Q Municipal Market Overview

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2 Q Municipal Market Overview Though tax reform optimism drove equity markets to all time highs, inflation expectations remained anchored and longer term municipal yields declined during the quarter. The market posted positive returns for the quarter with the Bloomberg Barclays Municipal Bond Index up +.75%. With short term yields increasing and longer term yields decreasing, the entire curve flattened significantly and ended 2017 at its flattest level in ten years. BBB-rated and High Yield municipals outperformed throughout the quarter as a result of higher income, strong demand and spread tightening. Despite uncertainty related to tax reform and above average market volatility, demand for municipals was strong and municipal fund flows remained mostly positive over the quarter. The trend of lower issuance was broken by a flood of new deals in November and December due to the potential loss of tax-exempt financing for Private Activity and Advanced-Refunding bonds. 2

3 The Tax Cut and Jobs Act and Municipal Bonds Now signed into law, the Tax Cut and Jobs Act contains sweeping changes to the current US tax system with multiple provisions that impact the municipal bond market. What is included? Advanced Refundings: Interest on advanced refunded municipal bonds issued after January 1 st 2018 will be taxable. Issuers will no longer be able to pre-refund bonds more than 90 days ahead of original call dates and replace existing bonds with new tax-exempt debt. State and Local Tax Deductions (SALT): The bill limits tax payers ability to deduct state and local taxes against their federal taxes. Now taxpayers will be capped at a $10,000 property tax deduction. Corporate Tax Rates: The bill reduces the corporate tax rate from 35% down to 21%. This change will likely reduce demand from banks and insurance companies but we do not anticipate any selling pressure. Alternative Minimum Tax (AMT): The bill eliminates the corporate AMT and reduces the number of taxpayers affected by the individual AMT. What is not included? Private Activity Bonds: Previous drafts of the bill included language that would have severely restricted access to the municipal market by non-governmental issuers. This was not included in the final bill. 3

4 Municipal Yield Changes Though tax reform optimism drove equity markets to all time highs, inflation expectations remained anchored and longer term municipal yields declined during the quarter. As a result, the market posted positive returns for both the quarter and the year with the Bloomberg Barclays Municipal Bond Index up +.75% and 5.45%, respectively. 25% 20% 15% 10% 5% 0% 21.83% 7.50% 6.42% 6.64% Major Asset Class Returns 0.47% 1.17% YTD '17 Q4 ' % 4.12% 2.31% 0.75% 1.11% 0.05% S&P 500 High Yield Corporate Municipal Bank Loan Treasury 4% AAA Municipal Yields (%) 9/30/17 12/31/17 The municipal curve flattened significantly as 2yr yields rose 56bps, 10yr yields decreased 2bps and 30yr yields declined 30bps. 3% 2% 1.56% 1.68% 1.35% 1.78% 1.62% 2.00% 1.98% 2.38% 2.26% 2.84% 2.54% For all of 2017, the curve flattened as 2yr yields rose 35bps, while 10yr and 30yr yields declined 33 and 50bps, respectively. 1% 0% 1.00% 2 yr 5 yr 7 yr 10 yr 15 yr 30 yr 4

5 Index Returns: YTD & Q Index Returns YTD & Q As a result of the increase in short term yields and decline in long term yields, longer term municipals significantly outperformed for both the quarter and the year. 12% 10% 8% 6% YTD '17 Q4' % 8.1% 5.5% 9.7% BBB-rated and High Yield municipals outperformed throughout the quarter and the year as a result of higher income, strong demand and spread tightening. 4% 2% 0% -2% 3.1% 0.5% 2.2% 0.8% -0.7% 5 yr 10 yr 22+ yr Barclays Municipal Bond Index 1.8% Barclays Municipal HY Index HY Index Returns YTD & Q Down over 8%, Puerto Rico bonds continued to struggle in the wake of Hurricane Maria as recovery values could be lower than previously expected. After underperforming in Q3, tobacco bonds outperformed as high yield municipal fund flows were positive and longer term yields declined. 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% 21.5% 16.0% 10.0% 9.7% 2.9% 2.4% 2.3% 1.8% Tobacco IDR/PCR Hospital Barclays HY Municipal Index YTD '17 Q4' % -8.3% Puerto Rico 5

