<PAGE> 1
1933 ACT FILE NO. 333-72039
1940 ACT FILE NO. 811-09155
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. 3 [X]
(CHECK APPROPRIATE BOX OR BOXES)
Eaton Vance New Jersey 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 HALE, ESQ.
KIRKPATRICK & LOCKHART LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM
ONE INTERNATIONAL PLACE 333 WEST WACKER DRIVE
BOSTON, MASSACHUSETTS 02110 CHICAGO, IL 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. [ ]
<PAGE> 2
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(1)(2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Auction Preferred Shares 1,520 $25,000 $38,000,000 $10,564
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Of which $278 has been previously paid.
<PAGE> 3
EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
AUCTION PREFERRED SHARES
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-2
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
<S> <C> <C>
1..................... Outside Front Cover Front Cover Page
2..................... Inside Front and Outside Back Cover Page Front and Back Cover Page; Underwriting
3..................... Fee Table and Synopsis Not Applicable
4..................... Financial Highlights Not Applicable
5..................... Plan of Distribution Underwriting
6..................... Selling Shareholders Not Applicable
7..................... Use of Proceeds Use of Proceeds
8..................... General Description of the Registrant Prospectus Summary; Management of the
...................... Trust; 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, Description of APS; Distributions and Taxes;
...................... and Other Securities Certain Provisions of the Declaration of Trust;
Description of Common Shares
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
</TABLE>
<TABLE>
<CAPTION>
PART B STATEMENT OF
ITEM NO. ITEM CAPTION ADDITIONAL INFORMATION CAPTION
<S> <C> <C>
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
</TABLE>
<PAGE> 4
The Prospectus and Statement of Additional Information contained in this
Registration Statement are effective herein only with respect to the Registrant.
The other registrants included in the Prospectus and Statement of Additional
Information have separately filed such documents as a part of their respective
registration statements.
<PAGE> 5
[EATON VANCE LOGO]
$262,000,000
<TABLE>
<S> <C>
EATON VANCE CALIFORNIA MUNICIPAL INCOME TRUST EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
2,360 SHARES 1,520 SHARES
EATON VANCE FLORIDA MUNICIPAL INCOME TRUST EATON VANCE NEW YORK MUNICIPAL INCOME TRUST
1,420 SHARES 1,780 SHARES
EATON VANCE MASSACHUSETTS MUNICIPAL INCOME TRUST EATON VANCE OHIO MUNICIPAL INCOME TRUST
860 SHARES 940 SHARES
EATON VANCE MICHIGAN MUNICIPAL INCOME TRUST EATON VANCE PENNSYLVANIA MUNICIPAL INCOME TRUST
700 SHARES 900 SHARES
</TABLE>
AUCTION PREFERRED SHARES
LIQUIDATION PREFERENCE $25,000 PER SHARE
------------------------
Each Eaton Vance Municipal Income Trust listed above (each a "Trust") is a
recently organized closed-end fund. Each Trust's investment objective is to
provide current income exempt from federal income tax and certain relevant state
and local taxes (as described below). This income will be earned by investing
primarily in investment grade municipal securities. Each Trust may also invest a
portion of its assets in higher risk, higher yielding municipal securities of
lesser quality. There is no assurance that a Trust will achieve its investment
objective. See "Investment Objective, Policies and Risks" beginning at page 16.
Each Trust's investment adviser is Eaton Vance Management ("Eaton Vance" or
the "Adviser"). Eaton Vance manages 54 different municipal bond funds with
combined assets of over $8 billion.
Capitalized terms not defined on this cover page are defined in the
Glossary that appears at the end of this Prospectus. The APS are offered at a
price per share of $25,000 subject to a sales load of $250 per share.
<TABLE>
<CAPTION>
Price to Sales Proceeds to
Public(1) load(2) Trust(1)
--------- -------- -----------
<S> <C> <C> <C>
California Trust............................. $59,000,000 $590,000 $58,410,000
Florida Trust................................ $35,500,000 $355,000 $35,145,000
Massachusetts Trust.......................... $21,500,000 $215,000 $21,285,000
Michigan Trust............................... $17,500,000 $175,000 $17,325,000
New Jersey Trust............................. $38,000,000 $380,000 $37,620,000
New York Trust............................... $44,500,000 $445,000 $44,055,000
Ohio Trust................................... $23,500,000 $235,000 $23,265,000
Pennsylvania Trust........................... $22,500,000 $225,000 $22,275,000
</TABLE>
- ---------------
(1) Plus accumulated dividends, if any, from the Date of Original Issue.
(2) Each Trust and the Adviser have agreed to indemnify the Underwriters against
certain liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION ("SEC") 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
PRUDENTIAL SECURITIES
SALOMON SMITH BARNEY
A.G. EDWARDS & SONS, INC.
------------------------
THE DATE OF THIS PROSPECTUS IS MARCH 1, 1999
<PAGE> 6
(continued from the previous page)
The Broker-Dealers may maintain a secondary trading market in the Auction
Preferred Shares ("APS") outside of Auctions; however, they have no obligation
to do so, and there can be no assurance that a secondary market for the APS will
develop or, if it does develop, that it will provide holders with a liquid
trading market (i.e., trading will depend on the presence of willing buyers and
sellers and the trading price is subject to variables to be determined at the
time of the trade by the Broker-Dealers). The APS will not be registered on any
stock exchange or on any automated quotation system. An increase in the level of
interest rates, particularly during any Long Term Dividend Period, likely will
have an adverse effect on the secondary market price of the APS, and a selling
shareholder may sell APS between Auctions at a price per share of less than
$25,000.
The APS are offered by the Underwriters, subject to prior sale, when, as
and if issued by each Trust and accepted by the Underwriters, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
one certificate for the APS of each Trust will be delivered to the nominee of
The Depository Trust Company on or about March 4, 1999.
Dividends on the APS of each Trust offered hereby will be cumulative from
the Date of Original Issue and payable commencing on the dates specified below
(an "Initial Dividend Payment Date") and, generally, on a weekly basis
thereafter on the days specified below, subject to certain exceptions. The cash
dividend rate (the "Applicable Rate") on the APS for the Initial Dividend Period
on such dates will be the per annum rate specified below:
<TABLE>
<CAPTION>
INITIAL DIVIDEND NORMAL WEEKLY INITIAL
PAYMENT DATE PAYMENT DAY APPLICABLE RATE
---------------- ------------- ---------------
<S> <C> <C> <C>
California Trust March , 1999 Monday %
Florida Trust March , 1999 Thursday %
Massachusetts Trust March , 1999 Tuesday %
Michigan Trust March , 1999 Thursday %
New Jersey Trust March , 1999 Monday %
New York Trust March , 1999 Friday %
Ohio Trust March , 1999 Wednesday %
Pennsylvania Trust March , 1999 Tuesday %
</TABLE>
The Applicable Rate on the APS for each Subsequent Dividend Period will be
determined pursuant to periodic auctions conducted in accordance with the
procedures described herein and in detail in Appendix D to the Statement of
Additional Information (an "Auction"). Except as otherwise provided herein, each
Subsequent Dividend Period for the APS will be a 7-Day Dividend Period;
provided, however, that prior to any Auction, a Trust may elect, subject to
certain limitations described herein, upon giving notice to holders thereof, a
Special Dividend Period. See "Description of APS--Dividends."
The Applicable Rate on the APS for each Subsequent Dividend Period will be
reset on the basis of Bids, Hold Orders and Sell Orders placed by Existing
Holders and Potential Holders in the Auction conducted on the Business Day
preceding the commencement of such Dividend Period. The Applicable Rate that
results from an Auction for any Dividend Period will not be greater than the
Maximum Applicable Rate. See "Description of APS--The Auction--Orders by
Beneficial Owners, Potential Beneficial Owners, Existing Holders and Potential
Holders."
Each Trust is required to allocate net capital gains and other taxable
income, if any, proportionately among its Common Shares and the APS. Each Trust
will give notice of the amount of any taxable income to be included in a
dividend on APS in the related Auction, as described herein, or, in limited
circumstances, include such income in a dividend on the APS without giving
advance notice thereof if it increases the dividend by an amount sufficient to
offset substantially the tax effect thereof. The amount of taxable income
allocable to the APS will depend upon the amount of such income realized by a
Trust and other factors but generally is not expected to be significant. See
"Taxes."
ii
<PAGE> 7
Each prospective purchaser should review carefully the detailed information
regarding the Auction Procedures which appears in this Prospectus and the
Statement of Additional Information and should note that (i) an Order
constitutes an irrevocable commitment to hold, purchase or sell APS based upon
the results of the related Auction, (ii) the Auctions will be conducted through
telephone communications, (iii) settlement for purchases and sales will be on
the Business Day following the Auction and (iv) ownership of APS will be
maintained in book-entry form by or through the Securities Depository. In
certain circumstances, holders of APS may be unable to sell their APS in an
Auction and thus may lack liquidity of investment. The APS only may be
transferred pursuant to a Bid or a Sell Order placed in an Auction through a
Broker-Dealer to the Auction Agent or in the secondary market, if any.
The APS are redeemable, in whole or in part, at the option of a Trust, on
any Dividend Payment Date (except during the Initial Dividend Period or a
Non-Call Period) at the Optional Redemption Price per share and will be subject
to mandatory redemption on dates fixed by the Board of Trustees, under certain
circumstances, at the Mandatory Redemption Price per share.
If a Trust fails to pay on any Dividend Payment Date (or within the
applicable grace period) the full amount of any dividend or the redemption price
of the APS called for redemption, the Applicable Rate will not be based on the
results of an Auction but instead will be equal to the Non-Payment Period Rate
until such failure to pay is cured. See "Description of APS--Dividends--Non-
Payment Period; Late Charge."
This Prospectus sets forth concisely information you should know before
investing in the APS. Please read and retain this Prospectus for future
reference. A Statement of Additional Information dated March 1, 1999, has been
filed with the SEC and can be obtained without charge by calling 1-800-225-6265
or by writing to the applicable Trust. A table of contents to the Statement of
Additional Information is located at page 58 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). Each Trust's
address is 24 Federal Street, Boston, Massachusetts 02110 and its telephone
number is 1-800-225-6265.
The APS 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 1
The Trusts............................... 11
Use of Proceeds.......................... 11
Capitalization........................... 12
Portfolio Composition.................... 14
Investment Objectives, Policies And
Risks.................................. 16
Description of APS....................... 27
Management of Trusts..................... 47
Taxes.................................... 48
Description of Capital Structure......... 53
Certain Provisions of the Declarations of
Trust.................................. 55
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Underwriting............................. 56
Shareholder Servicing Agent, Custodian
and Transfer Agent..................... 56
Legal Opinions........................... 57
Experts.................................. 57
Additional Information................... 57
Table of Contents for the Statement of
Additional Information................. 58
Trustees of Each Trust................... 58
Glossary................................. 59
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
NEITHER THE TRUSTS 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 TRUSTS 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.
iii
<PAGE> 8
(This page intentionally left blank)
<PAGE> 9
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus. Certain of the
capitalized terms used in this Summary are defined in the Glossary that appears
at the end of this Prospectus.
THE TRUSTS.................... Each of Eaton Vance California Municipal Income
Trust (the "California Trust"), Eaton Vance
Florida Municipal Income Trust (the "Florida
Trust"), Eaton Vance Massachusetts Municipal
Income Trust (the "Massachusetts Trust"), Eaton
Vance Michigan Municipal Income Trust (the
"Michigan Trust"), Eaton Vance New Jersey
Municipal Income Trust (the "New Jersey
Trust"), Eaton Vance New York Municipal Income
Trust (the "New York Trust"), Eaton Vance Ohio
Municipal Income Trust (the "Ohio Trust") and
Eaton Vance Pennsylvania Income Trust (the
"Pennsylvania Trust") (each a "Trust" and
together the "Trusts") is a recently organized
closed-end fund. Each Trust was organized as a
Massachusetts business trust on December 10,
1998, and has registered under the Investment
Company Act of 1940, as amended (the "1940
Act"). Each Trust's principal office is located
at 24 Federal Street, Boston, MA 02110, and its
telephone number is 1-800-225-6265. Each Trust
commenced operations on January 29, 1999 upon
the closing of an initial public offering of
shares of its Common Shares. In connection with
the initial public offering of each Trust's
common shares of beneficial interest, par value
$0.01 per share (the "Common Shares"), the
underwriters were granted an option to purchase
additional shares to cover over-allotments.
Each of the Trusts is offering pursuant to this
Prospectus preferred shares of beneficial
interest, par value $0.01 per share, which have
been designated Auction Preferred Shares
(collectively, the "APS"). See "The Trusts."
The Trustees of each Trust have determined that
for cost savings and other reasons that it is
appropriate for the Trusts to employ a combined
Prospectus with respect to the offering of the
APS. However, each Trust offers only its own
shares of beneficial interest, including the
APS. All statements made in this Prospectus by
a Trust are intended to apply only with respect
to that Trust and its APS offered hereby.
Consequently, each Trust disclaims any
responsibility for any misstatement or omission
in this Prospectus with respect to another
Trust. In approving the use of a combined
Prospectus, the Trustees of each Trust
considered the possibility that a Trust might
nevertheless become liable for a misstatement
or omission in the Prospectus regarding another
Trust.
INVESTMENT OBJECTIVES AND
POLICIES.................... Each Trust's investment objective is to provide
current income exempt from regular federal
income tax and the particular state and local
income taxes (and, in the case of the Florida
and Pennsylvania Trusts, to be an investment
exempt from the identified other taxes) set
forth below ("state taxes"):
1
<PAGE> 10
<TABLE>
<S> <C>
California Trust California State Personal Income
Tax
Florida Trust Florida Intangible Tax
Massachusetts Trust Massachusetts State Personal Income
Tax
Michigan Trust Michigan State and City Income and
Single Business Taxes
New Jersey Trust New Jersey State Personal Income
Tax
New York Trust New York State and New York City
Personal Income Taxes
Ohio Trust Ohio State Personal Income Tax
Pennsylvania Trust Pennsylvania State and Local Income
Taxes and Pennsylvania Personal
Property Tax
</TABLE>
An investment in APS of a Trust may not be
appropriate for all investors, and there is no
assurance that a Trust will achieve its
investment objective.
During normal market conditions substantially
all of each Trust's assets (at least 80%) will
be invested in debt obligations, the interest
on which is exempt from federal income tax and
relevant state taxes ("Municipal Obligations").
At least 65% of the Trust's total assets
normally will be invested in Municipal
Obligations (i) issued by the applicable state
or its political subdivisions, agencies,
authorities and instrumentalities and (ii)
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
("S&P") or by FitchIBCA ("Fitch")), or, if
unrated, determined by Eaton Vance Management
("Eaton Vance" or the "Adviser") to be of at
least investment grade quality. From time to
time, each Trust may hold a significant number
of Municipal Obligations not rated by a
nationally recognized statistical rating
organization ("Rating Agency"). When a 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.
PRINCIPAL INVESTMENT RISKS.... Each 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 Trust 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.
INVESTMENT ADVISER AND
ADMINISTRATOR............... Eaton Vance, a wholly-owned subsidiary of Eaton
Vance Corp., is each Trust's investment adviser
and administrator. The Adviser manages 4
national municipal funds, 40 single state
municipal
2
<PAGE> 11
funds, 10 limited maturity municipal funds and
1 money market municipal fund. See "Investment
Advisory and Management Arrangements."
THE OFFERING.................. Each Trust is offering an aggregate of the
following number of APS at a purchase price of
$25,000 per share plus accumulated dividends,
if any, from the Date of Original Issue:
<TABLE>
<S> <C>
California Trust -- 2,360 New Jersey Trust -- 1,520
Florida Trust -- 1,420 New York Trust -- 1,780
Massachusetts Trust -- 860 Ohio Trust -- 940
Michigan Trust -- 700 Pennsylvania Trust -- 900
</TABLE>
The APS are being offered by a group of
underwriters ("Underwriters") led by
PaineWebber Incorporated, Prudential
Securities, Salomon Smith Barney Inc. and A.G.
Edwards & Sons, Inc. See "Underwriting."
DIVIDENDS ON APS.............. The APS will be Preferred Shares of each Trust
that entitle their holders to receive cash
dividends at a rate per annum that may vary for
the successive Dividend Periods for such
shares. In general, except as described below,
each Dividend Period for the APS subsequent to
the Initial Dividend Period will be seven days
in length. The Applicable Rate for a particular
Dividend Period will be determined by an
Auction conducted on the Business Day next
preceding the start of such Dividend Period.
Through their Broker-Dealers, Beneficial Owners
and Potential Beneficial Owners of APS may
participate in Auctions therefor, although,
except in the case of certain Special Dividend
Periods, Beneficial Owners desiring to continue
to hold all of their APS regardless of the
Applicable Rate resulting from Auctions need
not participate. For an explanation of Auctions
and the method of determining the Applicable
Rate, see "Description of APS--The Auction."
Except as described herein, investors in APS
will not receive certificates representing
ownership of their shares. Ownership of APS
will be maintained in book-entry form by the
Securities Depository or its nominee for the
account of the investor's Agent Member. The
investor's Agent Member, in turn, will maintain
records of such investor's beneficial ownership
of APS. Accordingly, references herein to an
investor's investment in or purchase, sale or
ownership of APS are to purchases, sales or
ownership of those shares by Beneficial Owners.
After the Initial Dividend Period, each
Subsequent Dividend period for the APS will
generally consist of seven days (a "7-day
Dividend Period"); provided, however, that
prior to any Auction, a Trust may elect,
subject to certain limitations described
herein, upon giving notice to holders thereof,
a Special Dividend Period. A Special Dividend
Period is a Dividend Period consisting of a
specified number of days (other than seven),
evenly divisible by seven and not fewer than
seven nor more than 364 (a "Short Term Dividend
Period") or a Dividend Period consisting of a
specified period of one whole year or more but
not greater than five years (a "Long Term
Dividend Period"). Dividends on the APS offered
3
<PAGE> 12
hereby are cumulative from the Date of Original
Issue and are payable when, as and if declared
by the Board of Trustees of a Trust, out of
funds legally available therefor, commencing on
the Initial Dividend Payment Date and, in the
case of Dividend Periods that are not Special
Dividend Periods, dividends will be payable
generally on each succeeding day set forth
below, subject to certain exceptions:
<TABLE>
<S> <C>
California Trust -- Monday New Jersey Trust-- Monday
Florida Trust -- Thursday New York Trust -- Friday
Massachusetts Trust -- Tuesday Ohio Trust -- Wednesday
Michigan Trust -- Thursday Pennsylvania Trust -- Tuesday
</TABLE>
Dividends for the APS will be paid through the
Securities Depository (The Depository Trust
Company or a successor securities depository)
on each Dividend Payment Date. The Securities
Depository's normal procedures provide for it
to distribute dividends in same-day funds to
Agent Members, who are in turn expected to
distribute such dividends to the person for
whom they are acting as agent in accordance
with the instructions of such person. See
"Description of APS - Dividends."
For each Subsequent Dividend Period, the cash
dividend rate on the APS will be the Applicable
Rate that the Auction Agent (Bankers Trust
Corporation ("Bankers Trust") or any successor)
advises a Trust has resulted from an Auction.
See "Description of APS - Dividends." The first
Auction for the APS is scheduled to be held on
the ending date for the Initial Dividend Period
as set forth above.
The Amended By-Laws provide that until a Trust
gives a Request for Special Dividend Period and
the related Notice of Special Dividend Period,
only 7-Day Dividend Periods will be applicable
to the APS. While no Trust currently intends to
give a Request for Special Dividend Period with
respect to the APS, each may so elect in the
future subject to, and on, the conditions
discussed under "Description of the
APS -- Dividends -- Notification of Dividend
Period."
A Special Dividend Period will not be effective
for the APS unless Sufficient Clearing Bids
exist at the Auction in respect of such Special
Dividend Period. If Sufficient Clearing Bids do
not exist at such Auction for the APS, the
Dividend Period commencing on the Business Day
succeeding such Auction will be a 7-Day
Dividend Period, and the holders of the APS
outstanding prior to such Auction will be
required to continue to hold such shares for
such Dividend Period. In addition, a Trust may
not give a Notice of Special Dividend Period
with respect to the APS, or if a Trust has
given a Notice of Special Dividend Period for
the APS, the Trust will be required to give a
Notice of Revocation in respect thereof if (i)
either the 1940 Act APS Asset Coverage is not
satisfied or the Trust fails to maintain S&P
Eligible Assets with an aggregate Discounted
Value at least equal to the APS Basic
Maintenance Amount, in each case on each of the
two Valuation Dates immediately preceding the
Business Day prior to the related Auction Date
4
<PAGE> 13
for the APS, (ii) sufficient funds for the
payment of dividends payable on the immediately
succeeding Dividend Payment Date have not been
irrevocably deposited with the Auction Agent by
the close of business on the third Business Day
preceding the related Auction Date, or (iii)
the Broker-Dealers have given the Trust notice
that it is not advisable to hold an Auction in
respect of a Special Dividend Period. In such
event, the next succeeding Dividend Period will
be a 7-Day Dividend Period.
