies of the Trust. The Adviser shall place all orders for the purchase or sale of portfolio securities for the account of the Trust either directly with the issuer or with brokers or dealers selected by the Adviser, and to that end the Adviser is authorized as the agent of the Trust to give instructions to the custodian of the Trust as to deliveries of securities and payments of cash for the account of the Trust. In connection with the selection of such brokers or dealers and the placing of such orders, the Adviser shall use its best efforts to seek to execute portfolio security transactions at prices which are advantageous to the Trust and (when a disclosed commission is being charged) at reasonably competitive commission rates. In selecting brokers or dealers qualified to execute a particular transaction, brokers or dealers may be selected who also 2 provide brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to the Adviser and the Adviser is expressly authorized to cause the Trust to pay any broker or dealer who provides such brokerage and research services a commission for executing a security transaction which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the Adviser determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the overall responsibilities which the Adviser and its affiliates have with respect to accounts over which they exercise investment discretion. Subject to the requirement set forth in the second sentence of this paragraph, the Adviser is authorized to consider, as a factor in the selection of any broker or dealer with whom purchase or sale orders may be placed, the fact that such broker or dealer has sold or is selling shares of any one or more investment companies sponsored by the Adviser or its affiliates. The Adviser shall not be responsible for providing certain special administrative services to the Trust under this Agreement. Eaton Vance Management, in its capacity as Administrator of the Trust, shall be responsible for providing such services to the Trust under the Trust's separate Administration Agreement. 2. COMPENSATION OF THE ADVISER. For the services, payments and facilities to be furnished hereunder by the Adviser, the Adviser shall be entitled to receive from the Trust compensation in an amount equal to .70% annually of the average weekly gross assets of the Trust. (Gross assets shall be calculated by deducting accrued liabilities of the Trust except the principal amount of any indebtedness for money borrowed, including debt securities issued by the Trust, and the amount of any outstanding preferred shares issued by the Trust. Accrued liabilities are expenses incurred in the normal course of operations.) Such compensation shall be paid monthly in arrears on the last business day of each month. The Trust's net assets shall be computed in accordance with the Declaration of Trust of the Trust and any applicable votes and determinations of the Trustees of the Trust. In case of initiation or termination of the Agreement during any month, the fee for that month shall be reduced proportionately on the basis of the number of calendar days during which the Agreement is in effect and the fee shall be computed upon the basis of the average gross assets for the business days the Agreement is so in effect for that month. The Adviser may, from time to time, waive all or a part of the above compensation. 3. ALLOCATION OF CHARGES AND EXPENSES. It is understood that the Trust will pay all expenses other than those expressly stated to be payable by the Adviser hereunder, which expenses payable by the Trust shall include, without implied limitation, (i) expenses of maintaining the Trust and continuing its existence, (ii) registration of the Trust under the Investment Company Act of 1940, (iii) commissions, spreads, fees and other expenses connected with the acquisition, holding and disposition of securities and other investments, (iv) auditing, accounting and legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses of listing shares of the Trust with a stock exchange, and expenses of issue, sale, repurchase and redemption (if any) of interests in the Trust, including expenses of conducting tender offers for the purpose of repurchasing Trust interests, (viii) expenses of registering and qualifying the Trust and its shares under federal and state securities laws and of preparing and filing registration statements and amendments for such purposes (ix) expenses of reports and notices to shareholders and of meetings of shareholders and proxy solicitations therefor, (x) expenses of reports to governmental -2- 3 officers and commissions, (xi) insurance expenses, (xii) association membership dues, (xiii) fees, expenses and disbursements of custodians and subcustodians for all services to the Trust (including without limitation safekeeping of funds, securities and other investments, keeping of books, accounts and records, and determination of net asset values), (xiv) fees, expenses and disbursements of transfer agents, dividend disbursing agents, shareholder servicing agents and registrars for all services to the Trust, (xv) expenses for servicing shareholder accounts, (xvi) any direct charges to shareholders approved by the Trustees of the Trust, (xvii) compensation and expenses of Trustees of the Trust who are not members of the Adviser's organization, (xviii) pricing and valuation services employed by the Trust, (xix) all expenses incurred in connection with leveraging of Trust's assets through a line of credit, or issuing and maintaining preferred shares, and (xx) such non-recurring items as may arise, including expenses incurred in connection with litigation, proceedings and claims and the obligation of the Trust to indemnify its Trustees, officers and shareholders with respect thereto. 4. OTHER INTERESTS. It is understood that Trustees and officers of the Trust and shareholders of the Trust are or may be or become interested in the Adviser as trustees, officers, employees, shareholders or otherwise and that trustees, officers and shareholders of the Adviser are or may be or become similarly interested in the Trust, and that the Adviser may be or become interested in the Trust as shareholders or otherwise. It is also understood that trustees, officers, employees and shareholders of the Adviser may be or become interested (as directors, trustees, officers, employees, shareholders or otherwise) in other companies or entities (including, without limitation, other investment companies) which the Adviser may organize, sponsor or acquire, or with which it may merge or consolidate, and which may include the words "Eaton Vance" or any combination thereof as part of their name, and that the Adviser or its subsidiaries or affiliates may enter into advisory or management agreements or other contracts or relationships with such other companies or entities. 5. LIMITATION OF LIABILITY OF THE ADVISER. The services of the Adviser to the Trust are not to be deemed to be exclusive, the Adviser being free to render services to others and engage in other business activities. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Adviser, the Adviser shall not be subject to liability to the Trust or to any shareholder the Trust for any act or omission in the course of, or connected with, rendering services hereunder or for any losses which may be sustained in the acquisition, holding or disposition of any interest in a Loan or of any security, investment or other asset. 6. SUB-INVESTMENT ADVISERS. The Adviser may employ one or more sub-investment advisers from time to time to perform such of the acts and services of the Adviser, including the selection of brokers or dealers to execute the Trust's portfolio security transactions, and upon such terms and conditions as may be agreed upon between the Adviser and such sub-investment adviser and approved by the Trustees of the Trust, all as permitted by the Investment Company Act of 1940. 7. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become effective upon the date of its execution, and, unless terminated as herein provided, shall remain in full force and effect through and including February 28, 2000 and shall continue in full force and effect indefinitely thereafter, but only so long as such continuance after February 28, 2000 is specifically approved at least annually (i) by the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities of the Trust and (ii) by the vote of a majority of those Trustees of the Trust who are not interested persons of the Adviser or the Trust cast in person at a meeting called for the purpose of voting on such approval. Either party hereto may, at any time on sixty (60) days' prior written notice to the other, terminate this Agreement without the payment of any penalty, by action of Trustees of the Trust or the trustees of the Adviser, as the case may be, and the Trust may, at any time upon such written notice to the Adviser, terminate this Agreement by vote of a majority of the outstanding voting securities of the Trust. This Agreement shall terminate automatically in the event of its assignment. -3- 4 8. AMENDMENTS OF THE AGREEMENT. This Agreement may be amended by a writing signed by both parties hereto, provided that no amendment to this Agreement shall be effective until approved (i) by the vote of a majority of those Trustees of the Trust who are not interested persons of the Adviser or the Trust cast in person at a meeting called for the purpose of voting on such approval, and (ii) by vote of a majority of the outstanding voting securities of the Trust. 9. LIMITATION OF LIABILITY. The Adviser expressly acknowledges the provision in the Declaration of Trust of the Trust limiting the personal liability of the Trustees, officers and shareholders of the Trust, and the Adviser hereby agrees that it shall have recourse to the Trust for payment of claims or obligations as between the Trust and the Adviser arising out of this Agreement and shall not seek satisfaction from any Trustee, officer or shareholders of the Trust. 10. USE OF THE NAME "EATON VANCE". The Adviser hereby consents to the use by the Trust of the name "Eaton Vance" as part of the Trust's name; provided, however, that such consent shall be conditioned upon the employment of the Adviser or one of its affiliates as the investment adviser of the Trust. The name "Eaton Vance" or any variation thereof may be used from time to time in other connections and for other purposes by the Adviser and its affiliates and other investment companies that have obtained consent to the use of the name "Eaton Vance". The Adviser shall have the right to require the Trust to cease using the name "Eaton Vance" as part of the Trust's name if the Trust ceases, for any reason, to employ the Adviser or one of its affiliates as the Trust's investment adviser. Future names adopted by the Trust for itself, insofar as such names include identifying words requiring the consent of the Adviser, shall be the property of the Adviser and shall be subject to the same terms and conditions. 11. CERTAIN DEFINITIONS. The terms "assignment" and "interested persons" when used herein shall have the respective meanings specified in the Investment Company Act of 1940 as now in effect or as hereafter amended subject, however, to such exemptions as may be granted by the Securities and Exchange Commission by any rule, regulation or order. The term "vote of a majority of the outstanding voting securities" shall mean the vote, at a meeting of shareholders, of the lesser of (a) 67 per centum or more of the shares of the Trust present or represented by proxy at the meeting if the shareholders of more than 50 per centum of the shares of the Trust are present or represented by proxy at the meeting, or (b) more than 50 per centum of the shares of the Trust. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written. EATON VANCE MICHIGAN MUNICIPAL INCOME TRUST By:/s/ Thomas J. Fetter ---------------------------------- President, and not Individually EATON VANCE MANAGEMENT By:/s/ Alan R. Dynner ---------------------------------- Vice President, and not Individually -4- EX-99.2(H)(1) 5 FORM OF UNDERWRITING AGREEMENT 1 EXHIBIT 99(h)(1) Form of Underwriting Agreement 2,666,667 SHARES* OF BENEFICIAL INTEREST EATON VANCE MUNICIPAL INCOME TRUST UNDERWRITING AGREEMENT January 26, 1999 PAINEWEBBER INCORPORATED A.G. EDWARDS & SONS, INC. PRUDENTIAL SECURITIES INCORPORATED SALOMON SMITH BARNEY INC. DAIN RAUSCHER WESSELS EVEREN SECURITIES, INC. as Representatives of the Several Underwriters named in Schedule 1 hereto c/o PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 Ladies and Gentlemen: Eaton Vance Municipal Income Trust, a Massachusetts business trust (the "Trust"), proposes to issue and sell to you and the other underwriters named in Schedule 1 hereto (the "Underwriters"), for whom you are acting as representatives (the "Representatives"), up to 2,666,667 shares of beneficial interest (the "Firm Shares"), par value $.01 per share (the "Shares of Beneficial Interest"). In addition, the Trust hereby grants to the Underwriters an option (the "Option") to purchase up to an additional 400,000 of its Shares (the "Option Shares") solely for the purpose of covering over-allotments. The Firm Shares and the Option Shares are referred to collectively herein as the "Shares." Eaton Vance Management, a Massachusetts business trust ("Eaton Vance" or the "Investment Adviser"), will act as the Trust's investment adviser pursuant to an Investment Advisory Agreement by and between the Trust and the Invest- - -------- * Plus an option to purchase, in the aggregate, up to 400,000 additional Shares to cover over-allotments. 2 ment Adviser, dated as of January 29, 1999 (the "Investment Advisory Agreement"). The Trust has engaged Eaton Vance to act as its administrator pursuant to an Administration Agreement, dated as of January 29, 1999. Investors Bank & Trust Company ("IBT") will act as the custodian (the "Custodian") of the Trust's cash and portfolio assets pursuant to a Custody Agreement, effective as of January 29, 1999 (the "Custody Agreement"). First Data Investor Services Group will act as the Trust's transfer agent and dividend disbursing agent (the "Transfer Agent") pursuant to a transfer agency agreement, dated as of January 29, 1999 (the "Transfer Agency Agreement"). In addition, Eaton Vance has retained PaineWebber Incorporated, which is also one of the Underwriters, to serve as the Trust's Shareholder Servicing Agent pursuant to a shareholder servicing agreement (the "Shareholder Servicing Agreement"), dated as of January 29, 1999. The Trust and the Investment Adviser each hereby confirms as follows their agreements with the Representatives and the several other Underwriters. 1. Sale and Purchase; Compensation (a) The Trust will issue and sell to each Underwriter, and each Underwriter will purchase from the Trust, the number of Firm Shares set forth opposite such Underwriter's name in Schedule 1 hereto, at the purchase price of $15.00 per Firm Share. (b) The Trust grants to the Underwriters the Option to purchase all or any part of the Option Shares for the same consideration per share as for the Firm Shares. The Option may be exercised only to cover over-allotments in the sales of the Firm Shares by the Underwriters. The number of Option Shares (adjusted by the Representatives to eliminate fractions) to be purchased by each Underwriter will be the same percentage of the aggregate number of Option Shares being sold as such Underwriter is obligated to purchase of the Firm Shares. Such Option may be exercised in whole or in part, only to cover over-allotments, at any time or from time to time on or before the 45th day after the date of this Underwriting Agreement, upon written or telefacsimile notice (the "Option Shares Notice") from the Representatives to the Trust no later than 12:00 noon, New York City time, at least two and not more than five business days before the date specified for closing in the Option Shares Notice (the "Option Shares Closing Date"), setting forth the number of Option Shares to be purchased and the time and date of such purchase. Upon delivery and receipt of the Option Shares Notice, the Trust will issue and sell to each Underwriter, and each 3 Underwriter will purchase from the Trust, on the Option Shares Closing Date, its portion of the number of Option Shares set forth in the Option Shares Notice. (c) The obligations of the Underwriters under this Underwriting Agreement are several and not joint and are undertaken on the basis of the representations and are subject to the conditions set forth in this Underwriting Agreement. (d) The Investment Adviser agrees to make the payments to the Underwriters when and as required by Section 2 hereof. 2. Payment and Delivery. Delivery by the Trust of the Firm Shares (the "Firm Shares Closing") to the Representatives for the accounts of the Underwriters against payment of the purchase price by wire transfer of Federal Funds or similar same day funds to the Trust for the Firm Shares, will take place at the offices of PaineWebber Incorporated (the "Managing Representative"), 1285 Avenue of the Americas, New York, New York or such other location as is agreed upon by the parties hereto, or through the facilities of the Depository Trust Company or another mutually agreeable facility, at 9:00 a.m., New York City time, on the third business day following the date of this Underwriting Agreement, or at such time on such other date, not later than ten business days after the date of this Underwriting Agreement, as may be agreed upon by the Trust and the Managing Representative (the "Firm Shares Closing Date"). If and to the extent that the Option is exercised, delivery of the Option Shares and payment by the Underwriters (in the manner specified above) will take place at the offices or through the facilities specified above for the Firm Shares Closing at the time and date (which may be the Firm Shares Closing Date) specified in the Option Shares Notice. Any Option Shares Closing Date may not be later than three business days following the exercise of the related Option. The Firm Shares Closing Date and any Option Shares Closing Date are called the "Closing Dates." Certificates evidencing Shares of Beneficial Interest will be in definitive form (or temporary form acceptable to the New York Stock Exchange), registered in such names and in such denominations as the Managing Representative requests at least three full business days before the Firm Shares Closing Date or, in the case of Option Shares, on the day of notice of exercise of the Option as described in Section 1(b), and will be made available to the Managing Representative for checking and packaging, at a place in New York City designated by the Managing Representative, at least one full business day before the relevant Closing Date. 4 Simultaneous with delivery to the Underwriters of and payment by the Underwriters for (i) Firm Shares on the Firm Shares Closing Date and (ii) Option Shares on the Option Shares Closing Date, Eaton Vance (or an affiliate as determined by Eaton Vance) will pay to the Underwriters an amount equal to 4.50% of the purchase price per Share for each Share to be purchased by the Underwriters on such date by wire transfer of Federal Funds or similar same-day funds on such Firm Shares Closing Date or Option Shares Closing Date, as the case may be, to the order of the Managing Representative, on behalf of itself and the Underwriters. 3. Registration Statement and Prospectus; Public Offering. The Trust has filed with the Securities and Exchange Commission (the "Commission"), pursuant to the Securities Act of 1933, as amended (the "Securities Act"), the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the published rules and regulations adopted by the Commission under the Securities Act (the "Securities Act Rules") and the Investment Company Act (the "Investment Company Act Rules"), a Notification of Registration on Form N-8A (the "Notification") pursuant to Section 8 of the Investment Company Act and a registration statement on Form N-2 (File Nos. 333-68719 and 811-09141) relating to the Shares (the "registration statement"), including a preliminary prospectus (including any preliminary statement of additional information), and such amendments to such registration statement as may have been required to the date of this Underwriting Agreement. The preliminary prospectus (including any preliminary statement of additional information) is to be used in connection with the offering and sale of the Shares. The term "Preliminary Prospectus" as used herein means any preliminary prospectus (including any preliminary statement of additional information) included at any time as a part of the registration statement and any preliminary prospectus (including any preliminary statement of additional information) omitted therefrom pursuant to the Securities Act Rules. The Trust has furnished the Representatives copies of such registration statement, each amendment to such registration statement filed by the Trust with the Commission and the Preliminary Prospectus filed by the Trust with the Commission or used by the Trust. If the registration statement has not become effective, a further amendment (the "Final Amendment") to such registration statement, including the forms of final prospectus (including any final statement of additional information), necessary to permit such registration statement to become effective will promptly be filed by the Trust with the Commission. If such registration statement has become effective and any prospectus (including any statement of additional information) contained therein omits certain information at the time of effectiveness pursuant to Rule 5 430A of the Securities Act Rules, a final prospectus (the "Rule 430A Prospectus") containing such omitted information will be filed by the Trust with the Commission in accordance with Rule 497(h) of the Securities Act Rules. The registration statement as amended at the time it becomes or became effective (the "Effective Date"), including financial statements and all exhibits, and any information deemed to be included by Rule 430A, is called the "Registration Statement." The term "Prospectus" means the prospectus (including any statement of additional information) in the form in which it is first filed with the Commission pursuant to Rule 497(b), (h) or (j) of the Securities Act Rules, as the case may be. The Trust and the Investment Adviser understand that the Underwriters propose to make a public offering of the Firm Shares, as described in the Prospectus, as soon after the Effective Date (or, if later, after the date this Underwriting Agreement is signed) as the Managing Representative deems advisable. The Trust confirms that the Underwriters and dealers have been authorized to distribute the Preliminary Prospectus relating to the Shares included in the initial filing of the registration statement and are authorized to distribute the Prospectus and any amendments or supplements thereto. 4. Representations. (a) Each of the Trust and the Investment Adviser jointly and severally represents to each Underwriter as follows: (i) On (A) the Effective Date and the date on which the Prospectus is first filed with the Commission pursuant to Rule 497(b), (h) or (j) of the Securities Act Rules, as the case may be, (B) the date on which any post-effective amendment to the Registration Statement (except any post-effective amendment which is filed with the Commission after the later of (x) one year from the date of this Underwriting Agreement or (y) the date on which the distribution of the Shares is completed) became or becomes effective or any amendment or supplement to the Prospectus was or is filed with the Commission and (C) the Closing Dates, the Registration Statement, the Prospectus and any such amendment or supplement thereto and the Notification complied or will comply in all material respects with the requirements of the Securities Act, the Investment Company Act, the Securities Act Rules and the Investment Company Act Rules, as the case may be. On the Effective Date and on the date that any post- 6 effective amendment to the Registration Statement (except any post-effective amendment which is filed with the Commission after the later of (x) one year from the date of this Underwriting Agreement or (y) the date on which the distribution of the Shares is completed) became or becomes effective, neither the Registration Statement nor any such amendment did or will contain any untrue statement of a material fact or omit to state a material fact required to be stated in it or necessary to make the statements in it not misleading. At the Effective Date and, if applicable, the date the Prospectus or any amendment or supplement to the Prospectus was or is filed with the Commission and at the Closing Dates, the Prospectus did not or will not, as the case may be, contain any untrue statement of a material fact or omit to state a material fact required to be stated in it or necessary to make the statements in it, in light of the circumstances under which they were made, not misleading. The foregoing representations in this Section 4(a)(i) do not apply to statements or omissions relating to the Underwriters made in reliance on and in conformity with information furnished in writing to the Trust by the Representatives expressly for use in the Registration Statement, the Prospectus, or any amendments or supplements thereto, as described in Section 7(f) hereof. (ii) The Trust has been duly formed, is validly existing as a business trust under the laws of the Commonwealth of Massachusetts, with full power and authority to conduct all the activities conducted by it, to own or lease all assets owned or leased by it and to conduct its business as described in the Registration Statement and Prospectus, and the Trust is duly licensed and qualified to do business and in good standing in each jurisdiction in which its ownership or leasing of property or its conducting of business requires such qualification, except where the failure to be so qualified or be in good standing would not have a material adverse effect on the Trust, and the Trust owns, possesses or has obtained and currently maintains all governmental licenses, permits, consents, orders, approvals and other authorizations, whether foreign or domestic, necessary to carry on its business as contemplated in the Prospectus. The Trust has no subsidiaries. (iii) The capitalization of the Trust is as set forth in the Registration Statement and the Prospectus. The Shares of Benefi- 7 cial Interest of the Trust conform in all material respects to the description of them in the Prospectus. All the outstanding Shares of Beneficial Interest have been duly authorized and are validly issued, fully paid and nonassessable (except as described in the Registration Statement). The Shares to be issued and delivered to and paid for by the Underwriters in accordance with this Underwriting Agreement against payment therefor as provided by this Underwriting Agreement have been duly authorized and when issued and delivered to the Underwriters will have been validly issued and will be fully paid and nonassessable (except as described in the Registration Statement). No person is entitled to any preemptive or other similar rights with respect to the Shares. (iv) The Trust is duly registered with the Commission under the Investment Company Act as a non-diversified, closed-end management investment company, and, subject to the filing of the Final Amendment, if not already filed, all action under the Securities Act, the Investment Company Act, the Securities Act Rules and the Investment Company Act Rules, as the case may be, necessary to make the public offering and consummate the sale of the Shares as provided in this Underwriting Agreement has or will have been taken by the Trust. (v) The Trust has full power and authority to enter into each of this Underwriting Agreement, the Investment Advisory Agreement, the Custody Agreement and the Transfer Agency Agreement (collectively, the "Trust Agreements") and to perform all of the terms and provisions hereof and thereof to be carried out by it and (A) each Trust Agreement has been duly and validly authorized, executed and delivered by or on behalf of the Trust, (B) each Trust Agreement does not violate in any material respect any of the applicable provisions of the Investment Company Act, the Investment Advisers Act of 1940 (the "Advisers Act"), the Investment Company Act Rules and the rules and regulations adopted by the Commission under the Advisers Act (the "Advisers Act Rules"), as the case may be, and (C) assuming due authorization, execution and delivery by the other parties thereto, each Trust Agreement constitutes the legal, valid and binding obligation of the Trust enforceable in accordance with its terms, (1) subject, as to enforcement, to applicable bankruptcy, insolvency and similar 8 laws affecting creditors' rights generally and to general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and (2) except as rights to indemnity thereunder may be limited by federal or state securities laws. (vi) None of (A) the execution and delivery by the Trust of the Trust Agreements, (B) the issue and sale by the Trust of the Shares as contemplated by this Underwriting Agreement and (C) the performance by the Trust of its obligations under any of the Trust Agreements or consummation by the Trust of the other transactions contemplated by the Trust Agreements conflicts with or will conflict with, or results or will result in a breach of, the Declaration of Trust or the By-laws of the Trust or any agreement or instrument to which the Trust is a party or by which the Trust is bound, or any law, rule or regulation, or order of any court, governmental instrumentality, securities exchange or association or arbitrator, whether foreign or domestic, applicable to the Trust, other than state securities or "blue sky" laws applicable in connection with the purchase and distribution of the Shares by the Underwriters pursuant to this Underwriting Agreement. (vii) The Trust is not currently in breach of, or in default under, any written agreement or instrument to which it is a party or by which it or its property is bound or affected. (viii) No person has any right to the registration of any securities of the Trust because of the filing of the registration statement. (ix) No consent, approval, authorization or order of any court or governmental agency or body or securities exchange or association, whether foreign or domestic, is required by the Trust for the consummation by the Trust of the transactions to be performed by the Trust or the performance by the Trust of all the terms and provisions to be performed by or on behalf of it in each case as contemplated in the Trust Agreements, except such as (A) have been obtained under the Securities Act, the Investment Company Act, the Advisers Act, the Securities Act Rules, the Investment Company Act Rules, and the Advisers Act Rules, and (B) may be required by the New York Stock Exchange or under state securities or "blue sky" laws, in con- 9 nection with the purchase and distribution of the Shares by the Underwriters pursuant to this Underwriting Agreement. (x) The Shares are duly authorized for listing, subject to official notice of issuance, on the American Stock Exchange and the Trust's Registration Statement on Form 8-A, under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), has become effective. (xi) Deloitte & Touche LLP, whose report appears in the Prospectus, are independent public accountants with respect to the Trust as required by the Securities Act, the Investment Company Act, the Securities Act Rules and the Investment Company Act Rules. (xii) The statement of assets and liabilities included in the Registration Statement and the Prospectus presents fairly in all material respects, in accordance with generally accepted accounting principles in the United States applied on a consistent basis, the financial position of the Trust as of the date indicated. (xiii) The Trust will maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with existing assets through an asset reconciliation procedure or otherwise at reasonable intervals and appropriate action is taken with respect to any differences. (xiv) Since the date as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated therein, (A) there has been no material adverse change in the condition, financial or otherwise, business affairs or business of the Trust, whether or not arising in the ordinary course of business, (B) there have been no transactions entered into by the Trust other than those in the ordinary course of its business and (C) there has been no 10 dividend or distribution of any kind declared, paid or made on any class of its capital shares. (xv) There is no action, suit or proceeding before or by any court, commission, regulatory body, administrative agency or other governmental agency or body, foreign or domestic, now pending, or, to the knowledge of the Trust, threatened against or affecting the Trust, which (A) might result in any material adverse change in the condition, financial or otherwise, business affairs or business prospects of the Trust or might materially adversely affect the properties or assets of the Trust or (B) is of a character required to be described in the Registration Statement or the Prospectus; and there are no contracts, franchises or other documents that are of a character required to be described in, or that are required to be filed as exhibits to, the Registration Statement that have not been described or filed as required. (xvi) Except for stabilization transactions conducted by the Underwriters, and except for tender offers, Share repurchases and the issuance or purchase of Shares pursuant to the Trust's dividend reinvestment plan ("DRP") effected following the date on which the distribution of the Shares is completed in accordance with the policies of the Trust as set forth in the Prospectus, the Trust has not taken and will not take, directly or indirectly, any action designed or which might be reasonably expected to cause or result in, or which will constitute, stabilization or manipulation of the price of the Shares of Beneficial Interest in violation of applicable federal securities laws. (xvii) The Trust intends to direct the investment of the proceeds of the offering of the Shares in such a manner as to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). (xviii) To the knowledge of the Trust after due inquiry, no advertising, sales literature or other promotional materials (excluding road show slides or road show tapes) were authorized or prepared by or on behalf of the Trust and the Investment Adviser or any representative thereof for use in connection with the public offering or sale of the Shares other than the definitive client brochure and 11 the broker selling memo which were filed with the NASD on December 15, 1998, a draft prospecting letter which was filed with the NASD on December 21, 1998 and a draft of a prospecting letter made available on an Internet web site maintained by the Investment Adviser (collectively, the "sales materials"); the sales materials and any road show slides or road show tapes complied and comply in all material respects with the applicable requirements of the Securities Act, the Securities Act Rules and the rules and interpretations of the NASD; and no broker kits, road show slides, road show tapes or sales materials authorized or prepared by the Trust or authorized or prepared on behalf of the Trust by the Investment Adviser or any representative thereof for use in connection with the public offering or sale of the Shares contained or contains any untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. (b) The Investment Adviser represents to each Underwriter as follows: (i) The Investment Adviser has been duly formed, is validly existing as a business trust under the laws of the Commonwealth of Massachusetts with full power and authority to conduct all of the activities conducted by it, to own or lease all of the assets owned or leased by it and to conduct its business as described in the Registration Statement and Prospectus, and the Investment Adviser is duly licensed and qualified to do business and in good standing in each jurisdiction in which it is required to be so qualified, except to the extent that failure to be so qualified or be in good standing would not have a material adverse affect on the Investment Adviser; and the Investment Adviser owns, possesses or has obtained and currently maintains all governmental licenses, permits, consents, orders, approvals and other authorizations, whether foreign or domestic, necessary to carry on its business as contemplated in the Registration Statement and the Prospectus. (ii) The Investment Adviser is (A) duly registered as an investment adviser under the Advisers Act and (B) not prohibited by the Advisers Act, the Investment Company Act, the Advisers Act Rules or the Investment Company Act Rules from acting as the in- 12 vestment adviser for the Trust as contemplated by the Investment Advisory Agreement, the Registration Statement and the Prospectus. (iii) The Investment Adviser has full power and authority to enter into each of this Underwriting Agreement, the Investment Advisory Agreement, the Administration Agreement and the Shareholder Services Agreement dated as of January 29, 1999 (the "Shareholder Services Agreement") between the Investment Adviser and PaineWebber Incorporated (collectively, this Underwriting Agreement, the Investment Advisory Agreement, the Administration Agreement and the Shareholder Services Agreement being referred to as the "Investment Adviser Agreements") and to carry out all the terms and provisions hereof and thereof to be carried out by it; and each Investment Adviser Agreement has been duly and validly authorized, executed and delivered by the Investment Adviser; none of the Investment Adviser Agreements violate in any material respect any of the applicable provisions of the Investment Company Act, the Advisers Act, the Investment Company Act Rules and the Advisers Act Rules; and assuming due authorization, execution and delivery by the other parties thereto, each Investment Adviser Agreement constitutes a legal, valid and binding obligation of the Investment Adviser, enforceable in accordance with its terms, (1) subject, as to enforcement, to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and (2) except as rights to indemnity thereunder may be limited by federal or state securities laws. (iv) Neither (A) the execution and delivery by the Investment Adviser of any Investment Adviser Agreement by the Investment Adviser nor (B) the consummation by the Investment Adviser of the transactions contemplated by, or the performance of its obligations under any Investment Adviser Agreement conflicts or will conflict with, or results or will result in a breach of, the Agreement and Declaration of Trust or By-Laws of the Investment Adviser or any agreement or instrument to which the Investment Adviser is a party or by which the Investment Adviser is bound, or any law, rule or regulation, or order of any court, governmental instrumentality, securities 13 exchange or association or arbitrator, whether foreign or domestic, applicable to the Investment Adviser. (v) No consent, approval, authorization or order of any court, governmental agency or body or securities exchange or association, whether foreign or domestic, is required for the consummation of the transactions contemplated in, or the performance by the Investment Adviser of its obligations under, any Investment Adviser Agreement, as the case may be, except such as (A) have been obtained under the Investment Company Act, the Advisers Act, the Securities Act, the Investment Company Act Rules, the Advisers Act Rules and the Securities Act Rules, and (B) may be required by the New York Stock Exchange or under state securities or "blue sky" laws, in connection with the purchase and distribution of the Shares by the Underwriters pursuant to this Underwriting Agreement. (vi) The description of the Investment Adviser and its business, and the statements attributable to the Investment Adviser, in the Registration Statement and the Prospectus complies with the requirements of the Securities Act, the Investment Company Act, the Securities Act Rules and the Investment Company Act Rules and do not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. (vii) There is no action, suit or proceeding before or by any court, commission, regulatory body, administrative agency or other governmental agency or body, foreign or domestic, now pending or, to the knowledge of the Investment Adviser, threatened against or affecting the Investment Adviser of a nature required to be disclosed in the Registration Statement or Prospectus or that might reasonably be expected to result in any material adverse change in the condition, financial or otherwise, business affairs or business prospects of the Investment Adviser or the ability of the Investment Adviser to fulfill its respective obligations under any Investment Adviser Agreement. (viii) Except for stabilization activities conducted by the Underwriters and except for tender offers, Share repurchases and 14 the issuance or purchase of Shares pursuant to the Trust's DRP effected following the date on which the distribution of the Shares is completed in accordance with the policies of the Trust as set forth in the Prospectus, the Investment Adviser has not taken and will not take, directly or indirectly, any action designed, or which might reasonably be expected to cause or result in, or which will constitute, stabilization or manipulation of the price of the Shares of Beneficial Interest in violation of applicable federal securities laws. (ix) In the event that the Trust or the Investment Adviser makes available any promotional materials (other than the sales materials) intended for use only by qualified broker-dealers and registered representatives thereof by means of an Internet web site or similar electronic means, the Investment Adviser will install and maintain pre-qualification and password-protection or similar procedures which will effectively prohibit access to such promotional materials by persons other than qualified broker-dealers and registered representatives thereof. 