6 Billions Yield Municipal Market Overview Q Flows and Issuance Despite uncertainty related to tax reform and above average market volatility, demand for municipals was strong during October and November. Municipal bond mutual funds saw mild outflows in December. Fund flows were positive 8 out of 12 weeks and totaled over $2 billion. Year-to-date inflows totaled over $26 billion. 6% 5% 4% 3% 2% 1% Muni Mutual Fund Flows Total Flows AAA GO 30 yr Flows (Billions) The trend of lower issuance was broken by a flood of new deals in November and December due to the potential loss of tax-exempt financing for Private Activity and Advanced-Refunding bonds. To reduce the impact of these potential tax reform changes, issuers rushed to the market with over $36 billion of new deals in November and a record $64 billion in December. In early 2018, lackluster issuance will likely create a solid technical backdrop for the market, potentially resulting in strong market returns. 0% Municipal Bond Issuance: New vs. Refundings Refunding New

7 Municipal Yield Curve With 2yr yields increasing 56bps and 30yr yields decreasing 30bps during the quarter, the entire curve flattened dramatically and ended 2017 at its flattest level in ten years Year / 30-Year Curve As a result of three Fed rate hikes in 2017, short term municipal yields are at their highest levels since Therefore, we believe the short end of the yield curve is compelling, particularly for risk averse investors. 0 Though not as dramatic, the five-to-fifteen portion of the curve also flattened, as 5-year yields increased 33bps while 15-year yields declined 12bps Year / 15-Year Curve 200 When looking at the entire curve, an investor can pick up 78% of the yield available by going out 10 years and almost 89% of the yield available by going out 15 years

8 Muni-to-Treasury Yield Ratios Below average ratios to begin the quarter, combined with heavy supply, resulted in cheaper ratios at the front end of the curve during the quarter. 150% AAA Muni-to-Treasury Yield Ratios (%) 5Y 10Y 30Y Meanwhile, longer term ratios richened as investors sought out longer term holdings in anticipation of the potential loss of tax exempt issuance of Private Activity and Advance Refunding bonds in 2018 and beyond. 100% 50% 93% 82% 76% Over the last 10 years, the 5-year, 10-year and 30-year muni/treasury ratios have been higher (cheaper) approximately 73%, 95% and 93% of the time respectively. This suggests reasonably rich relative values for municipals compared to Treasurys, especially on the longer end of the curve. As short-term municipals cheapened, active muni managers who had crossed-over into Treasury bonds during Q3, had the opportunity to move back into municipals at more attractive valuations. How Attractive Are Muni/Treasury Ratios vs. 10 Year History Ratios Have Been Higher Ratios Have Been Lower 100% 80% 60% 73% 95% 93% 40% 20% 27% 5% 0% 7% 5Y 10Y 30Y 8

9 Money Market Reform and the Rise of SIFMA SEC money market reform, officially implemented in October 2016 requires institutional prime and institutional municipal money market funds to move to a floating net asset value (NAV). As a result of this regulatory change, tax-exempt money market funds experienced a significant decline in assets under management in 2016 but assets remained steady in , , , , ,000 50,000 0 Tax-Exempt Money Market Fund Assets ($MM) SIFMA, which ended Q3 at 94bps, ticked higher throughout the quarter before jumping to 171bps at year end as municipal funds reduced cash levels in favor of longer dated municipals in response to record new issuance in December. The quarter end jump higher in SIFMA is likely to be temporary as a lack of municipal supply, combined with heavy coupon payments, calls and maturities in January will increase demand for VRDNs and likely push SIFMA back down to a more equilibrium level SIFMA, LIBOR and Fed Funds Yield (%) SIFMA 1-Month LIBOR Fed Funds Rate 9