ADVANCE NOTICE OF ALLOCATION
OF TAXABLE INCOME; INCLUSION
OF TAXABLE INCOME IN
DIVIDENDS................... Dividends paid by each Trust, to the extent
paid from tax-exempt income earned on Municipal
Obligations, will be exempt from federal income
tax and relevant state taxes, though some or
all of those dividends may be a tax preference
item for purposes of the federal alternative
minimum tax. However, each Trust is required to
allocate net capital gains and other income
subject to federal income tax, if any,
proportionately among such Trust's Common
Shares and APS. Each Trust will notify the
Auction Agent of the amount of any net capital
gains or other income subject to federal income
tax or relevant state taxes ("taxable income")
to be included in any dividend on the APS prior
to the Auction establishing the Applicable Rate
for such dividend. The Auction Agent in turn
will notify each Broker-Dealer whenever it
receives any such notice from a Trust, and each
Broker-Dealer will notify its Beneficial Owners
and Potential Beneficial Owners, as provided in
its Broker-Dealer Agreement. In the
alternative, a Trust also may include such
taxable income in a dividend on the APS without
giving advance notice thereof if it increases
the dividend by an amount sufficient to offset
substantially the tax effect thereof. The
amount of taxable income allocable to the APS
will depend upon the amount of such income
realized by a Trust and other factors but
generally is not expected to be significant.
See "Taxes" and "Description of APS - The
Auction - Auction Date; Advance Notice of
Allocation of Taxable Income; Inclusion of
Taxable Income in Dividends."
ADDITIONAL DIVIDENDS.......... If a Trust retroactively allocates any net
capital gains or other taxable income to the
APS without having given advance notice thereof
as described above, the Trust will make certain
payments to holders of the APS to which such
allocation was made to offset substantially the
tax effect thereof. Such a retroactive
allocation may happen when such allocation is
made as a result of (i) the redemption of all
or a portion of the outstanding APS (ii) the
liquidation of the Trust or (iii) a debt
obligation believed to be a Municipal
Obligation unexpectedly turns out to be an
obligation subject to federal income tax and/or
a relevant state tax. None of the Trusts expect
to make payments to holders of the APS to
offset the tax effect of any reallocation of
net capital gains or other taxable income. See
"Description of APS--Dividends--Additional
Dividends" and "Taxes."
5
<PAGE> 14
DETERMINATION OF MAXIMUM
APPLICABLE RATES............ Except during a Non-Payment Period, the
Applicable Rate for any Dividend Period for the
APS will not be more than the Maximum
Applicable Rate applicable to such shares. The
Maximum Applicable Rate for the APS will depend
on the credit rating assigned to such shares
and on the duration of the Dividend Period. The
Maximum Applicable Rate will be the Applicable
Percentage of the Reference Rate. The Reference
Rate is (i) with respect to any 7-Day Dividend
Period or any Short Term Dividend Period having
28 or fewer days, the higher of the applicable
"AA" Composite Commercial Paper Rate and the
Taxable Equivalent of the Short-Term Municipal
Obligation Rate, (ii) with respect to any Short
Term Dividend Period having more than 28 but
fewer than 183 days, the applicable "AA"
Composite Commercial Paper Rate, (iii) with
respect to any Short Term Dividend Period
having 183 or more but fewer than 364 days, the
applicable U.S. Treasury Bill Rate and (iv)
with respect to any Long Term Dividend Period,
the applicable U.S. Treasury Note Rate. The
Applicable Percentage will be determined based
on (i) the credit rating assigned on such date
to the APS by S&P (or, if S&P shall not make
such rating available, the equivalent of such
rating by a Substitute Rating Agency) and (ii)
whether a Trust has provided notification to
the Auction Agent prior to the Auction
establishing the Applicable Rate for any
dividend that net capital gains or other
taxable income will be included in such
dividend on the shares of APS as follows:
<TABLE>
<CAPTION>
APPLICABLE
APPLICABLE PERCENTAGE OF PERCENTAGE OF
REFERENCE RATE -- REFERENCE RATE --
S&P CREDIT RATINGS NO NOTIFICATION NOTIFICATION
------------------ ------------------------ -----------------
<S> <C> <C>
AA- or higher......... 110% 150%
A- to A+.............. 125 160
BBB- to BBB+.......... 150 250
Below BBB-............ 200 275
</TABLE>
There is no minimum Applicable Rate in respect
of any Dividend Period.
The Applicable Rate for any Dividend Period
commencing during any Non-Payment Period, and
the rate used to calculate the late charge
described under "Description of
APS--Dividends--Non-Payment Period; Late
Charge," initially will be 200% of the
Reference Rate (or 275% of such rate if a Trust
has provided notification to the Auction Agent
prior to the Auction establishing the
Applicable Rate for any dividend that net
capital gains or other taxable income will be
included in such dividend on APS).
AUCTION PROCEDURES............ Unless otherwise permitted by a Trust,
Beneficial Owners and Potential Beneficial
Owners of APS may only participate in Auctions
through their Broker-Dealers. Broker-Dealers
will submit the Orders of their respective
customers who are Beneficial Owners and
Potential Beneficial Owners to the Auction
Agent, designating themselves as Existing
Holders in respect of shares subject to Orders
submitted or deemed submitted to them by
Beneficial Owners and as Potential Holders in
respect of shares subject to
6
<PAGE> 15
Orders submitted to them by Potential
Beneficial Owners. On or prior to each Auction
Date for the APS (the Business Day next
preceding the first day of each Dividend
Period), each Beneficial Owner may submit
Orders to its Broker-Dealer as follows:
- Hold Order--indicating its desire to hold the
APS without regard to the Applicable Rate for
the next Dividend Period for such shares.
- Bid--indicating its desire to hold the APS,
provided that the Applicable Rate for the
next Dividend Period for such shares is not
less than the rate per annum specified in
such Bid.
- Sell Order--indicating its desire to sell the
APS without regard to the Applicable Rate for
the next Dividend Period for such shares.
A Beneficial Owner may submit different types
of Orders to its Broker-Dealer with respect to
the APS then held by such Beneficial Owner,
provided that the total number of APS covered
by such Orders does not exceed the number of
APS held by such Beneficial Owner. If, however,
a Beneficial Owner offers through its Broker-
Dealer to purchase additional APS in such
Auction, such Beneficial Owner, for purposes of
such offer to purchase additional shares, will
be treated as a Potential Beneficial Owner as
described below. Bids by Beneficial Owners
through their Broker-Dealers with rates per
annum higher than the Maximum Applicable Rate
will be treated as Sell Orders. A Hold Order
(in the case of an Auction relating to a
Dividend Period which is 91 days or less) and a
Sell Order (in the case of an Auction relating
to a Special Dividend Period of longer than 91
days) shall be deemed to have been submitted on
behalf of a Beneficial Owner if an Order with
respect to the APS then held by such Beneficial
Owner is not submitted on behalf of such
Beneficial Owner for any reason, including the
failure of a Broker-Dealer to submit such
Beneficial Owner's Order to the Auction Agent.
Potential Beneficial Owners of APS may submit
Bids through their Broker-Dealers in which they
offer to purchase APS, provided that the
Applicable Rate for the next Dividend Period
for such shares is not less than the rate per
annum specified in such Bid. A Bid by a
Potential Beneficial Owner with a rate per
annum higher than the Maximum Applicable Rate
will not be considered.
Neither a Trust nor the Auction Agent will be
responsible for a Broker-Dealer's failure to
comply with any of the foregoing.
A Broker-Dealer also may hold APS for its own
account as a Beneficial Owner. A Broker-Dealer
thus may submit Orders to the Auction Agent as
a Beneficial Owner or a Potential Beneficial
Owner and therefore participate in an Auction
as an Existing Holder or Potential Holder on
behalf of both itself and its customers. An
Order placed with the Auction Agent by a
Broker-Dealer as an Existing Holder or a
Potential Holder as or on behalf of a
Beneficial Owner or a Potential Beneficial
Owner, as the case may be, will be treated in
the same manner as an Order placed with a
7
<PAGE> 16
Broker-Dealer by a Beneficial Owner or a
Potential Beneficial Owner. Similarly, any
failure by a Broker-Dealer to submit to the
Auction Agent an Order in respect of any APS
held by it or its customers who are Beneficial
Owners will be treated in the same manner as a
Beneficial Owner's failure to submit to its
Broker-Dealer an Order in respect of APS held
by it, as described above. Inasmuch as a
Broker-Dealer participates in an Auction as an
Existing Holder or a Potential Holder only to
represent the interests of a Beneficial Owner
or Potential Beneficial Owner, whether it be a
customer or itself, all discussion herein
relating to the consequences of an Auction for
Existing Holders and Potential Holders also
applies to the underlying beneficial ownership
interests represented thereby.
If Sufficient Clearing Bids exist in an Auction
(that is, in general, the number of APS subject
to Bids by Potential Holders with rates equal
to or lower than the Maximum Applicable Rate is
at least equal to the number of APS subject to
Sell Orders by Existing Holders), the
Applicable Rate will be the lowest rate per
annum specified in the Submitted Bids which,
taking into account such rate per annum and all
lower rates per annum bid by Existing Holders
and Potential Holders, would result in Existing
Holders and Potential Holders owning all of the
APS available for purchase in the Auction. If
Sufficient Clearing Bids do not exist, the
Dividend Period next following the Auction
automatically will be a 7-Day Dividend Period
and the Applicable Rate will be the Maximum
Applicable Rate, and in such event, Existing
Holders that have submitted Sell Orders will
not be able to sell in the Auction all, and may
not be able to sell any, APS subject to such
Sell Orders. Thus, in certain circumstances,
Existing Holders and, thus, the Beneficial
Owners they represent may not have liquidity of
investment. If all Existing Holders submit (or
are deemed to have submitted) Hold Orders in an
Auction, the Dividend Period next following the
Auction automatically shall be the same length
as the immediately preceding Dividend Period,
and the Applicable Rate will be 40% of the
Reference Rate (as defined under "Determination
of Maximum Applicable Rates" above) in effect
on the date of the Auction (or 60% of such rate
if a Trust has provided notification to the
Auction Agent prior to the Auction establishing
the Applicable Rate for any dividend that net
capital gains or other taxable income will be
included in such dividend on APS).
The Auction Procedures include a pro rata
allocation of shares for purchase and sale,
which may result in an Existing Holder selling
or holding, or a Potential Holder purchasing, a
number of APS that is less than the number of
APS specified in its Order. To the extent the
allocation has this result, a Broker-Dealer
will be required to make appropriate pro rata
allocations among its customers and itself.
A Sell Order by an Existing Holder will
constitute an irrevocable offer to sell the APS
subject thereto, and a Bid placed by an
Existing Holder also will constitute an
irrevocable offer to sell the
8
<PAGE> 17
APS subject thereto if the rate per annum
specified in the Bid is higher than the
Applicable Rate determined in the Auction, in
each case at a price per share equal to
$25,000. A Bid placed by a Potential Holder
will constitute an irrevocable offer to
purchase the APS subject thereto if the rate
per annum specified in such Bid is less than or
equal to the Applicable Rate determined in the
Auction. Settlement of purchases and sales will
be made on the next Business Day (also a
Dividend Payment Date) after the Auction Date
through the Securities Depository. Purchasers
will make payment through their Agent Members
in same-day funds to the Securities Depository
against delivery by book-entry to their Agent
Members. The Securities Depository will make
payment to the sellers' Agent Members in
accordance with the Securities Depository's
normal procedures, which now provide for
payment in same-day funds. See "Description of
APS--The Auction."
ASSET MAINTENANCE............. Under the Amended By-Laws, the Trust must
maintain (i) S&P Eligible Assets having in the
aggregate a Discounted Value at least equal to
the APS Basic Maintenance Amount and (ii) 1940
Act APS Asset Coverage of at least 200%. See
"Description of APS--Asset Maintenance."
Each Trust estimates that, based on the
composition of its portfolio at February 19,
1999, 1940 Act APS Asset Coverage with respect
to APS would be at least 270% immediately after
the issuance of the APS offered hereby in an
amount representing approximately 36% of each
Trust's capital (including the capital
attributable to the APS).
The Discount Factors and guidelines for
calculating the Discounted Value of each
Trust's portfolio for purposes of determining
whether the APS Basic Maintenance Amount has
been satisfied have been established by S&P in
connection with each Trust's receipt of ratings
on the APS on their Date of Original Issue of
AAA from S&P. See "Investment Objectives and
Policies--Rating Agency Guidelines."
MANDATORY REDEMPTION.......... If the APS Basic Maintenance Amount or the 1940
Act APS Asset Coverage is not maintained or
restored as specified herein, the APS will be
subject to mandatory redemption, out of funds
legally available therefor, at the Mandatory
Redemption Price of $25,000 per share plus an
amount equal to dividends thereon (whether or
not earned or declared) accumulated but unpaid
to the date fixed for redemption. In addition,
holders of APS may be entitled to receive
Additional Dividends in the event of redemption
of such APS as described herein. See
"Description of APS--Dividends--Additional
Dividends." Any such redemption will be limited
to the minimum number of APS necessary to
restore the APS Basic Maintenance Amount or the
1940 Act APS Asset Coverage, as the case may
be. Each Trust's ability to make such a
mandatory redemption may be restricted by the
provisions of the Investment Company Act of
1940, as amended (the "1940 Act"). See
"Description of APS--Redemption--Mandatory
Redemption."
9
<PAGE> 18
OPTIONAL REDEMPTION........... The APS are redeemable at the option of a
Trust, as a whole or in part, on any Dividend
Payment Date (except during the Initial
Dividend Period or a Non-Call Period) at the
Optional Redemption Price of $25,000 per share,
plus an amount equal to dividends thereon
(whether or not earned or declared) accumulated
but unpaid to the date fixed for redemption
plus the premium, if any, resulting from the
designation of a Premium Call Period. See
"Description of APS--Redemption-- Optional
Redemption." In addition, holders of APS may be
entitled to receive Additional Dividends in the
event of redemption of such APS to the extent
provided herein. See "Description of
APS--Dividends
--Additional Dividends."
LIQUIDATION PREFERENCE........ The liquidation preference of the APS will be
$25,000 per share, plus an amount equal to
accumulated but unpaid dividends (whether or
not earned or declared). See "Description of
APS--Liquidation Rights." In addition, holders
of APS may be entitled to receive Additional
Dividends in the event of the liquidation of a
Trust, as provided herein. See "Description of
APS--Dividends-- Additional Dividends."
RATING........................ It is a condition to their issuance that the
APS of each Trust be issued with a credit
quality rating of AAA from S&P. Each Trust may
at some future time seek to have its APS rated
by an additional Rating Agency. See "Investment
Objective and Policies--Rating Agency
Guidelines."
VOTING RIGHTS................. The 1940 Act requires that the holders of APS
and any other Preferred Shares of a Trust,
voting as a separate class, have the right to
elect at least two trustees of that Trust at
all times and to elect a majority of the
trustees at any time when two years' dividends
on the APS or any other Preferred Shares are
unpaid. The holders of APS and any other
Preferred Shares of a Trust will vote as a
separate class on certain other matters as
required under each Trust's Agreement and
Declaration of Trust ("Declaration of Trust")
and the 1940 Act. See "Description of
APS--Voting Rights" and "Description of Capital
Stock--Certain Provisions of the Declaration of
Trust."
10
<PAGE> 19
THE TRUSTS
Each of Eaton Vance California Municipal Income Trust (the "California
Trust"), Eaton Vance Florida Municipal Income Trust (the "Florida Trust"), Eaton
Vance Massachusetts Municipal Income Trust (the "Massachusetts Trust"), Eaton
Vance Michigan Municipal Income Trust (the "Michigan Trust"), Eaton Vance New
Jersey Municipal Income Trust (the "New Jersey Trust"), Eaton Vance New York
Municipal Income Trust (the "New York Trust"), Eaton Vance Ohio Municipal Income
Trust (the "Ohio Trust") and Eaton Vance Pennsylvania Income Trust (the
"Pennsylvania Trust") (each a "Trust" and together the "Trusts") is a closed-end
fund. Each Trust was organized as a Massachusetts business trust on December 10,
1998, and has registered under the Investment Company Act of 1940, as amended
(the "1940 Act"). Each Trust's principal office is located at 24 Federal Street,
Boston, MA 02110, and its telephone number is 1-800-225-6265.
Each Trust commenced operations on January 29, 1999 upon the closing of an
initial public offering of shares of its Common Shares. The proceeds of such
offerings were approximately as follows after the payment of organizational and
offering expenses: California Trust -- $91,417,000; Florida
Trust -- $54,740,500; Massachusetts Trust -- $33,034,000; Michigan
Trust -- $27,046,000; New Jersey Trust -- $58,483,000; New York
Trust -- $69,710,500; Ohio Trust -- $36,028,000; and Pennsylvania
Trust -- $34,531,000. In connection with the initial public offering of each
Trust's Common Shares, the underwriters were granted an option to purchase, at a
price of $15.00 per Common Share, the following amounts of additional Common
Shares to cover over-allotments: California Trust -- 915,000; Florida
Trust -- 547,500; Massachusetts Trust -- 330,000; Michigan Trust -- 270,000; New
Jersey Trust -- 585,000; New York Trust -- 697,500; Ohio Trust -- 360,000; and
Pennsylvania Trust -- 345,000. On February 3, 1999, the underwriters purchased
an additional 155,000 Common Shares of the Ohio Trust pursuant to a partial
exercise of the over-allotment. On February 26, the underwriters exercised the
over-allotment in full with respect to each Trust (other than the New York Trust
and the New Jersey Trust) and purchased pursuant to a partial exercise of such
options or additional 450,000 shares of the New York Trust and an additional
450,000 shares of the New Jersey Trust (collectively, the "Over-allotment Common
Shares").
Certain of the capitalized terms used in this Prospectus are defined in the
Glossary that appears at the end of this Prospectus.
USE OF PROCEEDS
The estimated net proceeds of this offering will be as follows after the
payment of offering expenses (not expected to exceed $100,000 per Trust) and the
sales load: California Trust -- $58,310,000; Florida Trust -- $35,045,000;
Massachusetts Trust -- $21,185,000; Michigan Trust -- $17,225,000; New Jersey
Trust -- $37,520,000; New York Trust -- $43,955,000; Ohio Trust -- $23,165,000;
and Pennsylvania Trust -- $22,175,000. See "Underwriting."
The net proceeds of the offering will be invested in accordance with each
Trust's investment objective and policies during a period estimated not to
exceed three months from the offer and sale of such APS depending on market
conditions and the availability of appropriate securities. Pending such
investment, it is anticipated that the proceeds will be invested in short-term
tax-exempt securities. See "Investment Objective and Policies."