5. Agreements of the Parties. (a) If the registration statement relating to the Shares has not yet become effective, the Trust will promptly file the Final Amendment, if not previously filed, with the Commission, and will use its best efforts to cause such registration statement to become effective and, as soon as the Trust is advised, will advise the Representative when the Registration Statement or any amendment thereto has become effective. If the Registration Statement has become effective and the Prospectus contained therein omits certain information at the time of effectiveness pursuant to Rule 430A of the Securities Act Rules, the Trust will file a 430A Prospectus pursuant to Rule 497(h) of the Securities Act Rules as promptly as practicable, but no later than the second business day following the earlier of the date of the determination of the offering price of the Shares or the date the Prospectus is first used after the Effective Date. If the Registration Statement has become effective and the Prospectus contained therein does not so omit such information, the Trust will file a Prospectus pursuant to Rule 497(b) or (j) of the Securities Act Rules as promptly as practicable, but no later than the fifth business day following the date of the later of the Effective Date or the commencement of the public offering of the Shares after the Effective Date. In either case, the Trust will provide the Representatives satisfactory evidence of the filing. The Trust will not file with the Commission any Prospectus or any other amendment (except any post-effective amendment which is filed with the Commission 15 after the later of (x) one year from the date of this Underwriting Agreement or (y) the date on which distribution of the Shares is completed) or supplement to the Registration Statement or the Prospectus unless a copy has first been submitted to the Managing Representative a reasonable time before its filing and the Managing Representative has not objected to it in writing within a reasonable time after receiving the copy. (b) For the period of three years from the date hereof, the Trust will advise the Representatives promptly (1) of the issuance by the Commission of any order in respect of the Trust or the Investment Adviser which relates to the Trust, or which relates to any material arrangements or proposed material arrangements involving the Trust or the Investment Adviser, (2) of the initiation or threatening of any proceedings for, or receipt by the Trust of any notice with respect to, the suspension of the qualification of the Shares for sale in any jurisdiction or the issuance of any order by the Commission suspending the effectiveness of the Registration Statement, (3) of receipt by the Trust, or any representative or attorney of the Trust, of any other communication from the Commission relating in any material way to the Trust, the Registration Statement, the Notification, any Preliminary Prospectus, the Prospectus or to the transactions contemplated by this Underwriting Agreement and (4) the issuance by any court, regulatory body, administrative agency or other governmental agency or body, whether foreign or domestic, of any order, ruling or decree, or the threat to initiate any proceedings with respect thereto, regarding the Trust, which relates in any material way to the Trust or any material arrangements or proposed material arrangements involving the Trust. The Trust will make every reasonable effort to prevent the issuance of any order suspending the effectiveness of the Registration Statement and, if any such order is issued, to obtain its lifting as soon as possible. (c) If not delivered prior to the date of this Underwriting Agreement, the Trust will deliver to the Representatives, without charge, a signed copy of the registration statement and the Notification and of any amendments (except any post-effective amendment which is filed with the Commission after the later of (x) one year from the date of this Underwriting Agreement or (y) the date on which the distribution of the Shares is completed) to either the Registration Statement or the Notification (including all exhibits filed with any such document) and as many conformed copies of the registration statement and any amendments thereto (except any post-effective amendment which is filed with the Commission after the later of (x) one year from the date of this Underwriting Agreement or (y) the date on which the distribution of the Shares is completed) (excluding exhibits) as the Representatives may reasonably request. 16 (d) During such period as a prospectus is required by law to be delivered by an underwriter or a dealer, the Trust will deliver, without charge, to the Representatives, the Underwriters and any dealers, at such office or offices as the Representatives may designate, as many copies of the Prospectus as the Representatives may reasonably request, and, if any event occurs during such period as a result of which it is necessary to amend or supplement the Prospectus, in order to make the statements therein, in light of the circumstances existing when such Prospectus is delivered to a purchaser of Shares, not misleading in any material respect, or if during such period it is necessary to amend or supplement the Prospectus to comply with the Securities Act, the Investment Company Act, the Securities Act Rules or the Investment Company Act Rules, the Trust promptly will prepare, submit to the Managing Representative, file with the Commission and deliver, without charge, to the Underwriters and to dealers (whose names and addresses the Representatives will furnish to the Trust) to whom Shares may have been sold by the Underwriters, and to other dealers on request, amendments or supplements to the Prospectus so that the statements in such Prospectus, as so amended or supplemented, will not, in light of the circumstances existing when such Prospectus is delivered to a purchaser, be misleading in any material respect and will comply with the Securities Act, the Investment Company Act, the Securities Act Rules and the Investment Company Act Rules. Delivery by the Underwriters of any such amendments or supplements to the Prospectus will not constitute a waiver of any of the conditions in Section 6 hereof. (e) The Trust will make generally available to holders of the Trust's securities, as soon as practicable but in no event later than the last day of the 18th full calendar month following the calendar quarter in which the Effective Date falls, an earnings statement, if applicable, satisfying the provisions of Section 11(a) of the Securities Act and, at the option of the Trust, Rule 158 of the Securities Act Rules. (f) The Trust will take such actions as the Representatives reasonably request in order to qualify the Shares for offer and sale under the securities or "blue sky" laws of such jurisdictions as the Representatives reasonably designate; provided that the Trust shall not be required in connection therewith or as a condition thereof to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction. (g) If the transactions contemplated by this Underwriting Agreement are consummated, the Trust shall pay all costs and expenses incident to 17 the performance of the obligations of the Trust under this Underwriting Agreement (to the extent such expenses do not, in the aggregate, exceed $0.03 per Share), including but not limited to costs and expenses of or relating to (1) the preparation, printing and filing of the registration statement and exhibits to it, each Preliminary Prospectus, the Prospectus and all amendments and supplements thereto, (2) the issuance of the Shares and the preparation and delivery of certificates for the Shares, (3) the registration or qualification of the Shares for offer and sale under the securities or "blue sky" laws of the jurisdictions referred to in the foregoing paragraph, including the fees and disbursements of counsel for the Underwriters in that connection, and the preparation and printing of preliminary and supplemental "blue sky" memoranda, (4) the furnishing (including costs of design, production, shipping and mailing) to the Underwriters and dealers of copies of each Preliminary Prospectus relating to the Shares, the sales materials, the Prospectus, and all amendments or supplements to the Prospectus, and of the other documents required by this Section to be so furnished, (5) the filing requirements of the National Association of Securities Dealers, Inc., in connection with its review of the financing, including filing fees and the fees, disbursements and other charges of counsel for the Underwriters in that connection, (6) all transfer taxes, if any, with respect to the sale and delivery of the Shares to the Underwriters, (7) the listing of the Shares on the New York Stock Exchange, (8) the transfer agent for the Shares, and (9) in addition to the foregoing, an aggregate reimbursement of up to [ ] as partial reimbursement of the costs and expenses of the Underwriters. To the extent the foregoing costs and expenses incident to the performance of the obligations of the Trust under this Underwriting Agreement exceed, in the aggregate, $0.03 per Share, Eaton Vance or an affiliate will pay all such excess costs and expenses. (h) If the transactions contemplated by this Underwriting Agreement are not consummated, except as otherwise provided herein, no party will be under any liability to any other party, except that (1) if this Underwriting Agreement is terminated by (x) the Trust or the Investment Adviser pursuant to any of the provisions hereof (otherwise than pursuant to Section 8 hereof) or (y) by the Representatives or the Underwriters because of any inability, failure or refusal on the part of the Trust or the Investment Adviser to comply with any material terms or because any of the conditions in Section 6 are not satisfied, Eaton Vance or an affiliate and the Trust, jointly and severally, will reimburse the Underwriters for all out-of-pocket expenses (including the reasonable fees, disbursements and other charges of their counsel) reasonably incurred by them in connection with the proposed purchase and sale of the Shares and (2) no Underwriter who has failed or refused to purchase the Shares agreed to be purchased by it under this Underwriting Agreement, in breach of its obli- 18 gations pursuant to this Underwriting Agreement, will be relieved of liability to the Trust and the Investment Adviser and the other Underwriters for damages occasioned by its default. (i) Without the prior written consent of the Representatives, the Trust will not offer, sell or register with the Commission, or announce an offering of, any equity securities of the Trust, within 180 days after the Effective Date, except for the Shares as described in the Prospectus and any issuances of Shares of Beneficial Interest pursuant to the dividend reinvestment plan established by the Trust and except in connection with any offering of preferred shares of beneficial interest as contemplated by the Prospectus. (j) The Trust will use its best efforts to list the Shares on the New York Stock Exchange and comply with the rules and regulations of such exchange. (k) The Trust will direct the investment of the net proceeds of the offering of the Shares in such a manner as to comply with the investment objective and policies of the Trust as described in the Prospectus. 6. Conditions of the Underwriters' Obligations. The obligations of the Underwriters to purchase the Shares are subject to the accuracy on the date of this Underwriting Agreement, and on the Closing Dates, of the representations of the Trust and the Investment Adviser in this Underwriting Agreement, to the accuracy and completeness of all statements made by the Trust or the Investment Adviser or any of their respective officers in any certificate delivered to the Representatives or their counsel pursuant to this Underwriting Agreement, to performance by the Trust and the Investment Adviser of their respective obligations under this Underwriting Agreement and to each of the following additional conditions: (a) The registration statement must have become effective by 5:30 p.m., New York City time, on the date of this Underwriting Agreement or such later date and time as the Managing Representative consents to in writing. The Prospectus must have been filed in accordance with Rule 497(b), (h) or (j), as the case may be, of the Securities Act Rules. (b) No order suspending the effectiveness of the Registration Statement may be in effect and no proceedings for such purpose may be pending before or, to the knowledge of counsel to the Underwriters, threatened by the Commis- 19 sion, and any requests for additional information on the part of the Commission (to be included in the Registration Statement or the Prospectus or otherwise) must be complied with or waived to the reasonable satisfaction of the Managing Representative. (c) Since the dates as of which information is given in the Registration Statement and the Prospectus, (1) there must not have been any material change in the Shares of Beneficial Interest or liabilities of the Trust except as set forth in or contemplated by the Prospectus; (2) there must not have been any material adverse change in the general affairs, prospects, management, business, financial condition or results of operations of the Trust or the Investment Adviser whether or not arising from transactions in the ordinary course of business as set forth in or contemplated by the Prospectus; (3) the Trust must not have sustained any material loss or interference with its business from any court or from legislative or other governmental action, order or decree, whether foreign or domestic, or from any other occurrence not described in the Registration Statement and Prospectus; and (4) there must not have occurred any event that makes untrue or incorrect in any material respect any statement or information contained in the Registration Statement or Prospectus or that is not reflected in the Registration Statement or Prospectus but should be reflected therein in order to make the statements or information therein (in the case of the Prospectus, in light of the circumstances in which they were made) not misleading in any material respect; if, in the judgment of the Managing Representative, any such development referred to in clause (1), (2), (3) or (4) of this paragraph (c) makes it impracticable or inadvisable to consummate the sale and delivery of the Shares pursuant to this Underwriting Agreement by the Underwriters, at the initial public offering price of the Shares. (d) The Representatives must have received on each Closing Date a certificate, dated such date, of the President or a Vice-President and the chief financial or accounting officer of each of the Trust and the Investment Adviser certifying that (1) the signers have carefully examined the Registration Statement, the Prospectus, and this Underwriting Agreement, (2) the representations of the Trust (with respect to the certificates from such Trust officers) and the representations of the Investment Adviser (with respect to the certificates from such officers of the Investment Adviser) in this Underwriting Agreement are accurate on and as of the date of the certificate, (3) there has not been any material adverse change in the general affairs, prospects, management, business, financial condition or results of operations of the Trust (with respect to the certificates from such Trust officers) or the Investment Adviser (with respect to the certificates from such officers of the Investment Adviser), which change would materially and adversely affect the ability of the Trust or the In- 20 vestment Adviser, as the case may be, to fulfill its obligations under this Underwriting Agreement or the Investment Advisory Agreement, whether or not arising from transactions in the ordinary course of business, (4) with respect to the Trust only, to the knowledge of such officers after reasonable investigation, no order suspending the effectiveness of the Registration Statement, prohibiting the sale of any of the Shares or otherwise having a material adverse effect on the Trust has been issued and no proceedings for any such purpose are pending before or threatened by the Commission or any other regulatory body, whether foreign or domestic, (5) to the knowledge of the officers of the Investment Adviser, after reasonable investigation, no order having a material adverse effect on the ability of the Investment Adviser to fulfill its obligations under this Underwriting Agreement or the Investment Advisory Agreement, as the case may be, has been issued and no proceedings for any such purpose are pending before or threatened by the Commission or any other regulatory body, whether foreign or domestic, and (6) each of the Trust (with respect to the certificates from such Trust officers) and the Investment Adviser (with respect to the certificates from such officers of the Investment Adviser) has performed all of its respective agreements that this Underwriting Agreement requires it to perform by such Closing Date (to the extent not waived in writing by the Managing Representative). (e) The Representatives must receive on each Closing Date the opinions dated such Closing Date substantially in the form of Annexes A and B to this Underwriting Agreement from the counsel identified in each such Annex. (f) The Representatives must receive on each Closing Date from Skadden, Arps, Slate, Meagher & Flom LLP and its affiliated entities, its counsel, an opinion dated such Closing Date with respect to the Trust, the Shares, the Registration Statement and the Prospectus, this Underwriting Agreement and the form and sufficiency of all proceedings taken in connection with the sale and delivery of the Shares. Such opinion and proceedings shall fulfill the requirements of this Section 6(f) only if such opinion and proceedings are satisfactory in all respects to the Representatives. The Trust and the Investment Adviser must have furnished to such counsel such documents as counsel may reasonably request for the purpose of enabling them to render such opinion. (g) The Representatives must receive on the date this Underwriting Agreement is signed and delivered by the Representatives a signed letter, dated such date, substantially in the form of Annex C to this Underwriting Agreement from the firm of accountants designated in such Annex. The Representatives also must receive on each Closing Date a signed letter from such accountants, dated as of 21 such Closing Date, confirming on the basis of a review in accordance with the procedures set forth in their earlier letter that nothing has come to their attention during the period from a date not more than five business days before the date of this Underwriting Agreement, specified in the letter, to a date not more than five business days before such Closing Date, that would require any change in their letter referred to in the foregoing sentence. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Underwriting Agreement will comply only if they are in form and scope reasonably satisfactory to counsel for the Underwriters, provided that any such documents, forms of which are annexed hereto, shall be deemed satisfactory to such counsel if substantially in such form. 7. Indemnification and Contribution. 22 (a) Each of the Trust and the Investment Adviser, jointly and severally, will indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of such Underwriter and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act from and against any and all losses, claims, liabilities, expenses and damages (including, but not limited to, any and all investigative, legal and other expenses reasonably incurred in connection with, and any and all amounts paid in settlement of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), to which such Underwriter or any such person, or any of them, may become subject under the Securities Act, the Exchange Act, the Investment Company Act, the Advisers Act or other federal or state statutory law or regulation, at common law or otherwise, whether foreign or domestic, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Preliminary Prospectus, the Prospectus, the sales materials, or any amendment or supplement to the Registration Statement, the Preliminary Prospectus, the Prospectus, the sales materials or in any documents filed under the Exchange Act and deemed to be incorporated by reference into the Registration Statement, the Preliminary Prospectus, the Prospectus, or in any application or other document executed by or on behalf of the Trust or based on written information furnished by or on behalf of the Trust filed in any jurisdiction in order to qualify the Shares under the securities laws thereof or filed with the Commission, (ii) the omission or alleged omission to state, in any or all such documents, a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any act or failure to act or any alleged act or failure to act by such Underwriter in connection with, or relating in any manner to, the Shares or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, liability, expense or damage arising out of or based upon matters covered by clause (i) or (ii) above (provided, however, that neither the Trust nor the Investment Adviser shall be liable under this clause (iii) to the extent it is finally judicially determined by a court of competent jurisdiction that such loss, claim, liability, expense or damage resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its gross negligence, bad faith or willful misconduct); provided that neither the Trust nor the Investment Adviser will be liable to the extent that such losses, claims, liabilities, expenses or damages are based on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to any underwriter furnished in writing to the Trust by the Representative on behalf of Underwriters expressly for inclusion in the Regis- 23 tration Statement, the Preliminary Prospectus or the Prospectus. This indemnity agreement will be in addition to any liability that the Trust or the Investment Adviser might otherwise have. (b) Each Underwriter will indemnify and hold harmless the Trust and the Investment Adviser, each person, if any, who controls the Trust or the Investment Adviser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each trustee of the Trust and each officer of the Trust who signs the Registration Statement to the same extent as the foregoing indemnity from the Trust or the Investment Adviser to the Underwriter, but only insofar as losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to such Underwriter furnished in writing to the Trust by such Underwriter expressly for use in the Registration Statement, the Preliminary Prospectus or Prospectus. This indemnity will be in addition to any liability that such Underwriter might otherwise have; provided, however, that in no case shall such Underwriter be liable or responsible for any amount in excess of the fees and commissions received by the Underwriter. (c) Any party that proposes to assert the right to be indemnified under this Section 7 will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 7, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission to so notify such indemnifying party will not relieve it from any liability that it may have to any indemnified party under the foregoing provision of this Section 7 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the 24 fees, disbursements and other charges of such counsel will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based on the advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party (3) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. Subject to the requirements of Investment Company Act Release No. 11330, all such fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they are incurred. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. An indemnifying party will not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld). No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 7 (whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding. (d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 7 is applicable but for any reason is held to be unavailable from the Trust, the Investment Adviser or the Underwriters, the Trust, the Investment Adviser and the Underwriters will contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Trust and the Investment Adviser from persons other than the Underwriter, such as persons who control the Trust or the Investment Adviser within the meaning of the Securities Act or the Exchange Act, 25 officers of the Trust who signed the Registration Statement and directors of the Trust, who may also be liable for contribution) to which the Trust, the Investment Adviser and the Underwriters may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Trust and the Investment Adviser on the one hand and the Underwriters on the other. The relative benefits received by the Trust and the Investment Adviser (treated jointly for this purpose as one person) on the one hand and the Underwriters on the other hand shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Trust bear to the total fees and commissions received by the Underwriters. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only such relative benefits referred to in the foregoing sentence but also the relative fault of the Trust and the Investment Adviser (treated jointly for this purpose as one person) on the one hand and the Underwriters on the other hand in connection with respect to the statements or omissions or alleged statements or omissions that resulted in the losses, claims, liabilities, expenses or damages (including any investigative, legal or other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), as well as any other relevant equitable considerations appropriate in the circumstances. Such relative fault of the parties shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Trust, the Investment Adviser or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission and any other equitable considerations appropriate in the circumstances. The Trust, the Investment Adviser and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 7(d) were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 7(d) shall be deemed to include, for purposes of this Section 7(d) any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding any other provisions of this Section 7(d), the Underwriters shall not be required to contribute any amount in excess of the fees and commissions received by them and no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7(d), any person who controls a party to 26 this Agreement within the meaning of the Securities Act will have the same rights to contribution as that party, and each trustee of the Trust and each officer of the Trust who signed the Registration Statement will have the same rights to contribution as the Trust, subject in each case to the provisions hereof. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 7(d), notify such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 7(d). No party will be liable for contribution with respect to any action or claim settled without its written consent (which consent shall not be unreasonably withheld). The Underwriters' obligations to contribute pursuant to this Section 7 are several in proportion to the respective number of Firm Shares set forth opposite their names in Schedule 1 (or such number of Firm Shares as determined pursuant to Section 9 hereof) and not joint. (e) Notwithstanding any other provisions in this Section 7, no party shall be entitled to indemnification or contribution under this Agreement against any loss, claim, liability, expense or damage arising by reason of such person's willful misfeasance, bad faith or gross negligence in the performance of its duties hereunder, or by reason of such person's reckless disregard of such person's obligations and duties hereunder. (f) The Trust and the Investment Adviser acknowledge that the statements with respect to (1) the public offering of the Shares as set forth on the cover page of and (2) the statements relating to stabilization and to selling concessions and reallowances of selling concessions under the caption "Underwriting" in the Prospectus constitute the only information furnished in writing to the Trust by the Representatives on behalf of the Underwriters expressly for use in such document. The Underwriters severally confirm that these statements are correct in all material respects and were so furnished by or on behalf of the Underwriters severally for use in the Prospectus. 8. Termination. This Underwriting Agreement may be terminated by the Managing Representative by notifying the Trust at any time: (a) before the later of the effectiveness of the Registration Statement and the time when any of the Shares are first generally offered pursuant to 27 this Underwriting Agreement by the Managing Representative to dealers by letter or telegram; (b) at or before any Closing Date if, in the sole judgment of the Managing Representative, payment for and delivery of any Shares is rendered impracticable or inadvisable because trading in the equity securities of the Trust is suspended by the Commission or by the principal exchange that lists the Shares, trading in securities generally on the New York Stock Exchange or the Nasdaq Stock Market shall have been suspended or limited or minimum or maximum prices shall have been generally established on such exchange or over-the-counter market, or, additional material governmental restrictions, not in force on the date of this Underwriting Agreement, have been imposed upon trading in securities or trading has been suspended on any U.S. securities exchange, a general banking moratorium has been established by U.S. federal or New York authorities or any material adverse change in the financial or securities markets in the United States or in political, financial or economic conditions in the United States or any outbreak or material escalation of hostilities or declaration by the United States of a national emergency or war or other calamity or crisis shall have occurred the effect of any of which is such as to make it, in the sole judgement of the Managing Representative, impracticable or inadvisable to market the Shares on the terms and in the manner contemplated by the Prospectus; or (c) at or before any Closing Date, if any of the conditions specified in Section 6 have not been fulfilled when and as required by this Underwriting Agreement. 