10 Fundamentals are Stable but Escalating Concerns The credit outlook for most states is stable, as most states are structurally balanced and building reserves. On an inflation adjusted basis, total state revenues now exceed their prerecession peak. Change in State Tax Revenue, Adjusted for Inflation Most states have manageable pension, OPEB and debt burdens due to GDP growth, pension reforms, and revised GASB reporting requirements. As a result, the median State burden has declined from 11.5% in 2011 to 8.2% in Escalating Concerns: Some states are structurally imbalanced, have thin financial reserves and are not fully funding their pension obligations, which is a major concern at this point in the credit cycle. At 29% of expenditures, Medicaid is the single largest spending category for most states and its rapid growth is crowding out other spending initiatives. As a result of deferred infrastructure spending, the average age of property plant and equipment across U.S. cities has increased to 15.2 years in 2015 from 11.5 years in Legislative gridlock and revenue volatility has led to twelve state ratings downgrades over the past year Cumulative Number of Issuer Defaults Jan Feb March April May Jun Jul Aug Sep Oct Nov Dec YTD

11 Yield Municipal Market Overview Q Chicago Credit Has Stabilized but Challenges Remain Chicago s four main pension plans are only 23% funded and the total unfunded liability is $33 billion, over three times the amount of its debt. After a downgrade to non-investment grade in 2015, the mayor and City Counsel were spurred to action. Today, all four pension plans have a dedicated revenue steam consisting of property taxes, water and sewer taxes, and a communications tax. While these taxes do not solve Chicago s financial issues, they begin to address the city's tremendous underfunded liabilities Chicago and Illinois Yields: Dec 2014 Dec 2017 Chi. BOE 5-42 Chi. GO 5-40 IL GO 5-36 Over the past few years, the City of Chicago has closed their recurring budget gap while phasing out one-time budget fixes. The City recently completed its first issuance under the $2.5 billion sales tax securitization granted under the State s newly authorized financing vehicle. This new bonding vehicle is estimated to save roughly $75 million annually once complete. Chicago Board of Education is facing tight liquidity and recurring budget deficits. To overcome these deficits, CBOE will continue to rely heavily on capital market access and support from the city and state. CPS finances for 2018 benefited from $210 million in additional State pension aid, $120 million in additional property tax legislation, a pledge of $80 million from the City, and a large upsized capital market deal in July and November. 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% City Annual Debt Service, Pension Actuarial Required Contribution (ARC), and OPEB ARC as a % of Gov t Revenues OPEB ARC to Revenues Pension ARC to Revenues Debt Service to Revenues 11

12 Illinois Issues $6 billion in GO Debt to Tackle Bill Backlog On July 6 th, the Illinois House of Representatives voted to override the Governor s veto of the 2018 budget bills. With the override vote, Illinois will enter 2018 with a budget, its first in three years. The 2018 budget closed the estimated $7.2 billion deficit through an increase in the individual (3.75% to 4.95%) and corporate income tax rates (5.25% to 7.0%) totaling $5 billion and expenditure cuts of roughly $2.5 billion. Over the past two fiscal years, Illinois has been hit with numerous downgrades as the budget stalemate persisted. Most recently on June 1st, S&P and Moody's downgraded the State of IL GO debt to Baa3/BBB- and both maintained their Negative outlook. While the passage of a budget and new revenue enhancements are a positive for State finances, the State still faced $15.1 billion backlog of unpaid bills and an unfunded pension liability of $141 billion. The Governor s office of OMB recently completed the planned issuance of $6.0 billion in GO bonds to partially address the bill backlog. As of the end of December, the unpaid balance totaled $9.1 billion. 4.95% 7.00% 6.25% We believe the State of Illinois has the ability to solve its financial challenges but it will take continued political will to solve address fiscal issues the state still faces. 12

13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Municipal Market Overview Q Puerto Rico Hurricane Maria Transitions the Island from a Financial Crisis to a Humanitarian Crisis Through December, ten unique Puerto Rico issuers had defaulted and six Puerto Rico entities (Commonwealth, COFINA, ERS, HTA, PREPA and GDB) had filed for Title III protection which is similar to Chapter 9 municipal bankruptcy. The total amount of missed principal payments is approximately $2.6 billion and additional defaults are expected. The Oversight Board s certified 10-year financial plan for the Commonwealth calls for both fiscal and austerity measures to reduce the $66.9 billion cumulative deficit. The current projection estimates only $7.9 billion in available resources to pay $35.1 billion in debt service, or just 24% Dollar Value of Annual Defaults ($Billions) PR US -ex PR On September 20 th, Puerto Rico was hit by a Category 4 hurricane, which sparked a humanitarian crisis, as the island s critical infrastructure (water, power, communications) was severely damaged. As of November 26th, 42% of the island was still without electricity, 22% without phone service and 8% without water. After the Hurricane Maria, the Oversite Board plans to evaluate and reassess the certified fiscal plan. While Puerto Rico will receive significant federal funding to rebuild, its weak economy, lack of liquidity and negative demographics combined with the hit from Maria could result in lower than expected recoveries for many uninsured Puerto Rico bonds. Dollar ($) Price of Puerto Rico Bonds Insured & Uninsured Insured Bonds Uninsured Bonds Puerto Rico GO's with AGM Bond Insurance Puerto Rico GO's Uninsured PREPA with National Bond Insurance PREPA Uninsured PR Sales Tax Financing Corp with AGM Bond Insurance PR Sales Tax Financing Corp Uninsured 13