11
<PAGE> 20
CAPITALIZATION
The following table sets forth the unaudited capitalization of each Trust
as of February 19, 1999 as if the Over-allotment Common Shares of each Trust
were issued on that date and as adjusted to give effect to the issuance of the
APS offered hereby.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
------------ ------------
<S> <C> <C>
CALIFORNIA TRUST
Shareholders' equity:
Preferred Shares, par value, $0.01 per share (no shares
issued; 2,360 APS, as adjusted, at $25,000 per share
liquidation preference)............................... -- $ 59,000,000
Common Shares, par value, $0.01 per share (7,021,667
shares issued and outstanding)........................ $ 70,217 70,217
Capital in excess of par value attributable to Common
Stock................................................. 105,044,333 105,044,333
Undistributed investment income -- net.................. 8,502 8,502
Accumulated realized gain (loss) -- net................. 12 12
Unrealized appreciation on investments -- net........... 97,294 97,294
Net Assets.............................................. $105,220,358 $164,220,358
============ ============
FLORIDA TRUST
Shareholders' equity:
Preferred Shares, par value, $0.01 per share (no shares
issued; 1,420 APS, as adjusted, at $25,000 per share
liquidation preference)............................... -- $ 35,500,000
Common Shares, par value, $0.01 per share (4,204,167
shares issued and outstanding)........................ $ 42,042 42,042
Capital in excess of par value attributable to Common
Stock................................................. 62,894,533 62,894,533
Undistributed investment income -- net.................. 6,400 6,400
Accumulated realized gain (loss) -- net................. (26) (26)
Unrealized appreciation on investments -- net........... 84,199 84,199
Net Assets.............................................. $ 63,027,148 $ 98,527,148
============ ============
MASSACHUSETTS TRUST
Shareholders' equity:
Preferred Shares, par value, $0.01 per share (no shares
issued; 860 APS, as adjusted, at $25,000 per share
liquidation preference)............................... -- $ 21,500,000
Common Shares, par value, $0.01 per share (2,536,667
shares issued and outstanding)........................ $ 25,367 25,367
Capital in excess of par value attributable to Common
Stock................................................. 37,948,733 37,948,733
Undistributed investment income -- net.................. 8,526 8,526
Accumulated realized gain (loss) -- net................. 0 0
Unrealized depreciation on investments -- net........... (90,842) (90,842)
Net Assets.............................................. $ 37,891,784 $ 59,391,784
============ ============
MICHIGAN TRUST
Shareholders' equity:
Preferred Shares, par value, $0.01 per share (no shares
issued; 700 APS, as adjusted, at $25,000 per share
liquidation preference)............................... -- $ 17,500,000
Common Shares, par value, $0.01 per share (2,076,667
shares issued and outstanding)........................ $ 20,767 20,767
Capital in excess of par value attributable to Common
Stock................................................. 31,067,133 31,067,133
Undistributed investment income -- net.................. (21,743) (21,743)
Accumulated realized gain (loss) -- net................. (3) (3)
Unrealized appreciation on investments -- net........... 5,307 5,307
Net Assets.............................................. $ 31,071,461 $ 48,571,461
============ ============
</TABLE>
12
<PAGE> 21
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
------------ ------------
<S> <C> <C>
NEW JERSEY TRUST
Shareholders' equity:
Preferred Shares, par value, $0.01 per share (no shares
issued; 1,520 APS, as adjusted, at $25,000 per share
liquidation preference)............................... -- $ 38,000,000
Common Shares, par value, $0.01 per share (4,356,667
shares issued and outstanding)........................ $ 43,567 43,567
Capital in excess of par value attributable to Common
Stock................................................. 65,175,933 65,175,933
Undistributed investment income -- net.................. (5,051) (5,051)
Accumulated realized gain (loss) -- net................. 4 4
Unrealized appreciation on investments -- net........... 28,034 28,034
Net Assets.............................................. $ 65,242,487 $103,242,487
============ ============
NEW YORK TRUST
Shareholders' equity:
Preferred Shares, par value, $0.01 per share (no shares
issued; 1,780 APS, as adjusted, at $25,000 per share
liquidation preference)............................... -- $ 44,500,000
Common Shares, par value, $0.01 per share (5,106,667
shares issued and outstanding)........................ $ 51,067 51,067
Capital in excess of par value attributable to Common
Stock................................................. 76,395,933 76,395,933
Undistributed investment income -- net.................. 35,653 35,653
Accumulated realized gain (loss) -- net................. 5 5
Unrealized appreciation on investments -- net........... 79,471 79,471
Net Assets.............................................. $ 76,562,129 $121,062,129
============ ============
OHIO TRUST
Shareholders' equity:
Preferred Shares, par value, $0.01 per share (no shares
issued; 940 APS, as adjusted, at $25,000 per share
liquidation preference)............................... -- $ 23,500,000
Common Shares, par value, $0.01 per share (2,766,667
shares issued and outstanding)........................ $ 27,667 27,667
Capital in excess of par value attributable to Common
Stock................................................. 41,389,533 41,389,533
Undistributed investment income -- net.................. (3,851) (3,851)
Accumulated realized gain (loss) -- net................. 3 3
Unrealized appreciation on investments -- net........... 7,368 7,368
Net Assets.............................................. $ 41,420,720 $ 64,920,720
============ ============
PENNSYLVANIA TRUST
Shareholders' equity:
Preferred Shares, par value, $0.01 per share (no shares
issued; 900 APS, as adjusted, at $25,000 per share
liquidation preference)............................... -- $ 22,500,000
Common Shares, par value, $0.01 per share (2,651,667
shares issued and outstanding)........................ $ 26,517 26,517
Capital in excess of par value attributable to Common
Stock................................................. 39,669,133 39,669,133
Undistributed investment income -- net.................. (2,905) (2,905)
Accumulated realized gain (loss) -- net................. (3,727) (3,727)
Unrealized depreciation on investments -- net........... (8,450) (8,450)
Net Assets.............................................. $ 39,680,568 $ 62,180,568
============ ============
</TABLE>
13
<PAGE> 22
PORTFOLIO COMPOSITION
Set forth below is the approximate percentage of each Trust's portfolio
invested in long-term and short-term Municipal Obligations as of February 19,
1999. Also included in these tables is other information with respect to the
composition of each Trust's investment portfolio as of the same date.
CALIFORNIA TRUST (68.6% long-term; 18.6% short-term)
<TABLE>
<CAPTION>
NUMBER OF VALUE
S&P* MOODY'S* ISSUES (IN THOUSANDS) PERCENT
---- -------- --------- -------------- -------
<S> <C> <C> <C> <C>
AAA Aaa.................................. 15 $48,396 52.9%
AA Aa................................... 3 12,452 13.6
BBB Baa1................................. 1 1,023 1.1
NR+ NR+.................................. 1 886 1.0
VMIG1 A+................................... 4 17,000 18.6
Cash................................................... -- 11,766 12.8
-- ------- -----
Total.................................................. 24 $91,523 100.0%
== ======= =====
</TABLE>
FLORIDA TRUST (78.0% long-term; 7.3% short-term)
<TABLE>
<CAPTION>
NUMBER OF VALUE
S&P* MOODY'S* ISSUES (IN THOUSANDS) PERCENT
---- -------- --------- -------------- -------
<S> <C> <C> <C> <C>
AAA Aaa.................................. 13 $25,270 46.1%
AA Aa................................... 6 11,625 21.2
A A.................................... 2 2,467 4.5
BBB Baa1................................. 1 1,625 3.0
NR+ NR+.................................. 3 1,781 3.2
VMIG1 A+................................... 2 4,000 7.3
Cash................................................... -- 8,063 14.7
-- ------- -----
Total.................................................. 27 $54,831 100.0%
== ======= =====
</TABLE>
MASSACHUSETTS TRUST (88.5% long-term; 5.0% short-term)
<TABLE>
<CAPTION>
NUMBER OF VALUE
S&P* MOODY'S* ISSUES (IN THOUSANDS) PERCENT
---- -------- --------- -------------- -------
<S> <C> <C> <C> <C>
AAA Aaa.................................. 16 $ 19,804 60.1%
AA Aa................................... 2 2,636 8.0
A A.................................... 2 3,032 9.2
BBB Baa1................................. 4 3,196 9.7
VMIG1 A-1+................................. 1 1,648 5.0
Closed-End Funds.............................................. 2 494 1.5
Cash................................................... 2,153 6.5
-- ----------- -----
Total.................................................. 27 $ 32,963 100.0%
== =========== =====
</TABLE>
MICHIGAN TRUST (90.0% long-term; 0.0% short-term)
<TABLE>
<CAPTION>
NUMBER OF VALUE
S&P* MOODY'S* ISSUES (IN THOUSANDS) PERCENT
---- -------- --------- -------------- -------
<S> <C> <C> <C> <C>
AAA Aaa.................................. 19 $ 18,660 69.1%
AA Aa................................... 1 974 3.6
A A.................................... 2 2,326 8.6
BBB Baa1................................. 2 1,791 6.6
NR+ NR+.................................. 1 551 2.1
Cash................................................... 2,698 10.0
-- ----------- -----
Total.................................................. 25 $ 27,000 100.0%
== =========== =====
</TABLE>
14
<PAGE> 23
NEW JERSEY TRUST (95.0% long-term; 4.4% short-term)
<TABLE>
<CAPTION>
NUMBER OF VALUE
S&P* MOODY'S* ISSUES (IN THOUSANDS) PERCENT
---- -------- --------- -------------- -------
<S> <C> <C> <C> <C>
AAA Aaa.................................. 16 $36,332 62.1%
AA Aa................................... 3 8,425 14.4
A A.................................... 1 1,755 3.0
BBB Baa1................................. 3 5,324 9.1
BB Ba2.................................. 2 1,521 2.6
VMIG1 A-1+................................. 1 2,485 4.4
Closed-End Funds.............................................. 2 1,542 3.8
Cash................................................... 375 0.6
-- ------- -----
Total.................................................. 28 $57,759 100.0%
== ======= =====
</TABLE>
NEW YORK TRUST (88.9% long-term; 8.5% short-term)
<TABLE>
<CAPTION>
NUMBER OF VALUE
S&P* MOODY'S* ISSUES (IN THOUSANDS) PERCENT
---- -------- --------- -------------- -------
<S> <C> <C> <C> <C>
AAA Aaa.................................. 8 $22,763 32.6%
AA Aa................................... 2 7,332 10.5
A A.................................... 7 20,599 29.5
BBB Baa.................................. 4 10,195 14.6
VMIG1 A-1+................................. 3 5,935 8.5
NR+ NR+.................................. 2 1,187 1.7
Cash................................................... -- 1,780 2.6
-- ------- -----
Total.................................................. 26 $69,791 100.0%
== ======= =====
</TABLE>
OHIO TRUST (75.0% long-term; 3.1% short-term)
<TABLE>
<CAPTION>
NUMBER OF VALUE
S&P* MOODY'S* ISSUES (IN THOUSANDS) PERCENT
---- -------- --------- -------------- -------
<S> <C> <C> <C> <C>
AAA Aaa.................................. 11 $14,420 37.6%
AA Aa................................... 3 5,638 14.7
A A.................................... 2 3,452 9.0
BBB Baa.................................. 3 3,835 10.0
BB Ba................................... 1 997 2.6
VMIG1 A-1+................................. 1 1,189 3.1
NR+ NR+.................................. 1 422 1.1
Cash................................................... -- 8,392 21.9
-- ------- -----
Total.................................................. 22 $38,345 100.0%
== ======= =====
</TABLE>
PENNSYLVANIA TRUST (96.5% long-term; 0.0% short-term)
<TABLE>
<CAPTION>
NUMBER OF VALUE
S&P* MOODY'S* ISSUES (IN THOUSANDS) PERCENT
---- -------- --------- -------------- -------
<S> <C> <C> <C> <C>
AAA Aaa.................................. 19 $25,225 73.1%
AA Aa................................... 2 2,709 7.9
A A.................................... 1 1,920 5.6
BBB Baa1................................. 2 2,229 6.5
NR+ NR+.................................. 2 1,183 3.4
Cash................................................... -- 1,234 3.5
-- ------- -----
Total.................................................. 26 $34,500 100.0%
== =======
</TABLE>
- ---------------
* Ratings: Using the higher of S&P's or Moody's ratings on a Trust's Municipal
Obligations. See "Schedule of Investments." S&P rating categories may be
modified further by a plus (+) or minus (-) in AA, A, BBB,
15
<PAGE> 24
BB, B and C ratings. Moody's rating categories may be modified further by a 1,
2, or 3 in Aa, A, Baa, Ba and B ratings.
+ Securities that are not rated by S&P or Moody's. Such Municipal Obligations
may be rated by nationally recognized statistical rating organizations other
than S&P or Moody's, or may not be rated by any such organization. With
respect to the percentage of each Trust's assets invested in such securities,
Eaton Vance Management ("Eaton Vance" or the "Adviser") believes these are of
comparable quality to Municipal Obligations rated investment grade. This
determination is based on the Adviser's own internal evaluation and does not
necessarily reflect how such securities would be rated by S&P or Moody's if
either were to rate the securities.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
INVESTMENT OBJECTIVES
Each Trust's investment objective is to provide current income exempt from
regular federal income tax and the particular state and local income taxes (and,
in the case of the Florida and Pennsylvania Trusts, to be an investment exempt
from the identified other taxes) set forth below ("state taxes"):
<TABLE>
<S> <C>
California Trust California State Personal Income Tax
Florida Trust Florida Intangible Tax
Massachusetts Trust Massachusetts State Personal Income Tax
Michigan Trust Michigan State and City Income and Single Business Taxes
New Jersey Trust New Jersey State Personal Income Tax
New York Trust New York State and New York City Personal Income Taxes
Ohio Trust Ohio State Personal Income Tax
Pennsylvania Trust Pennsylvania State and Local Income Taxes and
Pennsylvania Personal Property Tax
</TABLE>
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 on the Common Shares 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 each 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. Each Trust intends to emphasize the research that is
critical to discovering value while avoiding undue credit risk. Each Trust will
attempt to enhance performance opportunities by seeking to remain fully
invested.
INVESTMENT POLICIES-GENERAL COMPOSITION OF EACH TRUST
During normal market conditions substantially all of each Trust's assets
(at least 80%) will be invested in debt obligations, the interest on which is
exempt from federal income tax and relevant state taxes ("Municipal
Obligations"). At least 65% of the total assets of each Trust normally will be
invested in Municipal Obligations (i) issued by the applicable state or its
political subdivisions, agencies, authorities and instrumentalities and (ii)
rated at least investment grade at the time of investment (which are those rated
Baa or higher by Moody's or BBB or higher by either S&P, or by Fitch), or, if
unrated, determined by Eaton Vance to be of at least investment grade quality.
From time to time, each Trust may hold a significant number of Municipal
Obligations not rated by a nationally recognized statistical rating organization
("Rating Agency"). When a 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.
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<PAGE> 25
Each 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 Trust 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 a 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 federal income tax and relevant state
taxes. Public purpose municipal obligations 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 each Trust may invest 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. A 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, a Trust may have to sell other investments to
obtain cash needed to make income distributions.
Each 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 a Trust when short-term interest rates rise, and
increase the interest paid to a 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. Although a Trust is not limited with respect to
its investment in residual interest municipal bonds, each Trust does not intend
initially to invest more than 10% of its assets in such bonds.
17
<PAGE> 26
Each Trust may purchase Municipal Obligations 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 a 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 Trust's net asset value.
Each Trust has adopted certain fundamental investment restrictions set
forth in the Statement of Additional Information which may not be changed
without a vote of holders of Common Shares and APS voting together as a single
class. Except for such restrictions and the 80% requirement set forth above, the
investment objective and policies of each Trust may be changed by the Board of
Trustees without such action by holders of Common Shares and APS.
ADDITIONAL INVESTMENT PRACTICES
When-Issued Securities. Each 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 a Trust agreed to pay for them. A Trust may be required to
maintain a segregated account of liquid assets equal to outstanding purchase
commitments. Each Trust may also purchase instruments that give the Trust the
option to purchase a municipal obligation when and if issued.
Futures Transactions. Each 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 reduce the additional
long-term interest rate risk a 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 in securities prices, which may exceed a Trust's
initial investment in these contracts. Each 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 the Eaton Vance's use of futures will be
advantageous to a Trust. Distributions by the Trust of any gains realized on the
Trust's transactions in futures and options on futures will be taxable. The
rating agency guidelines with respect to the APS limit use of these
transactions. See "Investment Objectives, Policies and Risks -- Rating Agency
Guidelines."
Investment Company Securities. Each 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 Trusts, will not exceed 10% of
total assets, and no such company will be affiliated with Eaton Vance. These
companies bear fees and expenses that a Trust will incur indirectly.
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. This
risk is usually greater among Municipal Obligations with longer maturities or
durations and when residual interest bonds are held by a Trust. Although each
Trust has no policy governing the maturities or durations of its investments,
each Trust expects that it will invest in a portfolio of longer-term securities.
This means that each 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 each 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.
18
<PAGE> 27
Each Trust may invest to a significant extent in residual interest
municipal bonds known as inverse floaters. Compared to similar fixed rate
Municipal Obligations, 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 a Trust, an increase in short- or long-term market interest
rates will adversely affect the income received from such bonds.
Income Risk. Each Trust's income 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, such Trust's income available over time to make dividend
payments with respect to the APS 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 a 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, a Trust is likely to replace such called security with
a lower yielding security.
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 a Trust and a reduction in the value of the
security experiencing non-payment. 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 each Trust's portfolio will have speculative characteristics.
As indicated above, each 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 practicable). When a 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 a 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, each 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.
19
<PAGE> 28
To the extent that there is no established retail market for some of the
lower grade municipal securities in which each Trust may invest, trading in such
securities may be relatively inactive. The Adviser is responsible for
determining the net asset value of each Trust, subject to the supervision of the
Board of Trustees of each Trust. During periods of reduced market liquidity and
in the absence of readily available market quotations for lower grade municipal
securities held in each Trust's portfolio, the ability of the Adviser to value
each Trust's securities becomes more difficult and the Adviser's use of judgment
may play a greater role in the valuation of each 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, each 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 each 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 each Trust's
investment policies. Each 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, each
Trust may incur additional expense seeking recovery of its investment.
Changes in the credit quality of the issuers of Municipal Obligations held
by each 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 each 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.
Each 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. Each Trust normally will invest 65% or more of its total
assets in Municipal Obligations of issuers located in its particular state, and
may invest 25% or more of its total assets in a U. S. territory or in Municipal
Obligations in the same economic sector, including 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 each Trust more susceptible to adverse economic, political, or
regulatory occurrences affecting the applicable state or an economic sector. For
example, health care related issuers are susceptible to Medicaid reimbursement
policies, and national and state health care legislation.
Liquidity Risk. At times, a substantial portion of each 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, each Trust
could find it more difficult to sell such securities when Eaton Vance 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. In such circumstances, it
may also be more difficult to determine the fair value of such securities for
purposes of computing each Trust's net asset value.
The secondary market for some Municipal Obligations (including issues which
are privately placed with a Trust) 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 each Trust may invest. The market
for obligations rated below investment
20
<PAGE> 29
grade is also likely to be less liquid than the market for higher rated
obligations. As a result, each 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. Each 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 each Trust tenders for its Common
Shares, and may result in the Trust borrowing to meet short-term cash
requirements.
Non-Diversification. Each 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 a 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. Each 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 each 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 each Trust.
In addition, it is possible that the markets for municipal securities in
which each 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, each 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.
RATING AGENCY GUIDELINES
Each Trust intends that, so long as APS are outstanding, the composition of
its portfolio will reflect guidelines established by S&P in connection with the
Trust's receipt of a rating for such shares on or prior to their Date of
Original Issue of at least AAA from S&P. S&P, which is a Rating Agency, issues
ratings for various securities reflecting the perceived creditworthiness of such
securities. The guidelines described below have been developed by S&P in
connection with issuances of asset-backed and similar securities, including debt
obligations and variable rate Preferred Shares, generally on a case-by-case
basis through discussions with the issuers of these securities. The guidelines
are designed to ensure that assets underlying outstanding debt or Preferred
Shares will be varied sufficiently and will be of sufficient quality and amount
to justify investment grade ratings. The guidelines do not have the force of law
but have been adopted by each Trust in order to satisfy current requirements
necessary for S&P to issue the above-described ratings for APS, which ratings
generally are relied upon by institutional investors in purchasing such
securities. The guidelines provide 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. See "Description of APS -- Asset
Maintenance."
Each Trust intends to maintain a Discounted Value for its portfolio at
least equal to the APS Basic Maintenance Amount. S&P has established guidelines
for determining Discounted Value. To the extent any particular portfolio holding
does not satisfy these guidelines, all or a portion of such holding's value will
not be included in the calculation of Discounted Value of that Trust's portfolio
assets. The S&P guidelines do not
21
<PAGE> 30
impose any limitations on the percentage of Trust assets that may be invested in
holdings not eligible for inclusion in the calculation of the Discounted Value
of each Trust's portfolio.
Upon any failure to maintain the required aggregate Discounted Value, each
Trust will seek to alter the composition of its portfolio to retain a Discounted
Value at least equal to the APS Basic Maintenance Amount on or prior to the APS
Basic Maintenance Cure Date, thereby incurring additional transaction costs and
possible losses and/or gains on dispositions of portfolio securities. To the
extent any such failure is not cured in a timely manner, the APS will be subject
to mandatory redemption. See "Description of APS -- Asset Maintenance" and
"Description of APS -- Redemption." The APS Basic Maintenance Amount includes
the sum of (i) the aggregate liquidation value of APS then outstanding and (ii)
certain accrued and projected payment obligations of a Trust. See "Description
of APS -- Asset Maintenance."
Each Trust may, but is not required to, adopt any modifications to these
guidelines that hereafter may be established by S&P. Failure to adopt any such
modifications, however, may result in a change in the ratings described above or
a withdrawal of ratings altogether. In addition, any rating agency providing a
rating for the APS, at any time, may change or withdraw any such rating. As set
forth in the Amended By-Laws, each Trust's Board of Trustees ("Board of
Trustees"), without shareholder approval, may modify certain definitions or
restrictions that have been adopted by each Trust pursuant to the rating agency
guidelines, provided the Board of Trustees has obtained written confirmation
from S&P that any such change would not impair the ratings then assigned by S&P
to the APS.
As described by S&P, a Preferred Shares rating is an assessment of the
capacity and willingness of an issuer to pay Preferred Shares obligations. The
ratings on the APS are not recommendations to purchase, hold or sell APS,
inasmuch as the ratings do not comment as to market price or suitability for a
particular investor, nor do the rating agency guidelines described above address
the likelihood that a holder of APS will be able to sell such shares in an
Auction. The ratings are based on current information furnished to S&P by each
Trust and the Adviser and information obtained from other sources. The ratings
may be changed, suspended or withdrawn as a result of changes in, or the
unavailability of, such information. The Common Shares have not been rated by a
Rating Agency.