9. Substitution of Underwriters. If one or more of the Underwriters fails (other than for a reason sufficient to justify the termination of this Underwriting Agreement) to purchase on any Closing Date the Shares agreed to be purchased on such Closing Date by such Underwriter or Underwriters, the Managing Representative may find one or more substitute underwriters to purchase such Shares or make such other arrangements as the Managing Representative deems advisable, or one or more of the remaining Underwriters may agree to purchase such Shares in such proportions as may be approved by the Managing Representative, in each case upon the terms set forth in this Underwriting Agreement. If no such arrangements have been made within 36 hours after such Closing Date, and (a) the number of Shares to be purchased by the defaulting Underwriters on such Closing Date does not exceed 10% of the Shares that the Underwriters are obligated to purchase on such Closing Date, each of the nondefaulting 28 Underwriters will be obligated to purchase such Shares on the terms set forth in this Underwriting Agreement in proportion to their respective obligations under this Underwriting Agreement, or (b) the number of Shares to be purchased by the defaulting Underwriters on such Closing Date exceeds 10% of the Shares to be purchased by all the Underwriters on such Closing Date, the Trust will be entitled to an additional period of 24 hours within which to find one or more substitute underwriters reasonably satisfactory to the Managing Representative to purchase such Shares on the terms set forth in this Underwriting Agreement. In any such case, either the Managing Representative or the Trust will have the right to postpone the applicable Closing Date for not more than five business days in order that necessary changes and arrangements (including any necessary amendments or supplements to the Registration Statement or the Prospectus) may be effected by the Managing Representative and the Trust. If the number of Shares to be purchased on such Closing Date by such defaulting Underwriter or Underwriters exceeds 10% of the Shares that the Underwriters are obligated to purchase on such Closing Date, and none of the nondefaulting Underwriters or the Trust makes arrangements pursuant to this Section within the period stated for the purchase of the Shares that the defaulting Underwriters agreed to purchase, this Underwriting Agreement will terminate without liability on the part of any nondefaulting Underwriter, the Trust or the Investment Adviser, except as provided in Sections 5(g) and 7 hereof. This Section will not affect the liability of any defaulting Underwriter to the Trust or the nondefaulting Underwriters arising out of such default. A substitute underwriter will become a Underwriter for all purposes of this Underwriting Agreement. 10. Miscellaneous. (a) The reimbursement, indemnification and contribution agreements in Sections 5(g) and 7 hereof and the representations of the Trust, the Investment Adviser and the Underwriters in this Underwriting Agreement will remain in full force and effect regardless of any termination of this Underwriting Agreement. The reimbursement, indemnification and contribution agreements in Sections 5(g) and 7 hereof and the representations and agreements of the Trust, the Investment Adviser and the Underwriters in this Underwriting Agreement shall survive the Closing Dates and shall remain in full force and effect regardless of any investigation made by or on behalf of any Underwriter, the Trust, the Investment Adviser or any controlling person and delivery of and payment for the Shares. 29 (b) This Underwriting Agreement is for the benefit of the Underwriters, the Trust, the Investment Adviser and their successors and assigns, and, to the extent expressed in this Underwriting Agreement, for the benefit of persons controlling any of the Underwriters, the Trust, the Investment Adviser and directors and officers of the Trust and the Investment Adviser, and their respective successors and assigns, and no other person, partnership, association or corporation will acquire or have any right under or by virtue of this Underwriting Agreement. The term "successors and assigns" does not include any purchaser of the Shares from any Underwriter merely because of such purchase. (c) All notices and communications under this Underwriting Agreement will be in writing, effective only on receipt and mailed or delivered, by messenger, facsimile transmission or otherwise, to the Representatives in care of PaineWebber Incorporated, Attn: Financial Institutions Group, 1285 Avenue of the Americas, New York, New York 10019, to the Trust or the Investment Adviser at 24 Federal Street, Boston, MA 02110, Attn: Chief Legal Officer. (d) This Underwriting Agreement may be signed in multiple counterparts that taken as a whole constitute one agreement. (e) This Underwriting Agreement will be governed by and construed in accordance with the laws of the State of New York without reference to choice of law principles thereof. (f) A copy of the Agreement and Declaration of Trust of each of the Trust and the Investment Adviser is on file with the Secretary of The Commonwealth of Massachusetts, and notice hereby is given that this Underwriting Agreement is executed on behalf of the respective Trustees of the Trust and the Investment Adviser as Trustees and not individually and that the obligations or arising out of this Underwriting Agreement are not binding upon any of the Trustees or beneficiaries individually but are binding only upon the respective assets and properties of the Trust and the Investment Adviser. 30 Please confirm that the foregoing correctly sets forth the agreement between us. Very truly yours, Eaton Vance Municipal Income Trust By: Name: Title: Eaton Vance Management By: Name: Title: Confirmed: PaineWebber Incorporated A.G. Edwards & Sons, Inc. Prudential Securities Incorporated Salomon Smith Barney Inc. Dain Rauscher Wessels EVEREN Securities, Inc. As Representatives of the Underwriters c/o PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 By: PaineWebber Incorporated By: Name: Title: Acting on behalf of itself and the Underwriters named in Schedule 1 31 SCHEDULE 1 NAME NUMBER OF FIRM SHARES TO BE PURCHASED PaineWebber Incorporated [_____________] A.G. Edwards & Sons, Inc. [_____________] Prudential Securities Incorporated [_____________] Salomon Smith Barney Inc. [_____________] Dain Rauscher Wessels [_____________] EVEREN Securities, Inc. [_____________] 32 Total Underwriters 33 ANNEX A FORM OF OPINION OF KIRKPATRICK & LOCKHART LLC REGARDING THE TRUST 1. The Registration Statement and all post-effective amendments, if any, are effective under the Securities Act and no stop order with respect thereto has been issued and no proceeding for that purpose has been instituted or, to the best of our knowledge, is threatened by the Commission. Any filing of the Prospectus or any supplements thereto required under Rule 497 of the Securities Act Rules prior to the date hereof have been made in the manner and within the time required by such rule. 2. The Trust has been duly formed and is validly existing as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts, with full power and authority to conduct all the activities conducted by it, to own or lease all assets owned (or to be owned) or leased (or to be leased) by it and to conduct its business as described in the Registration Statement and Prospectus, and the Trust is duly licensed and qualified to do business and in good standing in each jurisdiction in which its ownership or leasing of property or its conducting of business requires such qualification, and the Trust owns, possesses or has obtained and currently maintains all governmental licenses, permits, consents, orders, approvals and other authorizations, whether foreign or domestic, necessary to carry on its business as contemplated in the Prospectus. The Trust has no subsidiaries. 3. The capitalization of the Trust is as set forth in the Registration Statement and the Prospectus. The Shares of Beneficial Interest of the Trust conform in all respects to the description of them in the Prospectus. All the outstanding Shares of Beneficial Interest have been duly authorized and are validly issued, fully paid and nonassessable. The Shares to be issued and delivered to and paid for by the Underwriters in accordance with the Underwriting Agreement against payment therefor as provided by the Underwriting Agreement have been duly authorized and when issued and delivered to the Underwriters will have been validly issued and will be fully paid and nonassessable (except as described in the Registration Statement). No person is entitled to any preemptive or other similar rights with respect to the Shares. 4. The Trust is duly registered with the Commission under the Investment Company Act as a non-diversified, closed-end management investment company and all action under the Securities Act, the Investment Company Act, the Securities Act Rules and the Investment Company Act Rules, as the case may be, necessary to make 34 the public offering and consummate the sale of the Shares as provided in the Underwriting Agreement has or will have been taken by the Trust. 5. The Trust has full power and authority to enter into each of the Underwriting Agreement, the Investment Advisory Agreement, the Custody Agreement and the Transfer Agency Agreement (collectively, the "Trust Agreements") and to perform all of the terms and provisions thereof to be carried out by it and (A) each Trust Agreement has been duly and validly authorized, executed and delivered by the Trust, (B) each Trust Agreement complies in all material respects with all applicable provisions of the Investment Company Act, the Advisers Act, the Investment Company Act Rules and the Advisers Act Rules, as the case may be, and (C) assuming due authorization, execution and delivery by the other parties thereto, each Trust Agreement constitutes the legal, valid and binding obligation of the Trust enforceable in accordance with its terms, (1) subject, as to enforcement, to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and (2) as rights to indemnity thereunder may be limited by federal or state securities laws. 6. None of (A) the execution and delivery by the Trust of the Trust Agreements, (B) the issue and sale by the Trust of the Shares as contemplated by the Underwriting Agreement and (C) the performance by the Trust of its obligations under the Trust Agreements or consummation by the Trust of the other transactions contemplated by the Trust Agreements conflicts with or will conflict with, or results or will result in a breach of, the Declaration of Trust or the By-laws of the Trust or any agreement or instrument to which the Trust is a party or by which the Trust is bound, or any law, rule or regulation, or order of any court, governmental instrumentality, securities exchange or association or arbitrator, whether foreign or domestic, applicable to the Trust, except that we express no opinion as to the securities or "blue sky" laws applicable in connection with the purchase and distribution of the Shares by the Underwriters pursuant to the Underwriting Agreement. 7. The Trust is not currently in breach of, or in default under, any written agreement or instrument to which it is a party or by which it or its property is bound or affected. 8. No consent, approval, authorization or order of any court or governmental agency or body or securities exchange or association, whether foreign or domestic, is required by the Trust for the consummation by the Trust of the transactions to be performed by the Trust or the performance by the Trust of all the terms and provisions to be performed by or on behalf of it in each case as contemplated in the Trust Agreements, except such as (A) have been obtained under the Securities Act, the In- 35 vestment Company Act, the Advisers Act, the Securities Act Rules, the Investment Company Act Rules and the Advisers Act Rules and (B) may be required by the New York Stock Exchange or under state securities or "blue sky" laws in connection with the purchase and distribution of the Shares by the Underwriters pursuant to the Underwriting Agreement. 9. The Shares have been approved for listing on the New York Stock Exchange, subject to official notice of issuance, and the Trust's Registration Statement on Form 8-A under the 1934 Act is effective. 10. There is no action, suit or proceeding before or by any court, commission, regulatory body, administrative agency or other governmental agency or body, foreign or domestic, now pending or, to our knowledge, threatened against or affecting the Trust, which is required to be disclosed in the Prospectus that is not disclosed in the Prospectus, and there are no contracts, franchises or other documents that are of a character required to be described in, or that are required to be filed as exhibits to, the Registration Statement that have not been described or filed as required. 11. The Trust does not require any tax or other rulings to enable it to qualify as a regulated investment company under Subchapter M of the Code. 12. Each of the sections in the Prospectus entitled "Distributions and Taxes" and the section in the Statement of Additional Information entitled "Taxes" is a fair summary of the principal United States federal income tax rules currently in effect applicable to the Trust and to the purchase, ownership and disposition of the Shares. 13. The Registration Statement (except the financial statements and schedules and other financial data included therein as to which we express no view), at the time it became effective, and the Prospectus (except as aforesaid), as of the date thereof, complied as to form in all material respects to the requirements of the Securities Act, the Investment Company Act and the rules and regulations of the Commission thereunder. In rendering our opinion, we have relied, as to factual matters, upon the attached written certificates and statements of officers of the Trust. In connection with the registration of the Shares, we have advised the Trust as to the requirements of the Securities Act, the Investment Company Act and the applicable rules and regulations of the Commission thereunder and have rendered other legal advice and assistance to the Trust in the course of its preparation of the Registration Statement and the Prospectus. Rendering such assistance involved, among other things, discussions and inquiries concerning various legal and related subjects and re- 36 views of certain corporate records, documents and proceedings. We also participated in conferences with representatives of the Trust and its accountants at which the contents of the Registration Statement and Prospectus and related matters were discussed. With your permission, we have not undertaken, except as otherwise indicated herein, to determine independently, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements in the Registration Statement or Prospectus. On the basis of the information which was developed in the course of the performance of the services referred to above, no information has come to our attention that would lead us to believe that the Registration Statement, at the time it became effective, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus, as of its date and as of the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or that any amendment or supplement to the Prospectus, as of its respective date, and as of the date hereof, contained any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements in the Prospectus, in the light of the circumstances under which they were made, not misleading (except the financial statements, schedules and other financial data included therein, as to which we express no view). 37 ANNEX B FORM OF OPINION OF INTERNAL COUNSEL REGARDING EATON VANCE MANAGEMENT 1. Eaton Vance has been duly formed and is validly existing as a Massachusetts business trust under the laws of its jurisdiction of incorporation with full power and authority to conduct all of the activities conducted by it, to own or lease all of the assets owned or leased by it and to conduct its business as described in the Registration Statement and Prospectus, and Eaton Vance is duly licensed and qualified and in good standing in each other jurisdiction in which it is required to be so qualified and Eaton Vance owns, possesses or has obtained and currently maintains all governmental licenses, permits, consents, orders, approvals and other authorizations, whether foreign or domestic, necessary for Eaton Vance to carry on its business as contemplated in the Registration Statement and the Prospectus. 2. Eaton Vance is duly registered as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act, the Investment Company Act, the Advisers Act Rules or the Investment Company Act Rules from acting as investment adviser for the Trust as contemplated by the Investment Advisory Agreement, the Registration Statement and the Prospectus. 3. Eaton Vance has full power and authority to enter into each of the Underwriting Agreement, the Investment Advisory Agreement, the Administration Agreement and the Shareholder Servicing Agreement (collectively, the "Eaton Vance Agreements") and to carry out all the terms and provisions thereof to be carried out by it, and each such agreement has been duly and validly authorized, executed and delivered by Eaton Vance; each Eaton Vance Agreement complies in all material respects with all provisions of the Investment Company Act, the Advisers Act, the Investment Company Act Rules and the Advisers Act Rules; and assuming due authorization, execution and delivery by the other parties thereto, each Eaton Vance Agreement constitutes a legal, valid and binding obligation of Eaton Vance, enforceable in accordance with its terms, (1) subject, as to enforcement, to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and (2) as rights to indemnity thereunder may be limited by federal or state securities laws. 4. Neither (A) the execution and delivery by Eaton Vance of any Eaton Vance Agreement nor (B) the consummation by Eaton Vance of the transactions contemplated by, or the performance of its obligations under any Eaton Vance Agreement 38 conflicts or will conflict with, or results or will result in a breach of, the Agreement and Declaration of Trust or By-Laws of Eaton Vance or any agreement or instrument to which Eaton Vance is a party or by which Eaton Vance is bound, or any law, rule or regulation, or order of any court, governmental instrumentality, securities exchange or association or arbitrator, whether foreign or domestic, applicable to Eaton Vance. 5. No consent, approval, authorization or order of any court, governmental agency or body or securities exchange or association, whether foreign or domestic, is required for the consummation of the transactions contemplated in, or the performance by Eaton Vance of its obligations under, any Eaton Vance Agreement, except such as have been obtained under the Investment Company Act, the Advisers Act, the Securities Act, the Investment Company Act Rules, the Advisers Act Rules and the Securities Act Rules. 6. The description of Eaton Vance and its business, and the statements attributable to Eaton Vance, in the Registration Statement and the Prospectus complies with the requirements of the Securities Act, the Investment Company Act, the Securities Act Rules and the Investment Company Act Rules and do not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. 7. There is no action, suit or proceeding before or by any court, commission, regulatory body, administrative agency or other governmental agency or body, foreign or domestic, now pending or, to our knowledge, threatened against or affecting Eaton Vance of a nature required to be disclosed in the Registration Statement or Prospectus or that might reasonably result in any material adverse change in the condition, financial or otherwise, business affairs or business prospects of Eaton Vance or the ability of Eaton Vance to fulfill its respective obligations under any Eaton Vance Agreement. 8. The Registration Statement (except the financial statements and schedules and other financial data included therein as to which we express no view), at the time it became effective, and the Prospectus (except as aforesaid), as of the date thereof, appeared on their face to be appropriately responsive in all material respects to the requirements of the Securities Act, the Investment Company Act and the rules and regulations of the Commission thereunder. In rendering our opinion, we have relied, as to factual matters, upon the attached written certificates and statements of officers of Eaton Vance. In connection with the registration of the Shares, we have advised Eaton Vance as to the requirements of the Securities Act, the Investment Company Act and 39 the applicable rules and regulations of the Commission thereunder and have rendered other legal advice and assistance to Eaton Vance in the course of the preparation of the registration Statement and the Prospectus. Rendering such assistance involved, among other things, discussions and inquiries concerning various legal and related subjects and reviews of certain corporate records, documents and proceedings. We also participated in conferences with representatives of the Trust and its accountants and Eaton Vance at which the contents of the registration and Prospectus and related matters were discussed. With your permission, we have not undertaken, except as otherwise indicated herein, to determine independently, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements in the Registration Statement or Prospectus. On the basis of the information which was developed in the course of the performance of the services referred to above, no information has come to our attention that would lead us to believe that the Registration Statement, at the time it became effective, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus, as of its date and as of the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or that any amendment or supplement to the Prospectus, as of its respective date, and as of the date hereof, contained any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements in the Prospectus, in the light of the circumstances under which they were made, not misleading (except the financial statements, schedules and other financial data included therein, as to which we express no view). 40 ANNEX C FORM OF ACCOUNTANT'S LETTER January 29, 1999 The Board of Trustees of Eaton Vance Municipal Income Trust 24 Federal Street Boston, Massachusetts 02110 PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 as Managing Representative of the Underwriters Ladies and Gentlemen: We have audited the statement of assets and liabilities of Eaton Vance Municipal Income Trust (the "Trust") as of January ___, 1999 included in the Registration Statement on Form N-2 filed by the Trust under the Securities Act of 1933 (the "Act") (File No. 333-68719) and under the Investment Company Act of 1940 (the "1940 Act") (File No. 811-09141); such statement and our report with respect to such statement are included in the Registration Statement. In connection with the Registration Statement: 1. We are independent public accountants with respect to the Trust within the meaning of the Act and the applicable rules and regulations thereunder. 2. In our opinion, the statement of assets and liabilities included in the Registration Statement and audited by us complies as to form in all respects with the applicable accounting requirements of the Act, the 1940 Act and the respective rules and regulations thereunder. 3. For purposes of this letter we have read the minutes of all meetings of the Shareholders, the Board of Trustees and all Committees of the Board of Trustees of the Trust as set forth in the minute books at the offices of the Trust, officials of the Trust having advised us that the 41 minutes of all such meetings through January ___, 1999, were set forth therein. 4. Trust officials have advised us that no financial statements as of any date subsequent to January ___, 1999, are available. We have made inquiries of certain officials of the Trust who have responsibility for financial and accounting matters regarding whether there was any change at January ___, 1999, in the capital shares or net assets of the Trust as compared with amounts shown in the January ___, 1999, statement of assets and liabilities included in the Registration Statement, except for changes that the Registration Statement discloses have occurred or may occur. On the basis of our inquiries and our reading of the minutes as described in Paragraph 3, nothing came to our attention that caused us to believe that there were any such changes. The foregoing procedures do not constitute an audit made in accordance with generally accepted auditing standards. Accordingly, we make no representations as to the sufficiency of the foregoing procedures for your purposes. This letter is solely for the information of the addressees and to assist the underwriters in conducting and documenting their investigation of the affairs of the Trust in connection with the offering of the securities covered by the Registration Statement, and is not to be used, circulated, quoted or otherwise referred to within or without the underwriting group for any other purpose, including but not limited to the registration, purchase or sale of securities, nor is it to be filed with or referred to in whole or in part in the Registration Statement or any other document, except that reference may be made to it in the underwriting agreement or in any list of closing documents pertaining to the offering of the securities covered by the Registration Statement. Very truly yours, DELOITTE & TOUCHE LLP EX-99.2(H)(2) 6 MASTER AGREEMENT AMONG UNDERWRITERS 1 Exhibit 99.(h)(2) AMENDED AND RESTATED MASTER AGREEMENT AMONG UNDERWRITERS June 11, 1984 PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 Gentlemen: 1. General. We understand that PaineWebber Incorporated ("PWI") is entering into this Agreement in counterparts with us and other firms who may be underwriters for issues of securities for which PWI is acting as Representative or one of the Representatives of the several underwriters. This Agreement shall apply to any offering of securities in which we elect to act as an underwriter after receipt of a telegram, telex or other form of written communication ("Written Communication") from PWI stating the identity of the issuer and, if different from the issuer, the seller or sellers of such securities, the securities proposed to be offered, whether the underwriters are afforded an option to purchase additional securities to cover over-allotments, the price to underwriters, public offering price and date, interest rate, if any, and other variables, the amount of our proposed participation and the names of the other Representatives, if any, and that our participation as an underwriter in the proposed offering shall be subject to the provisions of this Agreement. Upon our telegraphic acceptance of such Written Communication we shall become one of the underwriters of such issue for the amount specified in the Written Communication, and this Agreement shall become binding upon us and the Representatives with respect to such offering. The obligations of each underwriter shall be several and not joint. The issuer of the securities offered in any offering of securities made pursuant to this Agreement is hereinafter referred to as the "Company", and such securities are hereinafter called the "Securities". The seller or sellers of the Securities (including, if applicable, the Company) are hereinafter referred to collectively as the "Seller". All references herein to "you" or the "Representatives" shall include PWI and the other firms, if any, which are named as Representatives in the Written Communication. The Securities to be offered in any offering may but need not be registered in a shelf registration pursuant to Rule 415 under the Securities Act of 1933 (the "Securities Act"). The following provisions of this Agreement shall apply separately to each individual offering of Securities. 2. Underwriting Arrangements. The Representatives shall determine which signatories to this Agreement will be invited to become underwriters for the Securities. Changes may be made by the Representatives in those who are to be underwriters and in the respective amounts of Securities to be purchased by them, but the amount of Securities to be purchased by us as set forth in the Written Communication to us will not be changed without our consent except as provided herein or in the underwriting agreement (the "Underwriting Agreement") with the Seller covering the Securities. We authorize you on our behalf to execute and deliver the Underwriting Agreement in such form as you determine and to take such action as you deem 2 advisable in connection with the performance of the Underwriting Agreement and this Agreement and the purchase, carrying, sale and distribution of the Securities, including the election to exercise any option to purchase additional Securities to cover over-allotments if so provided. The parties on whose behalf you execute the Underwriting Agreement are hereinafter called the "Underwriters". You may waive performance or satisfaction by the Seller of certain of its obligations or conditions included in the Underwriting Agreement, if in your judgment such waiver will not have a material adverse effect upon the interests of the Underwriters. It is understood that, if so specified in the Written Communication for the issue, arrangements may be made for the sale of Securities by the Seller pursuant to delayed delivery contracts. Such Securities are hereinafter referred to as "Delayed Delivery Securities", and such contracts as "Delayed Delivery Contracts". References herein to delayed delivery and Delayed Delivery Contracts apply only to offerings in which delayed delivery is authorized. The term "underwriting obligation", as used in this Agreement with respect to any Underwriter, shall refer to the principal amount or number of shares of the Securities which such Underwriter is obligated to purchase pursuant to the provisions of the Underwriting Agreement, without regard to any reduction in such obligation as a result of Delayed Delivery Contracts which are entered into by the Seller. As compensation for your services we will pay a management fee as specified in the Written Communication for the issue (without deduction in respect of Delayed Delivery Securities), and you may charge our account therefor. If there is more than one Representative, such compensation will be divided among the Representatives in such proportions as they determine. 3. Prospectus and Registration Statement. You will furnish to us as soon as possible copies of the prospectus or supplemented prospectus to be used in connection with the offering of the Securities. As used herein with respect to an offering of Securities registered under the Securities Act, "Prospectus" means the form of prospectus (including any supplements) authorized for use in connection with such offering, and "Registration Statement" means the registration statement, as amended, filed under the Securities Act pursuant to which the Securities are registered under the Securities Act. As used herein with respect to an offering of Securities not registered under the Securities Act, "Prospectus" or "Registration Statement" means the form of final offering circular (including any supplements) authorized for use in connection with such offering and "preliminary prospectus" means any preliminary offering circular authorized for use in connection with such offering. We consent to being named in the prospectus as one of the Underwriters of the Securities. 4. Public Offering. (a) In connection with the public offering of the Securities, we authorize you, in your discretion (i) to determine the time of the initial public offering, to change the public offering price and the concessions and discounts to dealers after the initial public offering, to furnish the Company with the information to be included in the Registration Statement or Prospectus with respect to the terms of offering, and to determine all matters relating to advertising and communications with dealers or others; 2 3 (ii) to reserve for sale to dealers selected by you ("Selected Dealers") and to others, and to reserve for sale pursuant to Delayed Delivery Contracts (including Delayed Delivery Contracts arranged by you through Selected Dealers), all or any part of our Securities, which reservations for sales to others and for sales pursuant to Delayed Delivery Contracts not arranged through Selected Dealers are to be as nearly as practicable in proportion to the respective underwriting obligations of the Underwriters, unless you agree to a smaller proportion at the request of any Underwriter, and such other reservations to be in such proportions as you determine, and, from time to time, to add to the reserved Securities any Securities retained by us remaining unsold and to release to us any of our Securities reserved but not sold; (iii) to sell reserved Securities, as nearly as practicable in proportion to the respective reservations, to Selected Dealers at the public offering price less the Selected Dealers' concession and to others at the public offering price; and (iv) to buy Securities for our account from Selected Dealers at the public offering price less such amount not in excess of the Selected Dealers' concession as you determine. If, in accordance with the terms of offering set forth in the Prospectus, the offering of the Securities is not at a fixed price but at varying prices set by individual Underwriters based on market prices or at negotiated prices, the provisions of clause (i) above relating to your right to change the public offering price and concessions and discounts to dealers shall not apply, and other references in this Section and elsewhere in this Agreement to the public offering price or Selected Dealers' concession shall be deemed to mean the prices and concessions determined by you from time to time in your discretion. Sales of Securities between Underwriters may be made with your prior consent, or as you deem advisable for Blue Sky purposes. After advice from you that the Securities are released for public offering, we will offer to the public in conformity with the terms of offering set forth in the Prospectus such of our Securities as you advise us are not reserved. Any Securities sold by us (otherwise than through you) which you purchase in the open market for the account of any Underwriter will be repurchased by us on demand at a price equal to the total cost of such purchase including any taxes on redelivery, commissions, accrued interest and dividends. Securities delivered on such repurchase need not be the identical certificates so purchased. In lieu of such action you may in your discretion sell for our account the Securities so purchased and debit or credit our account for the loss or profit resulting from such sale, or charge our account with an amount not in excess of the Selected Dealers' concession with respect to such Securities. (b) We authorize you to act on our behalf in making all arrangements for the solicitation of offers to purchase Delayed Delivery Securities from the Seller pursuant to Delayed Delivery Contracts and we agree that all such arrangements will be made only through you, 3 4 directly or through Selected Dealers (including Underwriters acting as Selected Dealers) to whom you may pay a commission as provided in the Prospectus and herein. The obligation of each of the Underwriters to purchase and pay for Securities as set forth in the Underwriting Agreement shall be reduced in the proportion provided for therein, except that (i) as to any Delayed Delivery Contract determined by you, in your discretion, to have been directed and allocated by a purchaser to a particular Underwriter, such obligation of such Underwriters shall be reduced by the amount of Delayed Delivery Securities covered thereby, (ii) as to any Delayed Delivery Contracts for which arrangements are made through Selected Dealers, such obligation of each Underwriter shall be reduced as nearly as practicable in the proportion determined by you that the amount of Securities of such Underwriter reserved and sold pursuant to Delayed Delivery Contracts arranged through Selected Dealers bears to the total Securities so reserved and sold, and (iii) such reductions shall be rounded, as you shall determine, to the nearest $1,000 principal amount or whole share of the Securities. The fee payable to each Underwriter with respect to Delayed Delivery Securities pursuant to the Underwriting Agreement shall be credited to the account of such Underwriter based upon the amount by which such Underwriter's underwriting obligation is reduced as specified in the preceding paragraph. If the amount of Delayed Delivery Securities applied to reduce an Underwriter's underwriting obligation and the amount of Securities sold by or for the account of such Underwriter exceeds such Underwriter's underwriting obligation, there shall be credited to such Underwriter in connection with such excess amount of Securities only the amount of the Selected Dealers' concession with respect thereto. The commissions payable to Selected Dealers in respect of Delayed Delivery Contracts arranged through them shall be charged to each Underwriter in the proportion which the amount of Securities of such Underwriter reserved and sold pursuant to Delayed Delivery Contracts arranged through Selected Dealers bears to the total Securities so reserved and sold. 5. Payment and Delivery. We authorize you to make payment on our behalf to the Seller of the purchase price of our Securities, to take delivery of our Securities, registered as you may direct in order to facilitate deliveries, and to deliver our reserved Securities against sales. At your request we will pay you, as you direct, (i) an amount equal to the public offering price, less the selling concession, of either our Securities or our unreserved Securities or (ii) the amount set forth or indicated in the Written Communication with respect to the Securities, and such payment will be credited to our account and applied to the payment of the purchase price. After you receive payment for reserved Securities sold for our account, you will remit to us the purchase price (if any) paid by us for such Securities and credit or debit our account with the difference between the sale prices and the purchase price thereof. You will deliver to us our unreserved Securities promptly, and our reserved but unsold Securities, against payment of the purchase price therefor (except in the case of Securities for which payment has previously been made), as soon as practicable after the termination of the provisions referred to in Section 9, except that if the aggregate amount of reserved but unsold Securities upon such termination does not exceed 4 5 10% of the total amount of the Securities, you may in your discretion sell such reserved but unsold Securities for the accounts of the several Underwriters as soon as practicable after such termination, at such prices and in such manner as you determine. Unless we promptly give you written instructions otherwise, if transactions in the Securities may be settled through the facilities of The Depository Trust Company, payment for and delivery of securities purchased by us will be made through such facilities, if we are a member, or if we are not a member, settlement may be made through our ordinary correspondent who is a member. 