14 Higher Tax Rates Prior to tax reform, tax rates for the highest income earners had risen by nearly 30% since 2013 due to increases in ordinary and investment income taxes, the new health-care surtax and reinstated limitations. Including the impact of state income taxes, the effective tax rate for some investors was in the 50% range. 5% 4% 3% 2% 1% Taxable Equivalent Yields Tax Adjusted Yield Nominal Yield 4.26% 3.25% 2.71% 2.36% 0% Barclays US Aggregate Index Baclays US IG Corporate Barclays Municipal Bond Index Though the Trump administration succeeded in reducing the highest marginal tax bracket from 39.6% to 37%, this decline was less than originally anticipated. 5% Taxable Equivalent Yields if Tax Rate is reduced to 37% Tax Adjusted Yield Nominal Yield Despite the implementation of individual tax cuts at the Federal level, municipal taxable equivalent yields remain attractive compared to high quality alternatives. 4% 3% 2% 1% 2.71% 3.25% 4.07% 2.36% 0% Barclays US Aggregate Index Baclays US IG Corporate Barclays Municipal Bond Index 14

15 Municipal Market Outlook Even with the successful passage of the tax reform bill, we believe the combination of relatively slow growth, muted inflation and gradually tighter monetary policy should keep rates range bound for the foreseeable future. Because the spike in new issuance in November and December was largely driven by 2018 deals pulled forward into 2017, we anticipate a favorable technical environment in 2018 as demand will likely outpace supply. This decline in supply, combined with organic reinvestment from coupon payments, calls and maturities could cause municipals to richen relative to taxables in early We believe the muni curve is likely to flatten further with 2-to-3 potential Fed rate hikes in In this environment, we find shorter term municipals compelling. However, adding duration may be advantageous as the long end may outperform. Despite ongoing credit challenges for some high profile issuers, municipal credit is stable overall. But with credit spreads at historically tight levels, discipline and seasoned professional oversight are critical. We will closely monitor Q1 and Q2 economic data to see if tax reform impacts any of our baseline economic expectations. 15

16 Investing with a Leader in Municipal Bonds Eaton Vance is a premier municipal bond manager - Among the largest and deepest municipal investment teams in the U.S dedicated municipal investment professionals* - Consistent, bottom-up investment process and proven track record One of the broadest selections of muni solutions - Mutual funds, closed-end funds and separate accounts - Customizable solutions engineered for special investment situations Legacy of managing for tax-exempt income and total return *As of 12/31/17 includes all mutual funds, SMAs and advisory products. 16

17 Eaton Vance Municipal Income Investment Team Investment Team with Extensive Experience Municipal Bond Team Team Leadership Cynthia Clemson Co-Director of Municipal Investments Senior Portfolio Manager 32 Years Experience (32 with EV) Portfolio Manager Craig Brandon, CFA Co-Director of Municipal Investments Senior Portfolio Manager 23 Years Experience (19 with EV) Municipal Quantitative and Portfolio Analytics Adam Weigold, CFA Senior Portfolio Manager 20 Years Experience (20 with EV) Chris Eustance, CFA Associate Director of Quantitative & Portfolio Analytics 12 Years Experience (10 with EV) Paul Metheny Quantitative Portfolio Associate 3 Years Experience (3 with EV) Trading Portfolio Associates and Assistants Deborah Trachtenberg Director of Municipal Trading 43 Years Experience (20 with EV) Christopher Berry Senior Municipal Trader 25 Years Experience (16 with EV) Jessica Hemenway Portfolio Management Associate 11 Years Experience (8 with EV) Allison Goldie Portfolio Management Assistant 1 Year Experience (3 with EV) Simone Santiago Senior Trader 19 Years Experience (19 with EV) Tom Coan, CFA Municipal Trader 7 Years Experience (2 with EV) Product & Portfolio Strategy Michael Sullivan, CFA Institutional Portfolio Manager 17 Years Experience (3 with EV) Brandon Fritz, Institutional Portfolio Manager 14 Years Experience (1 with EV) Nicholas Stahelski Income Product Manager 3 Years Experience (3 with EV) Eaton Vance, as of 12/31/17 17