S&P AAA Rating Guidelines. The Discounted Value of each Trust's S&P
Eligible Assets is calculated on each Valuation Date. See "Description of
APS--Asset Maintenance--APS Basic Maintenance Amount." S&P Eligible Assets
include cash, Receivables for Municipal Obligations Sold (as defined below) and
Municipal Obligations eligible for consideration under S&P's current guidelines.
For purposes of calculating the Discounted Value of each Trust's portfolio under
current S&P guidelines, the fair market value of Municipal Obligations eligible
for consideration under such guidelines must be discounted by the applicable S&P
Discount Factor set forth in the table below. The Discounted Value of a
Municipal Obligation eligible for consideration under S&P guidelines is the fair
market value thereof divided by the S&P Discount Factor. The S&P Discount Factor
used to discount a particular Municipal Obligation will be determined by
reference to (a) the rating by S&P on such Municipal Obligation and (b) the S&P
Exposure Period. The S&P Exposure Period is the maximum period of time following
a Valuation Date, including the Valuation Date and the APS Basic Maintenance
Cure Date, that each Trust has to cure any failure to maintain, as of such
Valuation Date, a Discounted Value for its portfolio at least equal to the APS
Basic Maintenance Amount.
S&P Discount Factors applicable to Municipal Obligations for a range of S&P
Exposure Periods are set forth below:
CALIFORNIA TRUST
<TABLE>
<CAPTION>
S&P DISCOUNT FACTORS RATING CATEGORY
-------------------------------------
EXPOSURE PERIOD AAA AA A BBB
--------------- --- -- - ---
<S> <C> <C> <C> <C>
45 Business Days 200% 205% 220% 260%
25 Business Days 180 185 200 240
10 Business Days 165 170 185 225
7 Business Days 160 165 180 220
3 Business Days 140 145 160 200
</TABLE>
22
<PAGE> 31
FLORIDA TRUST
<TABLE>
<CAPTION>
S&P DISCOUNT FACTORS
RATING CATEGORY
---------------------
EXPOSURE PERIOD AAA AA A BBB
- ------------------------------- --- --- --- ---
<S> <C> <C> <C> <C>
45 Business Days 205% 210% 225% 265%
25 Business Days 185 190 205 245
10 Business Days 170 175 190 230
7 Business Days 165 170 185 225
3 Business Days 145 150 165 205
</TABLE>
MASSACHUSETTS TRUST
<TABLE>
<CAPTION>
S&P DISCOUNT FACTORS
RATING CATEGORY
---------------------
EXPOSURE PERIOD AAA AA A BBB
- ------------------------------- --- --- --- ---
<S> <C> <C> <C> <C>
45 Business Days 210% 215% 230% 270%
25 Business Days 190 195 210 250
10 Business Days 175 180 195 235
7 Business Days 170 175 190 230
3 Business Days 150 155 170 210
</TABLE>
MICHIGAN TRUST
<TABLE>
<CAPTION>
S&P DISCOUNT FACTORS
RATING CATEGORY
---------------------
EXPOSURE PERIOD AAA AA A BBB
- ------------------------------- --- --- --- ---
<S> <C> <C> <C> <C>
45 Business Days 215% 220% 235% 275%
25 Business Days 195 200 215 255
10 Business Days 180 185 200 240
7 Business Days 175 180 195 235
3 Business Days 155 160 175 215
</TABLE>
NEW JERSEY TRUST
<TABLE>
<CAPTION>
S&P DISCOUNT FACTORS
RATING CATEGORY
---------------------
EXPOSURE PERIOD AAA AA A BBB
- ------------------------------- --- --- --- ---
<S> <C> <C> <C> <C>
45 Business Days 202% 207% 222% 262%
25 Business Days 182 187 202 242
10 Business Days 167 172 187 227
7 Business Days 162 167 182 222
3 Business Days 142 147 162 202
</TABLE>
NEW YORK TRUST
<TABLE>
<CAPTION>
S&P DISCOUNT FACTORS
RATING CATEGORY
---------------------
EXPOSURE PERIOD AAA AA A BBB
- ------------------------------- --- --- --- ---
<S> <C> <C> <C> <C>
45 Business Days 210% 215% 230% 270%
25 Business Days 190 195 210 250
10 Business Days 175 180 195 235
7 Business Days 170 175 190 230
3 Business Days 150 155 170 210
</TABLE>
23
<PAGE> 32
OHIO TRUST
<TABLE>
<CAPTION>
S&P DISCOUNT FACTORS
RATING CATEGORY
---------------------
EXPOSURE PERIOD AAA AA A BBB
- ------------------------------- --- --- --- ---
<S> <C> <C> <C> <C>
45 Business Days 205% 210% 225% 265%
25 Business Days 185 190 205 245
10 Business Days 170 175 190 230
7 Business Days 165 170 185 225
3 Business Days 145 150 165 205
</TABLE>
PENNSYLVANIA TRUST
<TABLE>
<CAPTION>
S&P DISCOUNT FACTORS
RATING CATEGORY
---------------------
EXPOSURE PERIOD AAA AA A BBB
- ------------------------------- --- --- --- ---
<S> <C> <C> <C> <C>
45 Business Days 210% 215% 230% 270%
25 Business Days 190 195 210 250
10 Business Days 175 180 195 235
7 Business Days 170 175 190 230
3 Business Days 150 155 170 210
</TABLE>
Since the S&P Exposure Period currently applicable to each Trust is three
Business Days, the S&P Discount Factors currently applicable to Municipal
Obligations eligible for consideration under S&P guidelines will be determined
by reference to the factors set forth opposite the exposure period line entitled
"3 Business Days." Notwithstanding the foregoing, (i) the S&P Discount Factor
for short-term Municipal Obligations will be 120%, so long as such Municipal
Obligations are rated A-1+ or SP-1+ by S&P and mature or have a demand feature
exercisable in 30 days or less, or 125% if such Municipal Obligations are not
rated by S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however,
such short-term Municipal Obligations rated by Moody's but not rated by S&P
having a demand feature exercisable in 30 days or less must be backed by a
letter of credit, liquidity facility or guarantee from a bank or other financial
institution having a short-term rating of at least A-1+ from S&P; and further
provided that such short-term Municipal Obligations rated by Moody's but not
rated by S&P may comprise no more than 50% of short-term Municipal Obligations
that qualify as S&P Eligible Assets and (ii) no S&P Discount Factor will be
applied to cash or to Receivables for Municipal Obligations Sold. "Receivables
for Municipal Obligations Sold," for purposes of calculating S&P Eligible Assets
as of any Valuation Date, means the book value of receivables for Municipal
Obligations Sold as of or prior to such Valuation Date if such receivables are
due within five Business Days of such Valuation Date. For purposes of the
foregoing, Anticipation Notes rated SP-1+ or, if not rated by S&P, rated VMIG-1
by Moody's, which do not mature or have a demand feature exercisable in 30 days
and which do not have a long-term rating, shall be considered to be short-term
Municipal Obligations.
The S&P guidelines require certain minimum issue size and geographical
diversification and impose other requirements for purposes of determining S&P
Eligible Assets. In order to be considered S&P Eligible Assets, Municipal
Obligations must:
(i) be interest bearing and pay interest at least semi-annually;
(ii) be payable with respect to principal and interest in U.S.
dollars;
(iii) be publicly rated BBB or higher by S&P or, except in the case of
Anticipation Notes that are grant anticipation notes or bond anticipation
notes, which must be rated by S&P to be included in S&P Eligible Assets, if
not rated by S&P but rated by Moody's, be rated at least A by Moody's
(provided that such Moody's-rated Municipal Obligations will be included in
S&P Eligible Assets only to the extent the fair market value of such
Municipal Obligations does not exceed 50% of the aggregate fair market
value of the S&P Eligible Assets. For purposes of determining the S&P
Discount Factors applicable to any such Moody's-rated Municipal
Obligations, such Municipal Obligations will be deemed to have an S&P
rating that is one full rating category lower than its Moody's rating);
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<PAGE> 33
(iv) not be subject to a covered call or covered put option written by
a Trust;
(v), with respect to the California and New York Trusts, be part of an
issue with an original issue size of at least $20 million or, if of an
issue with an original issue size below $20 million (but in no event below
$10 million), be issued by an issuer with a total of at least $50 million
of securities outstanding; and
(vi), with respect to the Florida, Massachusetts, Michigan, New
Jersey, Ohio and Pennsylvania Trusts, be (a) part of an issue with an
original issue size of at least $10 million (b) part of an issue with an
original issue of at least $5 million issued by an issuer with a total of
at least $25 million of securities outstanding, or (c) part of an issue
with an original issue size of $5 million and rated A or better by S&P;
provided that the fair market value of Municipal Obligations rated A or
better by S&P may not exceed 20% of a Trust's S&P Eligible Assets.
Notwithstanding the foregoing:
(i) Municipal Obligations of any one issuer or guarantor (excluding
bond insurers) will be considered S&P Eligible Assets only to the extent
the fair market value of such obligations does not exceed 10% of the
aggregate fair market value of the S&P Eligible Assets, provided that 2% is
added to the applicable S&P Discount Factor for every 1% by which the fair
market value of such Municipal Obligations exceeds 5% of the aggregate fair
market value of the S&P Eligible Assets; and
(ii) Municipal Obligations issued by issuers in any one industry,
except the utility and transportation sectors, will be considered S&P
Eligible Assets only to the extent the fair market value of such Municipal
Obligations does not exceed 20% of the aggregate fair market value of S&P
Eligible Assets; provided, however, that
(a) the fair market value of the Municipal Obligations of each (1)
electric, gas and combination issues (if the combination issue includes
an electric issue) (2) water and sewer utilities and combination issues
(if the combination issue does not include an electric issue) and (3)
irrigation, resource recovery, solid waste, and other utilities
(provided the security is rated by S&P) comprise no more than 20% of
each Trust's S&P Eligible Assets, and
(b) the fair market value of the Municipal Obligations of (1)
streets and highways, toll roads, bridges and tunnels, airports and
multi-purpose port authorities (multiple revenue streams generated by
toll roads, air ports, real estate, bridges) issues and (2) mass
transit, parking, seaports and other transportation issues comprise no
more than 40% of each Trust's S&P Eligible Assets; provided that the
fair market value of Municipal Obligations in subgroup (1) comprises no
more than 20% of each Trust's S&P Eligible Assets.
General Obligation Bonds of a Trust's named state may comprise up to 50% of
such Trust's S&P Eligible Assets. "General Obligation Bonds" include bonds of
issuers that are directly or indirectly guaranteed by the applicable state and
utility issuers where the utility issuer is directly or indirectly supported by
the applicable state.
Escrow bonds (defeased bonds) may comprise 100% of a Trust's S&P Eligible
Assets. Bonds that are legally defeased and secured by direct U.S. government
obligations are not required to meet any minimum issuance size requirement.
Bonds that are economically defeased or secured by other U.S. agency paper must
meet the minimum issuance size requirement for Trust described above. Bonds
initially rated or rerated as an escrow bond by another Rating Agency are
limited to 50% of each Trusts S&P Eligible Assets, and carry one full rating
lower than the equivalent S&P rating for purposes of determining the applicable
discount factors. Bonds economically defeased and either initially rated or
rerated by S&P or another Rating Agency are assigned that same rating level as
its debt issuer, and will remain in its original industry category.
Residual interest bonds will qualify as S&P Eligible assets provided that
the ratio of aggregate dollar amount of floating rate instruments to inverse
floating rate instruments issued by the same issuer does not exceed a ratio of
one-to-one at their time of original issuance. Leveraged residual interest bonds
will not qualify as S&P Eligible Assets unless the leveraged bond has only one
reset remaining before the maturity of the floater.
25
<PAGE> 34
Each Trust may include Municipal Obligations as S&P Eligible Assets
pursuant to guidelines and restrictions to be established by S&P, provided that
S&P advises the Trust in writing that such action will not adversely affect its
then-current rating on the APS.
As discussed herein, each Trust may engage in options or futures
transactions. For so long as any APS are rated by S&P, each Trust will not
purchase or sell financial futures contracts, write, purchase or sell options on
financial futures contracts or write put options (except covered put options) or
call options (except covered call options) on portfolio securities unless it
receives written confirmation from S&P that engaging in such transactions will
not impair the ratings then assigned to the APS by S&P, except that each Trust
may purchase or sell financial futures contracts based on the Bond Buyer
Municipal Bond Index (the "Municipal Index") or United States Treasury Bonds or
Notes ("Treasury Bonds") and write, purchase or sell put and call options on
such contracts (collectively "S&P Hedging Transactions"), subject to the
following limitations:
(i) a Trust will not engage in any S&P Hedging Transaction based on
the Municipal Index (other than transactions that terminate a financial
futures contract or option held by the Trust by the Trust's taking an
opposite position thereto ("Closing Transactions")), that would cause the
Trust at the time of such transaction to own or have sold the least of (A)
more than 1,000 outstanding financial futures contracts based on the
Municipal Index, (B) outstanding financial futures contracts based on the
Municipal Index exceeding in number 25% of the quotient of the fair market
value of the Trust's total assets divided by $1,000 or (C) outstanding
financial futures contracts based on the Municipal Index exceeding in
number 10% of the average number of daily traded financial futures
contracts based on the Municipal Index in the 30 days preceding the time of
effecting such transaction as reported by The Wall Street Journal;
(ii) a Trust will not engage in any S&P Hedging Transaction based on
Treasury Bonds (other than Closing Transactions) that would cause the Trust
at the time of such transaction to own or have sold the lesser of (A)
outstanding financial futures contracts based on Treasury Bonds and on the
Municipal Index exceeding in number 25% of the quotient of the fair market
value of the Trust's total assets divided by $100,000 ($200,000 in the case
of the two-year United States Treasury Note) or (B) outstanding financial
futures contracts based on Treasury Bonds exceeding in number 10% of the
average number of daily traded financial futures contracts based on
Treasury Bonds in the 30 days preceding the time of effecting such
transaction as reported by The Wall Street Journal;
(iii) the Trust will engage in Closing Transactions to close out any
outstanding financial futures contract that the Trust owns or has sold or
any outstanding option thereon owned by the Trust in the event (A) the
Trust does not have S&P Eligible Assets with an aggregate Discounted Value
equal to or greater than the APS Basic Maintenance Amount on two
consecutive Valuation Dates and (B) the Trust is required to pay Variation
Margin on the second such Valuation Date;
(iv) a Trust will engage in a Closing Transaction to close out any
outstanding financial futures contract or option thereon in the month prior
to the delivery month under the terms of such financial futures contract or
option thereon unless the Trust holds the securities deliverable under such
terms; and
(v) when a Trust writes a financial futures contract or an option
thereon, it will either maintain an amount of cash, cash equivalents or
high grade (rated A or better by S&P) fixed-income securities in a
segregated account with the Trust's custodian, so that the amount so
segregated plus the amount of Initial Margin and Variation Margin held in
the account of or on behalf of the Trust's broker with respect to such
financial futures contract or option equals the fair market value of the
financial futures contract or option, or, in the event the Trust writes a
financial futures contract or option thereon that requires delivery of an
underlying security, it shall hold such underlying security in its
portfolio.
For purposes of determining whether each Trust has S&P Eligible Assets with
a Discounted Value that equals or exceeds the APS Basic Maintenance Amount, the
Discounted Value of cash or securities held for the payment of Initial Margin or
Variation Margin shall be zero and the aggregate Discounted Value of S&P
Eligible Assets shall be reduced by an amount equal to (i) 30% of the aggregate
settlement value, as marked
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<PAGE> 35
to market, of any outstanding financial futures contracts based on the Municipal
Index that are owned by the Trust plus (ii) 25% of the aggregate settlement
value, as marked to market, of any outstanding financial futures contracts based
on Treasury Bonds which contracts are owned by the Trust.
For so long as the APS are rated by S&P, each Trust, unless it has received
written confirmation from S&P that such action would not impair the ratings then
assigned to the APS by S&P will not (i) borrow money except for the purpose of
clearing transactions in portfolio securities (which borrowings under any
circumstances shall be limited to the lesser of $10 million and an amount equal
to 5% of the fair market value of the Trust's assets at the time of such
borrowings and which borrowings shall be repaid within 60 days and not be
extended or renewed and shall not cause the aggregate Discounted Value of S&P
Eligible Assets to be less than the APS Basic Maintenance Amount), (ii) engage
in short sales of securities, (iii) lend any securities, (iv) issue any class or
series of stock ranking prior to or on a parity with the APS with respect to the
payment of dividends or the distribution of assets upon dissolution, liquidation
or winding up of the Trust, (v) reissue any APS previously purchased or redeemed
by the Trust, (vi) merge or consolidate into or with any other corporation or
entity, (vii) change the Trust's pricing service or (vii) engage in reverse
repurchase agreements.
For so long as the APS are rated by S&P, each Trust will not purchase or
sell financial futures contracts, write, purchase or sell options on financial
futures contracts or write put options (except covered put options) or call
options (except covered call options) on portfolio securities unless it receives
written confirmation from S&P that engaging in such transactions will not impair
the ratings then assigned to the APS by S&P, except that each Trust may engage
in S&P Hedging Transactions subject to the limitations described herein. See
"Investment Objective and Policies--Rating Agency Guidelines" and "--Options and
Futures Transactions."
RISKS OF INVESTING IN APS
There are a number of specific factors investors in the APS should
consider:
- The credit ratings of the APS could be reduced while an investor holds
the APS.
- Neither Broker-Dealers nor a Trust are obligated to purchase the APS in
an Auction or otherwise nor is a Trust required to redeem the APS in the
event of a failed Auction.
- If in an Auction for the APS Sufficient Clearing Bids do not exist, the
Applicable Rate will be the Maximum Applicable Rate, and in such event,
Beneficial Owners that have submitted Sell Orders will not be able to
sell in the Auction all, and may not be able to sell any, the APS
subject to such Sell Orders. Thus, under certain circumstances,
Beneficial Owners may not have liquidity of investment.
The Broker-Dealers may maintain a secondary trading market in the APS
outside of Auctions; however, they have no obligation to do so and there can be
no assurance that a secondary market for the APS will develop or, if it does
develop, that it will provide holders with a liquid trading market (i.e.,
trading will depend on the presence of willing buyers and sellers and the
trading price is subject to variables to be determined at the time of the trade
by the Broker-Dealers). The APS will not be registered on any stock exchange or
on any automated quotation system. An increase in the level of interest rates,
particularly during any Long Term Dividend Period, likely will have an adverse
effect on the secondary market price of the APS, and a selling shareholder may
sell APS between Auctions at a price per share of less than $25,000.
Each Trust's Agreement and Declaration of Trust ("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. See "Description of Capital Stock--Certain Provisions
of the Declaration of Trust."
DESCRIPTION OF APS
The APS will be Preferred Shares of each respective Trust that entitle
their holders to receive dividends when, as and if declared by the Board of
Trustees, out of funds legally available therefor, at a rate per annum that may
vary for the successive Dividend Periods for each such series. After the Initial
Dividend Period, each
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<PAGE> 36
Subsequent Dividend Period for the APS generally will be a 7-Day Dividend
Period; provided, however, that prior to any Auction, each Trust may elect,
subject to certain limitations described herein, upon giving notice to holders
thereof, a Special Dividend Period. The Applicable Rate for a particular
Dividend Period will be determined by an Auction conducted on the Business Day
before the start of such Dividend Period. Beneficial Owners and Potential
Beneficial Owners of the APS may participate in Auctions therefor, although,
except in the case of a Special Dividend Period, Beneficial Owners desiring to
continue to hold all of their APS regardless of the Applicable Rate resulting
from Auctions need not participate. For an explanation of Auctions and the
method of determining the Applicable Rate, see "Description of APS -- The
Auction."
Except as otherwise required by law or unless there is no Securities
Depository, all outstanding APS will be represented by one or more certificates
registered in the name of the nominee of the Securities Depository (initially
expected to be Cede & Co.), and no person acquiring APS will be entitled to
receive a certificate representing such shares. See Appendix D to the Statement
of Additional Information (Auction Procedures). As a result, the nominee of the
Securities Depository is expected to be the sole holder of record of the APS.
Accordingly, each purchaser of APS must rely on (i) the procedures of the
Securities Depository and, if such purchaser is not a member of the Securities
Depository, such purchaser's Agent Member, to receive dividends, distributions
and notices and to exercise voting rights (if and when applicable) and (ii) the
records of the Securities Depository and, if such purchaser is not a member of
the Securities Depository, such purchaser's Agent Member, to evidence its
beneficial ownership of the APS.