6. Authority to Borrow. In connection with the purchase or carrying of our Securities or other securities purchased for our account, we authorize you, in your discretion, to advance your funds for our account, charging current interest rates, to arrange loans for our account, and in connection therewith to execute and deliver any notes or other instruments and hold or pledge as security any of our Securities or such other securities. Any lender may rely upon your instructions in all matters relating to any such loan. Any Securities or such other securities held by you for our account may be delivered to us for carrying purposes, and if so delivered will be redelivered to you upon demand. 7. Stabilization and Over-Allotment. We authorize you, in your discretion, to make purchases and sales of Securities, any other securities of the Company of the same class and series and any other securities of the Company which you may designate in the open market or otherwise, for long or short account, on such terms as you deem advisable, and, in arranging sales, to over-allot and cover any such over-allotment, at your discretion, by purchasing Securities, exercising the over-allotment option, if any, indicated in the Written Communication, or both. Such purchases and sales and over-allotments will be made for the accounts of the Underwriters as nearly as practicable in proportion to their respective underwriting obligations. It is understood that you may have made purchases of securities of the Company for stabilizing purposes prior to the time when we become one of the Underwriters, and we agree that any securities so purchased shall be treated as having been purchased for the respective accounts of the Underwriters pursuant to the foregoing authorization. We authorize you, in your discretion, to cover any short position incurred pursuant to this Section by purchasing securities on such terms as you deem advisable. At no time will our net commitment under the foregoing provisions of this Section exceed 15% of our underwriting obligation. Solely for purposes of the immediately preceding sentence, our "underwriting obligation" shall be deemed to exclude any Securities which we are obligated to purchase solely by virtue of the exercise of an over-allotment option. We will on demand take up at cost any securities so purchased and deliver any securities so sold or over-alloted for our account, and, if any other Underwriter defaults in its corresponding obligation, we will assume our proportionate share of such obligation without relieving the defaulting Underwriter from liability. Upon request, we will advise you of the Securities retained by us and unsold and will sell to you for the account of one or more of the Underwriters such of our unsold Securities and at such price, not less than the net price to Selected Dealers nor more than the public offering price, as you determine. 8. Open Market Transactions. We and you agree not to bid for, purchase, attempt to induce others to purchase, or sell, directly or indirectly, any Securities, any other securities of the Company of the same class and series and any other securities of the Company which you may 5 6 designate, except as brokers pursuant to unsolicited orders and as otherwise provided in this Agreement. If the Securities are common stock or securities convertible into common stock, we and you also agree not to effect, or attempt to induce others to effect, directly or indirectly, any transactions in or relating to put or call options on any stock of the Company, except to the extent permitted by Rule 10b-6 under the Securities Exchange Act of 1934 (the "Exchange Act") as interpreted by the Securities and Exchange Commission. An opening uncovered writing transaction in options to acquire Securities for our account or for the account of any customer shall be deemed, for purposes of the preceding sentence, to be a transaction effected by us in or relating to put or call options on stock of the Company not permitted by Rule 10b-6. The term "opening uncovered writing transaction" means an opening sale transaction where the seller intends to become a writer of an option to purchase stock which it does not own or have the right to acquire upon exercise of conversion or option rights. 9. Termination as to an Offering. The provisions of the last two paragraphs of Section 4(a), the first sentence of Section 7, and Section 8 will terminate at the close of business on the thirtieth day after the date of the initial public offering of the Securities, unless sooner terminated as hereinafter provided. You may terminate such provision as to such offering at any time by notice to us to the effect that the offering provisions of this Agreement as to such offering are terminated. 10. Expenses and Settlement. You may charge our account with any transfer taxes on sales made by you of Securities purchased by us under the Underwriting Agreement and with our proportionate shares (based upon our underwriting obligation) of all other expenses incurred by you under this Agreement or in connection with the purchase, carrying, sale or distribution of the Securities. The accounts hereunder will be settled as promptly as practicable after the termination of the provisions referred to in Section 9, but you may reserve such amount as you deem advisable for additional expenses. Your determination of the amount to be paid to or by us will be conclusive. You may at any time make partial distributions of credit balances or call for payment of debit balances. Any of our funds in your hands may be held with your general funds without accountability for interest. Notwithstanding any settlement, we will remain liable for any taxes on transfers for our account, and for our proportionate share (based upon our underwriting obligation) of all expenses and liabilities which may be incurred by or for the accounts of the Underwriters. 11. Default by Underwriters. Default by one or more Underwriters hereunder or under the Underwriting Agreement will not release the other Underwriters from their obligations or affect the liability of any defaulting Underwriter to the other Underwriters for damages resulting from such default. If one or more Underwriters default under the Underwriting Agreement, you may arrange for the purchase by others, including nondefaulting Underwriters, of Securities not taken up by the defaulting Underwriter or Underwriters. 12. Position of Representatives. You will be under no liability to us for any act or omission except for obligations expressly assumed by you herein, and no obligations on your part will be implied or inferred herefrom. Your authority hereunder and under the Underwriting Agreement may be exercised by you jointly or by PWI. The rights and liabilities of the 6 7 Underwriters are several and not joint, and nothing will constitute the Underwriters a partnership, association or separate entity. If for Federal income tax purposes the Underwriters should be deemed to constitute a partnership then each Underwriter elects to be excluded from the application of Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1954, as amended. You, as Representatives of the several Underwriters, are authorized, in your discretion, to execute on behalf of the Underwriters such evidence of such election as may be required by the Internal Revenue Service. 13. Indemnification. We will indemnify and hold harmless each other Underwriter and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act to the extent and upon the terms upon which each Underwriter agrees to indemnify the Company and any other Seller in the Underwriting Agreement. 14. Contribution. Each Underwriter (including you) will pay upon your request, as contribution, its proportionate share, based upon its underwriting obligation, of any losses, claims, damages or liabilities, joint or several, paid or incurred by any Underwriter to any person other than an Underwriter, arising out of or based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, any amendment or supplement thereto or any related preliminary prospectus or any other selling or advertising material approved by you for use by the Underwriters in connection with the sale of the Securities, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (other than an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by an Underwriter specifically for use therein); and will pay such proportionate share of any legal or other expenses reasonably incurred by you or with your consent in connection with investigating or defending against any such loss, claim, damage or liability, or any action or proceeding (including any action or proceeding brought by a governmental or regulatory body) in respect thereof. In determining the amount of any Underwriter's obligation under this Section, appropriate adjustment may be made by you to reflect any amounts received by any one or more Underwriters in respect of such claim from the Company or any other Seller pursuant to the Underwriting Agreement or otherwise. There shall be credited against any amount paid or payable by us pursuant to this Section any loss, damage, liability or expense which is incurred by us as a result of any such claim asserted against us, and if such loss, claim, damage, liability or expense is incurred by us subsequent to any payment by us pursuant to this Section, appropriate provision shall be made to effect such credit, by refund or otherwise. If any such claim is asserted, you may take such action in connection therewith as you deem necessary or desirable, including retention of counsel for the Underwriters, and in your discretion separate counsel for any particular Underwriter or group of Underwriters, and the fees and disbursements of any counsel so retained by you shall be included in the amounts payable pursuant to this Section. In determining amounts payable pursuant to this Section, any loss, claim, damage, liability or expense incurred by any person controlling any Underwriter within the meaning of Section 15 of the Securities Act which has been incurred by reason of such control relationship shall be deemed to have been incurred by such Underwriter. 7 8 Any Underwriter may elect to retain at its own expense its own counsel. You may settle or consent to the settlement of any such claim, on advice of counsel retained by you, with the approval of a majority in interest of the Underwriters. Whenever you receive notice of the assertion of any claim to which the provisions of this Section would be applicable, you will give prompt notice thereof to each Underwriter. You will also furnish each Underwriter with periodic reports, at such times as you deem appropriate, as to the status of such claim and the action taken by you in connection therewith. If any Underwriter or Underwriters default in their obligation to make any payments under this Section, each nondefaulting Underwriter shall be obligated to pay its proportionate share of all defaulted payments, based upon such Underwriter's underwriting obligation as related to the underwriting obligations of all nondefaulting Underwriters. 15. Reports and Blue Sky Matters. We authorize you to file with the Securities and Exchange Commission and any other governmental agency any reports required in connection with any transactions effected by you for our account pursuant to this Agreement, and we will furnish any information needed for such reports. If you effect stabilizing purchases pursuant to Section 7, you will notify us promptly of the initiation and termination thereof. If stabilization is effected we will file with you, c/o PWI, not later than the fifth full business day following the termination of stabilization, any report required to be filed pursuant to Rule 17a-2 under the Exchange Act. You will not have any responsibility with respect to the right of any Underwriter or other person to sell the Securities in any jurisdiction, notwithstanding any information you may furnish in that connection. 16. Representations and Agreements. (a) You represent that you are a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"), and we represent that we are either a member in good standing of the NASD or a foreign dealer not eligible for membership. If we are such a member we agree that in making sale of the Securities we will comply with all applicable rules of the NASD, including, without limitation, the NASD's interpretation with Respect to Free-Riding and Withholding and Section 24 of Article III of the Rules of Fair Practice. If we are such a foreign dealer, we agree not to offer or sell any Securities in the United States of America except through you and in making sales of Securities outside the United States of America we agree to comply as though we were a member with such interpretation and Sections 8, 24 and 36 of Article III of the NASD's Rules of Fair Practice and to comply with Section 25 of such Article III as it applies to a nonmember broker or dealer in a foreign country. (b) We understand that it is our responsibility to examine the Registration Statement, the Prospectus, any amendment or supplement thereto relating to the offering of the Securities, any preliminary prospectus and the material, if any, incorporated by reference therein and we will familiarize ourselves with the terms of the Securities and the other terms of the offering thereof which are to be reflected in the Prospectus and the Written Communication with respect thereto. You are authorized, with the approval of counsel for the Underwriters, to approve on our behalf any amendments or supplements to the Registration Statement or the Prospectus. (c) We confirm that the information that we have given or are deemed to have given in response to the Master Underwriters' Questionnaire attached as Exhibit A hereto (which 8 9 information has been furnished to the Company for use in the Registration Statement or the Prospectus) is correct. We will notify you immediately of any development before the termination of this Agreement under Section 9 as to the offering of the Securities which makes untrue or incomplete any information that we have given or are deemed to have given in response to the Master Underwriters' Questionnaire. (d) Unless we have promptly notified you in writing otherwise, our name as it should appear in the Prospectus and our address are set forth on the signature page hereof. (e)(i) If the Securities are being registered under the Securities Act, we represent that we are familiar with Rule 15c2-8 under the Exchange Act relating to the distribution of preliminary and final prospectuses and agree that we will comply therewith; we agree to keep an accurate record of the distribution (including dates, number of copies and persons to whom sent) by us of copies of the Registration Statement, the Prospectus or any preliminary prospectus (or any amendment or supplement to any thereof), and promptly upon request by you, to bring all subsequent changes to the attention of anyone to whom such material shall have been distributed; and we agree to furnish to persons who receive a confirmation of sale a copy of the Prospectus filed pursuant to Rule 424(b) or Rule 424(c) under the Securities Act. (ii) If the Securities will not be registered under the Securities Act, we agree that we will deliver all preliminary and final offering circulars required for compliance with the applicable laws and regulations governing the use and distribution of offering circulars by underwriters, and, to the extent consistent with such laws and regulations, we confirm that we have delivered and agree that we will deliver all preliminary and final offering circulars which would be required if the provisions of Rule 15c2-8 under the Exchange Act applied to this offering. (f) If the Securities are being registered under the Securities Act, we agree that, if we are advised by you that the Company was not, immediately prior to the filing of the Registration Statement, subject to the requirements of Section 13(a) or 15(d) of the Exchange Act, we will not, without your consent, sell any of the Securities to an account over which we exercise discretionary authority. 17. Miscellaneous. (a) This Agreement may be terminated by either party hereto upon five business days' written notice to the other party; provided that with respect to any offering of Securities for which a Written Communication was sent by you and accepted by us prior to such notice, this Agreement shall remain in full force and effect as to such offering and shall terminate with respect to such offering in accordance with the provisions of Section 9. This Agreement may be supplemented or amended by you by written notice thereof to us, and any such supplement or amendment to this Agreement shall be effective with respect to any offering of securities to which this Agreement applies after the date of such supplement or amendment. Each reference to "this Agreement" herein shall, as appropriate, be to this Agreement as so amended and supplemented. 9 10 (b) This Agreement and the terms and conditions set forth herein with respect to any offering of Securities together with such supplementary terms and conditions with respect to such offering as may be contained in any Written Communication from you to us in connection therewith shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, --------------------------------------- (Name of Firm) by ------------------------------------ Confirmed, as of the date first above written. PAINEWEBBER INCORPORATED, by ------------------------------ Vice President 10 11 EXHIBIT A PaineWebber Incorporated MASTER UNDERWRITERS' QUESTIONNAIRE The terms used herein and not otherwise defined shall have the meanings assigned thereto in the Amended and Restated Master Agreement Among Underwriters dated June 11, 1984, between you and PaineWebber Incorporated ("PWI"). Reference will be made to this Master Underwriters' Questionnaire in each Written Communication described in Section 1 of the Amended and Restated Master Agreement Among Underwriters received by you from PWI in connection with offerings of securities in which PWI is acting as Representative or the manager of the Representatives of the several Underwriters. Your telegraphic acceptance of any such Written Communication should respond to this Master Underwriters' Questionnaire. Except as indicated in your telegraphic acceptance of our Written Communication with respect to the Securities: (1) neither you nor any of your directors, officers, partners or branch managers has (nor have you or they had within the last three years) a material relationship (as "material" is defined in Regulation C under the Securities Act) with the Company or its parent (if any), nor are you an affiliate of (within the meaning of the By-laws of the NASD), controlled by, controlling or under common control with the Company; (2) neither you nor any of your partners, officers, directors or branch managers, separately or as a group, owns of record or beneficially more than 5% of any class of voting securities of the Company or its parent (if any); (3) if the Securities are to be issued under an indenture to be qualified under the Trust Indenture Act of 1939; (a) neither you nor any of your directors, officers or partners is an affiliate (as defined in Rule 0-2 under the Trust Indenture Act of 1939) of the Trustee, or its parent (if any) and neither the Trustee nor its parent (if any) nor any of their directors or executive officers is a director, officer, partner, employee, appointee or representative of yours; (b) neither you nor any of your directors, partners or executive officers, separately or as a group, owns beneficially more than 1% of any class of voting securities of the Trustee or its parent (if any); and (c) if you are a corporation, you do not have outstanding nor have you assumed or guaranteed any securities otherwise than in your corporate name, and neither the Trustee nor its parent (if any) is a holder of such securities. 12 (4) other than as is, or is to be, stated in the Registration Statement, the PWI Amended and Restated Master Agreement Among Underwriters, the PWI Amended and Restated Master Selected Dealer Agreement, or the Underwriting Agreement relating to the proposed offering, you do not know of or have reason to believe that (a) there are any discounts or commissions to be allowed or paid to underwriters or any other items that would be deemed by the NASD to constitute underwriting compensation for purposes of the NASD's Rules of Fair Practice, (b) there are any discounts or commissions to be allowed or paid to dealers, including all cash, securities, contracts, or other considerations to be received by any dealer in connection with the sale of the Securities, (c) there is an intention to over-allot or (d) the price of any security may be stabilized to facilitate the offering of the Securities; (5) your proposed commitment to purchase Securities will not result in a violation of the financial responsibility requirements of Section 15(c)(3) of the Exchange Act or the rules and regulations thereunder, including Rule 15c3-1, or any provisions of the applicable rules of the NASD or of any securities exchange to which you are subject or any restrictions imposed upon you by the NASD or any such exchange; (6) neither you nor any related person (as defined by the NASD) has (a) purchased any warrants, options or other securities of the Company within the preceding 12 months or (b) had any other dealings with the Company within the preceding 12 months as to which documents or other information is required to be furnished to the NASD, and, except as stated in the Registration Statement, you have no knowledge of any private placement of the Company's Securities within the preceding 18 months; (7) you have not prepared nor had prepared for you any report or memorandum for external use in connection with the proposed offering of the Securities, and if the Registration Statement is on Form S-1, you have not prepared any engineering, management or similar reports or memoranda relating to broad aspects of the business, operations or products of the Company within the past 12 months (except for reports solely comprised of recommendations to buy, sell or hold the securities of the Company, unless such recommendations have changed within the past six months). (If any such report or memorandum has been prepared furnish to PWI (a) four copies thereof and (b) a statement as to the actual or proposed use, identifying (i) each class of persons (institutional mailing lists, retail clients, etc.) who have received or will receive the report or memorandum, (ii) the number of copies distributed to each such class and (iii) the period of distribution.); (8) if the Written Communication states that the Company is subject to regulation under the Public Utility Holding Company Act of 1935 (the "Holding Company Act"), you are not a "holding company", or an "affiliate", or a "subsidiary company" of a "public utility company" or "holding company", each as defined in the Holding Company Act; and 13 (9) if the Written Communication states that the Company is subject to regulation under the Holding Company Act, to the best of your knowledge, you are not a party to any proceeding being conducted by the Securities and Exchange Commission pursuant to any of the Acts administered by it, which is required to be disclosed in the Registration Statement or Prospectus or which would disqualify you from purchasing the Securities. EX-99.2(H)(3) 7 MASTER SELECTED DEALERS 1 Exhibit 99.(h)(3) AMENDED AND RESTATED MASTER SELECTED DEALER AGREEMENT June 11, 1984 PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 Gentlemen: 1. General. We understand that PaineWebber Incorporated ("PW") is entering into this Agreement with us and other firms who may be offered the right to purchase as principal a portion of securities being distributed to the public. The terms and conditions of this Agreement shall be applicable to any public offering of securities ("Securities") wherein PW (acting for its own account or for the account of any underwriting or similar group or syndicate) is responsible for managing or otherwise implementing the sale of the Securities to selected dealers ("Selected Dealers") and has expressly informed us that such terms and conditions shall be applicable. Any such offering of Securities to us as a Selected Dealer is hereinafter called an "Offering". In the case of any Offering in which you are acting for the account of any underwriting or similar group or syndicate ("Underwriters"), the terms and conditions of this Agreement shall be for the benefit of, and binding upon, such Underwriters, including, in the case of any Offering in which you are acting with others as representatives of Underwriters, such other representatives. The term "preliminary prospectus" means, in the case of an Offering registered under the Securities Act of 1933 (the "Securities Act"), any preliminary prospectus relating to an Offering of Securities or any preliminary prospectus supplement together with a prospectus relating to an Offering of Securities and, in the case of an Offering not registered under the Securities Act, any preliminary offering circular relating to an Offering of Securities or any preliminary offering circular supplement together with an offering circular relating to an Offering of Securities; the term "Prospectus" means in the case of an Offering registered under the Securities Act of 1933 (the "Securities Act"), the prospectus, together with the final prospectus supplement, if any, relating to such Offering of Securities, filed pursuant to Rule 424(b) or Rule 424(c) under the Securities Act and, in the case of an Offering not registered under the Securities Act, the final offering circular, including any supplements, relating to such Offering of Securities. 2. Conditions of Offering; Acceptance and Purchase. Any Offering will be subject to delivery of the Securities and their acceptance by you and any other Underwriters may be subject to the approval of all legal matters by counsel and the satisfaction of other conditions, and may be made on the basis of reservation of Securities or an allotment against subscription. You will advise us by telegram, telex or other form of written communication ("Written Communication") of the particular method and supplementary terms and conditions (including, without limitation, the information as to prices and offering date referred to in Section 3(b)) of any Offering in which we are invited to participate. To the extent such supplementary terms and conditions are inconsistent with any provision herein, 2 such terms and conditions shall supersede any such provision. Unless otherwise indicated in any such Written Communication, acceptances and other communications by us with respect to any Offering should be sent to PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York 10019. You reserve the right to reject any acceptance in whole or in part. Payment for Securities purchased by us is to be made at such office as you may designate, at the public offering price, or, if you shall so advise us, at such price less the concession to dealers or at the price set forth or indicated in a Written Communication, on such date as you shall determine, on one day's prior notice to us, by certified or official bank check in New York Clearing House funds payable to the order of PaineWebber Incorporated, against delivery of certificates evidencing such Securities. If payment is made for Securities purchased by us at the public offering price, the concession to which we shall be entitled will be paid to us upon termination of the provisions of Section 3(b) with respect to such Securities. Unless we promptly give you written instructions otherwise, if transactions in the Securities may be settled through the facilities of The Depository Trust Company, payment for and delivery of Securities purchased by us will be made through such facilities if we are a member, or if we are not a member, settlement may be made through our ordinary correspondent who is a member. 3. Representations, Warranties and Agreements. (a) Prospectuses. You shall provide us with such number of copies of each preliminary prospectus, the Prospectus and any supplement thereto relating to each Offering as we may reasonably request. If the Securities will be registered under the Securities Act, we represent that we are familiar with Rule 15c2-8 under the Exchange Act relating to the distribution of preliminary and final prospectuses and agree that we will comply therewith; we agree to keep an accurate record of our distribution (including dates, number of copies and persons to whom sent) of copies of the Prospectus or any preliminary prospectus (or any amendment or supplement to any thereof), and promptly upon request by you, to bring all subsequent changes to the attention of anyone to whom such material shall have been furnished; and we agree to furnish to persons who receive a confirmation of sale a copy of the Prospectus filed pursuant to Rule 424(b) or Rule 424(c) under the Securities Act. If the Securities will not be registered under the Securities Act, we agree that we will deliver all preliminary and final offering circulars required for compliance with the applicable laws and regulations governing the use and distribution of the offering circulars by underwriters, and, to the extent consistent with such laws and regulations, we confirm that we have delivered and agree that we will deliver all preliminary and final offering circulars which would be required if the provisions of Rule 15c2-8 under the Exchange Act applied to this offering. We agree that in purchasing Securities in an Offering we will rely upon no statements whatsoever, written or oral, other than the statements in the Prospectus delivered to us by you. We will not be authorized by the issuer or other seller of Securities offered pursuant to a Prospectus or by any Underwriters to give any information or to make any representation not contained in the Prospectus in connection with the sale of such Securities. 2 3 (b) Offer and Sale of the Public. With respect to any Offering of Securities, you will inform us by a Written Communication of the public offering price, the selling concession, the reallowance (if any) to dealers and the time when we may commence selling Securities to the public. After such public offering has commenced, you may change the public offering price, the selling concession and the reallowance to dealers. With respect to each Offering of Securities, until the provisions of this Section 3(b) shall be terminated pursuant to Section 4, we agree to offer Securities to the public only at the public offering price, except that if a reallowance is in effect, a reallowance from the public offering price not in excess of such reallowance may be allowed as consideration for services rendered in distribution to dealers who are actually engaged in the investment banking or securities business, who execute the written agreement prescribed by Section 24(c) of Article III of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. (the "NASD"), and who are either members in good standing of the NASD or foreign brokers or dealers not eligible for membership in the NASD who represent to us that they will promptly reoffer such Securities at the public offering price and will abide by the conditions with respect to foreign brokers and dealers set forth in Section 3(e). (c) Stabilization and Over-Allotment. You may, with respect to any Offering, be authorized to over-allot in arranging sales to Selected Dealers, to purchase and sell Securities, any other securities of the issuer of the Securities of the same class and series and any other securities of such issuer that you may designate for long or short account and to stabilize or maintain the market price of the Securities. We agree to advise you from time to time upon request, prior to the termination of the provisions of Section 3(b) with respect to any Offering, of the amount of Securities purchased by us hereunder remaining unsold and we will, upon your request, sell to you, for the accounts of the Underwriters, such amount of Securities as you may designate, at the public offering price thereof less an amount to be determined by you not in excess of the concession to dealers. In the event that prior to the later of (i) the termination of the provisions of Section 3(b) with respect to any Offering, or (ii) the covering by you of any short position created by you in connection with such Offering for your account or the account of one or more Underwriters, you purchase or contract to purchase for the account of any of the Underwriters, in the open market or otherwise, any Securities theretofore delivered to us, you reserve the right to withhold the above-mentioned concession to dealers on such Securities if sold to us at the public offering price, or if such concession has been allowed to us through our purchase at a net price, we agree to repay such concession upon your demand, plus in each case any taxes on redelivery, commissions, accrued interest and dividends paid in connection with such purchase or contract to purchase. (d) Open Market Transactions. We agree not to bid for, purchase, attempt to purchase, or sell, directly or indirectly, any Securities, any other securities of the issuer of the Securities of the same class and series or any other securities of such issuer as you may designate, except as brokers pursuant to unsolicited orders and as otherwise provided in this Agreement. If the Securities are common stock or securities convertible into common stock, we agree not to effect, or attempt to induce others to effect, directly or indirectly, any transactions in or relating to put or call options on any stock of such issuer, except to the 3 4 extent permitted by Rule 10b-6 under the Exchange Act as interpreted by the Securities and Exchange Commission. An opening uncovered writing transaction in options to acquire Securities for our account or for the account of any customer shall be deemed, for purposes of the preceding sentence, to be a transaction effected by us in or relating to put or call options on stock of the Company not permitted by Rule 10b-6. The term "opening uncovered writing transaction" means an opening sale transaction where the seller intends to become a writer of an option to purchase stock which it does not own or have the right to acquire upon exercise of conversion or option rights. (e) NASD. We represent that we are actually engaged in the investment banking or securities business and we are either a member in good standing of the NASD, or, if not such a member, a foreign dealer not eligible for membership. If we are such a member we agree that in making sales of the Securities we will comply with all applicable rules of the NASD, including, without limitation, the NASD's Interpretation with Respect to Fee-Riding and Withholding and Section 24 of Article III of the Rules of Fair Practice. If we are such a foreign dealer, we agree not to offer or sell any Securities in the United States of America except through you and in making sales of Securities outside the United States of America we agree to comply as though we were a member with such Interpretation and Sections 8.24 and 36 of Article III of the NASD's Rules of Fair Practice and to comply with Section 25 of such Article III as it applies to a nonmember broker or dealer in a foreign country. (f) Relationship among Underwriters and Selected Dealers. You may buy Securities from or sell Securities to any Underwriter or Selected Dealer and, with your consent, the Underwriters (if any) and the Selected Dealers may purchase Securities from and sell Securities to each other at the public offering price less all or any part of the concession. We are not authorized to act as agent for you or any Underwriter or the issuer or other seller of any Securities in offering Securities to the public or otherwise. Nothing contained herein or in any Written Communication from you shall constitute the Selected Dealers partners with you or any Underwriter or with one another. Neither you nor any Underwriter shall be under any obligation to us except for obligations assumed hereby or in any Written Communication from you in connection with any Offering. In connection with any Offering, we agree to pay our proportionate share of any claim, demand or liability asserted against us, and the other Selected Dealers or any of them, or against you or the Underwriters, if any, based on any claim that such Selected Dealers or any of them constitute an association, unincorporated business or other separate entity, including in each case our proportionate share of any expense incurred in defending against any such claim, demand or liability. (g) Blue Sky Laws. Upon application to you, you will inform us as to the jurisdictions in which you believe the Securities have been qualified for sale under the respective securities of "blue sky" laws of such jurisdictions. We understand and agree that compliance with the securities or "blue sky" laws in each jurisdiction in which we shall offer or sell any of the Securities shall be our sole responsibility and that you assume no responsibility or obligations as to the eligibility of the Securities for sale or our right to sell the Securities in any jurisdiction. 