18 Eaton Vance Tax-Advantaged Bond Strategies Team Investment Team with Extensive Experience TABS Team Team Leadership Jim Evans, CFA Director Tax Advantaged Bond Strategies 34 Yrs Experience (28 with EV) Institutional Portfolio and Traders Separately Managed Account (SMA) Portfolio Managers Brian Barney, CFA Director Institutional Portfolio Strategies 16 Yrs Experience (16 with EV) Issac Kuo, CFA, CPA Co-Director SMA Strategies 14 Years Experience (8 with EV) Jonathon Rocafort, CFA Co-Director SMA Strategies 15 Yrs Experience (13 with EV) Devin Cooch, CFA Portfolio Manager 9 Yrs Experience (9 with EV) Daniel Cozzi, CFA Portfolio Manager 14 Yrs Experience (3 with EV) Joseph Davolio Portfolio Manager 16 Yrs Experience (16 with EV) Lauren Kashmanian Portfolio Manager 10 Yrs Experience (9 with EV) Nisha Patel, CFA Portfolio Manager 12 Yrs Experience (12 with EV) Chris Harshman, CFA Portfolio Manager 14 Yrs Experience (9 with EV) Evan Rourke, CFA Portfolio Manager 30 Yrs Experience (10 with EV) Alison Wagner, CFA Associate Portfolio Analyst 5 Yrs Experience (2 with EV) David Grean, CFA Portfolio Management Associate 4 Years of Ind. Experience (3 with EV) Product & Portfolio Strategy Quantitative and Portfolio Analytics Michael Sullivan, CFA Institutional Portfolio Manager 17 Yrs Experience (3 with EV) Brandon Fritz, Institutional Portfolio Manager 14 Years Experience (1 with EV) Nicholas Stahelski Income Product Manager 3 Years Experience (3 with EV) Stephan McElreath Quantitative Portfolio Associate 9 Years Experience (<1 with EV) Eaton Vance, as of 12/31/17 18

19 Eaton Vance Municipal Credit Research Team Credit Research Team with Extensive Experience Municipal Credit Research Team Bill Delahunty, CFA Director of Municipal Credit Research Hospitals, Senior Living, Corporate 21 Yrs. Experience (20 with EV) Lilly Scher Senior Analyst Hospitals, Education 31 Yrs. Experience (18 with EV) Leanne Parziale, CFA Senior Analyst Tobacco, Real Estate, General Obligations 24 Yrs. Experience (21 with EV) Marc Savaria Senior Analyst Education, Utilities, Corporate 22 Yrs. Experience (7 with EV) Raya McAnern Senior Analyst General Obligations, Real Estate 18 Yrs. Experience (10 with EV) Henry Hong, CFA Senior Analyst Airports, Public Power, Corporate, Gaming 21 Yrs. Experience (12 with EV) Trevor Smith Senior Analyst General Obligations, Special Tax, Puerto Rico, Ports, Bond Insurers 12 Yrs. Experience (7 with EV) Kate Chanoux, CFA Senior Analyst Water & Sewer, General Obligations, Special Tax 12 Yrs. Experience (12 with EV) Colin Shaw Analyst General Obligations, Water & Sewer, Special Tax 10 Yrs. Experience (10 with EV) Brian Hassler, CFA Senior Analyst Water & Sewer, Special Tax, General Obligations, Senior Living 11 Yrs. Experience (11 with EV) Carl Thompson, CFA Senior Analyst General Obligations, Housing, Student Loans 7 Yrs. Experience (7 with EV) Patrick Keogh, CFA Analyst General Obligations, Special Tax, Water & Sewer 7 Yrs. Experience (4 with EV) Victor Joita, CFA Research Associate General Obligations 2 Yrs. Experience (7 with EV) Jeffrey Sayman, CFA Research Associate General Obligations 5 Yrs. Experience (4 with EV) Daniel Streppa Research Associate General Obligations 1 Yr. Experience (1 Yr. with EV) Jason Michonski Research Associate General Obligations 1 Yr. Experience (1 Yr. with EV) Eaton Vance, as of 12/31/17 19