When issued and sold, the APS will have a liquidation preference of $25,000
per share plus an amount equal to accumulated but unpaid dividends (whether or
not earned or declared) and will be fully paid and non-assessable. See
"Description of APS -- Liquidation Rights." The APS will not be convertible into
Common Shares or other capital stock of a Trust, and the holders thereof will
have no preemptive rights. The APS will not be subject to any sinking fund but
will be subject to redemption at the option of a Trust at the Optional
Redemption Price on any Dividend Payment Date for such series (except during the
Initial Dividend Period and during a Non-Call Period) and, in certain
circumstances, will be subject to mandatory redemption by the Trust at the
Mandatory Redemption Price stated herein. See "Description of
APS -- Redemption."
In addition to serving as the Auction Agent in connection with the Auction
Procedures described below, Bankers Trust Corporation ("Bankers Trust") will be
the transfer agent, registrar, dividend disbursing agent and redemption agent
for the APS. The Auction Agent, however, will serve merely as the agent of each
Trust, acting in accordance with each Trust's instructions, and will not be
responsible for any evaluation or verification of any matters certified to it.
Except in an Auction, each Trust will have the right (to the extent
permitted by applicable law) to purchase or otherwise acquire any APS so long as
the Trust is current in the payment of dividends on APS and on any other shares
of beneficial interest of the Trust ranking on a parity with the APS with
respect to the payment of dividends or upon liquidation.
The following is a brief description of the terms of the APS. This
description does not purport to be complete and is subject to and qualified in
its entirety by reference to each Trust's Declaration of Trust and Amended
By-Laws, including the provisions thereof establishing the APS. Each Trust's
Declaration of Trust and the form of Amended By-Laws establishing the terms of
the APS have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
THE AUCTION
General. Holders of the APS will be entitled to receive cumulative cash
dividends on their shares when, as and if declared by the Board of Trustees of
each Trust, out of the funds legally available therefor, on the Initial Dividend
Payment Date with respect to the Initial Dividend Period and, thereafter, on
each Dividend Payment Date with respect to a Subsequent Dividend Period
(generally a period of seven days subject to certain exceptions set forth under
"Description of APS -- Dividends -- General") at the rate per annum equal to the
Applicable Rate for each such Dividend Period.
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<PAGE> 37
The provisions of the Amended By-Laws establishing the terms of the APS
offered hereby will provide that the Applicable Rate for each Dividend Period
after the Initial Dividend Period therefor will be equal to the rate per annum
that the Auction Agent advises has resulted on the Business Day preceding the
first day of such Dividend Period due to implementation of the auction
procedures set forth in the Amended By-Laws (the "Auction Procedures") in which
persons determine to hold or offer to purchase or sell the APS. The Auction
Procedures are attached as Appendix D to the Statement of Additional
Information. Each periodic operation of such procedures with respect to the APS
is referred to hereinafter as an "Auction." If, however, a Trust should fail to
pay or duly provide for the full amount of any dividend on or the redemption
price of the APS called for redemption, the Applicable Rate for the APS will be
determined as set forth under "Description of APS -- Dividends -- Determination
of Dividend Rate."
Auction Agent Agreement. Each Trust will enter into an agreement (the
"Auction Agent Agreement") with Bankers Trust (together with any successor bank
or trust company or other entity entering into a similar agreement with this
Trust, the "Auction Agent"), which provides, among other things, that the
Auction Agent will follow the Auction Procedures for the purpose of determining
the Applicable Rate for the APS. Each Trust will pay the Auction Agent
compensation for its services under the Auction Agent Agreement.
The Auction Agent will act as agent for each Trust in connection with
Auctions. In the absence of bad faith or negligence on its part, the Auction
Agent will not be liable for any action taken, suffered or omitted, or for any
error of judgment made, by it in the performance of its duties under the Auction
Agent Agreement, and will not be liable for any error of judgment made in good
faith unless the Auction Agent shall have been negligent in ascertaining the
pertinent facts. Pursuant to the Auction Agent Agreement, each Trust is required
to indemnify the Auction Agent for certain losses and liabilities incurred by
the Auction Agent without negligence or bad faith on its part in connection with
the performance of its duties under such agreement.
The Auction Agent may terminate the Auction Agent Agreement upon notice to
a Trust, which termination may be no earlier than 60 days following delivery of
such notice. If the Auction Agent resigns, a Trust will use its best efforts to
enter into an agreement with a successor Auction Agent containing substantially
the same terms and conditions as the Auction Agent Agreement. Each Trust may
terminate the Auction Agent Agreement, provided that prior to such termination
the Trust shall have entered into such an agreement with respect thereto with a
successor Auction Agent.
Broker-Dealer Agreements. The Auctions require the participation of one or
more broker-dealers. The Auction Agent will enter into agreements with
PaineWebber Incorporated, Prudential Securities, Salomon Smith Barney Inc. and
A.G. Edwards & Sons, Inc., and may enter into similar agreements (collectively,
the "Broker-Dealer Agreements") with one or more other broker-dealers
(collectively, the "Broker-Dealers") selected by each Trust, which provide for
the participation of such Broker-Dealers in Auctions. A Broker-Dealer Agreement
may be terminated by the Auction Agent or a Broker-Dealer on five days' notice
to the other party, provided that the Broker-Dealer Agreement with PaineWebber
Incorporated, Prudential Securities, Salomon Smith Barney Inc. and A.G. Edwards
& Sons, Inc. may not be terminated without the prior written consent of a Trust,
which consent may not be unreasonably withheld.
Securities Depository. The Depository Trust Company initially will act as
the Securities Depository for the Agent Members with respect to the APS. One or
more registered certificates for all of the shares of each series of APS
initially will be registered in the name of Cede & Co., as nominee of the
Securities Depository. The certificate will bear a legend to the effect that
such certificate is issued subject to the provisions restricting transfers of
the APS contained in the Amended By-Laws. Cede & Co. initially will be the
holder of record of all APS, and Beneficial Owners will not be entitled to
receive certificates representing their ownership interest in such shares. See
Appendix D (Auction Procedures) to the Statement of Additional Information. The
Securities Depository will maintain lists of its participants and will maintain
the positions (ownership interests) of the APS held by each Agent Member,
whether as the Beneficial Owner thereof for its own account or as nominee for
the Beneficial Owner thereof. Payments made by each Trust to holders of APS will
be duly made by making payments to the nominee of the Securities Depository.
Auction Procedures. The following is a brief summary of the procedures to
be used in conducting Auctions. This summary is qualified by reference to the
Auction procedures set forth in Appendix C to the
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<PAGE> 38
Statement of Additional Information. The Settlement Procedures to be used with
respect to Auctions are set forth in Appendix B to the Statement of Additional
Information.
Auction Date; Advance Notice of Allocation of Taxable Income; Inclusion of
Taxable Income in Dividends. An Auction to determine the Applicable Rate for
the APS offered hereby for each Dividend Period for such shares (other than the
Initial Dividend Period therefor) will be held on the last Business Day
preceding the first day of such Dividend Period, which first day is also the
Dividend Payment Date for the preceding Dividend Period (the date of each
Auction being referred to herein as an "Auction Date"). Auctions for the APS for
Dividend Periods after the Initial Dividend Period normally will be held with
respect to a Trust on every day set forth below after the preceding Dividend
Payment Date, and each subsequent Dividend Period normally will begin on the
following day set forth below (also a Dividend Payment Date):
<TABLE>
<CAPTION>
DIVIDEND PERIOD
AUCTION DAY BEGINNING DAY
----------- ---------------
<S> <C> <C>
California Trust................................. Friday Monday
Florida Trust.................................... Wednesday Thursday
Massachusetts Trust.............................. Monday Tuesday
Michigan Trust................................... Wednesday Thursday
New Jersey Trust................................. Friday Monday
New York Trust................................... Thursday Friday
Ohio Trust....................................... Tuesday Wednesday
Pennsylvania Trust............................... Monday Tuesday
</TABLE>
The Auction Date and the first day of the related Dividend Period (both of which
must be Business Days) need not be consecutive calendar days. See "Description
of APS -- Dividends" for information concerning the circumstances under which a
Dividend Payment Date may fall on a date other than the days specified above,
which may affect the Auction Date.
Except as noted below, whenever a Trust intends to include any net capital
gains or other income subject to federal income tax or relevant state taxes
("taxable income") in any dividend on the APS, the Trust will notify the Auction
Agent of the amount to be so included at least five Business Days prior to the
Auction Date on which the Applicable Rate for such dividend is to be
established. Whenever the Auction Agent receives such notice from a Trust, in
turn it will notify each Broker-Dealer, who, on or prior to such Auction Date,
in accordance with its Broker-Dealer Agreement, will notify its customers who
are Beneficial Owners and Potential Beneficial Owners believed to be interested
in submitting an Order in the Auction to be held on such Auction Date. Each
Trust also may include such income in a dividend on the APS without giving
advance notice thereof if it increases the dividend by an additional amount
calculated as if such income were a Retroactive Taxable Allocation and the
additional amount were an Additional Dividend; provided that each Trust will
notify the Auction Agent of the additional amounts to be included in such
dividend at least five Business Days prior to the applicable Dividend Payment
Date. See "Description of APS -- Dividends -- Additional Dividends."
Orders by Beneficial Owners, Potential Beneficial Owners, Existing Holders
and Potential Holders. On or prior to each Auction Date:
(a) each Beneficial Owner may submit to its Broker-Dealer by telephone
a:
(i) Hold Order -- indicating the number of outstanding APS, if any,
that such Beneficial Owner desires to continue to hold without regard to
the Applicable Rate for the next Dividend Period for such shares;
(ii) Bid -- indicating the number of outstanding APS, if any, that
such Beneficial Owner desires to continue to hold, provided that the
Applicable Rate for the next Dividend Period for such shares is not less
than the rate per annum then specified by such Beneficial Owner; and/or
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<PAGE> 39
(iii) Sell Order -- indicating the number of outstanding APS, if
any, that such Beneficial Owner offers to sell without regard to the
Applicable Rate for the next Dividend Period for such shares; and
(b) Broker-Dealers will contact customers who are Potential Beneficial
Owners of APS to determine whether such Potential Beneficial Owners desire
to submit Bids indicating the number of APS which they offer to purchase
provided that the Applicable Rate for the next Dividend Period for such
shares is not less than the rates per annum specified in such Bids.
The communication by a Beneficial Owner or Potential Beneficial Owner to a
Broker-Dealer and the communication by a Broker-Dealer, whether or not acting
for its own account, to the Auction Agent of the foregoing information is
hereinafter referred to as an "Order" and collectively as "Orders." A Beneficial
Owner or a Potential Beneficial Owner placing an Order, including a
Broker-Dealer acting in such capacity for its own account, is hereinafter
referred to as a "Bidder" and collectively as "Bidders." Any Order submitted by
a Beneficial Owner or a Potential Beneficial Owner to its Broker-Dealer, or by a
Broker-Dealer to the Auction Agent, prior to the Submission Deadline on any
Auction Date shall be irrevocable.
In an Auction, a Beneficial Owner may submit different types of Orders with
respect to APS then held by such Beneficial Owner, as well as Bids for
additional APS. For information concerning the priority given to different types
of Orders placed by Beneficial Owners, see "Submission of Orders by
Broker-Dealers to Auction Agent" below.
The Maximum Applicable Rate for the APS will be the Applicable Percentage
of the Reference Rate. The Auction Agent will round each applicable Maximum
Applicable Rate to the nearest one-thousandth (0.001) of one percent per annum,
with any such number ending in five ten-thousandths of one percent being rounded
upwards to the nearest one-thousandth (0.001) of one percent. The Auction Agent
will not round the applicable Reference Rate as part of its calculation of the
Maximum Applicable Rate.
The Maximum Applicable Rate for the APS will depend on the credit rating or
ratings assigned to such shares. The Applicable Percentage will be determined
based on (i) the credit rating assigned on such date to such shares by S&P (or
if S&P shall not make such rating available, the equivalent of such rating by a
Substitute Rating Agency), and (ii) whether a Trust has provided notification to
the Auction Agent prior to the Auction establishing the Applicable Rate for any
dividend that net capital gains or other taxable income will be included in such
dividend on the APS as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF APPLICABLE PERCENTAGE OF
REFERENCE RATE- REFERENCE RATE-
S&P CREDIT RATINGS NO NOTIFICATION NOTIFICATION
------------------ --------------- ------------------------
<S> <C> <C>
AA- or higher............................. 110% 150%
A- to A+.................................. 125 160
BBB- to BBB+.............................. 150 250
Below BBB-................................ 200 275
</TABLE>
There is no minimum Applicable Rate in respect of any Dividend Period.
Each Trust will take all reasonable action necessary to enable S&P to
provide a rating for the APS. If S&P shall not make such a rating available, the
Underwriters or their affiliates and successors, after consultation with a
Trust, will select another Rating Agency (a "Substitute Rating Agency") to act
as a Substitute Rating Agency.
Any Bid by a Beneficial Owner specifying a rate per annum higher than the
Maximum Applicable Rate will be treated as a Sell Order, and any Bid by a
Potential Beneficial Owner specifying a rate per annum higher than the Maximum
Applicable Rate will not be considered. See "Determination of Sufficient
Clearing Bids, Winning Bid Rate and Applicable Rate" and "Acceptance and
Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares."
Neither a Trust nor the Auction Agent will be responsible for a
Broker-Dealer's failure to comply with the foregoing. A Broker-Dealer also may
hold APS in its own account as a Beneficial Owner. A Broker-Dealer
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<PAGE> 40
thus may submit Orders to the Auction Agent as a Beneficial Owner or a Potential
Beneficial Owner and therefore participate in an Auction as an Existing Holder
or Potential Holder on behalf of both itself and its customers. Any Order placed
with the Auction Agent by a Broker-Dealer as or on behalf of a Beneficial Owner
or a Potential Beneficial Owner will be treated in the same manner as an Order
placed with a Broker-Dealer by a Beneficial Owner or a Potential Beneficial
Owner. Similarly, any failure by a Broker-Dealer to submit to the Auction Agent
an Order in respect of any APS held by it or its customers who are Beneficial
Owners will be treated in the same manner as a Beneficial Owner's failure to
submit to its Broker-Dealer an Order in respect of APS held by it, as described
in the next paragraph. Inasmuch as a Broker-Dealer participates in an Auction as
an Existing Holder or a Potential Holder only to represent the interests of a
Beneficial Owner or Potential Beneficial Owner, whether it be its customers or
itself, all discussion herein relating to the consequences of an Auction for
Existing Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented thereby. For information concerning the priority
given to different types of Orders placed by Existing Holders, see "Submission
of Orders by Broker-Dealers to Auction Agent." Each purchase or sale in an
Auction will be settled on the Business Day next succeeding the Auction Date at
a price per share equal to $25,000. See "Notification of Results; Settlement."
If one or more Orders covering in the aggregate all of the outstanding APS
held by a Beneficial Owner are not submitted to the Auction Agent prior to the
Submission Deadline, either because a Broker-Dealer failed to contact such
Beneficial Owner or otherwise, the Auction Agent shall deem a Hold Order (in the
case of an Auction relating to a Dividend Period of 91 days or less) and a Sell
Order (in the case of an Auction relating to a Special Dividend Period of longer
than 91 days) to have been submitted on behalf of such Beneficial Owner covering
the number of outstanding the APS held by such Beneficial Owner and not subject
to Orders submitted to the Auction Agent.
If all of the outstanding APS are subject to Submitted Hold Orders, the
Dividend Period next succeeding the Auction automatically shall be the same
length as the immediately preceding Dividend Period, and the Applicable Rate for
the next Dividend Period for all the APS will be 40% of the Reference Rate on
the date of the applicable Auction (or 60% of such rate if a Trust has provided
notification to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend that net capital gains or other taxable income
will be included in such dividend on the APS).
For the purposes of an Auction, the APS for which each Trust shall have
given notice of redemption and deposited moneys therefor with the Auction Agent
in trust or segregated in an account at a Trust's custodian bank for the benefit
of the Auction Agent, as set forth under "Description of APS -- Redemption,"
will not be considered as outstanding and will not be included in such Auction.
Pursuant to the Amended By-Laws of the Trust, each Trust will be prohibited from
reissuing and its affiliates (other than the Underwriter) will be prohibited
from transferring (other than to a Trust) any APS they may acquire. Neither a
Trust nor any affiliate of the Trust (other than the Underwriter) may submit an
Order in any Auction, except that an affiliate of the Trust that is a
Broker-Dealer may submit an Order.
Submission of Orders by Broker-Dealers to Auction Agent. Prior to 1:00
p.m., New York City time, on each Auction Date, or such other time on the
Auction Date as may be specified by the Auction Agent (the "Submission
Deadline"), each Broker-Dealer will submit to the Auction Agent in writing all
Orders obtained by it for the Auction to be conducted on such Auction Date,
designating itself (unless otherwise permitted by a Trust) as the Existing
Holder or Potential Holder in respect of the APS subject to such Orders. Any
Order submitted by a Beneficial Owner or a Potential Beneficial Owner to its
Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to the
Submission Deadline on any Auction Date, shall be irrevocable.
If the rate per annum specified in any Bid contains more than three figures
to the right of the decimal point, the Auction Agent will round such rate per
annum up to the next highest one-thousandth (.001) of 1%. If one or more Orders
of an Existing Holder are submitted to the Auction Agent and such Orders cover
in the aggregate more than the number of outstanding APS held by such Existing
Holder, such Orders will be considered valid in the following order of priority:
(i) any Hold Order will be considered valid up to and including the
number of outstanding APS held by such Existing Holder, provided that if
more than one Hold Order is submitted by such Existing Holder
32
<PAGE> 41
and the number of APS subject to such Hold Orders exceeds the number of
outstanding APS held by such Existing Holder, the number of APS subject to
each of such Hold Orders will be reduced pro rata so that such Hold Orders,
in the aggregate, will cover exactly the number of outstanding APS held by
such Existing Holder;
(ii) any Bids will be considered valid, in the ascending order of
their respective rates per annum if more than one Bid is submitted by such
Existing Holder, up to and including the excess of the number of
outstanding APS held by such Existing Holder over the number of outstanding
APS subject to any Hold Order referred to in clause (i) above (and if more
than one Bid submitted by such Existing Holder specifies the same rate per
annum and together they cover more than the remaining number of shares that
can be the subject of valid Bids after application of clause (i) above and
of the foregoing portion of this clause (ii) to any Bid or Bids specifying
a lower rate or rates per annum, the number of shares subject to each of
such Bids will be reduced pro rata so that such Bids, in the aggregate,
cover exactly such remaining number of outstanding shares); and the number
of outstanding shares, if any, subject to Bids not valid under this clause
(ii) shall be treated as the subject of a Bid by a Potential Holder; and
(iii) any Sell Order will be considered valid up to and including the
excess of the number of outstanding APS held by such Existing Holder over
the sum of the number of APS subject to Hold Orders referred to in clause
(i) above and the number of APS subject to valid Bids by such Existing
Holder referred to in clause (ii) above; provided that, if more than one
Sell Order is submitted by any Existing Holder and the number of APS
subject to such Sell Orders is greater than such excess, the number of APS
subject to each of such Sell Orders will be reduced pro rata so that such
Sell Orders, in the aggregate, will cover exactly the number of APS equal
to such excess.
If more than one Bid of any Potential Holder is submitted in any Auction,
each Bid submitted in such Auction will be considered a separate Bid with the
rate per annum and number of APS therein specified.
Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate. Not earlier than the Submission Deadline for each Auction, the Auction
Agent will assemble all Orders submitted or deemed submitted to it by the
Broker-Dealers (each such "Hold Order," "Bid" or "Sell Order" as submitted or
deemed submitted by a Broker-Dealer hereinafter being referred to as a
"Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the
case may be, or as a "Submitted Order") and will determine the excess of the
number of outstanding APS over the number of outstanding APS subject to
Submitted Hold Orders (such excess being referred to as the "Available APS") and
whether Sufficient Clearing Bids have been made in such Auction. Sufficient
Clearing Bids will have been made if the number of outstanding APS that are the
subject of Submitted Bids of Potential Holders with rates per annum not higher
than the Maximum Applicable Rate equals or exceeds the number of outstanding
shares that are the subject of Submitted Sell Orders (including the number of
shares subject to Bids of Existing Holders specifying rates per annum higher
than the Maximum Applicable Rate). If Sufficient Clearing Bids have been made,
the Auction Agent will determine the lowest rate per annum specified in the
Submitted Bids (the "Winning Bid Rate") which would result in the number of
shares subject to Submitted Bids specifying such rate per annum or a lower rate
per annum being at least equal to the Available APS. If Sufficient Clearing Bids
have been made, the Winning Bid Rate will be the Applicable Rate for the next
Dividend Period for the APS then outstanding. If Sufficient Clearing Bids have
not been made (other than because all outstanding APS are the subject of
Submitted Hold Orders), the Dividend Period next following the Auction
automatically will be a 7-Day Dividend Period, and the Applicable Rate for such
Dividend Period will be equal to the Maximum Applicable Rate.
If Sufficient Clearing Bids have not been made, Beneficial Owners that have
Submitted Sell Orders will not be able to sell in the Auction all, and may not
be able to sell any, the APS subject to such Submitted Sell Orders. See
"Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares." Thus, under some circumstances, Beneficial Owners may not
have liquidity of investment.
Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares. Based on the determinations described under
"Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate" and subject to the discretion of the Auction Agent to round as described
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<PAGE> 42
below, Submitted Bids and Submitted Sell Orders will be accepted or rejected in
the order of priority set forth in the Auction Procedures with the result that
Existing Holders and Potential Holders of APS will sell, continue to hold and/or
purchase APS as set forth below. Existing Holders that submit or are deemed to
have submitted Hold Orders will continue to hold the APS subject to such Hold
Orders.
If Sufficient Clearing Bids have been made:
(a) each Existing Holder that placed a Submitted Bid specifying a rate
per annum higher than the Winning Bid Rate or a Submitted Sell Order will
sell the outstanding APS subject to such Submitted Bid or Submitted Sell
Order;
(b) each Existing Holder that placed a Submitted Bid specifying a rate
per annum lower than the Winning Bid Rate will continue to hold the
outstanding APS subject to such Submitted Bid;
(c) each Potential Holder that placed a Submitted Bid specifying a
rate per annum lower than the Winning Bid Rate will purchase the number of
APS subject to such Submitted Bid;
(d) each Existing Holder that placed a Submitted Bid specifying a rate
per annum equal to the Winning Bid Rate will continue to hold the
outstanding APS subject to such Submitted Bids, unless the number of
outstanding APS subject to all such Submitted Bids of Existing Holders is
greater than the excess of the Available APS over the number of APS
accounted for in clauses (b) and (c) above, in which event each Existing
Holder with such a Submitted Bid will sell a number of outstanding APS
determined on a pro rata basis based on the number of outstanding APS
subject to all such Submitted Bids of such Existing Holders; and
(e) each Potential Holder that placed a Submitted Bid specifying a
rate per annum equal to the Winning Bid Rate will purchase any Available
APS not accounted for in clause (b), (c) or (d) above on a pro rata basis
based on the APS subject to all such Submitted Bids of Potential Holders.
If Sufficient Clearing Bids have not been made (other than because all
outstanding APS are the subject of Submitted Hold Orders):
(a) each Existing Holder that placed a Submitted Bid specifying a rate
per annum equal to or lower than the Maximum Applicable Rate will continue
to hold the outstanding APS subject to such Submitted Bid;
(b) each Potential Holder that placed a Submitted Bid specifying a
rate per annum equal to or lower than the Maximum Applicable Rate will
purchase the number of APS subject to such Submitted Bid; and
(c) each Existing Holder that placed a Submitted Bid specifying a rate
per annum higher than the Maximum Applicable Rate or a Submitted Sell Order
will sell a number of outstanding APS determined on a pro rata basis based
on the outstanding APS subject to all such Submitted Bids and Submitted
Sell Orders. If as a result of the Auction Procedures described above any
Existing Holder would be entitled or required to sell, or any Potential
Holder would be entitled or required to purchase, a fraction of APS, the
Auction Agent, in such manner as, in its sole discretion, it shall
determine, will round up or down the number of APS being sold or purchased
on such Auction Date so that each share sold or purchased by each Existing
Holder or Potential Holder will be a whole APS. If any Potential Holder
would be entitled or required to purchase less than a whole APS, the
Auction Agent, in such manner as, in its sole discretion, it shall
determine, will allocate APS for purchase among Potential Holders so that
only whole APS are purchased by any such Potential Holder, even if such
allocation results in one or more of such Potential Holders not purchasing
any APS.
Notification of Results; Settlement. The Auction Agent will advise each
Broker-Dealer who submitted a Bid or Sell Order in an Auction whether such Bid
or Sell Order was accepted or rejected in whole or in part and of the Applicable
Rate for the next Dividend Period for the related APS by telephone at
approximately 3:00 p.m., New York City time, on the Auction Date for such
Auction. Each such Broker-Dealer that submitted an Order for the account of a
customer then will advise such customer whether such Bid or Sell
34
<PAGE> 43
Order was accepted or rejected, will confirm purchases and sales with each
customer purchasing or selling APS as a result of the Auction and will advise
each customer purchasing or selling APS to give instructions to its Agent Member
of the Securities Depository to pay the purchase price against delivery of such
shares or to deliver such shares against payment therefor as appropriate. If a
customer selling APS as a result of an Auction shall fail to instruct its Agent
Member to deliver such shares, the Broker-Dealer that submitted such customer's
Bid or Sell Order will instruct such Agent Member to deliver such shares against
payment therefor. Each Broker-Dealer that submitted a Hold Order in an Auction
on behalf of a customer also will advise such customer of the Applicable Rate
for the next Dividend Period for the APS. The Auction Agent will record each
transfer of APS on the record book of Existing Holders to be maintained by the
Auction Agent.
In accordance with the Securities Depository's normal procedures, on the
day after each Auction Date, the transactions described above will be executed
through the Securities Depository, and the accounts of the respective Agent
Members at the Securities Depository will be debited and credited as necessary
to effect the purchases and sales of APS as determined in such Auction.
Purchasers will make payment through their Agent Members in same-day funds to
the Securities Depository against delivery through their Agent Members; the
Securities Depository will make payment in accordance with its normal
procedures, which now provide for payment in same-day funds. If the procedures
of the Securities Depository applicable to APS shall be changed to provide for
payment in next-day funds, then purchasers may be required to make payment in
next-day funds. If the certificates for the APS are not held by the Securities
Depository or its nominee, payment will be made in same-day funds to the Auction
Agent against delivery of such certificates.
If any Existing Holder selling APS in an Auction fails to deliver such
shares, the Broker-Dealer of any person that was to have purchased APS in such
Auction may deliver to such person a number of whole APS that is less than the
number of shares that otherwise was to be purchased by such person. In such
event, the number of APS to be so delivered will be determined by such
Broker-Dealer. Delivery of such lesser number of shares will constitute good
delivery. Each Broker-Dealer Agreement also will provide that neither a Trust
nor the Auction Agent will have responsibility or liability with respect to the
failure of a Potential Beneficial Owner, Beneficial Owner or their respective
Agent Members to deliver APS or to pay for APS purchased or sold pursuant to an
Auction or otherwise.
BROKER-DEALERS
The Auction Agent after each Auction will pay a service charge from funds
provided by each Trust to each Broker-Dealer on the basis of the purchase price
of APS placed by such Broker-Dealer at such Auction. The service charge (i) for
any 7-Day Dividend Period shall be payable at the annual rate of 0.25% of the
purchase price of the APS placed by such Broker-Dealer in any such Auction and
(ii) for any Special Dividend Period shall be determined by mutual consent of a
Trust and any such Broker-Dealer or Broker-Dealers and shall be based upon a
selling concession that would be applicable to an underwriting of fixed or
variable rate preferred shares with a similar final maturity or variable rate
dividend period, respectively, at the commencement of the Dividend Period with
respect to such Auction. For the purposes of the preceding sentence, the APS
will be placed by a Broker-Dealer if such shares were (i) the subject of Hold
Orders deemed to have been made by Beneficial Owners that were acquired by such
Beneficial Owners through such Broker-Dealer or (ii) the subject of the
following Orders submitted by such Broker-Dealer: (A) a Submitted Bid of a
Beneficial Owner that resulted in such Beneficial Owner continuing to hold such
shares as a result of the Auction, (B) a Submitted Bid of a Potential Beneficial
Owner that resulted in such Potential Beneficial Owner purchasing such shares as
a result of the Auction or (C) a Submitted Hold Order.
The Broker-Dealer Agreements provide that a Broker-Dealer may submit Orders
in Auctions for its own account, unless a Trust notifies all Broker-Dealers that
they no longer may do so; provided that Broker-Dealers may continue to submit
Hold Orders and Sell Orders. If a Broker-Dealer submits an Order for its own
account in any Auction of APS, it may have knowledge of Orders placed through it
in that Auction and therefore have an advantage over other Bidders, but such
Broker-Dealer would not have knowledge of Orders submitted by other
Broker-Dealers in that Auction.
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<PAGE> 44
The Broker-Dealers may maintain a secondary trading market in the APS
outside of Auctions; however, they have no obligation to do so and there can be
no assurance that a secondary market for the APS will develop or, if it does
develop, that it will provide holders with a liquid trading market (i.e.,
trading will depend on the presence of willing buyers and sellers and the
trading price is subject to variables to be determined at the time of the trade
by the Broker-Dealers). The APS will not be registered on any stock exchange or
on any automated quotation system. An increase in the level of interest rates,
particularly during any Long-Term Dividend Period, likely will have an adverse
effect on the secondary market price of the APS, and a selling shareholder may
sell APS between Auctions at a price per share of less than $25,000.
DIVIDENDS
General. The holders of the APS of a Trust will be entitled to receive,
when, as and if declared by that Trust's Board of Trustees, out of funds legally
available therefor, cumulative cash dividends on their APS, at the Applicable
Rate determined as set forth below under "Determination of Dividend Rate,"
payable on the dates set forth below. Dividends on the APS of a Trust so
declared and payable shall be paid (i) in preference to and in priority over any
dividends so declared and payable on that Trust's Common Shares and (ii) to the
extent permitted under the Code and available, out of the net tax-exempt income
earned on that Trust's investments. Dividends on the APS, to the extent that
they are derived from Municipal Obligations, generally will be exempt from
federal income tax though some or all of those dividends may be a tax preference
item for purposes of the federal alternative minimum tax ("Preference Item"),
and relevant state taxes. See "Taxes."
Dividends on the APS will accumulate from the date on which a Trust
originally issues the APS (the "Date of Original Issue") and will be payable on
the APS on the dates described below. Dividends on the APS with respect to the
Initial Dividend Period shall be payable on the Initial Dividend Payment Date.
Following the Initial Dividend Payment Date, dividends on the APS will be
payable, at the option of each Trust, either (i) with respect to any 7-Day
Dividend Period and any Short Term Dividend Period of 35 or fewer days, on the
day next succeeding the last day thereof or (ii) with respect to any Short Term
Dividend Period of more than 35 days and with respect to any Long Term Dividend
Period, monthly on the first Business Day of each calendar month during such
Short Term Dividend Period or Long Term Dividend Period and on the day next
succeeding the last day thereof (each such date referred to in clause (i) or
(ii) being referred to herein as a "Normal Dividend Payment Date"), except that
if such Normal Dividend Payment Date is not a Business Day, the Dividend Payment
Date shall be the first Business Day next succeeding such Normal Dividend
Payment Date. Although any particular Dividend Payment Date may not occur on the
originally scheduled date because of the exceptions discussed above, the next
succeeding Dividend Payment Date, subject to such exceptions, will occur on the
next following originally scheduled date. If for any reason a Dividend Payment
Date cannot be fixed as described above, then the Board of Trustees shall fix
the Dividend Payment Date. The Board of Trustees by resolution prior to
authorization of a dividend by the Board of Trustees may change a Dividend
Payment Date if such change does not adversely affect the contract rights of the
holders of APS set forth in the Charter. The Initial Dividend Period, 7-Day
Dividend Periods and Special Dividend Periods are hereinafter sometimes referred
to as "Dividend Periods." Each dividend payment date determined as provided
above is hereinafter referred to as a "Dividend Payment Date."
Prior to each Dividend Payment Date, each Trust is required to deposit with
the Auction Agent sufficient funds for the payment of declared dividends. Each
Trust does not intend to establish any reserves for the payment of dividends.
Each dividend will be paid to the record holder of the APS, which holder is
expected to be the nominee of the Securities Depository. See "Description of
APS--The Auction--Securities Depository." The Securities Depository will credit
the accounts of the Agent Members of the Existing Holders in accordance with the
Securities Depository's normal procedures which provide for payment in same-day
funds. The Agent Member of an Existing Holder will be responsible for holding or
disbursing such payments on the applicable Dividend Payment Date to such
Existing Holder in accordance with the instructions of such Existing Holder.
Dividends in arrears for any past Dividend Period may be declared and paid at
any time, without reference to any regular Dividend Payment Date, to the nominee
of the Securities Depository. Any dividend payment made on the
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<PAGE> 45
APS first shall be credited against the earliest declared but unpaid dividends
accumulated with respect to such shares.
Holders of the APS will not be entitled to any dividends, whether payable
in cash, property or stock, in excess of full cumulative dividends except as
described under "Additional Dividends" and "Non-Payment Period; Late Charge"
below. No interest will be payable in respect of any dividend payment or
payments on the APS which may be in arrears.
The amount of cash dividends per share of APS payable (if declared) on the
Initial Dividend Payment Date, each 7-Day Dividend Period and each Dividend
Payment Date of each Short Term Dividend Period shall be computed by multiplying
the Applicable Rate for such Dividend Period by a fraction, the numerator of
which will be the number of days in such Dividend Period or part thereof that
such share was outstanding and for which dividends are payable on such Dividend
Payment Date and the denominator of which will be 365, multiplying the amount so
obtained by $25,000, and rounding the amount so obtained to the nearest cent.
During any Long Term Dividend Period, the amount of cash dividends per share of
APS payable (if declared) on any Dividend Payment Date shall be computed by
multiplying the Applicable Rate for such Dividend Period by a fraction, the
numerator of which will be such number of days in such part of such Dividend
Period that such share was outstanding and for which dividends are payable on
such Dividend Payment Date and the denominator of which will be 360, multiplying
the amount so obtained by $25,000, and rounding the amount so obtained to the
nearest cent.
Notification of Dividend Period. With respect to each Dividend Period that
is a Special Dividend Period, each Trust, at its sole option and to the extent
permitted by law, by telephonic and written notice (a "Request for Special
Dividend Period") to the Auction Agent and to each Broker-Dealer, may request
that the next succeeding Dividend Period for the APS will be a number of days
(other than seven), evenly divisible by seven, and not fewer than seven nor more
than 364 in the case of a Short Term Dividend Period or one whole year or more
but not greater than five years in the case of a Long Term Dividend Period,
specified in such notice, provided that a Trust may not give a Request for
Special Dividend Period (and any such request shall be null and void) unless,
for any Auction occurring after the initial Auction, Sufficient Clearing Bids
were made in the last occurring Auction and unless full cumulative dividends,
any amounts due with respect to redemptions, and any Additional Dividends
payable prior to such date have been paid in full. Such Request for Special
Dividend Period, in the case of a Short Term Dividend Period, shall be given on
or prior to the second Business Day but not more than seven Business Days prior
to an Auction Date for the APS and, in the case of a Long Term Dividend Period,
shall be given on or prior to the second Business Day but not more than 28 days
prior to an Auction Date for the APS. Upon receiving such Request for Special
Dividend Period, the Broker-Dealers jointly shall determine whether, given the
factors set forth below, it is advisable that a Trust issue a Notice of Special
Dividend Period as contemplated by such Request for Special Dividend Period and
the Optional Redemption Price of the APS during such Special Dividend Period and
the Specific Redemption Provisions and shall give each Trust and the Auction
Agent written notice (a "Response") of such determination by no later than the
second Business Day prior to such Auction Date. In making such determination,
the Broker-Dealers will consider (i) existing short-term and long-term market
rates and indices of such short-term and long-term rates, (ii) existing market
supply and demand for short-term and long-term securities, (iii) existing yield
curves for short-term and long-term securities comparable to the APS, (iv)
industry and financial conditions which may affect the APS, (v) the investment
objective of a Trust and (vi) the Dividend Periods and dividend rates at which
current and potential beneficial holders of the APS would remain or become
beneficial holders.
If the Broker-Dealers shall not give a Trust and the Auction Agent a
Response by such second Business Day or if the Response states that given the
factors set forth above it is not advisable that the Trust give a Notice of
Special Dividend Period for the APS, the Trust may not give a Notice of Special
Dividend Period in respect of such Request for Special Dividend Period. In the
event the Response indicates that it is advisable that a Trust give a Notice of
Special Dividend Period for the APS, the Trust, by no later than the second
Business Day prior to such Auction Date, may give a notice (a "Notice of Special
Dividend Period") to the Auction Agent, the Securities Depository and each
Broker-Dealer, which notice will specify (i) the duration of the Special
Dividend Period, (ii) the Optional Redemption Price as specified in the related
Response and
37
<PAGE> 46
(iii) the Specific Redemption Provisions, if any, as specified in the related
Response. Each Trust also shall provide a copy of such Notice of Special
Dividend Period to S&P. A Trust shall not give a Notice of Special Dividend
Period, and, if such Notice of Special Dividend Period shall have been given
already, shall give telephonic and written notice of its revocation (a "Notice
of Revocation") to the Auction Agent, each Broker-Dealer, and the Securities
Depository on or prior to the Business Day prior to the relevant Auction Date if
(x) either the 1940 Act APS Asset Coverage is not satisfied or the Trust shall
fail to maintain S&P Eligible Assets with an aggregate Discounted Value at least
equal to the APS Basic Maintenance Amount, on each of the two Valuation Dates
immediately preceding the Business Day prior to the relevant Auction Date on an
actual basis and on a pro forma basis giving effect to the proposed Special
Dividend Period (using as a pro forma dividend rate with respect to such Special
Dividend Period the dividend rate which the Broker-Dealers shall advise a Trust
is an approximately equal rate for securities similar to the APS with an equal
dividend period), (y) sufficient funds for the payment of dividends payable on
the immediately succeeding Dividend Payment Date have not been irrevocably
deposited with the Auction Agent by the close of business on the third Business
Day preceding the related Auction Date or (z) the Broker-Dealers jointly advise
a Trust that, after consideration of the factors listed above, they have
concluded that it is advisable to give a Notice of Revocation. Each Trust also
shall provide a copy of such Notice of Revocation to S&P. If a Trust is
prohibited from giving a Notice of Special Dividend Period as a result of the
factors enumerated in clause (x), (y) or (z) above or if the Trust gives a
Notice of Revocation with respect to a Notice of Special Dividend Period, the
next succeeding Dividend Period for that series will be a 7-Day Dividend Period.
In addition, in the event Sufficient Clearing Bids are not made in any Auction
or an Auction is not held for any reason, the next succeeding Dividend Period
will be a 7-Day Dividend Period, and the Trust may not again give a Notice of
Special Dividend Period (and any such attempted notice shall be null and void)
until Sufficient Clearing Bids have been made in an Auction with respect to a
7-Day Dividend Period.
Determination of Dividend Rate. The dividend rate on the APS during the
period from and including the Date of Original Issue for the APS to but
excluding the Initial Dividend Payment Date for the APS (the "Initial Dividend
Period") will be the rate per annum set forth on the inside cover page hereof.
Commencing on the Initial Dividend Payment Date for the APS, the Applicable Rate
on the APS for each Subsequent Dividend Period, which Subsequent Dividend Period
shall be a period commencing on and including a Dividend Payment Date and ending
on and including the calendar day prior to the next Dividend Payment Date (or
last Dividend Payment Date in a Dividend Period if there is more than one
Dividend Payment Date), shall be equal to the rate per annum that results from
the Auction with respect to such Subsequent Dividend Period. The Initial
Dividend Period and Subsequent Dividend Period for the APS is referred to herein
as a "Dividend Period." Cash dividends shall be calculated as set forth above
under "Dividends--General."