4 5 (h) Compliance with Law. We agree that in selling Securities pursuant to any Offering (which agreement shall also be for the benefit of the issuer or other seller of such Securities) we will comply with the applicable provisions of the Securities Act and the Exchange Act, the applicable rules and regulations of the Securities and Exchange Commission thereunder, the applicable rules and regulations of the NASD and the applicable rules and regulations of any securities exchange having jurisdiction over the Offering. You shall have full authority to take such action as you may deem advisable in respect of all matters pertaining to any Offering. Neither you nor any Underwriter shall be under any liability to us, except for lack of good faith and for obligations expressly assumed by you in this Agreement; provided, however, that nothing in this sentence shall be deemed to relieve you from any liability imposed by the Securities Act. 4. Termination; Supplements and Amendments. This agreement may be terminated by either party hereto upon five business days' written notice to the other party; provided that with respect to any Offering for which a Written Communication was sent and accepted prior to such notice, this Agreement as it applies to such Offering shall remain in full force and effect and shall terminate with respect to such Offering in accordance with the last sentence of this Section. This Agreement may be supplemented or amended by you by written notice thereof to us, and any such supplement or amendment to this Agreement shall be effective with respect to any Offering to which this Agreement applies after the date of such supplement or amendment. Each reference to "this Agreement" herein shall, as appropriate, be to this Agreement as so amended and supplemented. The terms and conditions set forth in Sections 3(b) and (d) with regard to any Offering will terminate at the close of business on the thirtieth day after the date of the initial public offering of the Securities to which such Offering relates, but such terms and conditions, upon notice to us, may be terminated by you at any time. 5. Successors and Assigns. This Agreement shall be binding on, and inure to the benefit of, the parties hereto and other persons specified or indicated in Section 1, and the respective successors and assigns of each of them. 6. Governing Law. This Agreement and the terms and conditions set forth herein with respect to any Offering together with such supplementary terms and conditions with respect to such Offering as may be contained in any Written Communication from you to us in connection therewith shall be governed by, and construed in accordance with, the laws of the State of New York. By signing this Agreement we confirm that our subscription to, or our acceptance of any reservation of, any Securities pursuant to an Offering shall constitute (i) acceptance of and agreement to other terms and conditions of this Agreement (as supplemented and amended pursuant to Section 4) together with and subject to any supplementary terms and conditions contained in any Written Communication from you in connection with such Offering, all of which shall constitute a binding agreement between us and you, individually or as representative of any Underwriters, (ii) confirmation that our representations and warranties set forth in Section 3 are true and correct at that time and (iii) confirmation that 5 6 our agreements set forth in Sections 2 and 3 have been and will be fully performed by us to the extent and at the times required thereby. Very truly yours, ------------------------------------- (Name of Firm) by ----------------------------------- Confirmed, as of the date first above written. PAINEWEBBER INCORPORATED. by ------------------------------- Vice President EX-99.2(J) 8 CUSTODIAN AGREEMENT 1 EATON VANCE MUNICIPAL INCOME TRUST Exhibit 99.(j) December 21, 1998 Eaton Vance Municipal Income Trust hereby adopts and agrees to become a party to the attached Master Custodian Agreement between the Eaton Vance Group of Funds and Investors Bank & Trust Company. EATON VANCE MUNICIPAL INCOME TRUST By: /s/ Thomas J. Fetter ----------------------------- Thomas J. Fetter President Accepted and agreed to: Investors Bank & Trust Company By: /s/ Andrew M. Nesvet ---------------------------- Andrew M. Nesvet Director, Client Management 2 MASTER CUSTODIAN AGREEMENT between EATON VANCE GROUP OF FUNDS and INVESTORS BANK & TRUST COMPANY 3 TABLE OF CONTENTS 1. Definitions....................................................... 1-2 2. Employment of Custodian and Property to be held by it............. 2-3 3. Duties of the Custodian with Respect to Property of the Fund.............................................. 3 A. Safekeeping and Holding of Property........................... 3 B. Delivery of Securities........................................ 3-6 C. Registration of Securities.................................... 6 D. Bank Accounts................................................. 6 E. Payments for Shares of the Fund............................... 6 F. Investment and Availability of Federal Funds.................. 6 G. Collections................................................... 7 H. Payment of Fund Moneys........................................ 8-9 I. Liability for Payment in Advance of Receipt of Securities Purchased............................... 9 J. Payments for Repurchases of Redemptions of Shares of the Fund......................................... 9-10 K. Appointment of Agents by the Custodian........................ 10 L. Deposit of Fund Portfolio Securities in Securities Systems.... 10-11 M. Deposit of Fund Commercial Paper in an Approved Book-Entry System for Commercial Paper................................ 12-13 N. Segregated Account............................................ 13-14 O. Ownership Certificates for Tax Purposes....................... 14 P. Proxies....................................................... 14 Q. Communications Relating to Fund Portfolio Securities.......... 14 R. Exercise of Rights; Tender Offers............................ 14-15
-i- 4 S. Depository Receipts............................................. 15 T. Interest Bearing Call or Time Deposits.......................... 15 U. Options, Futures Contracts and Foreign Currency Transactions. 15-17 V. Actions Permitted Without Express Authority..................... 17 4. Duties of Bank with Respect to Books of Account and Calculations of Net Asset Value..................................... 17 5. Records and Miscellaneous Duties.................................... 18 6. Opinion of Fund`s Independent Public Accountants.................... 18 7. Compensation and Expenses of Bank................................... 18 8. Responsibility of Bank.............................................. 18-19 9. Persons Having Access to Assets of the Fund......................... 19 10. Effective Period, Termination and Amendment; Successor Custodian.... 20 11. Interpretive and Additional Provisions.............................. 20 12. Notices............................................................. 21 13. Massachusetts Law to Apply.......................................... 21 14. Adoption of the Agreement by the Fund............................... 21
-ii- 5 MASTER CUSTODIAN AGREEMENT This Agreement is made between each investment company advised by Eaton Vance Management which has adopted this Agreement in the manner provided herein and Investors Bank & Trust Company (hereinafter called "Bank", "Custodian" and "Agent"), a trust company established under the laws of Massachusetts with a principal place of business in Boston, Massachusetts. Whereas, each such investment company is registered under the Investment Company Act of 1940 and has appointed the Bank to act as Custodian of its property and to perform certain duties as its Agent, as more fully hereinafter set forth; and Whereas, the Bank is willing and able to act as each such investment company's Custodian and Agent, subject to and in accordance with the provisions hereof; Now, therefore, in consideration of the premises and of the mutual covenants and agreements herein contained, each such investment company and the Bank agree as follows: 1. DEFINITIONS Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: (a) "Fund" shall mean the investment company which has adopted this Agreement. If the Fund is a Massachusetts business trust, it may in the future establish and designate other separate and distinct series of shares, each of which may be called a "portfolio"; in such case, the term "Fund" shall also refer to each such separate series or portfolio. (b) "Board" shall mean the board of directors/trustees/managing general partners/director general partners of the Fund, as the case may be. (c) "The Depository Trust Company", a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934 which acts as a securities depository and which has been specifically approved as a securities depository for the Fund by the Board. (d) "Participants Trust Company", a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934 which acts as a securities depository and which has been specifically approved as a securities depository for the Fund by the Board. (e) "Approved Clearing Agency" shall mean any other domestic clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934 which acts as a securities depository BUT ONLY if the Custodian has received a certified copy of a vote of the Board approving such clearing agency as a securities depository for the Fund. (f) "Federal Book-Entry System" shall mean the book-entry system referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for United States and federal agency securities (i.e., as provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the book-entry regulations of federal agencies substantially in the form of Subpart O). -1- 6 (g) "Approved Foreign Securities Depository" shall mean a foreign securities depository or clearing agency referred to in Rule 17f-4 under the Investment Company Act of 1940 for foreign securities BUT ONLY if the Custodian has received a certified copy of a vote of the Board approving such depository or clearing agency as a foreign securities depository for the Fund. (h) "Approved Book-Entry System for Commercial Paper" shall mean a system maintained by the Custodian or by a subcustodian employed pursuant to Section 2 hereof for the holding of commercial paper in book-entry form BUT ONLY if the Custodian has received a certified copy of a vote of the Board approving the participation by the Fund in such system. (i) The Custodian shall be deemed to have received "proper instructions" in respect of any of the matters referred to in this Agreement upon receipt of written or facsimile instructions signed by such one or more person or persons as the Board shall have from time to time authorized to give the particular class of instructions in question. Electronic instructions for the purchase and sale of securities which are transmitted by Eaton Vance Management to the Custodian through the Eaton Vance equity trading system and the Eaton Vance fixed income trading system shall be deemed to be proper instructions; the Fund shall cause all such instructions to be confirmed in writing. Different persons may be authorized to give instructions for different purposes. A certified copy of a vote of the Board may be received and accepted by the Custodian as conclusive evidence of the authority of any such person to act and may be considered as in full force and effect until receipt of written notice to the contrary. Such instructions may be general or specific in terms and, where appropriate, may be standing instructions. Unless the vote delegating authority to any person or persons to give a particular class of instructions specifically requires that the approval of any person, persons or committee shall first have been obtained before the Custodian may act on instructions of that class, the Custodian shall be under no obligation to question the right of the person or persons giving such instructions in so doing. Oral instructions will be considered proper instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. The Fund authorizes the Custodian to tape record any and all telephonic or other oral instructions given to the Custodian. Upon receipt of a certificate signed by two officers of the Fund as to the authorization by the President and the Treasurer of the Fund accompanied by a detailed description of the communication procedures approved by the President and the Treasurer of the Fund, "proper instructions" may also include communications effected directly between electromechanical or electronic devices provided that the President and Treasurer of the Fund and the Custodian are satisfied that such procedures afford adequate safeguards for the Fund's assets. In performing its duties generally, and more particularly in connection with the purchase, sale and exchange of securities made by or for the Fund, the Custodian may take cognizance of the provisions of the governing documents and registration statement of the Fund as the same may from time to time be in effect (and votes, resolutions or proceedings of the shareholders or the Board), but, nevertheless, except as otherwise expressly provided herein, the Custodian may assume unless and until notified in writing to the contrary that so-called proper instructions received by it are not in conflict with or in any way contrary to any provisions of such governing documents and registration statement, or votes, resolutions or proceedings of the shareholders or the Board. 2. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT The Fund hereby appoints and employs the Bank as its Custodian and Agent in accordance with and subject to the provisions hereof, and the Bank hereby accepts such appointment and employment. The Fund agrees to deliver to the Custodian all securities, participation interests, cash and other assets owned by it, and all payments of income, payments of principal and capital distributions and adjustments received by it with respect to all securities and participation interests owned by the Fund from time to time, and the cash -2- 7 consideration received by it for such new or treasury shares ("Shares") of the Fund as may be issued or sold from time to time. The Custodian shall not be responsible for any property of the Fund held by the Fund and not delivered by the Fund to the Custodian. The Fund will also deliver to the Bank from time to time copies of its currently effective charter (or declaration of trust or partnership agreement, as the case may be), by-laws, prospectus, statement of additional information and distribution agreement with its principal underwriter, together with such resolutions, votes and other proceedings of the Fund as may be necessary for or convenient to the Bank in the performance of its duties hereunder. The Custodian may from time to time employ one or more subcustodians to perform such acts and services upon such terms and conditions as shall be approved from time to time by the Board of Directors. Any such subcustodian so employed by the Custodian shall be deemed to be the agent of the Custodian, and the Custodian shall remain primarily responsible for the securities, participation interests, moneys and other property of the Fund held by such subcustodian. Any foreign subcustodian shall be a bank or trust company which is an eligible foreign custodian within the meaning of Rule 17f-5 under the Investment Company Act of 1940, and the foreign custody arrangements shall be approved by the Board of Directors and shall be in accordance with and subject to the provisions of said Rule. For the purposes of this Agreement, any property of the Fund held by any such subcustodian (domestic or foreign) shall be deemed to be held by the Custodian under the terms of this Agreement. 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND A. SAFEKEEPING AND HOLDING OF PROPERTY The Custodian shall keep safely all property of the Fund and on behalf of the Fund shall from time to time receive delivery of Fund property for safekeeping. The Custodian shall hold, earmark and segregate on its books and records for the account of the Fund all property of the Fund, including all securities, participation interests and other assets of the Fund (1) physically held by the Custodian, (2) held by any subcustodian referred to in Section 2 hereof or by any agent referred to in Paragraph K hereof, (3) held by or maintained in The Depository Trust Company or in Participants Trust Company or in an Approved Clearing Agency or in the Federal Book-Entry System or in an Approved Foreign Securities Depository, each of which from time to time is referred to herein as a "Securities System", and (4) held by the Custodian or by any subcustodian referred to in Section 2 hereof and maintained in any Approved Book-Entry System for Commercial Paper. B. DELIVERY OF SECURITIES The Custodian shall release and deliver securities or participation interests owned by the Fund held (or deemed to be held) by the Custodian or maintained in a Securities System account or in an Approved Book-Entry System for Commercial Paper account only upon receipt of proper instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities or participation interests for the account of the Fund, BUT ONLY against receipt of payment therefor; if delivery is made in Boston or New York City, payment therefor shall be made in accordance with generally accepted clearing house procedures or by use of Federal Reserve Wire System procedures; if delivery is made elsewhere payment therefor shall be in accordance with the then current "street delivery" custom or in accordance with such procedures agreed to in writing from time to time by the parties hereto; if the sale is effected through a Securities System, delivery and payment therefor shall be made in accordance with the provisions of Paragraph L hereof; if the -3- 8 sale of commercial paper is to be effected through an Approved Book-Entry System for Commercial Paper, delivery and payment therefor shall be made in accordance with the provisions of Paragraph M hereof; if the securities are to be sold outside the United States, delivery may be made in accordance with procedures agreed to in writing from time to time by the parties hereto; for the purposes of this subparagraph, the term "sale" shall include the disposition of a portfolio security (i) upon the exercise of an option written by the Fund and (ii) upon the failure by the Fund to make a successful bid with respect to a portfolio security, the continued holding of which is contingent upon the making of such a bid; 2) Upon the receipt of payment in connection with any repurchase agreement or reverse repurchase agreement relating to such securities and entered into by the Fund; 3) To the depository agent in connection with tender or other similar offers for portfolio securities of the Fund; 4) To the issuer thereof or its agent when such securities or participation interests are called, redeemed, retired or otherwise become payable; PROVIDED that, in any such case, the cash or other consideration is to be delivered to the Custodian or any subcustodian employed pursuant to Section 2 hereof; 5) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee of the Custodian or into the name or nominee name of any agent appointed pursuant to Paragraph K hereof or into the name or nominee name of any subcustodian employed pursuant to Section 2 hereof; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; PROVIDED that, in any such case, the new securities or participation interests are to be delivered to the Custodian or any subcustodian employed pursuant to Section 2 hereof; 6) To the broker selling the same for examination in accordance with the "street delivery" custom; PROVIDED that the Custodian shall adopt such procedures as the Fund from time to time shall approve to ensure their prompt return to the Custodian by the broker in the event the broker elects not to accept them; 7) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the Issuer of such securities, or pursuant to provisions for conversion of such securities, or pursuant to any deposit agreement; PROVIDED that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian or any subcustodian employed pursuant to Section 2 hereof; -4- 9 8) In the case of warrants, rights or similar securities, the surrender thereof in connection with the exercise of such warrants, rights or similar securities, or the surrender of interim receipts or temporary securities for definitive securities; PROVIDED that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian or any subcustodian employed pursuant to Section 2 hereof; 9) For delivery in connection with any loans of securities made by the Fund (such loans to be made pursuant to the terms of the Fund's current registration statement), BUT ONLY against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities; except that in connection with any securities loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of Treasury, the Custodian will not be held liable or responsible for the delivery of securities loaned by the Fund prior to the receipt of such collateral; 10) For delivery as security in connection with any borrowings by the Fund requiring a pledge or hypothecation of assets by the Fund (if then permitted under circumstances described in the current registration statement of the Fund), provided, that the securities shall be released only upon payment to the Custodian of the monies borrowed, except that in cases where additional collateral is required to secure a borrowing already made, further securities may be released for that purpose; upon receipt of proper instructions, the Custodian may pay any such loan upon redelivery to it of the securities pledged or hypothecated therefor and upon surrender of the note or notes evidencing the loan; 11) When required for delivery in connection with any redemption or repurchase of Shares of the Fund in accordance with the provisions of Paragraph J hereof; 12) For delivery in accordance with the provisions of any agreement between the Custodian (or a subcustodian employed pursuant to Section 2 hereof) and a broker-dealer registered under the Securities Exchange Act of 1934 and, if necessary, the Fund, relating to compliance with the rules of The Options Clearing Corporation or of any registered national securities exchange, or of any similar organization or organizations, regarding deposit or escrow or other arrangements in connection with options transactions by the Fund; 13) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian (or a subcustodian employed pursuant to Section 2 hereof), and a futures commissions merchant, relating to compliance with the rules of the Commodity Futures Trading Commission and/or of any contract market or commodities exchange or similar organization, regarding futures margin account deposits or payments in connection with futures transactions by the Fund; -5- 10 14) For any other proper corporate purpose, BUT ONLY upon receipt of, in addition to proper instructions, a certified copy of a vote of the Board specifying the securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made. C. REGISTRATION OF SECURITIES Securities held by the Custodian (other than bearer securities) for the account of the Fund shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Custodian, or in the name or nominee name of any agent appointed pursuant to Paragraph K hereof, or in the name or nominee name of any subcustodian employed pursuant to Section 2 hereof, or in the name or nominee name of The Depository Trust Company or Participants Trust Company or Approved Clearing Agency or Federal Book-Entry System or Approved Book-Entry System for Commercial Paper; provided, that securities are held in an account of the Custodian or of such agent or of such subcustodian containing only assets of the Fund or only assets held by the Custodian or such agent or such subcustodian as a custodian or subcustodian or in a fiduciary capacity for customers. All certificates for securities accepted by the Custodian or any such agent or subcustodian on behalf of the Fund shall be in "street" or other good delivery form or shall be returned to the selling broker or dealer who shall be advised of the reason thereof. D. BANK ACCOUNTS The Custodian shall open and maintain a separate bank account or accounts in the name of the Fund, subject only to draft or order by the Custodian acting in pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for the Fund may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as the Custodian may in its discretion deem necessary or desirable; PROVIDED, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall be approved in writing by two officers of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be subject to withdrawal only by the Custodian in that capacity. E. PAYMENT FOR SHARES OF THE FUND The Custodian shall make appropriate arrangements with the Transfer Agent and the principal underwriter of the Fund to enable the Custodian to make certain it promptly receives the cash or other consideration due to the Fund for such new or treasury Shares as may be issued or sold from time to time by the Fund, in accordance with the governing documents and offering prospectus and statement of additional information of the Fund. The Custodian will provide prompt notification to the Fund of any receipt by it of payments for Shares of the Fund. F. INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS Upon agreement between the Fund and the Custodian, the Custodian shall, upon the receipt of proper instructions, which may be continuing instructions when deemed appropriate by the parties, -6- 11 1) invest in such securities and instruments as may be set forth in such instructions on the same day as received all federal funds received after a time agreed upon between the Custodian and the Fund; and 2) make federal funds available to the Fund as of specified times agreed upon from time to time by the Fund and the Custodian in the amount of checks received in payment for Shares of the Fund which are deposited into the Fund's account. G. COLLECTIONS The Custodian shall promptly collect all income and other payments with respect to registered securities held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall promptly collect all income and other payments with respect to bearer securities if, on the date of payment by the issuer, such securities are held by the Custodian or agent thereof and shall credit such income, as collected, to the Fund's custodian account. The Custodian shall do all things necessary and proper in connection with such prompt collections and, without limiting the generality of the foregoing, the Custodian shall 1) Present for payment all coupons and other income items requiring presentations; 2) Present for payment all securities which may mature or be called, redeemed, retired or otherwise become payable; 3) Endorse and deposit for collection, in the name of the Fund, checks, drafts or other negotiable instruments; 4) Credit income from securities maintained in a Securities System or in an Approved Book-Entry System for Commercial Paper at the time funds become available to the Custodian; in the case of securities maintained in The Depository Trust Company funds shall be deemed available to the Fund not later than the opening of business on the first business day after receipt of such funds by the Custodian. The Custodian shall notify the Fund as soon as reasonably practicable whenever income due on any security is not promptly collected. In any case in which the Custodian does not receive any due and unpaid income after it has made demand for the same, it shall immediately so notify the Fund in writing, enclosing copies of any demand letter, any written response thereto, and memoranda of all oral responses thereto and to telephonic demands, and await instructions from the Fund; the Custodian shall in no case have any liability for any nonpayment of such income provided the Custodian meets the standard of care set forth in Section 8 hereof. The Custodian shall not be obligated to take legal action for collection unless and until reasonably indemnified to its satisfaction. The Custodian shall also receive and collect all stock dividends, rights and other items of like nature, and deal with the same pursuant to proper instructions relative thereto. -7- 12 H. PAYMENT OF FUND MONEYS Upon receipt of proper instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out moneys of the Fund in the following cases only: 1) Upon the purchase of securities, participation interests, options, futures contracts, forward contracts and options on futures contracts purchased for the account of the Fund but only (a) against the receipt of (i) such securities registered as provided in Paragraph C hereof or in proper form for transfer or (ii) detailed instructions signed by an officer of the Fund regarding the participation interests to be purchased or (iii) written confirmation of the purchase by the Fund of the options, futures contracts, forward contracts or options on futures contracts by the Custodian (or by a subcustodian employed pursuant to Section 2 hereof or by a clearing corporation of a national securities exchange of which the Custodian is a member or by any bank, banking institution or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940 to act as a custodian and which has been designated by the Custodian as its agent for this purpose or by the agent specifically designated in such instructions as representing the purchasers of a new issue of privately placed securities); (b) in the case of a purchase effected through a Securities System, upon receipt of the securities by the Securities System in accordance with the conditions set forth in Paragraph L hereof; (c) in the case of a purchase of commercial paper effected through an Approved Book-Entry System for Commercial Paper, upon receipt of the paper by the Custodian or subcustodian in accordance with the conditions set forth in Paragraph M hereof; (d) in the case of repurchase agreements entered into between the Fund and another bank or a broker-dealer, against receipt by the Custodian of the securities underlying the repurchase agreement either in certificate form or through an entry crediting the Custodian's segregated, non-proprietary account at the Federal Reserve Bank of Boston with such securities along with written evidence of the agreement by the bank or broker-dealer to repurchase such securities from the Fund; or (e) with respect to securities purchased outside of the United States, in accordance with written procedures agreed to from time to time in writing by the parties hereto; 2) When required in connection with the conversion, exchange or surrender of securities owned by the Fund as set forth in Paragraph B hereof; 3) When required for the redemption or repurchase of Shares of the Fund in accordance with the provisions of Paragraph J hereof; -8- 13 4) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: advisory fees, distribution plan payments, interest, taxes, management compensation and expenses, accounting, transfer agent and legal fees, and other operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 5) For the payment of any dividends or other distributions to holders of Shares declared or authorized by the Board; and 6) For any other proper corporate purpose, BUT ONLY upon receipt of, in addition to proper instructions, a certified copy of a vote of the Board, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom such payment is to be made. I. LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED In any and every case where payment for purchase of securities for the account of the Fund is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions signed by two officers of the Fund to so pay in advance, the Custodian shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by the Custodian; EXCEPT that in the case of a repurchase agreement entered into by the Fund with a bank which is a member of the Federal Reserve System, the Custodian may transfer funds to the account of such bank prior to the receipt of (i) the securities in certificate form subject to such repurchase agreement or (ii) written evidence that the securities subject to such repurchase agreement have been transferred by book-entry into a segregated non-proprietary account of the Custodian maintained with the Federal Reserve Bank of Boston or (iii) the safekeeping receipt, PROVIDED that such securities have in fact been so transfered by book-entry and the written repurchase agreement is received by the Custodian in due course; AND EXCEPT that if the securities are to be purchased outside the United States, payment may be made in accordance with procedures agreed to in writing from time to time by the parties hereto. J. PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND From such funds as may be available for the purpose, but subject to any applicable votes of the Board and the current redemption and repurchase procedures of the Fund, the Custodian shall, upon receipt of written instructions from the Fund or from the Fund's transfer agent or from the principal underwriter, make funds and/or portfolio securities available for payment to holders of Shares who have caused their Shares to be redeemed or repurchased by the Fund or for the Fund`s account by its transfer agent or principal underwriter. The Custodian may maintain a special checking account upon which special checks may be drawn by shareholders of the Fund holding Shares for which certificates have not been issued. Such checking account and such special checks shall be subject to such rules and regulations as the Custodian and the Fund may from time to time adopt. The Custodian or the Fund may suspend or terminate use -9- 14 of such checking account or such special checks (either generally or for one or more shareholders) at any time. The Custodian and the Fund shall notify the other immediately of any such suspension or termination. K. APPOINTMENT OF AGENTS BY THE CUSTODIAN The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company (PROVIDED such bank or trust company is itself qualified under the Investment Company Act of 1940 to act as a custodian or is itself an eligible foreign custodian within the meaning of Rule 17f-5 under said Act) as the agent of the Custodian to carry out such of the duties and functions of the Custodian described in this Section 3 as the Custodian may from time to time direct; PROVIDED, however, that the appointment of any such agent shall not relieve the Custodian of any of its responsibilities or liabilities hereunder, and as between the Fund and the Custodian the Custodian shall be fully responsible for the acts and omissions of any such agent. For the purposes of this Agreement, any property of the Fund held by any such agent shall be deemed to be held by the Custodian hereunder. L. DEPOSIT OF FUND PORTFOLIO SECURITIES IN SECURITIES SYSTEMS The Custodian may deposit and/or maintain securities owned by the Fund (1) in The Depository Trust Company; (2) in Participants Trust Company; (3) in any other Approved Clearing Agency; (4) in the Federal Book-Entry System; or (5) in an Approved Foreign Securities Depository in each case only in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, and at all times subject to the following provisions: (a) The Custodian may (either directly or through one or more subcustodians employed