20 Eaton Vance Municipal Investment Process Team-oriented, research-based process with qualitative and quantitative overlays The Opportunity The Process Credit Research The Result $3.8 Trillion Municipal Market Relative Value Investing Broad Municipal Product Offerings Market Surveillance Bottom-up Analysis and Selection Internal risk rating Investment universe Issuer relative ranking Issuer specific fundamental analysis Relative value rankings within industries Market valuation Relative industry valuations Technical analysis Determine liquidity and price trends Fundamental trends Bottom-up industry review Collaborative decision making Portfolio managers Credit analysts Traders Risk management Product specific guidelines Best portfolio within guidelines Portfolio Credit names 20

21 Important Information & Disclosure INDEX DEFINITIONS: Barclays Municipal Bond Index is an unmanaged index of municipal bonds traded in the U.S. Barclays U.S. Aggregate Index is an unmanaged index of domestic investment-grade bonds, including corporate, government and mortgage-backed securities. Barclays U.S. Corporate High Yield Index measures USD-denominated, non-investment grade corporate securities. Barclays U.S. Corporate Index is an unmanaged index that measures the performance of investment-grade corporate securities within the Barclays Capital U.S. Aggregate Index. S&P/LSTA Leveraged Loan Index is an unmanaged index of the institutional leveraged loan market. Terms: Municipal-to-Treasury Yield Ratios are relative value indicators that measure the richness or cheapness of Municipal bond yields to comparable maturity Treasury bond yields. Yield to Worst is a measure which reflects the lowest potential yield earned on a bond without the issuer defaulting. The yield to worst is calculated by making worst-case scenario assumptions by calculating the returns that would be received if provisions, including prepayment, call or sinking fund, are used by the issuer. Debt, Pension and OPEB Liabilities as a % of GDP Debt is net tax supported debt from Moody s May Unfunded pension liabilities from State CAFRs as of June 30, States share of estimated pension liabilities are based upon the states share of the total state and local liabilities as per Moody s US State Pension Medians Increase in Fiscal 2012 (January 2014) and Eaton Vance assumptions. GDP from the Bureau of Economic Analysis 2013 advanced estimates. State s pension plan discount rates from 2013 State CAFRs. Eaton Vance then applied a 5.5% discount rate to pension liabilities, based on Moody s Adjustments to US State and Local Government Reported Pension Data, July 2, 2012, where for each 1% difference between 5.5% and a plan s discount rate, the actuarial accrued liability increased by 13%. OPEB liabilities from State CAFRs. Importantly, the states unfunded OPEB liability has not been adjusted for the states share of the total state and local OPEB liability, which could result in the states OPEB liability being overstated. 21