Non-Payment Period; Late Charge. A Non-Payment Period will commence if a
Trust fails to (i) declare, prior to the close of business on the second
Business Day preceding any Dividend Payment Date, for payment on or (to the
extent permitted as described below) within three Business Days after such
Dividend Payment Date to the persons who held such shares as of 12:00 noon, New
York City time, on the Business Day preceding such Dividend Payment Date, the
full amount of any dividend on the APS payable on such Dividend Payment Date or
(ii) deposit, irrevocably in trust, in same-day funds, with the Auction Agent by
12:00 noon, New York City time, (A) on such Dividend Payment Date the full
amount of any cash dividend on such shares (if declared) payable on such
Dividend Payment Date or (B) on any redemption date for the APS called for
redemption, the Mandatory Redemption Price per share of such APS or, in the case
of an optional redemption, the Optional Redemption Price per share. Such
Non-Payment Period will consist of the period commencing on and including the
aforementioned Dividend Payment Date or redemption date, as the case may be, and
ending on and including the Business Day on which, by 12:00 noon, New York City
time, all unpaid cash dividends and unpaid redemption prices shall have been so
deposited or otherwise shall have been made available to the applicable holders
in same-day funds, provided that a Non-Payment Period for the APS will not end
unless a Trust shall have given at least five days' but no more than 30 days'
written notice of such deposit or availability to the Auction Agent, the
Securities Depository and all holders of the APS of such series. Notwithstanding
the foregoing, the failure by a Trust to deposit funds as provided for by
clauses (ii) (A) or (ii) (B) above within three Business Days after any Dividend
Payment Date or redemption date, as the case may be, in each case to the extent
contemplated below, shall not constitute a
38
<PAGE> 47
"Non-Payment Period." The Applicable Rate for each Dividend Period for the APS
of any series, commencing during a Non-Payment Period, will be equal to the
Non-Payment Period Rate; and each Dividend Period commencing after the first day
of, and during, a Non-Payment Period shall be a 3-Day Dividend Period. Any
dividend on the APS due on any Dividend Payment Date for such shares (if, prior
to the close of business on the second Business Day preceding such Dividend
Payment Date, a Trust has declared such dividend payable on such Dividend
Payment Date to the persons who held such shares as of 12:00 noon, New York City
time, on the Business Day preceding such Dividend Payment Date) or redemption
price with respect to such shares not paid to such persons when due may be paid
to such persons in the same form of funds by 12:00 noon, New York City time, on
any of the first three Business Days after such Dividend Payment Date or due
date, as the case may be, provided that such amount is accompanied by a late
charge calculated for such period of non-payment at the Non-Payment Period Rate
applied to the amount of such non-payment based on the actual number of days
comprising such period divided by 365. In the case of a willful failure of a
Trust to pay a dividend on a Dividend Payment Date or to redeem any APS on the
date set for such redemption, the preceding sentence shall not apply and the
Applicable Rate for the Dividend Period commencing during the Non-Payment Period
resulting from such failure shall be the Non-Payment Period Rate. For the
purposes of the foregoing, payment to a person in same-day funds on any Business
Day at any time will be considered equivalent to payment to that person in New
York Clearing House (next-day) funds at the same time on the preceding Business
Day, and any payment made after 12:00 noon, New York City time, on any Business
Day shall be considered to have been made instead in the same form of funds and
to the same person before 12:00 noon, New York City time, on the next Business
Day. The Non-Payment Period Rate initially will be 200% of the applicable
Reference Rate (or 275% of such rate if a Trust has provided notification to the
Auction Agent prior to the Auction establishing the Applicable Rate for any
dividend that net capital gains or other taxable income will be included in such
dividend on the APS), provided that the Board of Trustees of a Trust shall have
the authority to adjust, modify, alter or change from time to time the initial
Non-Payment Period Rate if the Board of Trustees of the Trust determines and S&P
(or any Substitute Rating Agency in lieu of S&P in the event such party shall
not rate the APS) advises the Trust in writing that such adjustment,
modification, alteration or change will not adversely affect its then-current
rating on the APS.
Restrictions on Dividends and Other Payments. Under the 1940 Act, a Trust
may not declare dividends or make other distributions on Common Shares or
purchase any such shares if, at the time of the declaration, distribution or
purchase, as applicable (and after giving effect thereto), asset coverage (as
defined in the 1940 Act) with respect to the outstanding APS would be less than
200% (or such other percentage as in the future may be required by law). Each
Trust estimates that, based on the composition of its portfolio at February 19,
1999, asset coverage with respect to the APS would be at least 270% immediately
after the issuance of the APS offered hereby. Under the Code, each Trust must,
among other things, distribute each year at least 90% of the sum of its net
tax-exempt income and investment company taxable income in order to maintain its
qualification for tax treatment as a regulated investment company. The foregoing
limitations on dividends, other distributions and purchases in certain
circumstances may impair a Trust's ability to maintain such qualification. See
"Taxes."
Upon any failure to pay dividends on the APS for two years or more, the
holders of the APS will acquire certain additional voting rights. See "Voting
Rights" below.
For so long as any APS are outstanding, a Trust will not declare, pay or
set apart for payment any dividend or other distribution (other than a dividend
or distribution paid in shares of, or options, warrants or rights to subscribe
for or purchase, Common Shares or other stock, if any, ranking junior to the APS
as to dividends or upon liquidation) in respect of Common Shares or any other
stock of the Trust ranking junior to or on a parity with the APS as to dividends
or upon liquidation, or call for redemption, redeem, purchase or otherwise
acquire for consideration any Common Shares or shares of any other such junior
stock (except by conversion into or exchange for stock of the Trust ranking
junior to APS as to dividends and upon liquidation) or any such parity stock
(except by conversion into or exchange for stock of the Trust ranking junior to
or on a parity with APS as to dividends and upon liquidation), unless (A)
immediately after such transaction, the Trust would have S&P Eligible Assets
with an aggregate Discounted Value equal to or greater than the APS
39
<PAGE> 48
Basic Maintenance Amount, and the 1940 Act APS Asset Coverage (see "Asset
Maintenance" and "Redemption" below) would be satisfied, (B) full cumulative
dividends on the APS due on or prior to the date of the transaction have been
declared and paid or shall have been declared and sufficient Trusts for the
payment thereof deposited with the Auction Agent, (C) any Additional Dividend
required to be paid on or before the date of such declaration or payment has
been paid and (D) the Trust has redeemed the full number of APS required to be
redeemed by any provision for mandatory redemption contained in the Amended
By-Laws.
Additional Dividends. If a Trust retroactively allocates any net capital
gains or other taxable income to the APS without having given advance notice
thereof to the Auction Agent as described above under "The Auction--Auction
Date; Advance Notice of Allocation of Taxable Income; Inclusion of Taxable
Income in Dividends," the Trust, within 90 days (and generally within 60 days)
after the end of the Trust's fiscal year for which a Retroactive Taxable
Allocation is made, will provide notice thereof to the Auction Agent and to each
holder of APS (initially Cede & Co. as nominee of the Securities Depository)
during such fiscal year at such holder's address as the same appears or last
appeared on the stock books of the Trust. Such a retroactive allocation may
happen when such allocation is made as a result of (i) the redemption of all or
a portion of the outstanding APS, (ii) the liquidation of the Trust (the amount
of such allocation referred to herein as a "Retroactive Taxable Allocation") or
(iii) a debt obligation believed to be a Municipal Obligation unexpectedly turns
out to be an obligation subject to federal income tax and/or a relevant state
tax. Each such Trust, within 30 days after such notice is given to the Auction
Agent, will pay to the Auction Agent (who then will distribute to such holders
of the APS), out of funds legally available therefor, an amount equal to the
aggregate Additional Dividend (as defined below) with respect to all Retroactive
Taxable Allocations made to such holders during the fiscal year in question. See
"Taxes."
An "Additional Dividend" means a payment to a present or former holder of
the APS of an amount that would cause (i) the dollar amount of such holder's
dividends received on the APS with respect to the fiscal year in question
(including the Additional Dividend) less the federal income tax and applicable
state tax attributable to the aggregate of (x) the Retroactive Taxable
Allocations made to such holder with respect to the fiscal year in question and
(y) the Additional Dividend (to the extent taxable) to equal (ii) the dollar
amount of such holder's dividends received on the APS with respect to the fiscal
year in question (excluding the Additional Dividend) if there had been no
Retroactive Taxable Allocations. An Additional Dividend shall be calculated (i)
without consideration being given to the time value of money; (ii) assuming that
none of the dividends received from a Trust is a Preference Item; and (iii)
assuming that each Retroactive Taxable Allocation would be taxable to each
holder of APS at the maximum combined marginal federal and relevant state income
tax rate (including any surtax) applicable to the taxable character of the
distribution (i.e., ordinary income or net capital gain) in the hands of an
individual or a corporation, whichever is greater (disregarding the effect of
any other state and local taxes and the phase out of, or provisions limiting,
personal exemptions, itemized deductions, or the benefit of lower tax brackets).
Although each Trust generally intends to designate any Additional Dividend as an
"exempt-interest" dividend to the extent permitted by applicable law, it is
possible that all or a portion of any Additional Dividend will be taxable to the
recipient thereof. See "Taxes--Tax Treatment of Additional Dividends." A Trust
will not pay a further Additional Dividend with respect to any taxable portion
of an Additional Dividend.
If a Trust does not give advance notice of the amount of taxable income to
be included in a dividend on the APS in the related Auction, as described above
under "The Auction--Auction Date; Advance Notice of Allocation of Taxable
Income; Inclusion of Taxable Income in Dividends," the Trust may include such
taxable income in a dividend on the APS if it increases the dividend by an
additional amount calculated as if such income were a Retroactive Taxable
Allocation and the additional amount were an Additional Dividend and notifies
the Auction Agent of such inclusion at least five days prior to the applicable
Dividend Payment Date.
ASSET MAINTENANCE
Each Trust will be required to satisfy two separate asset maintenance
requirements under the terms of the Amended By-Laws. These requirements are
summarized below.
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<PAGE> 49
1940 Act APS Asset Coverage. Each Trust will be required under the Amended
By-Laws to maintain, with respect to the APS, as of the last Business Day of
each month in which any APS are outstanding, asset coverage of at least 200%
with respect to senior securities which are beneficial interests in the Trust,
including the APS (or such other asset coverage as in the future may be
specified in or under the 1940 Act as the minimum asset coverage for senior
securities which are beneficial interests of a closed-end investment company as
a condition of paying dividends on its common stock) ("1940 Act APS Asset
Coverage"). If a Trust fails to maintain 1940 Act APS Asset Coverage and such
failure is not cured as of the last Business Day of the following month (the
"1940 Act Cure Date"), the Trust will be required under certain circumstances to
redeem certain of the APS. See "Redemption" below.
The 1940 Act APS Asset Coverage immediately following the issuance of APS
offered hereby (after giving effect to the deduction of the sales load and
offering expenses for the APS) computed using each Trust's net assets as of
February 19, 1999 and assuming the Over-allotment Common Shares and the APS had
been issued as of such date will be as follows:
CALIFORNIA TRUST
<TABLE>
<S> <C> <C> <C> <C>
Value of Trust assets less liabilities not
constituting senior securities $163,530,358
- ---------------------------------------------------
Senior securities representing indebtedness plus = = 277%
liquidation value of APS $ 59,000,000
</TABLE>
FLORIDA TRUST
<TABLE>
<S> <C> <C> <C> <C>
Value of Trust assets less liabilities not
constituting senior securities $98,072,148
- ---------------------------------------------------
Senior securities representing indebtedness plus = = 276%
liquidation value of APS $35,500,000
</TABLE>
MASSACHUSETTS TRUST
<TABLE>
<S> <C> <C> <C> <C>
Value of Trust assets less liabilities not
constituting senior securities $59,076,784
- ---------------------------------------------------
Senior securities representing indebtedness plus = = 275%
liquidation value of APS $21,500,000
</TABLE>
MICHIGAN TRUST
<TABLE>
<S> <C> <C> <C> <C>
Value of Trust assets less liabilities not
constituting senior securities $48,296,461
- ---------------------------------------------------
Senior securities representing indebtedness plus = = 276%
liquidation value of APS $17,500,000
</TABLE>
NEW JERSEY TRUST
<TABLE>
<S> <C> <C> <C> <C>
Value of Trust assets less liabilities not
constituting senior securities $102,762,487
- ---------------------------------------------------
Senior securities representing indebtedness plus = = 270%
liquidation value of APS $ 38,000,000
</TABLE>
NEW YORK TRUST
<TABLE>
<S> <C> <C> <C> <C>
Value of Trust assets less liabilities not
constituting senior securities $120,517,129
- ---------------------------------------------------
Senior securities representing indebtedness plus = = 271%
liquidation value of APS $ 44,500,000
</TABLE>
41
<PAGE> 50
OHIO TRUST
<TABLE>
<S> <C> <C> <C> <C>
Value of Trust assets less liabilities not
constituting senior securities $64,585,720
- ---------------------------------------------------
Senior securities representing indebtedness plus = = 275%
liquidation value of APS $23,500,000
</TABLE>
PENNSYLVANIA TRUST
<TABLE>
<S> <C> <C> <C> <C>
Value of Trust assets less liabilities not
constituting senior securities $61,855,568
- ---------------------------------------------------
Senior securities representing indebtedness plus = = 275%
liquidation value of APS $22,500,000
</TABLE>
APS Basic Maintenance Amount. So long as the APS are outstanding, each
Trust will be required under the Amended By-Laws to maintain as of each Business
Day (a "Valuation Date") S&P Eligible Assets and having in the aggregate a
Discounted Value at least equal to the APS Basic Maintenance Amount. If a Trust
fails to meet such requirement as of any Valuation Date and such failure is not
cured on or before the sixth Business Day after such Valuation Date (the "APS
Basic Maintenance Cure Date"), the Trust will be required in certain
circumstances to redeem certain of the APS. Upon any failure to maintain the
required Discounted Value, the Trust will use its best efforts to alter the
composition of its portfolio to retain a Discounted Value at least equal to the
APS Basic Maintenance Amount on or prior to the APS Basic Maintenance Cure Date.
See "Redemption."
The APS Basic Maintenance Amount as of any Valuation Date is defined as the
dollar amount equal to (i) the sum of (A) the product of the number of APS
outstanding on such Valuation Date multiplied by the sum of $25,000 and any
applicable redemption premium attributable to the designation of a Premium Call
Period; (B) the aggregate amount of cash dividends (whether or not earned or
declared) that will have accumulated for each APS outstanding to (but not
including) the end of the current Dividend Period that follows such Valuation
Date in the event the then-current Dividend Period will end within 49 calendar
days of such Valuation Date or through the 49th day after such Valuation Date in
the event the then-current Dividend Period for the APS will not end within 49
calendar days of such Valuation Date; (C) in the event the then-current Dividend
Period will end within 49 calendar days of such Valuation Date, the aggregate
amount of cash dividends that would accumulate at the Maximum Applicable Rate
applicable to a Dividend Period of 28 or fewer days on any APS outstanding from
the end of such Dividend Period through the 49th day after such Valuation Date,
multiplied by the S&P Volatility Factor determined from time to time by S&P
(except that if such Valuation Date occurs during a Non-Payment Period, the cash
dividend for purposes of calculation would accumulate at the then-current
Non-Payment Period Rate); (D) the amount of anticipated Trust expenses for the
90 days subsequent to such Valuation Date; (E) the amount of the Trust's Maximum
Potential Additional Dividend Liability as of such Valuation Date; and (F) any
current liabilities as of such Valuation Date to the extent not reflected in any
of (i) (A) through (i) (E) (including, without limitation, and immediately upon
determination, any amounts due and payable by the Trust pursuant to repurchase
agreements, any amounts payable for Municipal Obligations purchased as of such
Valuation Date) less (ii) either (A) the Discounted Value of any Trust assets,
or (B) the face value of any of the Trust's assets if such assets mature prior
to or on the date of redemption of the APS or payment of a liability and are
either securities issued or guaranteed by the United States Government or
Deposit Securities, in both cases irrevocably deposited by the Trust for the
payment of the amount needed to redeem the APS subject to redemption or to
satisfy any of (i) (B) through (i) (F). For purposes of the foregoing, "Maximum
Potential Additional Dividend Liability," as of any Valuation Date, means the
aggregate amount of Additional Dividends that would be due if the Trust were to
make Retroactive Taxable Allocations, with respect to any fiscal year, estimated
based upon dividends paid and the amount of undistributed realized net capital
gains and other taxable income earned by the Trust, as of the end of the
calendar month immediately preceding such Valuation Date and assuming such
Additional Dividends are fully taxable.
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<PAGE> 51
The Discount Factors and guidelines for determining the market value of
each Trust's portfolio holdings have been based on criteria established in
connection with rating the APS. These factors include, but are not limited to,
the sensitivity of the market value of the relevant asset to changes in interest
rates, the liquidity and depth of the market for the relevant asset, the credit
quality of the relevant asset (for example, the lower the rating of a debt
obligation, the higher the related discount factor) and the frequency with which
the relevant asset is marked to market. In no event shall the Discounted Value
of any asset of the Trust exceed its unpaid principal balance or face amount as
of the date of calculation. The Discount Factor relating to any asset of a Trust
and the APS Basic Maintenance Amount, the assets eligible for inclusion in the
calculation of the Discounted Value of the Trust's portfolio and certain
definitions and methods of calculation relating thereto may be changed from time
to time by the Trust, without shareholder approval, but only in the event such
Trust receives written confirmation from S&P, and any Substitute Rating Agency
that any such changes would not impair the ratings then assigned to the APS by
S&P or any Substitute Rating Agency.
On or before the third Business Day after a Valuation Date on which a Trust
fails to maintain S&P Eligible Assets with an aggregate Discounted Value equal
to or greater than the APS Basic Maintenance Amount, the Trust is required to
deliver to the Auction Agent and S&P a report with respect to the calculation of
the APS Basic Maintenance Amount and the value of its portfolio holdings as of
the date of such failure (an "APS Basic Maintenance Report"). Additionally, on
or before the third Business Day after the first day of a Special Dividend
Period, such Trust will deliver an APS Basic Maintenance Report to S&P and the
Auction Agent. Each Trust also will deliver an APS Basic Maintenance Report as
of the last Business Day of the last month of each fiscal quarter of such Trust
on or before the third Business Day after such day. Within ten Business Days
after delivery of such report relating to the last Business Day of the last
month of each fiscal quarter of a Trust, such Trust will deliver a letter
prepared by the Trust's independent accountants regarding the accuracy of the
calculations made by the Trust in its most recent APS Basic Maintenance Report.
Also, on or before 5:00 p.m., New York City time, on the first Business Day
after Common Shares are repurchased by a Trust, such Trust will complete and
deliver to S&P an APS Basic Maintenance Report as of the close of business on
such date that Common Shares is repurchased. If any such letter prepared by a
Trust's independent accountants shows that an error was made in the most recent
APS Basic Maintenance Report, the calculation or determination made by such
Trust's independent accountants will be conclusive and binding on such Trust.
REDEMPTION
Optional Redemption. To the extent permitted under the 1940 Act and under
Massachusetts law, upon giving a Notice of Redemption, as provided below, each
Trust, at its option, may redeem the APS, in whole or in part, out of funds
legally available therefor, at the Optional Redemption Price per share on any
Dividend Payment Date; provided that no APS may be redeemed at the option of the
Trust during (a) the Initial Dividend Period with respect to the APS or (b) a
Non-Call Period to which such share is subject. "Optional Redemption Price"
means $25,000 per share of APS plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared) to the date fixed for redemption
plus any applicable redemption premium, if any, attributable to the designation
of a Premium Call Period. In addition, holders of APS may be entitled to receive
Additional Dividends in the event of redemption of such APS to the extent
provided herein. See "Description of APS--Dividends--Additional Dividends." Each
Trust has the authority to redeem the APS for any reason and may redeem all or
part of the outstanding APS if it anticipates that the Trust's leveraged capital
structure will result in a lower rate of return to holders of Common Shares for
any significant period of time than that obtainable if the Common Shares were
unleveraged.
Mandatory Redemption. Each Trust will be required to redeem, out of funds
legally available therefor, at the Mandatory Redemption Price per share, the APS
to the extent permitted under the 1940 Act and Massachusetts law, on a date
fixed by the Board of Trustees, if the Trust fails to maintain S&P Eligible
Assets with an aggregate Discounted Value equal to or greater than the APS Basic
Maintenance Amount or to satisfy the 1940 Act APS Asset Coverage and such
failure is not cured on or before the APS Basic Maintenance Cure Date or the
1940 Act Cure Date (herein collectively referred to as a "Cure Date"), as the
case may be. "Mandatory Redemption Price" of APS means $25,000 per share plus an
amount equal to accumulated but
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unpaid dividends (whether or not earned or declared) to the date fixed for
redemption. In addition, holders of APS may be entitled to receive Additional
Dividends in the event of redemption of such APS to the extent provided herein.
See "Description of APS--Dividends--Additional Dividends." The number of APS to
be redeemed will be equal to the lesser of (a) the minimum number of APS the
redemption of which, if deemed to have occurred immediately prior to the opening
of business on the Cure Date, together with all other shares of the Preferred
Shares subject to redemption or retirement, would result in a Trust having S&P
Eligible Assets each with an aggregate Discounted Value equal to or greater than
the APS Basic Maintenance Amount or satisfaction of the 1940 Act APS Asset
Coverage, as the case may be, on such Cure Date (provided that, if there is no
such minimum number of shares the redemption of which would have such result,
all APS then outstanding will be redeemed), and (b) the maximum number of APS,
together with all other shares of Preferred Shares subject to redemption or
retirement, that can be redeemed out of Trusts expected to be legally available
therefor on such redemption date. In determining the number of APS required to
be redeemed in accordance with the foregoing, each Trust shall allocate the
number required to be redeemed which would result in the Trust having S&P
Eligible Assets with an aggregate Discounted Value equal to or greater than the
APS Basic Maintenance Amount or satisfaction of the 1940 Act APS Asset Coverage,
as the case may be, pro rata among APS and other Preferred Shares subject to
redemption pursuant to provisions similar to those set forth below; provided
that, APS that may not be redeemed at the option of the Trust due to the
designation of a Non-Call Period applicable to such shares (A) will be subject
to mandatory redemption only to the extent that other shares are not available
to satisfy the number of shares required to be redeemed and (B) will be selected
for redemption in an ascending order of outstanding number of days in the
Non-Call Period (with shares with the lowest number of days to be redeemed
first) and by lot in the event of shares having an equal number of days in such
Non-Call Period. Each Trust is required to effect such a mandatory redemption
not later than 35 days after such Cure Date, except that if the Trust does not
have funds legally available for the redemption of all of the required number of
APS which are subject to mandatory redemption or the Trust otherwise is unable
to effect such redemption on or prior to 35 days after such Cure Date, the Trust
will redeem those APS which it was unable to redeem on the earliest practicable
date on which it is able to effect such redemption.