pursuant to Section 2 keep securities of the Fund in a Securities System provided that such securities are maintained in a non-proprietary account ("Account") of the Custodian or such subcustodian in the Securities System which shall not include any assets of the Custodian or such subcustodian or any other person other than assets held by the Custodian or such subcustodian as a fiduciary, custodian, or otherwise for its customers. (b) The records of the Custodian with respect to securities of the Fund which are maintained in a Securities System shall identify by book-entry those securities belonging to the Fund, and the Custodian shall be fully and completely responsible for maintaining a recordkeeping system capable of accurately and currently stating the Fund's holdings maintained in each such Securities System. -10- 15 (c) The Custodian shall pay for securities purchased in book-entry form for the account of the Fund only upon (i) receipt of notice or advice from the Securities System that such securities have been transferred to the Account, and (ii) the making of any entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund only upon (i) receipt of notice or advice from the Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund. Copies of all notices or advices from the Securities System of transfers of securities for the account of the Fund shall identify the Fund, be maintained for the Fund by the Custodian and be promptly provided to the Fund at its request. The Custodian shall promptly send to the Fund confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice of each such transaction, and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transactions in the Securities System for the account of the Fund on the next business day. (d) The Custodian shall promptly send to the Fund any report or other communication received or obtained by the Custodian relating to the Securities System's accounting system, system of internal accounting controls or procedures for safeguarding securities deposited in the Securities System; the Custodian shall promptly send to the Fund any report or other communication relating to the Custodian's internal accounting controls and procedures for safeguarding securities deposited in any Securities System; and the Custodian shall ensure that any agent appointed pursuant to Paragraph K hereof or any subcustodian employed pursuant to Section 2 hereof shall promptly send to the Fund and to the Custodian any report or other communication relating to such agent's or subcustodian's internal accounting controls and procedures for safeguarding securities deposited in any Securities System. The Custodian's books and records relating to the Fund's participation in each Securities System will at all times during regular business hours be open to the inspection of the Fund's authorized officers, employees or agents. (e) The Custodian shall not act under this Paragraph L in the absence of receipt of a certificate of an officer of the Fund that the Board has approved the use of a particular Securities System; the Custodian shall also obtain appropriate assurance from the officers of the Fund that the Board has annually reviewed the continued use by the Fund of each Securities System, and the Fund shall promptly notify the Custodian if the use of a Securities System is to be discontinued; at the request of the Fund, the Custodian will terminate the use of any such Securities System as promptly as practicable. (f) Anything to the contrary in this Agreement notwithstanding, the Custodian shall be liable to the Fund for any loss or damage to the Fund resulting from use of the Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or subcustodians or of any of its or their employees or from any failure of the Custodian or any such agent or subcustodian to enforce effectively such rights as it may have against the Securities System or any other person; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Fund has not been made whole for any such loss or damage. -11- 16 M. DEPOSIT OF FUND COMMERCIAL PAPER IN AN APPROVED BOOK-ENTRY SYSTEM FOR COMMERCIAL PAPER Upon receipt of proper instructions with respect to each issue of direct issue commercial paper purchased by the Fund, the Custodian may deposit and/or maintain direct issue commercial paper owned by the Fund in any Approved Book-Entry System for Commercial Paper, in each case only in accordance with applicable Securities and Exchange Commission rules, regulations, and no-action correspondence, and at all times subject to the following provisions: (a) The Custodian may (either directly or through one or more subcustodians employed pursuant to Section 2) keep commercial paper of the Fund in an Approved Book-Entry System for Commercial Paper, provided that such paper is issued in book entry form by the Custodian or subcustodian on behalf of an issuer with which the Custodian or subcustodian has entered into a book-entry agreement and provided further that such paper is maintained in a non-proprietary account ("Account") of the Custodian or such subcustodian in an Approved Book-Entry System for Commercial Paper which shall not include any assets of the Custodian or such subcustodian or any other person other than assets held by the Custodian or such subcustodian as a fiduciary, custodian, or otherwise for its customers. (b) The records of the Custodian with respect to commercial paper of the Fund which is maintained in an Approved Book-Entry System for Commercial Paper shall identify by book-entry each specific issue of commercial paper purchased by the Fund which is included in the System and shall at all times during regular business hours be open for inspection by authorized officers, employees or agents of the Fund. The Custodian shall be fully and completely responsible for maintaining a recordkeeping system capable of accurately and currently stating the Fund's holdings of commercial paper maintained in each such System. (c) The Custodian shall pay for commercial paper purchased in book-entry form for the account of the Fund only upon contemporaneous (i) receipt of notice or advice from the issuer that such paper has been issued, sold and transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such purchase, payment and transfer for the account of the Fund. The Custodian shall transfer such commercial paper which is sold or cancel such commercial paper which is redeemed for the account of the Fund only upon contemporaneous (i) receipt of notice or advice that payment for such paper has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer or redemption and payment for the account of the Fund. Copies of all notices, advices and confirmations of transfers of commercial paper for the account of the Fund shall identify the Fund, be maintained for the Fund by the Custodian and be promptly provided to the Fund at its request. The Custodian shall promptly send to the Fund confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice of each such transaction, and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transactions in the System for the account of the Fund on the next business day. (d) The Custodian shall promptly send to the Fund any report or other communication received or obtained by the Custodian relating to each System's accounting system, system of internal accounting controls or procedures for safeguarding commercial paper deposited in the System; the Custodian shall promptly send to the Fund any report or other communication relating to the Custodian's internal accounting controls and procedures for safeguarding -12- 17 commercial paper deposited in any Approved Book-Entry System for Commercial Paper; and the Custodian shall ensure that any agent appointed pursuant to Paragraph K hereof or any subcustodian employed pursuant to Section 2 hereof shall promptly send to the Fund and to the Custodian any report or other communication relating to such agent's or subcustodian's internal accounting controls and procedures for safeguarding securities deposited in any Approved Book-Entry System for Commercial Paper. (e) The Custodian shall not act under this Paragraph M in the absence of receipt of a certificate of an officer of the Fund that the Board has approved the use of a particular Approved Book-Entry System for Commercial Paper; the Custodian shall also obtain appropriate assurance from the officers of the Fund that the Board has annually reviewed the continued use by the Fund of each Approved Book-Entry System for Commercial Paper, and the Fund shall promptly notify the Custodian if the use of an Approved Book-Entry System for Commercial Paper is to be discontinued; at the request of the Fund, the Custodian will terminate the use of any such System as promptly as practicable. (f) The Custodian (or subcustodian, if the Approved Book-Entry System for Commercial Paper is maintained by the subcustodian) shall issue physical commercial paper or promissory notes whenever requested to do so by the Fund or in the event of an electronic system failure which impedes issuance, transfer or custody of direct issue commercial paper by book-entry. (g) Anything to the contrary in this Agreement notwithstanding, the Custodian shall be liable to the Fund for any loss or damage to the Fund resulting from use of any Approved Book-Entry System for Commercial Paper by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or subcustodians or of any of its or their employees or from any failure of the Custodian or any such agent or subcustodian to enforce effectively such rights as it may have against the System, the issuer of the commercial paper or any other person; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the System, the issuer of the commercial paper or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Fund has not been made whole for any such loss or damage. N. SEGREGATED ACCOUNT The Custodian shall upon receipt of proper instructions establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Paragraph L hereof, (i) in accordance with the provisions of any agreement among the Fund, the Custodian and any registered broker-dealer (or any futures commission merchant), relating to compliance with the rules of the Options Clearing Corporation and of any registered national securities exchange (or of the Commodity Futures Trading Commission or of any contract market or commodities exchange), or of any similar organization or organizations, regarding escrow or deposit or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or U.S. Government securities in connection with options purchased, sold or written by the Fund or futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by -13- 18 Investment Company Act Release No. 10666, or any subsequent release or releases of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in addition to proper instructions, a certificate signed by two officers of the Fund, setting forth the purpose such segregated account and declaring such purpose to be a proper purpose. O. OWNERSHIP CERTIFICATES FOR TAX PURPOSES The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to securities of the Fund held by it and in connection with transfers of securities. P. PROXIES The Custodian shall, with respect to the securities held by it hereunder, cause to be promptly delivered to the Fund all forms of proxies and all notices of meetings and any other notices or announcements or other written information affecting or relating to the securities, and upon receipt of proper instructions shall execute and deliver or cause its nominee to execute and deliver such proxies or other authorizations as may be required. Neither the Custodian nor its nominee shall vote upon any of the securities or execute any proxy to vote thereon or give any consent or take any other action with respect thereto (except as otherwise herein provided) unless ordered to do so by proper instructions. Q. COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES The Custodian shall deliver promptly to the Fund all written information (including, without limitation, pendency of call and maturities of securities and participation interests and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund and the maturity of futures contracts purchased or sold by the Fund) received by the Custodian from issuers and other persons relating to the securities and participation interests being held for the Fund. With respect to tender or exchange offers, the Custodian shall deliver promptly to the Fund all written information received by the Custodian from issuers and other persons relating to the securities and participation interests whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. R. EXERCISE OF RIGHTS; TENDER OFFERS In the case of tender offers, similar offers to purchase or exercise rights (including, without limitation, pendency of calls and maturities of securities and participation interests and expirations of rights in connection therewith and notices of exercise of call and put options and the maturity of futures contracts) affecting or relating to securities and participation interests held by the Custodian under this Agreement, the Custodian shall have responsibility for promptly notifying the Fund of all such offers in accordance with the standard of reasonable care set forth in Section 8 hereof. For all such offers for which the Custodian is responsible as provided in this Paragraph R, the Fund shall have responsibility for providing the Custodian with all necessary instructions in timely fashion. Upon receipt of proper instructions, the Custodian shall timely deliver to the issuer or trustee thereof, or to the agent of either, warrants, puts, calls, rights or similar securities for the purpose of being exercised or sold upon proper receipt therefor and upon receipt of assurances satisfactory to the Custodian that the new securities and cash, if any, acquired by such action are to be delivered to the Custodian or any subcustodian employed pursuant to Section 2 hereof. Upon receipt of proper instructions, the Custodian shall -14- 19 timely deposit securities upon invitations for tenders of securities upon proper receipt therefor and upon receipt of assurances satisfactory to the Custodian that the consideration to be paid or delivered or the tendered securities are to be returned to the Custodian or subcustodian employed pursuant to Section 2 hereof. Notwithstanding any provision of this Agreement to the contrary, the Custodian shall take all necessary action, unless otherwise directed to the contrary by proper instructions, to comply with the terms of all mandatory or compulsory exchanges, calls, tenders, redemptions, or similar rights of security ownership, and shall thereafter promptly notify the Fund in writing of such action. S. DEPOSITORY RECEIPTS The Custodian shall, upon receipt of proper instructions, surrender or cause to be surrendered foreign securities to the depository used by an issuer of American Depository Receipts or International Depository Receipts (hereinafter collectively referred to as "ADRs") for such securities, against a written receipt therefor adequately describing such securities and written evidence satisfactory to the Custodian that the depository has acknowledged receipt of instructions to issue with respect to such securities ADRs in the name of a nominee of the Custodian or in the name or nominee name of any subcustodian employed pursuant to Section 2 hereof, for delivery to the Custodian or such subcustodian at such place as the Custodian or such subcustodian may from time to time designate. The Custodian shall, upon receipt of proper instructions, surrender ADRs to the issuer thereof against a written receipt therefor adequately describing the ADRs surrendered and written evidence satisfactory to the Custodian that the issuer of the ADRs has acknowledged receipt of instructions to cause its depository to deliver the securities underlying such ADRs to the Custodian or to a subcustodian employed pursuant to Section 2 hereof. T. INTEREST BEARING CALL OR TIME DEPOSITS The Custodian shall, upon receipt of proper instructions, place interest bearing fixed term and call deposits with the banking department of such banking institution (other than the Custodian) and in such amounts as the Fund may designate. Deposits may be denominated in U.S. Dollars or other currencies. The Custodian shall include in its records with respect to the assets of the Fund appropriate notation as to the amount and currency of each such deposit, the accepting banking institution and other appropriate details and shall retain such forms of advice or receipt evidencing the deposit, if any, as may be forwarded to the Custodian by the banking institution. Such deposits shall be deemed portfolio securities of the applicable Fund for the purposes of this Agreement, and the Custodian shall be responsible for the collection of income from such accounts and the transmission of cash to and from such accounts. U. OPTIONS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS 1. OPTIONS. The Custodians shall, upon receipt of proper instructions and in accordance with the provisions of any agreement between the Custodian, any registered broker-dealer and, if necessary, the Fund, relating to compliance with the rules of the Options Clearing Corporation or of any registered national securities exchange or similar organization or organizations, receive and retain confirmations or other documents, if any, evidencing the purchase or writing of an option on a security or securities index or other financial instrument or index by the Fund; deposit and maintain in a segregated account for each Fund separately, either physically or by book-entry in a Securities System, securities subject to a covered call option written by the Fund; and release -15- 20 and/or transfer such securities or other assets only in accordance with a notice or other communication evidencing the expiration, termination or exercise of such covered option furnished by the Options Clearing Corporation, the securities or options exchange on which such covered option is traded or such other organization as may be responsible for handling such options transactions. The Custodian and the broker-dealer shall be responsible for the sufficiency of assets held in each Fund's segregated account in compliance with applicable margin maintenance requirements. 2. FUTURES CONTRACTS The Custodian shall, upon receipt of proper instructions, receive and retain confirmations and other documents, if any, evidencing the purchase or sale of a futures contract or an option on a futures contract by the Fund; deposit and maintain in a segregated account, for the benefit of any futures commission merchant, assets designated by the Fund as initial, maintenance or variation "margin" deposits (including mark-to-market payments) intended to secure the Fund's performance of its obligations under any futures contracts purchased or sold or any options on futures contracts written by Fund, in accordance with the provisions of any agreement or agreements among the Fund, the Custodian and such futures commission merchant, designed to comply with the rules of the Commodity Futures Trading Commission and/or of any contract market or commodities exchange or similar organization regarding such margin deposits or payments; and release and/or transfer assets in such margin accounts only in accordance with any such agreements or rules. The Custodian and the futures commission merchant shall be responsible for the sufficiency of assets held in the segregated account in compliance with the applicable margin maintenance and mark-to-market payment requirements. 3. FOREIGN EXCHANGE TRANSACTIONS The Custodian shall, pursuant to proper instructions, enter into or cause a subcustodian to enter into foreign exchange contracts or options to purchase and sell foreign currencies for spot and future delivery on behalf and for the account of the Fund. Such transactions may be undertaken by the Custodian or subcustodian with such banking or financial institutions or other currency brokers, as set forth in proper instructions. Foreign exchange contracts and options shall be deemed to be portfolio securities of the Fund; and accordingly, the responsibility of the Custodian therefor shall be the same as and no greater than the Custodian's responsibility in respect of other portfolio securities of the Fund. The Custodian shall be responsible for the transmittal to and receipt of cash from the currency broker or banking or financial institution with which the contract or option is made, the maintenance of proper records with respect to the transaction and the maintenance of any segregated account required in connection with the transaction. The Custodian shall have no duty with respect to the selection of the currency brokers or banking or financial institutions with which the Fund deals or for their failure to comply with the terms of any contract or option. Without limiting the foregoing, it is agreed that upon receipt of proper instructions and insofar as funds are made available to the Custodian for the purpose, the Custodian may (if determined necessary by the Custodian to consummate a particular transaction on behalf and for the account of the Fund) make free outgoing payments of cash in the form of U.S. dollars or foreign currency before receiving confirmation of a foreign exchange contract or confirmation that the countervalue currency completing the foreign exchange -16- 21 contact has been delivered or received. The Custodian shall not be responsible for any costs and interest charges which may be incurred by the Fund or the Custodian as a result of the failure or delay of third parties to deliver foreign exchange; provided that the Custodian shall nevertheless be held to the standard of care set forth in, and shall be liable to the Fund in accordance with, the provisions of Section 8. V. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY The Custodian may in its discretion, without express authority from the Fund: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement, PROVIDED, that all such payments shall be accounted for by the Custodian to the Treasurer of the Fund; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and 4) in general, attend to all nondiscretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund except as otherwise directed by the Fund. 4. DUTIES OF BANK WITH RESPECT TO BOOKS OF ACCOUNT AND CALCULATIONS OF NET ASSET VALUE The Bank shall as Agent (or as Custodian, as the case may be) keep such books of account (including records showing the adjusted tax costs of the Fund's portfolio securities) and render as at the close of business on each day a detailed statement of the amounts received or paid out and of securities received or delivered for the account of the Fund during said day and such other statements, including a daily trial balance and inventory of the Fund's portfolio securities; and shall furnish such other financial information and data as from time to time requested by the Treasurer or any executive officer of the Fund; and shall compute and determine, as of the close of business of the New York Stock Exchange, or at such other time or times as the Board may determine, the net asset value of a Share in the Fund, such computation and determination to be made in accordance with the governing documents of the Fund and the votes and instructions of the Board at the time in force and applicable, and promptly notify the Fund and its investment adviser and such other persons as the Fund may request of the result of such computation and determination. In computing the net asset value the Custodian may rely upon security quotations received by telephone or otherwise from sources or pricing services designated by the Fund by proper instructions, and may further rely upon information furnished to it by any authorized officer of the Fund relative (a) to liabilities of the Fund not appearing on its books of account, (b) to the existence, status and proper treatment of any reserve or reserves, (c) to any procedures established by the Board regarding the valuation of portfolio securities, and (d) to the value to be assigned to any bond, note, debenture, Treasury bill, repurchase agreement, subscription right, security, participation interests or other asset or property for which market quotations are not readily available. -17- 22 5. RECORDS AND MISCELLANEOUS DUTIES The Bank shall create, maintain and preserve all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of the Fund under the Investment Company Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder, applicable federal and state tax laws and any other law or administrative rules or procedures which may be applicable to the Fund. All books of account and records maintained by the Bank in connection with the performance of its duties under this Agreement shall be the property of the Fund, shall at all times during the regular business hours of the Bank be open for inspection by authorized officers, employees or agents of the Fund, and in the event of termination of this Agreement shall be delivered to the Fund or to such other person or persons as shall be designated by the Fund. Disposition of any account or record after any required period of preservation shall be only in accordance with specific instructions received from the Fund. The Bank shall assist generally in the preparation of reports to shareholders, to the Securities and Exchange Commission, including Forms N-SAR and N-1Q, to state "blue sky" authorities and to others, audits of accounts, and other ministerial matters of like nature; and, upon request, shall furnish the Fund's auditors with an attested inventory of securities held with appropriate information as to securities in transit or in the process of purchase or sale and with such other information as said auditors may from time to time request. The Custodian shall also maintain records of all receipts, deliveries and locations of such securities, together with a current inventory thereof, and shall conduct periodic verifications (including sampling counts at the Custodian) of certificates representing bonds and other securities for which it is responsible under this Agreement in such manner as the Custodian shall determine from time to time to be advisable in order to verify the accuracy of such inventory. The Bank shall not disclose or use any books or records it has prepared or maintained by reason of this Agreement in any manner except as expressly authorized herein or directed by the Fund, and the Bank shall keep confidential any information obtained by reason of this Agreement. 6. OPINION OF FUND'S INDEPENDENT PUBLIC ACCOUNTANTS The Custodian shall take all reasonable action, as the Fund may from time to time request, to enable the Fund to obtain from year to year favorable opinions from the Fund's independent public accountants with respect to its activities hereunder in connection with the preparation of the Fund's registration statement and Form N-SAR or other periodic reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission. 7. COMPENSATION AND EXPENSES OF BANK The Bank shall be entitled to reasonable compensation for its services as Custodian and Agent, as agreed upon from time to time between the Fund and the Bank. The Bank shall be entitled to receive from the Fund on demand reimbursement for its cash disbursements, expenses and charges, including counsel fees, in connection with its duties as Custodian and Agent hereunder, but excluding salaries and usual overhead expenses. 8. RESPONSIBILITY OF BANK So long as and to the extent that it is in the exercise of reasonable care, the Bank as Custodian and Agent shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties. -18- 23 The Bank as Custodian and Agent shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Bank as Custodian and Agent shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement but shall be liable only for its own negligent or bad faith acts or failures to act. Notwithstanding the foregoing, nothing contained in this paragraph is intended to nor shall it be construed to modify the standards of care and responsibility set forth in Section 2 hereof with respect to subcustodians and in subparagraph f of Paragraph L of Section 3 hereof with respect to Securities Systems and in subparagraph g of Paragraph M of Section 3 hereof with respect to an Approved Book-Entry System for Commercial Paper. The Custodian shall be liable for the acts or omissions of a foreign banking institution to the same extent as set forth with respect to subcustodians generally in Section 2 hereof, provided that, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from, or caused by, the direction of or authorization by the Fund to maintain custody of any securities or cash of the Fund in a foreign county including, but not limited to, losses resulting from nationalization, expropriation, currency restrictions, acts of war, civil war or terrorism, insurrection, revolution, military or usurped powers, nuclear fission, fusion or radiation, earthquake, storm or other disturbance of nature or acts of God. If the Fund requires the Bank in any capacity to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Bank, result in the Bank or its nominee assigned to the Fund being liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. 9. PERSONS HAVING ACCESS TO ASSETS OF THE FUND (i) No trustee, director, general partner, officer, employee or agent of the Fund shall have physical access to the assets of the Fund held by the Custodian or be authorized or permitted to withdraw any investments of the Fund, nor shall the Custodian deliver any assets of the Fund to any such person. No officer or director, employee or agent of the Custodian who holds any similar position with the Fund or the investment adviser of the Fund shall have access to the assets of the Fund. (ii) Access to assets of the Fund held hereunder shall only be available to duly authorized officers, employees, representatives or agents of the Custodian or other persons or entities for whose actions the Custodian shall be responsible to the extent permitted hereunder, or to the Fund's independent public accountants in connection with their auditing duties performed on behalf of the Fund. (iii) Nothing in this Section 9 shall prohibit any officer, employee or agent of the Fund or of the investment adviser of the Fund from giving instructions to the Custodian or executing a certificate so long as it does not result in delivery of or access to assets of the Fund prohibited by paragraph (i) of this Section 9. -19- 24 10. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT; SUCCESSOR CUSTODIAN This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated by either party after August 31, 2000 by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than sixty (60) days after the date of such delivery or mailing; PROVIDED, that the Fund may at any time by action of its Board, (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian in the event the Custodian assigns this Agreement to another party without consent of the noninterested Trustees of the Funds, or (ii) immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Custodian by the Federal Deposit Insurance Corporation or by the Banking Commissioner of The Commonwealth of Massachusetts or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Agreement, the Fund shall pay to the Custodian such compensation as may be due as of the date of such termination (and shall likewise reimburse the Custodian for its costs, expenses and disbursements). This Agreement may be amended at any time by the written agreement of the parties hereto. If a majority of the non-interested trustees of any of the Funds determines that the performance of the Custodian has been unsatisfactory or adverse to the interests of shareholders of any Fund or Funds or that the terms of the Agreement are no longer consistent with publicly available industry standards, then the Fund or Funds shall give written notice to the Custodian of such determination and the Custodian shall have 60 days to (1) correct such performance to the satisfaction of the non-interested trustees or (2) renegotiate terms which are satisfactory to the non-interested trustees of the Funds. If the conditions of the preceding sentence are not met then the Fund or Funds may terminate this Agreement on sixty (60) days written notice. The Board of the Fund shall, forthwith, upon giving or receiving notice of termination of this Agreement, appoint as successor custodian, a bank or trust company having the qualifications required by the Investment Company Act of 1940 and the Rules thereunder. The Bank, as Custodian, Agent or otherwise, shall, upon termination of the Agreement, deliver to such successor custodian, all securities then held hereunder and all funds or other properties of the Fund deposited with or held by the Bank hereunder and all books of account and records kept by the Bank pursuant to this Agreement, and all documents held by the Bank relative thereto. In the event that no written order designating a successor custodian shall have been delivered to the Bank on or before the date when such termination shall become effective, then the Bank shall not deliver the securities, funds and other properties of the Fund to the Fund but shall have the right to deliver to a bank or trust company doing business in Boston, Massachusetts of its own selection meeting the above required qualifications, all funds, securities and properties of the Fund held by or deposited with the Bank, and all books of account and records kept by the Bank pursuant to this Agreement, and all documents held by the Bank relative thereto. Thereafter such bank or trust company shall be the successor of the Custodian under this Agreement. 11. INTERPRETIVE AND ADDITIONAL PROVISIONS In connection with the operation of this Agreement, the Custodian and the Fund may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, PROVIDED that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the governing instruments of the Fund. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement. -20- 25 12. NOTICES Notices and other writings delivered or mailed postage prepaid to the Fund addressed to 24 Federal Street, Boston, Massachusetts 02110, or to such other address as the Fund may have designated to the Bank, in writing, or to Investors Bank & Trust Company, 24 Federal Street, Boston, Massachusetts 02110, shall be deemed to have been properly delivered or given hereunder to the respective addressees. 13. MASSACHUSETTS LAW TO APPLY This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts. If the Fund is a Massachusetts business trust, the Custodian expressly acknowledges the provision in the Fund's declaration of Trust limiting the personal liability of the trustees and shareholders of the Fund; and the Custodian agrees that it shall have recourse only to the assets of the Fund for the payment of claims or obligations as between the Custodian and the Fund arising out of this Agreement, and the Custodian shall not seek satisfaction of any such claim or obligation from the trustees or shareholders of the Fund. 14. ADOPTION OF THE AGREEMENT BY THE FUND The Fund represents that its Board has approved this Agreement and has duly authorized the Fund to adopt this Agreement, such adoption to be evidenced by a letter agreement between the Fund and the Bank reflecting such adoption, which letter agreement shall be dated and signed by a duly authorized officer of the Fund and duly authorized officer of the Bank. This Agreement shall be deemed to be duly executed and delivered by each of the parties in its name and behalf by its duly authorized officer as of the date of such letter agreement, and this Agreement shall be deemed to supersede and terminate, as of the date of such letter agreement, all prior agreements between the Fund and the Bank relating to the custody of the Fund's assets. * * * * * -21- EX-99.2(K)(1) 9 TRANSFER AGENCY AND SERVICES AGREEMENT 1 EXHIBIT 99.(K)(1) TRANSFER AGENCY AND SERVICES AGREEMENT AGREEMENT dated as of December 21, 1998, between each registered investment company listed on Exhibit 1 hereof (as may be amended from time to time) (each a "Fund"), each being a voluntary association commonly known as a "Massachusetts business trust" having its principal place of business at 24 Federal Street, Boston, MA 02110, and FIRST DATA INVESTOR SERVICES GROUP, INC. (the "Transfer Agent" or "FDISG"), a Massachusetts corporation with principal offices at 4400 Computer Drive, Westboro, Massachusetts 01581. W I T N E S S E T H: WHEREAS, each Fund desires to retain FDISG as its transfer agent, dividend disbursing agent and agent in connection with certain other activities, and FDISG desires to provide such services on the terms herein. NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth, each Fund and FDISG agree as follows: 1. DEFINITIONS. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: (a) "Articles of Organization" shall mean the Articles of Organization, Declaration of Trust or other charter document of the Fund, as the same may be amended from time to time; (b) "Authorized Person" shall be deemed to include any person duly authorized to give Oral Instructions or Written Instructions on behalf of the Fund as indicated in writing to FDISG from time to time; (c) "Commission" shall mean the Securities and Exchange Commission; (d) "Counsel" shall mean (i) outside legal counsel of the Fund in its capacity as such and (ii) outside legal counsel of FDISG if such counsel has been specifically authorized by an Authorized Person of the Fund to render its opinion on the matter that has arisen; (e) "Custodian" refers to the custodian and any sub-custodian of all securities and other property which the Fund may from time to time deposit, or cause to be deposited or held under the name or account of such custodian duly engaged by the Fund; (f) "Trustees" or "Board of Trustees" refers to the duly elected Trustees or Directors of the Fund; 2 (g) "Oral Instructions" shall mean instructions, other than Written Instructions, actually received by FDISG from a person reasonably believed by FDISG to be an Authorized Person; (h) "Prospectus" shall mean the Fund's current prospectus and statement of additional information, including any supplements thereto, relating to the registration of the Fund's Shares under the Securities Act of 1933, as amended, and the 1940 Act; (i) "Shares" refers to the shares of beneficial interest or common stock of the Fund (which may be divided into classes); (j) "Shareholder" means a record owner of Shares; (k) Written Instructions" means any written communication signed by an Authorized Person and actually received by FDISG, and shall include manually executed originals and authorized electronic transmissions of such originals (including telefacsimile); and (l) The "1940 Act" refers to the Investment Company Act of 1940 and the rules and regulations promulgated thereunder, all as amended from time to time. 2. APPOINTMENT OF FDISG. The Fund hereby appoints FDISG as transfer agent for its Shares and as shareholder servicing agent for the Fund, and FDISG accepts such appointment and agrees to perform the duties hereinafter set forth. 3. DUTIES OF FDISG. (a) FDISG shall be responsible for administering and/or performing transfer agent functions; for acting as service agent in connection with dividend and distribution functions; and for performing shareholder account and administrative agent functions in connection with the issuance and transfer (including coordination with the Custodian) of Shares. Such duties are described in the written Schedule of Duties of FDISG annexed hereto as Schedule A. FDISG shall also act in accordance with the terms of the Prospectus of the Fund, applicable law and the procedures established from time to time between FDISG and the Fund. (b) FDISG shall record the issuance of Shares and maintain pursuant to Rule 17Ad-10(e) under the Securities Act of 1934 a record of the total number of Shares of the Fund which are authorized (with due authorization based upon data provided by the Fund), issued and outstanding. FDISG shall provide the Fund on a regular basis with such information but shall have no obligation, when recording the issuance of Shares, to monitor the legality of issuance of Shares or to take cognizance of any laws relating to the proper issue or sale of such Shares, which functions shall be the sole responsibility of the Fund (or its administrator). (c) FDISG shall serve as agent for Shareholders pursuant to the Fund's dividend reinvestment plan, as amended from time to time. 2 3 (d) FDISG acknowledges that the Funds' administrator, Eaton Vance Management ("EVM"), currently employs personnel to provide shareholders with, among other things, information regarding their accounts and transaction procedures of FDISG. FDISG acknowledges that EVM is not responsible for transfer agency services to the Fund. In the event FDISG determines that a particular transaction requested by a shareholder cannot be processed because it is not permitted by law or procedures established hereby but EVM or Fund personnel desire the transaction to be so processed, then FDISG shall nonetheless process the transaction if EVM provides a standard form indemnification to FDISG. At the request of EVM, FDISG shall provide a written explanation for its decision. 4. RECORDKEEPING, AND OTHER INFORMATION. (a) FDISG shall create and maintain all records required of it pursuant to its duties hereunder and as set forth in Schedule A in accordance with all applicable laws, rules and regulations, including records required by Section 31(a) of the 1940 Act and the rules thereunder. Where applicable, such records shall be maintained by FDISG for the periods and the places required by Rule 31a-2 under the 1940 Act. (b) FDISG agrees that all such records prepared or maintained by FDISG relating to the services to be performed by FDISG hereunder are the property of the Fund, and will be surrendered promptly to the Fund on and in accordance with the Fund's request. (c) In case of any requests or demands for the inspection of Shareholder records of the Fund by third parties, FDISG will endeavor to notify the Fund of such request and secure Written Instructions as to the handling of such request. FDISG reserves the right, however, to exhibit the Shareholder records to any person whenever it is required to do so by law. 5. FUND INSTRUCTIONS - LIMITATIONS OF LIABILITY. (a) FDISG will have no liability when acting in conformance with Written or Oral Instructions reasonably believed to have been executed or orally communicated by an Authorized Person and will not be held to have any notice of any change of authority of any person until receipt of a Written Instruction thereof from the Fund. FDISG will also have no liability when processing Share certificates which it reasonably believes them to bear the proper manual or facsimile signatures of the Officers of the Fund and the proper countersignature of FDISG. (b) At any time, FDISG may apply to any Authorized Person of the Fund for Written Instructions and may, after obtaining prior oral or written approval by an Authorized Person, seek advise from Counsel with respect to any matter arising in connection with this Agreement, and it shall not be liable for any action taken or not taken or suffered by it in good faith in accordance with such Written Instructions or in accordance with this opinion of Counsel. Written Instructions requested by FDISG will be provided by the Fund within a reasonable 3 4 period of time. In addition, FDISG, its Officers, agents or employees, shall accept Oral Instructions or Written Instructions given to them by any person representing or acting on behalf of the Fund only if said representative is known by FDISG, or its Officers, agents or employees, to be an Authorized Person. FDISG shall have no duty or obligation to inquire into, nor shall FDISG be responsible for, the legality of any act done by it upon the request or direction of an Authorized Person. (c) Notwithstanding any of the foregoing provisions of this Agreement, FDISG shall be under no duty or obligation to inquire into, and shall not be liable for: (i) the legality of the issuance or sale of any Shares or the sufficiency of the amount to be received therefor; (ii) the propriety of the amount per share to be paid on any redemption; (iii) the legality of the declaration of any dividend by the Trustees, or the legality of the issuance of any Shares in payment of any dividend; or (iv) the legality of any recapitalization or readjustment of the Shares. (d) FDISG will not be liable or responsible for delays or errors by reason of circumstances beyond its control, including acts of civil or military authority, national emergencies, fire, mechanical breakdown beyond its control, flood, acts of God, insurrection, war, riots, and loss of communication or power supply, provided, however, that FDISG shall have acted in accordance with its Disaster Recovery Plan previously provided to the Eaton Vance Group of Funds, which may be amended from time to time by agreement of the Fund and FDISG. 6. COMPENSATION. (a) The Fund will compensate FDISG for the performance of its obligations hereunder in accordance with the fees set forth in the written schedule of fees annexed hereto as Schedule B and incorporated herein. (b) Out-of-pocket disbursements shall mean the items specified in the written schedule of out-of-pocket charges annexed hereto as Schedule C and incorporated herein. Reimbursement by the Fund for such out-of-pocket disbursements incurred by FDISG in any month shall be made as soon as practicable after the receipt of an itemized bill from FDISG. Reimbursement by the Fund for expenses other than those specified in Schedule C shall be upon mutual agreement of the parties as provided in Schedule C. (c) FDISG will bill the Fund as soon as practicable after the end of each calendar month, and said billings will be detailed in accordance with Schedule B. The Fund will promptly pay to FDISG the amount of such billing. (d) The parties agree to review at least annually at a Trustees' meeting of the Fund the services provided, cost thereof, and fees and expenses charged, including comparative information regarding the transfer agency industry. The compensation agreed to hereunder may be adjusted from time to time by attaching to this Agreement a revised Schedule, dated and executed by the parties hereto. 4 5 7. DOCUMENTS. In connection with the appointment of FDISG, the Fund shall upon request, on or before the date this Agreement goes into effect, but in any case within a reasonable period of time for FDISG to prepare to perform its duties hereunder, furnish FDISG with the following documents: (a) A certified copy of the Articles of Organization and By-Laws of the Fund, as amended; (b) A copy of the resolution of the Trustees authorizing the execution and delivery of this Agreement; (c) If applicable, a specimen of the certificate for Shares of the Fund in the form approved by the Trustees, with a certificate of an Officer of the Fund as to such approval; (d) All account application forms and other documents relating to Shareholder accounts or to any plan, program or service offered by the Fund; and (e) With respect to any Fund previously serviced by another transfer agent, to the extent practicable a certified list of Shareholders of the Fund with the name, address and taxpayer identification number of each Shareholder, and the number of shares of the Fund held by each, certificate numbers and denominations (if any certificates have been issued), lists of any accounts against which stop transfer orders have been placed, together with the reasons therefor, and the number of Shares redeemed by the Fund. 8. REPRESENTATIONS AND WARRANTIES. (a) FDISG represents and warrants to the Fund that: (i) it is a corporation duly organized, existing and in good standing under the laws of the Commonwealth of Massachusetts; (ii) it is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement; (iii) all requisite corporate proceedings have been taken to authorize it to enter into this Agreement; (iv) FDISG will maintain its registration as a transfer agent as provided in Section 17A(c) of the Securities Act of 1934, as amended, (the "1934 Act") and shall comply with all applicable provisions of Section 17A of the 1934 Act and the rules promulgated thereunder, as may be amended from time to time, including rules relating to record retention; (v) it has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement; 5 6 (vi) to the best of its knowledge, the various procedures and systems which FDISG has implemented or will implement with regard to safeguarding from loss or damage attributable to fire, theft or any other cause (including provision for 24 hours-a-day restricted access) of the Fund's records and other data and FDISG's records, data, equipment, facilities and other property used in the performance of its obligations hereunder are adequate and that it will make such changes therein from time to time as in its judgement are required for the secure performance of its obligations hereunder. The parties shall review such systems and procedures on a periodic basis; and (vii) it maintains adequate insurance to enable it to continue its operations as described herein, including coverage for Year 2000 system failures. FDISG shall notify the Fund should any of its insurance coverage as set forth in Schedule F attached hereto be changed for any reason. Such notification shall include the date of change and reason or reasons therefor. FDISG shall notify the Fund of any claims against it whether or not they may be covered by insurance and shall notify the Fund from time to time as may be appropriate, and at lest within 30 days following the end of each fiscal year of FDISG, of the total outstanding claims made by FDISG under its insurance coverage. (b) The Fund represents and warrants to FDISG that: (i) it is duly organized, existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) it is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into this Agreement; (iii) all corporate proceedings required by said Articles of Incorporation, By-Laws and applicable laws have been taken to authorize it to enter into this Agreement; (iv) a registration statement under the Securities Act of 1933, as amended, and/or the 1940 Act is currently effective and will remain effective, and all appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Fund being offered for sale; and (v) all outstanding Shares are validly issued, fully paid and non-assessable and when Shares are hereafter issued in accordance with the terms of the Fund's Articles of Incorporation and its Prospectus, such Shares when issued shall be validly issued, fully paid and non-assessable. 9. DUTY OF CARE AND INDEMNIFICATION. (a) Each party shall fulfill its obligations hereunder by acting with reasonable care and in good faith; 6 7 (b) The Fund will indemnify FDISG against and hold it harmless from any and all losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from any claim, demand, action or suit not resulting from the bad faith or negligence of FDISG, and arising out of, or in connection with, its duties on behalf of the Fund hereunder. In addition, the Fund will indemnify FDISG against and hold it harmless from any and all losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from any claim, demand, action or suit as a result of : (i) any action taken in accordance with Written or Oral Instructions, or share certificates reasonably believed by FDISG to be genuine and to be signed, countersigned or executed, or orally communicated by an Authorized Person; (ii) any action taken in accordance with written or oral advice reasonably believed by FDISG to have been given by counsel for the Fund; or (iii) any action taken as a result of any error or omission in any record which FDISG had no reasonable basis to believe was inaccurate (including but not limited to magnetic tapes, computer printouts, hard copies and microfilm copies) and was delivered, or caused to be delivered, by the Fund to FDISG in connection with this Agreement; (c) FDISG will indemnify the Fund against and hold it harmless from any and all losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from any claim, demand, action or suit not resulting from the bad faith or negligence of the Fund, or arising out of, or in connection with, FDISG's breach of this Agreement; (d) In any case in which a party may be asked to indemnify or hold the other party harmless, the indemnifying party shall be advised of all pertinent facts concerning the situation in question and the party seeking indemnification shall notify the indemnifying party promptly concerning any situation which presents or appears likely to present a claim for indemnification. The indemnifying party shall have the option to defend against any claim which may be the subject of this indemnification and, in the event that the indemnifying party so elects, such defense shall be conducted by counsel chosen by the indemnifying party, and thereupon the indemnifying party shall take over complete defense of the claim and the party seeking indemnification shall sustain no further legal or other expenses in such situation for which it seeks indemnification. The party seeking indemnification will not confess any claim or make any compromise in any case in which the indemnifying party will be asked to provide indemnification, except with the indemnifying party's prior written consent; and (e) The obligations of the parties hereto under this Section shall survive the termination of this Agreement. 10. TERMS AND TERMINATION. (a) Either party may terminate this Agreement without cause on or after July 31, 2002 by giving 180 days written notice to the other party; 7 8 (b) Either party may terminate this Agreement if the other party has materially breached the Agreement by giving the defaulting party 30 days written notice and the defaulting party has failed to cure the breach within 60 days thereafter; and (c) Any written notice of termination shall specify the date of termination. The Fund shall provide notice of the successor transfer agent within 30 days of the termination date. Upon termination, FDISG will deliver to such successor a certified list of shareholders of the Fund (with names, addresses and taxpayer identification of Social Security numbers and such other federal tax information as FDISG may be required to maintain), an historical record of the account of each shareholder and the status thereof, and all other relevant books, records, correspondence, and other data established or maintained by the books, records, correspondence, and other data established or maintained by FDISG under this Agreement in the form reasonably acceptable to the Fund, and will cooperate in the transfer of such duties and responsibilities, including provisions for assistance from FDISG's personnel in the establishment of books, records and other data by such successor or successors. FDISG shall be entitled to its out-of-pocket expenses set forth in Schedule C incurred in the delivery of such records net of the fees owed to FDISG for the last month of service if this Agreement is terminated pursuant to paragraph (b) immediately above. (d) If a majority of the non-interested trustees of any of the Funds determines, in the exercise of their fiduciary duties and pursuant to their reasonable business judgement after consultation with Eaton Vance Management, that the performance of FDISG has been unsatisfactory or adverse to the interests of shareholders of any Fund or Funds or that the terms of the Agreement are no longer consistent with publicly available industry standards, then the Fund or Funds shall give written notice to FDISG of such determination and FDISG shall have 60 days (or such longer period if the non-interested Trustees so determine) to (1) correct such performance to the satisfaction of the non-interested trustees or (2) renegotiate terms which are satisfactory to the non-interested trustees of the Funds. If the conditions of the preceding sentence are not met then the Fund or Funds may terminate this Agreement on sixty (60) days written notice provided, however, that the provisions of Paragraph 11(c) shall remain outstanding for an additional 30 days if necessary to transfer records to a successor transfer agent. (e) If the Board of Trustees hereafter establishes and designates a new Fund, FDISG agrees that it will act as transfer agent and shareholder servicing agent for such new Fund in accordance with the terms set forth herein. The Trustees shall cause a written notice to be sent to FDISG to the effect that it has established a new Fund and that it appoints FDISG as transfer agent and shareholder servicing agent for the new Fund. Such written notice must be received by FDISG in a reasonable period of time prior to the commencement of operations of the new Fund to allow FDISG, in the ordinary course of its business, to prepare to perform its duties. 8 9 11. CONFIDENTIALITY OF RECORDS. (a) FDISG agrees to treat all records and other information relative to the Fund and its prior, present or potential Shareholders in confidence except that, after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where FDISG may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Fund. (b) FDISG shall make available during regular business hours all records and other data created and maintained pursuant to this Agreement for reasonable audit and inspection by the Fund, or any person retained by the Fund. Upon reasonable notice by the Fund, FDISG shall make available during regular business hours its facilities and premises employed in connection with its performance of this Agreement for reasonable visitation by the Fund, or any person retained by the Fund, to inspect its operating capabilities or for any other reason. (c) The Fund agrees to keep all records and information of FDISG (including trade secrets) in confidence, unless such is required to be divulged pursuant to law or where the Fund may be exposed to or criminal contempt proceedings for failure to comply. FDISG acknowledges that such records and information may be disclosed to Eaton Vance Management personnel and to Fund auditors consistent with the responsibilities of such parties, and in such cases the Fund shall take reasonable precautions to safeguard the confidentiality of such data to the extent practicable. 12. AMENDMENT, ASSIGNMENT AND SUBCONTRACTING. (a) This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties. (b) This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that any assignment of this Agreement (as defined in the 1940 Act) to an entity shall require the written consent of the other party. (c) The Fund agrees that FDISG may, in its discretion, subcontract for certain of the services described under this Agreement or the Schedules hereto; provided that the appointment of any such Agent shall not relieve FDISG of its responsibilities hereunder. 13. USE OF TRADE NAMES. (a) FDISG shall approve all reasonable uses of its name which merely refer in accurate terms to its appointment hereunder or which are required by the Commission or a state securities commission. Notwithstanding the foregoing, any reference to FDISG shall include a statement to the effect that it is a wholly owned subsidiary of First Data Corporation. 9 10 (b) FDISG shall not use the name of the Fund or material relating to the Fund on any documents or forms for other than internal use in a manner not approved prior thereto in writing; provided, that the Fund shall approve all reasonable uses of its name which merely refer in accurate terms to the appointment of FDISG or which are required by the Commission or a state securities commission. 14. NOTICE. Any notice or other instrument authorized or required by this Agreement to be given in writing to the Fund or FDISG, shall be sufficiently given if addressed to that party and received by it at its office set forth below or at such other place as it may from time to time designate in writing. To the Fund: 24 Federal Street Boston, MA 02110 Attention: Fund Secretary To FDISG: First Data Investor Services Group, Inc. 4400 Computer Drive Westboro, Massachusetts 01581 Attn: President with a copy to FDISG's General Counsel 15. GOVERNING LAW/VENUE. The laws of the Commonwealth of Massachusetts, excluding the laws on conflicts of laws, shall govern the interpretation, validity, and enforcement of this agreement. All actions arising from or related to this Agreement shall be brought in the state and federal courts sitting in the City of Boston, and the parties hereby submit themselves to the exclusive jurisdiction of those courts. 16. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original; but such counterparts shall, together, constitute only one instrument. 17. CAPTIONS. The captions of this Agreement are included for convenience or reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. 18. SEVERABILITY. The parties intend every provision of this Agreement to be severable. If a court of competent jurisdiction determines that any term or provision is illegal or invalid for any reason, the illegality or invalidity shall not affect the validity of the remainder of this Agreement. In such case, the parties shall in good faith modify or substitute such provision consistent 10 11 with the original intent of the parties. Without limiting the generality of this paragraph, if a court determines that any remedy stated in this Agreement failed of its essential purpose, then all provisions of this Agreement, including the limitations on liability and exclusion of damages, shall remain fully effective. 19. LIABILITY OF TRUSTEES, OFFICERS AND SHAREHOLDERS. The execution and delivery of this Agreement have been authorized by the Trustees of the Fund and signed by an authorized Officer of the Fund, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such Officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, and the obligations of this Agreement are not binding upon any of the Trustees or shareholders of the Fund, but bind only the property of the Fund. No class of the Fund shall be liable for the obligations of another class. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective Officers thereunder duly authorized as of the day and year first above written. First Data Investors Services Group, Inc. Eaton Vance Michigan Municipal Income Trust By: /s/ Michael G. McCarthy Senior Vice President, General Manager By: /s/ James B. Hawkes -------------------------------- ----------------------------- Eaton Vance Municipal Income Trust Eaton Vance New Jersey Municipal Income Trust By: /s/ James B. Hawkes By: /s/ James B. Hawkes ---------------------------------- ----------------------------- Eaton Vance California Municipal Eaton Vance New York Municipal Income Trust Income Trust By: /s/ James B. Hawkes By: /s/ James B. Hawkes --------------------------------- ----------------------------- Eaton Vance Florida Municipal Eaton Vance Ohio Municipal Income Trust Income Trust By: /s/ James B. Hawkes By: /s/ James B. Hawkes ---------------------------------- ----------------------------- Eaton Vance Massachusetts Municipal Eaton Vance Pennsylvania Income Trust Municipal Income Trust By: /s/ James B. Hawkes By: /s/ James B. Hawkes -------------------------------- -----------------------------
11 12 SCHEDULE A DUTIES OF FDISG 1. SHAREHOLDER INFORMATION. FDISG shall maintain a record of the number of Shares held by each Shareholder of record which shall include name, address, taxpayer identification and which shall indicate whether such Shares are held in certificates or uncertificated form. 2. SHAREHOLDER SERVICES. FDISG will investigate all shareholder inquiries relating to Shareholder accounts and will answer all communications from Shareholders and others with respect to its duties hereunder. FDISG shall keep records of all Shareholder correspondence and replies thereto, and of lapse of time between the receipt of such correspondence and the mailing of such replies. 3. SHARE CERTIFICATES. (a) At the expense of the Fund, the Fund shall supply FDISG with an adequate supply of blank share certificates to meet FDISG requirements therefor. Such Share certificates shall be properly signed by facsimile. The Fund agrees that, notwithstanding the death, resignation, or removal of any officer of the Fund whose signature appears on such certificates, FDISG or its agent may continue to countersign certificates which bear such signatures until otherwise directed by Written Instructions. (b) FDISG shall issue replacement Share certificates in lieu of certificates which have been lost, stolen or destroyed, upon receipt by FDISG of properly executed affidavits and lost certificate bonds, in form satisfactory to FDISG, with the Fund and FDISG as obligees under the bond. (c) FDISG shall also maintain a record of each certificate issued, the number of Shares represented thereby and the Shareholder of record. With respect to Shares held in open accounts or uncertificated form (i.e., no certificate being issued with respect thereto) FDISG shall maintain comparable records of the Shareholders thereof, including their names, addresses and taxpayer identification numbers. FDISG shall further maintain a stop transfer record on lost and/or replaced certificates. 4. MAILING COMMUNICATIONS TO SHAREHOLDERS; PROXY MATERIALS. FDISG will address and mail to Shareholders of the Fund, all reports to Shareholders, dividend and distribution notices and proxy material for the Fund's meetings of Shareholders, and such other communications as the Fund may authorize. In connection with meetings of Shareholders, FDISG will prepare Shareholder lists, mail and certify as to the mailing of proxy materials, process and tabulate returned proxy cards, report on proxies voted prior to meetings, act as inspector of election at meetings and certify Shares voted at meetings. 5. TRANSFER OF SHARES. (a) FDISG shall process all requests to transfer Shares in accordance with the transfer procedures set forth in the Fund's Prospectus. 13 (b) FDISG will transfer Shares upon receipt of Written Instructions or otherwise pursuant to the Prospectus and Share certificates, if any, properly endorsed for transfer, accompanied by such documents as FDISG reasonably may deem necessary. (c) FDISG reserves the right to refuse to transfer Shares until it is satisfied that the endorsement on the instructions is valid and genuine. FDISG also reserves the right to refuse to transfer Shares until it is satisfied that the requested transfer is legally authorized, and it shall incur no liability for the refusal, in good faith, to make transfers which FDISG in its good judgment, deems improper or unauthorized, or until it is reasonably satisfied that there is no basis to any claims adverse to such transfer. 7. DIVIDENDS. (a) Upon the declaration of each dividend and each capital gains distribution by the Board of Directors of the Fund with respect to Shares of the Fund, the Fund shall furnish or cause to be furnished to FDISG Written Instructions setting forth the date of the declaration of such dividend or distribution, the ex-dividend date, the date of payment thereof, the record date as of which Shareholders entitled to payment shall be determined, the amount payable per Share to the Shareholders of record as of that date, the total amount payable on the payment date and whether such dividend or distribution is to be paid in Shares at net asset value. (b) On or before the payment date specified in such resolution of the Board of Directors, the Fund will provide FDISG with sufficient cash to make payment to the Shareholders of record as of such payment date. (c) If FDISG does not receive sufficient cash from the Fund to make total dividend and/or distribution payments to all Shareholders of the Fund as of the record date, FDISG will, upon notifying the Fund, withhold payment to all Shareholders of record as of the record date until sufficient cash is provided to FDISG. 8. MISCELLANEOUS In addition to and neither in lieu nor in contravention of the services set forth above, FDISG shall perform all the customary services of a transfer agent registrar dividend disbursing agent and agent of the dividend reinvestment plan as described herein consistent with those requirements in effect as at the date of this Agreement. The detailed definition, frequency, limitations and associated costs (if any) set out in the attached fee schedule, include but are not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, tabulating proxies, mailing Shareholder reports to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts where applicable, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all registered Shareholders. 14 SCHEDULE B FEE SCHEDULE 1. INITIAL PUBLIC OFFERING FEES IPO Project Administration Fee: $3,000 per Fund IPO Project Administration Fee covers: Issuance of up to 1,000 certificates - Issuance of certificates in excess of 1,000 to be billed at $2.00 per certificate Administrative coordination with IPO client, underwriter and legal representatives Attendance at closing (out of pocket expenses associated with such attendance will be billed as incurred) Set-up, testing and implementation of electronic settlement and delivery of shares through The Depository Trust Company 2. OVER-ALLOTMENT FEE: $1,000 per Fund Applies in the event that the underwriters elect to exercise an over-allotment option which requires a second closing 3. STANDARD SERVICE FEES: The following fees shall apply with respect to the initial class of shares offered by the Fund. Should the Fund issue additional classes of shares, the fees for such shall be mutually agreed to in writing by the parties. Annual Service Fee $15.00 Per Account Monthly Minimum Fee $5,000.00 After the one year anniversary of the effective date of this Agreement, FDISG may adjust the above fees once per calendar year, upon thirty (30) days prior written notice in an amount not to exceed the cumulative percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U) U.S. City Average, All items (unadjusted) - (1982-84=100), published by the U.S. Department of Labor since the last such adjustment in the Fund's monthly fees (or the Effective Date absent a prior such adjustment). 15 SCHEDULE C OUT-OF-POCKET EXPENSES The Fund shall reimburse FDISG monthly for applicable out-of-pocket expenses, including, but not limited to the following items: - Microfiche/microfilm production - Magnetic media tapes and freight - Printing costs, including certificates, envelopes, checks and stationery - Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct pass through to the Fund - Due diligence mailings - Telephone and telecommunication costs, including all lease, maintenance and line costs - Ad hoc reports - Proxy solicitations, mailings and tabulations - Daily & Distribution advice mailings - Shipping, Certified and Overnight mail and insurance - Year-end form production and mailings - Terminals, communication lines, printers and other equipment and any expenses incurred in connection with such terminals and lines - Duplicating services - Courier services - Incoming and outgoing wire charges - Federal Reserve charges for check clearance - Overtime, as approved by the Fund - Temporary staff, as approved by the Fund - Travel and entertainment, as approved by the Fund - Record retention, retrieval and destruction costs, including, but not limited to exit fees charged by third party record keeping vendors - Third party audit reviews - Ad hoc SQL time Insurance - Such other miscellaneous expenses reasonably incurred by FDISG in performing its duties and responsibilities under this Agreement. The Fund agrees that postage and mailing expenses will be paid on the day of or prior to mailing as agreed with FDISG. In addition, the Fund will promptly reimburse FDISG for any other unscheduled expenses incurred by FDISG whenever the Fund and FDISG mutually agree that such expenses are not otherwise properly borne by FDISG as part of its duties and obligations under the Agreement. 16 EXHIBIT 1 LIST OF FUNDS Eaton Vance Municipal Income Trust Eaton Vance California Municipal Income Trust Eaton Vance Florida Municipal Income Trust Eaton Vance Massachusetts Municipal Income Trust Eaton Vance Michigan Municipal Income Trust Eaton Vance New Jersey Municipal Income Trust Eaton Vance New York Municipal Income Trust Eaton Vance Ohio Municipal Income Trust Eaton Vance Pennsylvania Municipal Income Trust Dated: December 21, 1998 EX-99.2(K)(2) 10 ADMINISTRATION AGREEMENT 1 EXHIBIT 99.(k)(2) EATON VANCE MUNICIPAL INCOME TRUST ADMINISTRATION AGREEMENT AGREEMENT made this 21st day of December, 1998, between Eaton Vance Municipal Income Trust, a Massachusetts business trust (the "Fund"), and Eaton Vance Management, a Massachusetts business trust (the "Administrator"). 