22 Important Information & Disclosure This presentation is for informational and illustrative purposes only. This material does not constitute investment advice and should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any particular securities or to adopt any investment strategy. This information has been prepared on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. However, no assurances are provided regarding the reliability of such information and Eaton Vance has not sought to independently verify information taken from public and third party sources. Any investment views and market opinions/analyses expressed constitute judgments as of the date of this presentation and are subject to change at any time without notice. Different views may be expressed based on different investment styles, objectives, views or philosophies. Each managed product is individually managed and may differ significantly from the information discussed in terms of portfolio holdings, characteristics and performance. It should not be assumed that any investments in securities, companies, sectors or markets described were or will be profitable. It should not be assumed that any managed product will have an investment experience similar to any returns shown or to any previous or existing managed product. There are no guarantees concerning the achievement of investment objectives, allocations, target returns or measurements such as alpha, tracking error, stock weightings and information ratios. The use of tools cannot guarantee performance. There is no assurance that any portfolio characteristics, holdings, sectors or securities mentioned are currently held in a managed product or will remain in a managed product at the time you receive this report or that securities have not been sold or repurchased. The specific securities mentioned are not representative of all the securities purchased, sold or recommended for managed products. It should not be assumed that any of the securities were or will be profitable, or that any recommendations in the future will be profitable or will equal the performance of the listed securities. Not all of Eaton Vance s recommendations have been or will be profitable. Actual holdings will vary for each managed product, and there is no guarantee that a particular managed product will hold any, or all, or the securities identified. The views and strategies described may not be suitable for all investors. Not all of Eaton Vance s recommendations have been or will be profitable. Hypothetical scenarios, blended portfolios, forecasts and estimates and certain information contained herein are based, in part, upon proprietary research and the experience of Eaton Vance, and are not to be relied upon as advice or interpreted as a recommendation. The information does not reflect the experience or holdings of a managed product. Hypothetical scenarios, blended portfolios, forecasts and estimates have certain inherent limitations and do not reflect actual trading, liquidity constraints, fees and other costs. In addition, references to future yield/returns should not be construed as an estimate or promise of the results a managed product may achieve. Information may not reflect the impact that material economic and market factors might have had on Eaton Vance s decision-making. Any references to future returns should not be construed as an estimate or promise of the results a managed product may achieve. Actual portfolio holdings will vary for each managed product. The returns experienced by a particular managed product will be different from those included in this presentation. This presentation may include statements that are not historical facts, referred to as forwardlooking statements. Future results may differ significantly from those stated in forward-looking statements, depending on factors such as changes in securities or financial markets or general economic conditions. Unless otherwise stated, index returns do not reflect the effect of any applicable sales charges, commissions, fees, expenses, taxes or leverage, as applicable. It is not possible to directly invest in an index or the hypothetical blended portfolios as constructed by Eaton Vance. Past performance does not predict future results. Investing entails risk and there can be no assurance that Eaton Vance, or its affiliates, will achieve profits or avoid incurring losses. 22

23 Important Information & Disclosure ABOUT ASSET CLASS COMPARISONS: Elements of this report include comparisons of different asset classes, each of which has distinct risk and return characteristics. Every investment carries risk, and principal values and performance will fluctuate with all asset classes shown, sometimes substantially. Asset classes shown are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. All asset classes shown are subject to risks, including possible loss of principal invested. The principal risks involved with investing in the asset classes shown are interest-rate risk, credit risk and liquidity risk, with each asset class shown offering a distinct combination of these risks. Generally, considered along a spectrum of risks and return potential, U.S. Treasury securities (which are guaranteed as to the payment of principal and interest by the U.S. government) offer lower credit risk, higher levels of liquidity, higher interest-rate risk and lower return potential, whereas asset classes such as high-yield corporate bonds and emerging market bonds offer higher credit risk, lower levels of liquidity, lower interest-rate risk and higher return potential. Other asset classes shown carry different levels of each of these risk and return characteristics, and as a result generally fall varying degrees along the risk/return spectrum. Costs and expenses associated with investing in asset classes shown will vary, sometimes substantially, depending upon specific investment vehicles chosen. No investment in the asset classes shown is insured or guaranteed, unless explicitly stated for a specific investment vehicle. Interest income earned on asset classes shown is subject to ordinary federal, state and local income taxes, excepting U.S. Treasury securities (exempt from state and local income taxes) and municipal securities (exempt from federal income taxes, with certain securities exempt from federal, state and local income taxes). In addition, federal and/or state capital gains taxes may apply to investments that are sold at a profit. Eaton Vance does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Credit ratings that may be referenced are based on Moody's, S&P or Fitch, as applicable. Credit ratings are based largely on the rating agency's investment analysis at the time of rating and the rating assigned to any particular security is not necessarily a reflection of the issuer's current financial condition. The rating assigned to a security by a rating agency does not necessarily reflect its assessment of the volatility of a security's market value or of the liquidity of an investment in the security. Ratings of BBB or higher by Standard and Poor's or Fitch (Baa or higher by Moody's) are considered to be investment grade quality. 23

24 For More Information Not FDIC Insured Not Bank Guaranteed May Lose Value