1. Duties of the Administrator. The Fund hereby employs the Administrator to act as administrator for and to administer the affairs of the Fund, subject to the supervision of the Trustees of the Fund for the period and on the terms set forth in this Agreement. The Administrator hereby accepts such employment, and agrees to administer the Fund's business affairs and, in connection therewith, to furnish for the use of the Fund office space and all necessary office facilities, equipment and personnel for administering the affairs of the Fund. The Administrator shall also pay the salaries and compensation of all officers and Trustees of the Fund who are members of the Administrator's organization and who render executive and administrative services to the Fund, and the salaries and compensation of all other personnel of the Administrator performing management and administrative services for the Fund. The Administrator shall for all purposes herein be deemed to be an independent contractor and shall, except as otherwise expressly provided or authorized, have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund. In connection with its responsibilities as Administrator of the Fund, the Administrator (i) will assist in preparing all annual, semi-annual and other reports required to be sent to Fund shareholders, and arrange for the printing and dissemination of such reports to shareholders; (ii) will prepare and assemble all reports required to be filed by the Fund with the Securities and Exchange Commission ("SEC") on Form N-SAR, or on such other form as the SEC may substitute for Form N-SAR, and file such reports with the SEC; (iii) will review the provision of services by the Fund's independent accountants, including but not limited to the preparation by such accountants of audited financial statements of the Fund and the Fund's federal, state and local tax returns; and make such reports and recommendations to the Trustees of the Fund concerning the performance of the independent accountants as the Trustees deem appropriate; (iv) will arrange for the filing with the appropriate authorities all required federal, state and local tax returns; (v) will arrange for the dissemination to shareholders of the Fund's proxy materials, and will oversee the tabulation of proxies by the Fund's transfer agent; (vi) will review and supervise the provision of custodian services to the Fund; and make such reports and recommendations to the Trustees concerning the provision of such services as the Trustees deem appropriate; (vii) will value all such portfolio investments and other assets of the Fund as may be designated by the Trustees (subject to any guidelines, directions and instructions of the Trustees), and review and supervise the calculation of the net asset value of the Fund's shares by the custodian; (viii) will negotiate the terms and conditions under which transfer agency and dividend disbursing services will be provided to the Fund, and the fees to be paid by the Fund in connection therewith; review and supervise the 2 2 provision of transfer agency and dividend disbursing services to the Fund; and make such reports and recommendations to the Trustees concerning the performance of the Fund's transfer and dividend disbursing agent as the Trustees deem appropriate; (ix) will establish the accounting policies of the Fund; reconcile accounting issues which may arise with respect to the Fund's operations; and consult with the Fund's independent accountants, legal counsel, custodian, accounting and bookkeeping agents and transfer and dividend disbursing agent as necessary in connection therewith; (x) will determine the amount of all distributions to be paid by the Fund to its shareholders; prepare and arrange for the printing of notices to shareholders regarding such distributions and provide the Fund's transfer and dividend disbursing agent and custodian with such information as is required for such parties to effect the payment of distributions and to implement the Fund's dividend reinvestment plan; (xi) will review the Fund's bills and authorize payments of such bills by the Fund's custodian; (xii) will make recommendations to the Trustees as to whether the Fund should make repurchase or tender offers for its own shares; arrange for the preparation and filing of all documents required to be filed by the Fund with the SEC; arrange for the preparation and dissemination of all appropriate repurchase or tender offer documents and papers on behalf of the Fund; and supervise and conduct the Fund's periodic repurchase or tender offers for its own shares; (xiii) monitor any variance between the market value and net asset value per share, and periodically report to the Trustees available actions that may conform such values; (xiv) monitor the activities of the Shareholder Servicing Agent retained by the Administrator and periodically report to the Trustees about such activities; (xv) will arrange for the preparation and filing of all other reports, forms, registration statements and documents required to be filed by the Fund with the SEC, the National Association of Securities Dealers, Inc. and any securities exchange where Fund shares are listed; and (xvi) will provide to the Fund such other internal legal, auditing and accounting services and internal executive management and administrative services as the Trustees deem appropriate to conduct the Fund's business affairs. Notwithstanding the foregoing, the Administrator shall not be deemed to have assumed any duties with respect to, and shall not be responsible for, the management of the Fund's assets or the rendering of investment advice and supervision with respect thereto or the distribution of shares of the Fund, nor shall the Administrator be deemed to have assumed or have any responsibility with respect to functions specifically assumed by any transfer agent, custodian or shareholder servicing agent of the Fund. Sub-Administrators. The Administrator may employ one or more sub-administrators from time to time to perform such of the acts and services of the Administrator and upon such terms and conditions as may be agreed upon between the Administrator and such sub-administrators and approved by the Trustees of the Fund. 2. Compensation of the Administrator. For the services, payments and facilities to be furnished hereunder by the Administrator, the Fund shall pay to the Administrator on the last day of each month a fee equivalent to .20% annually of the average weekly gross assets of the Fund. (Gross assets shall be calculated by deducting accrued liabilities of the Fund except the principal amount of any indebtedness for money borrowed, including debt securities issued by the Fund, and the amount of any outstanding preferred shares issued by the Fund. Accrued liabilities are expenses incurred in the normal course of operations.) In case of initiation or termination of the Agreement during any month, the fee for that month shall be reduced proportionately on the basis of the number of calendar days during which the Agreement is in effect and the fee shall be computed upon the basis of the average gross assets for the business days the Agreement is so in effect for that month. The Administrator may, from time to time, waive all or a part of the above compensation. 3. Allocation of Charges and Expenses. It is understood that the Fund will pay all its expenses other than those expressly stated to be payable by the Administrator hereunder, which expenses payable by the Fund shall include, without implied limitation: (i) expenses of maintaining the Fund and continuing 3 3 its existence; (ii) registration of the Fund under the Investment Company Act of 1940; (iii) commissions, fees and other expenses connected with the acquisition, holding and disposition of securities and other investments; (iv) auditing, accounting and legal expenses; (v) taxes and interest; (vi) governmental fees; (vii) expenses of repurchase and redemption (if any) of shares, including all expenses incurred in conducting repurchase and tender offers for the purpose of repurchasing Fund shares; (viii) expenses of registering and qualifying the Fund and its shares under federal and state securities laws and of preparing registration statements and amendments for such purposes; (ix) expenses of reports and notices to shareholders and of meetings of shareholders and proxy solicitations therefor; (x) expenses of reports to governmental officers and commissions; (xi) insurance expenses; (xii) association membership dues; (xiii) fees, expenses and disbursements of custodians and subcustodians for all services to the Fund (including without limitation safekeeping of funds and securities, keeping of books and accounts and determination of net asset value); (xiv) fees, expenses and disbursements of transfer agents, dividend disbursing agents, shareholder servicing agents and registrars for all services to the Fund; (xv) expenses of listing shares with a stock exchange; (xvi) any direct charges to shareholders approved by the Trustees of the Fund; (xvii) compensation of and any expenses of Trustees of the Fund who are not members of the Administrator's organization; (xviii) all payments to be made and expenses to be assumed by the Fund in connection with the distribution of Fund shares; (xix) any pricing and valuation services employed by the Fund; (xx) any investment advisory fee payable to an investment adviser; (xxi) all expenses incurred in connection with leveraging the Fund's assets through a line of credit, or issuing and maintaining preferred shares; and (xxii) such non-recurring items as may arise, including expenses incurred in connection with litigation, proceedings and claims and obligation of the Fund to indemnify its Trustees, officers and with respect thereto. 4. Other Interests. It is understood that Trustees, officers and shareholders of the Fund are or may be or become interested in the Administrator as trustees, officers, employees, shareholders or otherwise and that trustees, officers, employees and shareholders of the Administrator are or may be or become similarly interested in the Fund, and that the Administrator may be or become interested in the Fund as a shareholder or otherwise. It is also understood that trustees, officers, employees and shareholders of the Administrator may be or become interested (as directors, trustees, officers, employees, stockholders or otherwise) in other companies or entities (including, without limitation, other investment companies) which the Administrator may organize, sponsor or acquire, or with which it may merge or consolidate, and that the Administrator or its subsidiaries or affiliates may enter into advisory, management or administration agreements or other contracts or relationship with such other companies or entities. 5. Limitation of Liability of the Administrator. The services of the Administrator to the Fund are not to be deemed to be exclusive, the Administrator being free to render services to others and engage in other business activities. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Administrator, the Administrator shall not be subject to liability to the Fund or to any shareholder of the Fund for any act or omission in the course of, or connected with, rendering services hereunder or for any losses which may be sustained in the acquisition, holding or disposition of any security or other investment. 6. Duration and Termination of this Agreement. This Agreement shall become effective upon the date of its execution, and, unless terminated as herein provided, shall remain in full force and effect through and including February 28, 2000 and shall continue in full force and effect indefinitely thereafter, but only so long as such continuance after February 28, 2000 is specifically approved at least annually (i) by the Board of Trustees of the Fund, and (ii) by the vote of a majority of those Trustees of the Fund who are not interested persons of the Administrator or the Fund. 4 4 Either party hereto may, at any time on sixty (60) days' prior written notice to the other, terminate this Agreement by action of the Trustees of the Fund or the trustees of the Administrator, and the Fund may, at any time upon such written notice to the Administrator, terminate the Agreement by vote of a majority of the outstanding voting securities of the Fund. This Agreement shall terminate automatically in the event of its assignment. 7. Amendments of the Agreement. This Agreement may be amended by a writing signed by both parties hereto, provided that no amendment to this Agreement shall be effective until approved (i) by the vote of a majority of those Trustees of the Fund who are not interested persons of the Administrator or the Fund, and (ii) by vote of the Board of Trustees of the Fund. 8. Limitation of Liability. Each party expressly acknowledges the provision in the other party's Agreement and Declaration of Trust limiting the personal liability of its shareholders officers, and Trustees, and each party hereby agrees that it shall have recourse to the other party for payment of claims or obligations as between the Fund and the Administrator arising out of this Agreement and shall not seek satisfaction from the Trustees, officers or shareholders of the other party. 9. Use of the Name "Eaton Vance." The Administrator hereby consents to the use by the Fund of the name "Eaton Vance" as part of the Fund's name; provided, however, that such consent shall be conditioned upon the employment of the Administrator or one of its affiliates as the administrator of the Fund. The name "Eaton Vance" or any variation thereof may be used from time to time in other connections and for other purposes by the Administrator and its affiliates and other investment companies that have obtained consent to the use of the name "Eaton Vance." The Administrator shall have the right to require the Fund to cease using the name "Eaton Vance" as part of the Fund's name if the Fund ceases, for any reason, to employ the Administrator or one of its affiliates as the Fund's administrator. Future names adopted by the Fund for itself, insofar as such names include identifying words requiring the consent of the Administrator, shall be the property of the Administrator and shall be subject to the same terms and conditions. 10. Certain Definitions. The terms "assignment" and "interested persons" when used herein shall have the respective meanings specified in the Investment Company Act of 1940 as now in effect or as hereafter amended subject, however, to such exemptions as may be granted by the Securities and Exchange Commission by any rule, regulation or order. The term "vote of a majority of the outstanding voting securities" shall mean the vote of the lesser of (a) 67 per centum or more of the shares of the Fund present or represented by proxy at the meeting if the holders of more than 50 per centum of the outstanding shares of the Fund are present or represented by proxy at the meeting, or (b) more than 50 per centum of the outstanding shares of the Fund. EATON VANCE MUNICIPAL INCOME TRUST EATON VANCE MANAGEMENT By: /s/ Thomas J. Fetter By: /s/ Alan R. Dynner ---------------------------------- ------------------------------------ President, and not Individually Vice President, and not Individually EX-99.2(K)(3) 11 FORM OF SHAREHOLDER SERVICING AGREEMENT 1 EXHIBIT 99.(k)(3) FORM OF SHAREHOLDER SERVICING AGREEMENT SHAREHOLDER SERVICING AGREEMENT (the "Agreement"), dated as of January 29, 1999, between Eaton Vance Management ("Eaton Vance") and PaineWebber Incorporated ("PaineWebber"). WHEREAS, Eaton Vance Municipal Income Trust (the "Trust") is a closed-end, non-diversified management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and its shares of beneficial interest are registered under the Securities Act of 1933, as amended; and WHEREAS, Eaton Vance is the investment adviser and the administrator of the Trust; and WHEREAS, Eaton Vance desires to retain PaineWebber to provide shareholder servicing and market information with respect to the Trust, and PaineWebber is willing to render such services; NOW, THEREFORE, in consideration of the mutual terms and conditions set forth below, the parties hereto agree as follows: 1) Eaton Vance hereby employs PaineWebber, for the period and on the terms and conditions set forth herein, to provide the following services: a) Undertake to make available public information pertaining to the Trust on an ongoing basis and to communicate to investors and prospective investors the Trust's features and benefits (including periodic seminars or conference calls, responses to questions from current or prospective shareholders and specific shareholder contact where appropriate); b) Make available to investors and prospective investors market price, net asset value, yield and other information regarding the Trust, if reasonably obtainable, for the purpose of maintaining the visibility of the Trust in the investor community; c) At the request of Eaton Vance or the Trust, provide certain economic research and statistical information and reports, if reasonably obtainable, on behalf of Eaton Vance or the Trust and consult with representatives of Eaton Vance and/or Trustees of the Trust in connection therewith, which information and reports shall include: (i) statistical and financial market information with respect 2 to the Trust's market performance; and (ii) comparative information regarding the Trust and other closed-end management investment companies with respect to (x) the net asset value of their respective shares, (y) the respective market performance of the Trust and such other companies, and (z) other relevant performance indicators; and d) At the request of Eaton Vance or the Trust, provide information to and consult with Eaton Vance and/or the Board of Trustees of the Trust with respect to applicable strategies designed to address market value discounts, which may include share repurchases, tender offers, modifications to dividend policies or capital structure, repositioning or restructuring of the Trust, conversion of the Trust to an open-end investment company, liquidation or merger; including providing information concerning the use and impact of the above strategic alternatives by other market participants. e) At the request of Eaton Vance or the Trust, PaineWebber shall limit or cease any action or service provided hereunder to the extent and for the time period requested by Eaton Vance or the Trust; provided, however, that pending termination of this Agreement as provided for is Section 5 hereof, any such limitation or cessation shall not relieve Eaton Vance of its payment obligations pursuant to Section 2 hereof. f) PaineWebber will promptly notify Eaton Vance or the Trust, as the case may be, if it learns of any material inaccuracy or misstatement in, or material omission from, any written information provided by PaineWebber to Eaton Vance or the Trust in connection with the performance of services by PaineWebber under this Agreement. 2) Eaton Vance will pay PaineWebber a fee computed weekly and payable quarterly at an annualized rate of 0.10% of the average weekly gross assets of the Trust. 3) Eaton Vance acknowledges that the shareholder services of PaineWebber provided for hereunder do not include any advice as to the value of securities or regarding the advisability of purchasing or selling any securities for the Trust's portfolio. No provision of this Agreement shall be considered as creating, nor shall any provision create, any obligation on the part of PaineWebber, and PaineWebber is not hereby agreeing, to: (i) furnish any advice or make any recommendations regarding the purchase or sale of portfolio securities or (ii) render any opinions, valuations or recommendations of any kind or to perform any such similar services in connection with providing the services described in Section 1 hereof. 3 4) Nothing herein shall be construed as prohibiting PaineWebber or its affiliates from providing similar or other services to any other clients (including other registered investment companies or other investment managers), so long as PaineWebber's services to Eaton Vance and the Trust are not impaired thereby. 5) The term of this Agreement shall commence upon the date referred to above, shall be in effect for a period of two years and shall thereafter continue for successive one year periods provided that the agreement may be terminated by either party upon 60 days' written notice of the intention to terminate. 6) Eaton Vance will furnish PaineWebber with such information as PaineWebber believes appropriate to its assignment hereunder (all such information so furnished being the "Information"). Eaton Vance recognizes and confirms that PaineWebber (a) will use and rely primarily on the Information and on information available from generally recognized public sources in performing the services contemplated by this Agreement without having independently verified the same and (b) does not assume responsibility for the accuracy or completeness of the Information and such other information. To the best of Eaton Vance's knowledge, the Information to be furnished by Eaton Vance when delivered, will be true and correct in all material respects and will not contain any material misstatement of fact or omit to state any material fact necessary to make the statements contained therein not misleading. Eaton Vance will promptly notify PaineWebber if it learns of any material inaccuracy or misstatement in, or material omission from, any Information delivered to PaineWebber. 7) It is understood that PaineWebber is being engaged hereunder solely to provide the services described above to Eaton Vance and to the Trust and that PaineWebber is not acting as an agent or fiduciary of, and shall have no duties or liability to the current or future shareholders of the Trust, the current or future shareholders of the Trust or any other third party in connection with its engagement hereunder, all of which are hereby expressly waived. 8) Eaton Vance agrees that PaineWebber shall have no liability to Eaton Vance or the Trust for any act or omission to act by PaineWebber in the course of its performance under this Agreement, in the absence of gross negligence or willful misconduct on the part of PaineWebber. Eaton Vance agrees to the indemnification and other agreements set forth in the Indemnification Agreement attached hereto, the provisions of which are incorporated herein by reference and shall survive the termination, expiration or supersession of this Agreement. 9) THIS AGREEMENT SHALL BE CONSTRUED IN ACCOR DANCE WITH THE LAWS OF THE STATE OF NEW YORK FOR CONTRACTS TO 4 BE PERFORMED ENTIRELY THEREIN AND WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPLES THEREOF. 10) EACH OF THE EATON VANCE AND PAINEWEBBER AGREE THAT ANY ACTION OR PROCEEDING BASED HEREON, OR ARISING OUT OF PAINEWEBBER'S ENGAGEMENT HEREUNDER, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. EATON VANCE AND PAINEWEBBER EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH ACTION OR PROCEEDING AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTION OR PROCEEDING. EACH OF EATON VANCE AND PAINEWEBBER HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 11) Eaton Vance and PaineWebber each hereby irrevocably waive any right they may have to a trial by jury in respect of any claim based upon or arising out of this Agreement or the transactions contemplated hereby. This Agreement may not be assigned by either party without the prior written consent of the other party. 12) This Agreement (including the attached Indemnification Agreement) embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. If any provision of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any other respect or any other provision of this Agreement, which will remain in full force and effect. This Agreement may not be amended or otherwise modified or waived except by an instrument in writing signed by both PaineWebber and Eaton Vance. 13) All notices required or permitted to be sent under this Agreement shall be sent, if to Eaton Vance: Eaton Vance Corporation 5 24 Federal Street Boston, MA 02110 Attention: Chief Legal Officer or if to PaineWebber: PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 Attention: Oscar J. Junquera or such other name or address as may be given in writing to the other parties. Any notice shall be deemed to be given or received on the third day after deposit in the U.S. mail with certified postage prepaid or when actually received, whether by hand, express delivery service or facsimile transmission, whichever is earlier. 14) This Agreement may be exercised on separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. 15) A copy of the Agreement and Declaration of Trust of Eaton Vance is on file with the Secretary of The Commonwealth of Massachusetts, and notice hereby is given that this Agreement is executed on behalf of the Trustees of Eaton Vance as Trustees and not individually and that the obligations or arising out of this Agreement are not binding upon any of the Trustees or beneficiaries individually but are binding only upon the assets and properties of Eaton Vance. IN WITNESS WHEREOF, the parties hereto have duly executed this Shareholder Servicing Agreement as of the date first above written. EATON VANCE MANAGEMENT By: _____________________________ Name: Title: 6 PAINEWEBBER INCORPORATED By: _____________________________ Name: Title: 7 PAINEWEBBER INDEMNIFICATION AGREEMENT Date January 29, 1999 Paine Webber Incorporated 1285 Avenue of the Americas New York, NY 10019 Gentlemen: In connection with the engagement of Paine Webber Incorporated ("Paine Webber") to advise and assist the undersigned (referred to herein as "we," or "us") with the matters set forth in the Agreement dated January 29, 1999 between us and Paine Webber, we hereby agree to indemnify and hold harmless Paine Webber, its affiliated companies, and each of Paine Webber's and such affiliated companies' respective officers, directors, agents, employees and controlling persons (within the meaning of each of Section 20 of the Securities Exchange Act of 1934 and Section 15 of the Securities Act of 1933) (each of the foregoing, including Paine Webber, being hereinafter referred to as an "Indemnified Person") to the fullest extent permitted by law from and against any and all losses, claims, damages, expenses (including reasonable fees, disbursements and other charges of counsel), actions (including actions brought by us or our equity holders or derivative actions brought by any person claiming through us or in our name), proceedings, arbitrations or investigations (whether formal or informal), or threats thereof (all of the foregoing being hereinafter referred to as "Liabilities"), based upon, relating to or arising out of such engagement or any Indemnified Person's role therein; provided, however, that we shall not be liable under this paragraph: (a) for any amount paid in settlement of claims without our consent, unless our consent is unreasonably withheld, or (b) to the extent that it is finally judicially determined, or expressly stated in an arbitration award, that such Liabilities resulted primarily from the willful misconduct or gross negligence of the Indemnified Person seeking indemnification. If multiple claims are brought against any Indemnified Person in an arbitration or other proceeding and at least one such claim is based upon, relates to or arises out of the engagement of Paine Webber by us or any Indemnified Person's role therein, we agree that any award, judgment and other Liabilities resulting therefrom shall be deemed conclusively to be based on, relate to or arise out of the engagement of Paine Webber by us or any Indemnified Person's role 8 therein, except to the extent that such award or judgment expressly states that the award or judgment, or any portion thereof, is based solely upon, relates to or arises out of other matters for which indemnification is not available hereunder. In connection with our obligation to indemnify for expenses as set forth above, we further agree to reimburse each Indemnified Person for all such expenses (including reasonable fees, disbursements and other charges of counsel) as they are incurred by such Indemnified Person; provided, however, that if an Indemnified Person is reimbursed hereunder for any expenses, the amount so paid shall be refunded if and to the extent it is finally judicially determined, or expressly stated in an arbitration award, that the Liabilities in question resulted primarily from the willful misconduct or gross negligence of such Indemnified Person. We hereby also agree that neither Paine Webber nor any other Indemnified Person shall have any liability to us (or anyone claiming through us or in our name) in connection with Paine Webber's engagement by us except to the extent that such Indemnified Person has engaged in willful misconduct or been grossly negligent. Promptly after Paine Webber receives notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, Paine Webber will notify us thereof; but the omission so to notify us shall not relieve us from any obligation hereunder unless, and only to the extent that, such omission results in our forfeiture of substantive rights or defenses. If any such action or other proceeding shall be brought against any Indemnified Person, we shall, upon written notice given reasonably promptly following your notice to us of such action or proceeding, be entitled to assume the defense thereof at our expense with counsel chosen by us and reasonably satisfactory to such Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, such Indemnified Person shall have the right to employ separate counsel at our expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (i) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to us, or (ii) a difference of position or potential difference of position exists between us and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall we be required to pay fees and expenses under this indemnity for more than one firm of attorneys (in addition to local counsel) in any jurisdiction in any one legal action or group of related legal actions. We agree that we will not, without the prior written consent of PaineWebber, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by PaineWebber's engagement (whether or not any Indemnified Person is a party thereto) unless such settlement, compromise or 9 consent includes an unconditional release of PaineWebber and each other Indemnified Person from all liability arising or that may arise out of such claim, action or proceeding. If the indemnification of an Indemnified Person provided for hereunder is finally judicially determined by a court of competent jurisdiction to be unenforceable, then we agree, in lieu of indemnifying such Indemnified Person, to contribute to the amount paid or payable by such Indemnified Person as a result of such Liabilities in such proportion as is appropriate to reflect the relative benefits received, or sought to be received, by us on the one hand and by PaineWebber on the other from transactions in connection with which PaineWebber has been engaged. If the allocation provided in the preceding sentence is not permitted by applicable law, then we agree to contribute to the amount paid or payable by such Indemnified Person as a result of such Liabilities in such proportion as is appropriate to reflect not only the relative benefits referred to in such preceding sentence but also the relative fault of us and of such Indemnified Person. Notwithstanding the foregoing, in no event shall the aggregate amount required to be contributed by all Indemnified Persons taking into account our contributions as described above exceed the amount of fees actually received by PaineWebber pursuant to such engagement. The relative benefits received or sought to be received by us on the one hand and by PaineWebber on the other shall be deemed to be in the same proportion as (a) the total value of the transactions with respect to which PaineWebber has been engaged bears to (b) the fees paid or payable to PaineWebber with respect to such engagement. EX-99.2(L)(1) 12 OPINION AND CONSENT OF KIRKPATRICK & LOCKHART LLP 1 EXHIBIT 99(2) KIRKPATRICK & LOCKHART LLP ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110 (617) 261-3100 MARK P. GOSHKO (617) 261-3163 GOSHKOMP@KL.COM January 26, 1999 Eaton Vance Municipal Income Trust 24 Federal Street Boston, MA 02110 Dear Sirs: This opinion is furnished in connection with the registration by Eaton Vance Municipal Income Trust, a business trust organized under the laws of the Commonwealth of Massachusetts ("Fund"), of 15,300,000 shares of beneficial interest, par value $.01 per share ("Shares"), under the Securities Act of 1933, as amended, pursuant to a registration statement on Form N-2 (File No. 333-68719), as amended ("Registration Statement"), in the amounts set forth under "Amount Being Registered" on the facing page of the Registration Statement. As counsel for the Fund, we are familiar with the proceedings taken by it in connection with the authorization, issuance and sale of the Shares. In addition, we have examined and are familiar with the Agreement and Declaration of Trust of the Fund, the By-Laws of the Fund, and such other documents as we have deemed relevant to the matters referred to in this opinion. Based upon the foregoing, we are of the opinion that the Shares, upon issuance and sale in the manner referred to in the Registration Statement, will be legally issued, fully paid and non-assessable (except as described in the Registration Statement) shares of common stock of the Fund. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name in the Prospectus constituting a part thereof. Very truly yours, /s/ Kirkpatrick & Lockhart LLP Kirkpatrick & Lockhart LLP EX-99.2(N)(1) 13 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 99.(N)(2) INDEPENDENT AUDITORS' CONSENT We consent to the use in the Registration Statement on Form N-2 of Eaton Vance Municipal Income Trust of our report, dated January 22, 1999, appearing in the Statement of Additional Information, which is part of this Registration Statement. /s/ Deloitte & Touche LLP - ---------------------------------- Deloitte & Touche LLP Boston, Massachusetts January 22, 1999 EX-99.2(P) 14 LETTER AGREEMENT WITH EATON VANCE MANAGEMENT 1 EXHIBIT 99.(p) Eaton Vance Management 24 Federal Street Boston, MA 02110 Telephone: (617) 482-8260 Telecopy: (617) 338-8054 January 21, 1999 Eaton Vance Municipal Income Trust 24 Federal Street Boston, MA 02110 Ladies and Gentlemen: With respect to our purchase from you, at the purchase price of $100,000 of 6,666.67 shares of beneficial interest, net asset value of $15.00 per share ("Initial Shares") in Eaton Vance Municipal Income Trust, we hereby advise you that we are purchasing such Initial Shares for investment purposes without any present intention of redeeming or reselling. Very truly yours, EATON VANCE MANAGEMENT By: /s/ William M. Steul ------------------------------- William M. Steul Treasurer and Vice President EX-99.2(S)(1) 15 POWER OF ATTORNEY 1 EXHIBIT 99.(s)(1) POWER OF ATTORNEY We, the undersigned officers and Trustees of Eaton Vance Municipal Income Trust, a Massachusetts business trust, do hereby severally constitute and appoint Alan R. Dynner, James B. Hawkes and Eric G. Woodbury, or any of them, to be true, sufficient and lawful attorneys, or attorney for each of us, to sign for each of us, in the name of each of us in the capacities indicated below, the Registration Statement and any and all amendments (including post-effective amendments) to the Registration Statement on Form N-2 filed by Eaton Vance Municipal Income Trust with the Securities and Exchange Commission in respect of shares of beneficial interest and other documents and papers relating thereto. IN WITNESS WHEREOF we have hereunto set our hands on the dates set opposite our respective signatures.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Thomas J. Fetter President and Principal December 21, 1998 - ----------------------------------------------- Executive Officer Thomas J. Fetter /s/ James L. O'Connor Treasurer and Principal Financial December 21, 1998 - ---------------------------------------------- and Accounting Officer James L. O'Connor - ---------------------------------------------- Trustee Jessica M. Bibliowicz /s/ Donald R. Dwight Trustee December 21, 1998 - ---------------------------------------------- Donald R. Dwight /s/ James B. Hawkes Trustee December 21, 1998 - ----------------------------------------------- James B. Hawkes /s/ Samuel L. Hayes, III Trustee December 21, 1998 - ----------------------------------------------- Samuel L. Hayes, III /s/ Norton H. Reamer Trustee December 21, 1998 - ---------------------------------------------- Norton H. Reamer /s/ Lynn A. Stout Trustee December 21, 1998 - ----------------------------------------------- Lynn A. Stout /s/ Jack L. Treynor Trustee December 21, 1998 - ----------------------------------------------- Jack L. Treynor
EX-99.2(S)(2) 16 POWER OF ATTORNEY 1 EXHIBIT 99.(s)(2) POWER OF ATTORNEY We, the undersigned officers and Trustees of Eaton Vance Municipal Income Trust, a Massachusetts business trust, do hereby severally constitute and appoint Alan R. Dynner, James B. Hawkes and Eric G. Woodbury, or any of them, to be true, sufficient and lawful attorneys, or attorney for each of us, to sign for each of us, in the name of each of us in the capacities indicated below, the Registration Statement and any and all amendments (including post-effective amendments) to the Registration Statement on Form N-2 filed by Eaton Vance Municipal Income Trust with the Securities and Exchange Commission in respect of shares of beneficial interest and other documents and papers relating thereto. IN WITNESS WHEREOF we have hereunto set our hands on the dates set opposite our respective signatures. SIGNATURE TITLE DATE --------- ----- ---- /s/ Jessica M. Bibliowicz Trustee January 5, 1999 - --------------------------------- Jessica M. Bibliowicz EX-27 17 FINANCIAL DATA SCHEDULE
6 1000 OTHER NOV-30-1999 JAN-21-1999 0 0 50 100 600 750 0 0 650 650 0 100 7 0 0 0 0 0 0 100 0 0 0 0 0 0 0 0 0 0 0 0 7 0 0 100 0 0 0 0 0 0 50 0 0 0 0 0 0 0 15.00 0 0 0
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