General. If the APS are to be redeemed, a notice of redemption will be
mailed to each record holder of such APS (initially Cede & Co. as nominee of the
Securities Depository) and to the Auction Agent not less than 17 nor more than
30 days prior to the date fixed for the redemption thereof. Each notice of
redemption will include a statement setting forth: (i) the redemption date, (ii)
the aggregate number of APS to be redeemed, (iii) the redemption price, (iv) the
place or places where APS are to be surrendered for payment of the redemption
price, (v) a statement that dividends on the shares to be redeemed will cease to
accumulate on such redemption date (except that holders may be entitled to
Additional Dividends) and (vi) the provision of the Amended By-Laws pursuant to
which such shares are being redeemed. The notice also will be published in The
Wall Street Journal. No defect in the notice of redemption or in the mailing or
publication thereof will affect the validity of the redemption proceedings,
except as required by applicable law.
If less than all of the outstanding APS are to be redeemed, the shares to
be redeemed will be selected by lot or such other method as each Trust shall
deem fair and equitable, and the results thereof will be communicated to the
Auction Agent. The Auction Agent will give notice to the Securities Depository,
whose nominee will be the record holder of all APS, and the Securities
Depository will determine the number of shares to be redeemed from the account
of the Agent Member of each Existing Holder. Each Agent Member will determine
the number of shares to be redeemed from the account of each Existing Holder for
which it acts as agent. An Agent Member may select for redemption shares from
the accounts of some Existing Holders without selecting for redemption any
shares from the accounts of other Existing Holders. Notwithstanding the
foregoing, if neither the Securities Depository nor its nominee is the record
holder of all of the APS series, the particular shares to be redeemed shall be
selected by each Trust by lot or by such other method as the Trust shall deem
fair and equitable.
If a Trust gives notice of redemption, and concurrently or thereafter
deposits in trust with the Auction Agent, or segregates in an account at the
Trust's custodian bank for the benefit of the Auction Agent, Deposit Securities
(with a right of substitution) having an aggregate Discounted Value (utilizing
an S&P Exposure
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Period of 22 Business Days) equal to the redemption payment for the APS as to
which notice of redemption has been given, with irrevocable instructions and
authority to pay the redemption price to the record holders thereof, then upon
the date of such deposit or, if no such deposit is made, upon such date fixed
for redemption (unless the Trust shall default in making payment of the
redemption price), all rights of the holders of such shares called for
redemption will cease and terminate, except the right of such holders to receive
the redemption price thereof and any Additional Dividends, but without interest,
and such shares no longer will be deemed to be outstanding. Each Trust will be
entitled to receive, from time to time, the interest, if any, earned on such
Deposit Securities deposited with the Auction Agent, and the holders of any
shares so redeemed will have no claim to any such interest. Any funds so
deposited which are unclaimed at the end of one year from such redemption date
will be repaid, upon demand, to a Trust, after which the holders of the APS of
such series so called for redemption may look only to the Trust for payment
thereof.
So long as any APS are held of record by the nominee of the Securities
Depository (initially Cede & Co.), the redemption price for such shares will be
paid on the redemption date to the nominee of the Securities Depository. The
Securities Depository's normal procedures now provide for it to distribute the
amount of the redemption price to Agent Members who, in turn, are expected to
distribute such Trusts to the persons for whom they are acting as agent.
Notwithstanding the provisions for redemption described above, no APS shall
be subject to optional redemption (i) unless all dividends in arrears on the
outstanding APS, and all capital stock of a Trust ranking on a parity with the
APS with respect to the payment of dividends or upon liquidation, have been or
are being contemporaneously paid or declared and set aside for payment and (ii)
if redemption thereof would result in a Trust's failure to maintain S&P Eligible
Assets with an aggregate Discounted Value equal to or greater than the APS Basic
Maintenance Amount.
LIQUIDATION RIGHTS
Upon any liquidation, dissolution or winding up of a Trust, whether
voluntary or involuntary, the holders of APS will be entitled to receive, out of
the assets of the Trust available for distribution to shareholders, before any
distribution or payment is made upon any Common Shares or any other shares of
beneficial interest of the Trust ranking junior in right of payment upon
liquidation of APS, $25,000 per share together with the amount of any dividends
accumulated but unpaid (whether or not earned or declared) thereon to the date
of distribution, and after such payment the holders of APS will be entitled to
no other payments except for any Additional Dividends. If such assets of a Trust
shall be insufficient to make the full liquidation payment on outstanding APS
and liquidation payments on any other outstanding class or series of Preferred
Shares of the Trust ranking on a parity with the APS as to payment upon
liquidation, then such assets will be distributed among the holders of APS and
the holders of shares of such other class or series ratably in proportion to the
respective preferential amounts to which they are entitled. After payment of the
full amount of liquidation distribution to which they are entitled, the holders
of APS will not be entitled to any further participation in any distribution of
assets by a Trust except for any Additional Dividends. A consolidation, merger
or share exchange of a Trust with or into any other entity or entities or a
sale, whether for cash, shares of stock, securities or properties, of all or
substantially all or any part of the assets of the Trust shall not be deemed or
construed to be a liquidation, dissolution or winding up of the Trust.
VOTING RIGHTS
Except as otherwise indicated in this Prospectus and except as otherwise
required by applicable law, holders of APS of each Trust will be entitled to one
vote per share on each matter submitted to a vote of shareholders and will vote
together with holders of Common Shares and other Preferred Shares of that Trust
as a single class.
In connection with the election of each Trust's trustees, holders of the
APS and any other Preferred Shares, voting as a separate class, shall be
entitled at all times to elect two of the Trust's trustees, and the remaining
trustees will be elected by holders of Common Shares and APS and any other
Preferred Shares, voting together as a single class. In addition, if at any time
dividends on outstanding APS shall be unpaid in an
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amount equal to at least two full years' dividends thereon or if at any time
holders of any shares of Preferred Shares are entitled, together with the
holders of APS, to elect a majority of the trustees of the Trust under the 1940
Act, then the number of trustees constituting the Board of Trustees
automatically shall be increased by the smallest number that, when added to the
two trustees elected exclusively by the holders of APS and any other Preferred
Shares as described above, would constitute a majority of the Board of Trustees
as so increased by such smallest number, and at a special meeting of
shareholders which will be called and held as soon as practicable, and at all
subsequent meetings at which trustees are to be elected, the holders of the APS
and any other Preferred Shares, voting as a separate class, will be entitled to
elect the smallest number of additional trustees that, together with the two
trustees which such holders in any event will be entitled to elect, constitutes
a majority of the total number of trustees of the Trust as so increased. The
terms of office of the persons who are trustees at the time of that election
will continue. If a Trust thereafter shall pay, or declare and set apart for
payment in full, all dividends payable on all outstanding APS and any other
Preferred Shares for all past Dividend Periods, the additional voting rights of
the holders of APS and any other Preferred Shares as described above shall
cease, and the terms of office of all of the additional trustees elected by the
holders of APS and any other Preferred Shares (but not of the trustees with
respect to whose election the holders of Common Shares were entitled to vote or
the two trustees the holders of APS and any other Preferred Shares have the
right to elect in any event) will terminate automatically.
The affirmative vote of a majority of the votes entitled to be cast by
holders of outstanding APS and any other Preferred Shares, voting as a separate
class, will be required to (i) authorize, create or issue any class or series of
stock ranking prior to the APS or any other series of Preferred Shares with
respect to the payment of dividends or the distribution of assets on
liquidation; provided, however, that no vote is required to authorize the
issuance of another class of Preferred Shares which are substantially identical
in all respects to the APS or (ii) amend, alter or repeal the provisions of the
Declaration of Trust or the Amended By-Laws, whether by merger, consolidation or
otherwise, so as to adversely affect any of the contract rights expressly set
forth in the Declaration of Trust or the Amended By-Laws of holders of APS or
any other Preferred Shares. To the extent permitted under the 1940 Act, in the
event shares of more than one series of APS are outstanding, a Trust shall not
approve any of the actions set forth in clause (i) or (ii) which adversely
affects the contract rights expressly set forth in the Declaration of Trust of a
holder of shares of a series of APS differently than those of a holder of shares
of any other series of APS without the affirmative vote of at least a majority
of votes entitled to be cast by holders of APS of each series adversely affected
and outstanding at such time (each such adversely affected series voting
separately as a class). Each Board of Trustees, however, without shareholder
approval, may amend, alter or repeal any or all of the various rating agency
guidelines described herein in the event a Trust receives confirmation from the
rating agencies that any such amendment, alteration or repeal would not impair
the ratings then assigned to the APS. Unless a higher percentage is provided for
under "Description of Capital Stock--Certain Provisions in the Declaration of
Trust," the affirmative vote of a majority of the votes entitled to be cast by
holders of outstanding APS and any other Preferred Shares, voting as a separate
class, will be required to approve any plan of reorganization (including
bankruptcy proceedings) adversely affecting such shares or any action requiring
a vote of security holders under Section 13(a) of the 1940 Act including, among
other things, changes in the Trust's investment objective or changes in the
investment restrictions described as fundamental policies under "Investment
Objective and Policies." The class vote of holders of APS and any other
Preferred Shares described above in each case will be in addition to a separate
vote of the requisite percentage of Common Shares and APS and any other
Preferred Shares, voting together as a single class, necessary to authorize the
action in question.
The foregoing voting provisions will not apply to the APS if, at or prior
to the time when the act with respect to which such vote otherwise would be
required shall be effected, such shares shall have been (i) redeemed or (ii)
called for redemption and sufficient Trusts shall have been deposited in trust
to effect such redemption.
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MANAGEMENT OF TRUSTS
BOARDS OF TRUSTEES
The management of each Trust, including general supervision of the duties
performed by the Adviser under the Investment Advisory Agreement, is the
responsibility of each Trust's Board of Trustees under the laws of The
Commonwealth of Massachusetts.
THE ADVISER
Eaton Vance Management acts as each Trust's investment adviser under an
Investment Advisory Agreement ("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 $34 billion, of which approximately $32 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 obligations 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
obligations investment company, and has done so continuously since 1978. Eaton
Vance currently manages 4 national municipal investment companies, 40 single
state municipal investment companies, 10 limited maturity municipal investment
companies and 1 money market municipal investment company, with assets of over
$8 billion.
Under the general supervision of each Trust's Board of Trustees, the
Adviser will carry out the investment and reinvestment of the assets of each
Trust, will furnish continuously an investment program with respect to each
Trust, will determine which securities should be purchased, sold or exchanged,
and will implement such determinations. The Adviser will furnish to each 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 each Trust who are members of the Adviser's organization and who
render investment services to each Trust, and will also compensate all other
Adviser personnel who provide research and investment services to each Trust. In
return for these services, facilities and payments, each 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 each Trust. Gross assets of each
Trust shall be calculated by deducting accrued liabilities of each Trust not
including the amount of any Preferred Shares outstanding.
Cynthia J. Clemson is the portfolio manager of the California Trust and the
Florida Trust and is responsible for day-to-day management of each Trust's
investments. Ms. Clemson has been an employee of Eaton Vance since 1985 and a
Vice President of Eaton Vance since 1993. She currently manages ten municipal
obligations investment companies (including these Trusts) with combined assets
of approximately $1.3 billion.
Robert B. MacIntosh is the portfolio manager of the Massachusetts Trust and
the New Jersey Trust and is responsible for day-to-day management of each
Trust's investments. Mr. MacIntosh has been an employee of Eaton Vance since
1991 and a Vice President of Eaton Vance since 1991. He currently manages eight
municipal obligations investment companies (including these Trusts) with
combined assets of over $980 million.
Timothy T. Browse is the portfolio manager of the Michigan Trust and the
Pennsylvania Trust and is responsible for day-to-day management of each Trust's
investments. Mr. Browse has been an employee of Eaton Vance since 1992 and a
Vice President of Eaton Vance since 1993. He currently manages eight municipal
obligations investment companies (including these Trusts) with combined assets
of over $925 million.
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Thomas J. Fetter is the portfolio manager of the New York Trust and the
Ohio Trust and is responsible for day-to-day management of each Trust's
investments. Mr. Fetter has been an employee of Eaton Vance since 1986 and a
Vice President of Eaton Vance since 1987. He currently manages four municipal
obligations investment companies (including these Trusts) with combined assets
of over $990 million.
Each 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 a Trust)
for their own accounts, subject to certain pre-clearance, reporting and other
restrictions and procedures contained in such Codes.
Each 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 each Trust, subject to the supervision of each Trust's Board of
Trustees. Eaton Vance will furnish to each Trust all office facilities,
equipment and personnel for administering the affairs of each 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 each 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 each Trust's business. In return
for these services, facilities and payments, each 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 each Trust.
Eaton Vance has agreed to bear all ordinary and organizational expenses of
each Trust that exceed 5% of average weekly net assets (taking into account the
deduction of any Preferred Shares and related expenses) for the first year of
operations. In return for this arrangement, each Trust will reimburse Eaton
Vance over the first year of operations for organizational expenses of each
Trust borne by Eaton Vance at the onset of operations.
TAXES
GENERAL
Each Trust intends to elect and to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Code. As long as a
Trust so qualifies, in any taxable year in which it distributes at least 90% of
the sum of its investment company taxable income (consisting generally of
taxable net investment income, net short-term capital gain and net realized
gains from certain hedging transactions) and its net tax-exempt income (see
below), that Trust (but not its shareholders) will not be subject to federal
income tax to the extent that it distributes its investment company taxable
income and net capital gain (the excess of net long-term capital gain over net
short-term capital loss). Each Trust intends to distribute substantially all of
such income and gain each year.
The APS will constitute stock of each Trust, and distributions by a Trust
with respect to its APS (other than distributions in redemption of APS that are
treated as exchanges of stock under Section 302(b) of the Code) thus will
constitute dividends to the extent of that Trust's current and accumulated
earnings and profits as calculated for federal income tax purposes. It is
possible, however, that the Internal Revenue Service (the "IRS") might take a
contrary position, asserting, for example, that the APS constitute debt of each
Trust. If this position were upheld, the discussion of the treatment of
distributions below would not apply. Instead, distributions by each Trust to
holders of APS would constitute interest, whether or not they exceeded the
earnings and profits of each Trust, would be included in full in the income of
the recipient and would be taxed as ordinary income. Kirkpatrick & Lockhart LLP,
counsel to each Trust, believes that such a position, if asserted by the IRS,
would be unlikely to prevail if the issue were properly litigated.
Each dividend distribution ordinarily will constitute income exempt from
federal income tax (i.e., qualify as an "exempt-interest" dividend, which is
excludable from the shareholder's gross income). A portion of dividends
attributable to interest on certain Municipal Obligations, however, may be a
Preference Item.
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Furthermore, exempt-interest dividends are included in determining what portion,
if any, of a person's social security and railroad retirement benefits will be
includible in gross income subject to federal income tax. Distributions of any
taxable net investment income and net short-term capital gain will be taxable as
ordinary income. Finally, distributions of each Trust's net capital gain, if
any, will be taxable to shareholders as long-term capital gains, regardless of
the length of time they held their shares. Distributions, if any, in excess of a
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).
Dividends and other distributions declared by a Trust in October, November
or December of any year and payable to shareholders of record on a date in any
of those months will be deemed to have been paid by the Trust and received by
the shareholders on December 31 of that year if the distributions are paid by
the Trust during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
Each Trust will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. The IRS has taken
the position that if a RIC has more than one class of shares, it may designate
distributions made to each class in any year as consisting of no more than that
class's proportionate share of particular types of income for that year,
including tax-exempt interest and net capital gain. A class's proportionate
share of a particular type of income for a year is determined according to the
percentage of total dividends paid by the RIC during that year to the class.
Thus, each Trust is required to allocate a portion of its net capital gain and
other taxable income to the APS. Each Trust generally will notify the Auction
Agent of the amount of any net capital gain and other taxable income to be
included in any dividend on the APS prior to the Auction establishing the
Applicable Rate for that dividend. Except for the portion of any dividend that
it informs the Auction Agent will be treated as net capital gain or other
taxable income, each Trust anticipates that the dividends paid on the APS will
constitute exempt-interest dividends. The amount of net capital gains and
ordinary income allocable to a Trust's APS (the "taxable distribution") will
depend upon the amount of such gains and income realized by the Trust and the
total dividends paid by the Trust on its Common Shares and the APS during a
taxable year, but taxable distributions generally are not expected to be
significant. The tax treatment of Additional Dividends also may affect each
Trust's calculation of each class's allocable share of capital gains and other
taxable income. See "Tax Treatment of Additional Dividends."
Although the matter is not free from doubt, due to the absence of direct
regulatory or judicial authority, in the opinion of Kirkpatrick & Lockhart LLP,
counsel to each Trust, under current law the manner in which each Trust intends
to allocate items of tax-exempt income, net capital gain, and other taxable
income, if any, among each Trust's Common Shares and APS will be respected for
federal income tax purposes. It is possible that the IRS could disagree with
counsel's opinion and attempt to reallocate each Trust's net capital gain or
other taxable income. In the event of such a reallocation, some of the dividends
identified by a Trust as exempt-interest dividends to holders of APS may be
recharacterized as additional net capital gain or other taxable income. In the
event of such recharacterization, however, no Trust would be required to make
payments to such shareholders to offset the tax effect of such reallocation.
Kirkpatrick & Lockhart LLP has advised each Trust that, in its opinion, if the
IRS were to challenge in court the Trust's allocations of income and gain and
the issue were properly litigated, the IRS would be unlikely to prevail. A
holder should be aware, however, that the opinion of Kirkpatrick & Lockhart LLP
represents only its best legal judgment and is not binding on the IRS or the
courts.
Interest on indebtedness incurred or continued by a shareholder to purchase
or carry APS is not deductible for federal income tax purposes to the extent
that interest relates to exempt-interest dividends received from the Trust.
If at any time when APS are outstanding a Trust does not meet the asset
coverage requirements of the 1940 Act, the Trust will be required to suspend
distributions to holders of Common Shares until the asset coverage is restored.
See "Description of APS--Restrictions on Dividends and Other Payments." Such a
suspension may prevent a Trust from distributing at least 90% of its net income
and may, therefore, jeopardize
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the Trust's qualification for taxation as a RIC. Upon any failure to meet the
asset coverage requirements of the 1940 Act, a Trust, in its sole discretion,
may redeem APS in order to maintain or restore the requisite asset coverage and
avoid the adverse consequences to the Trust and its shareholders of failing to
qualify for treatment as a RIC. See "Description of APS--Redemption." There can
be no assurance, however, that any such action would achieve that objective.
Certain of each Trust's investment practices are subject to special Code
provisions that, among other things, may defer the use of certain losses of the
Trust and affect the holding period of securities held by the Trust and the
character of the gains or losses realized by the Trust. These provisions may
also require a Trust to recognize income or gain without receiving cash with
which to make distributions in the amounts necessary to satisfy the requirements
for maintaining RIC status and for avoiding income and excise taxes. Each Trust
will monitor its transactions and may make certain tax elections in order to
mitigate the effect of these rules and prevent disqualification of the Trust as
a RIC.
TAX TREATMENT OF ADDITIONAL DIVIDENDS
If a Trust makes a Retroactive Taxable Allocation, it will pay Additional
Dividends to holders of APS who are subject to the Retroactive Taxable
Allocation. See "Description of APS--Dividends--Additional Dividends." The
federal income tax consequences of Additional Dividends under existing law are
uncertain. An Additional Dividend generally will be designated by each Trust as
an exempt-interest dividend except to the extent net capital gain or other
taxable income is allocated thereto as described above.
SALES OF APS
The sale of APS (including transfers in connection with a redemption or
repurchase of APS) will be a taxable transaction for federal income tax
purposes. A selling shareholder generally will recognize gain or loss equal to
the difference between the holder's adjusted tax basis in the APS and the amount
received. If the APS are held as a capital asset, the gain or loss will be a
capital loss and will be long-term if the APS have been held for more than one
year. Any loss realized on a disposition of APS held for six months or less will
be disallowed to the extent of any exempt-interest dividends received with
respect to those APS and any such loss that is not disallowed will be treated as
a long-term, rather than a short-term, capital loss to the extent of any capital
gain distributions received with respect to those APS. A shareholder's holding
period for APS 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 APS will be disallowed to the
extent those APS are replaced by other APS within a period of 61 days beginning
30 days before and ending 30 days after the date of disposition of the original
APS. In that event, the basis of the replacement APS will be adjusted to reflect
the disallowed loss.
BACKUP WITHHOLDING
Each Trust is required to withhold 31% of all taxable dividends, capital
gain dividends and repurchase proceeds payable to any individuals and certain
other non-corporate shareholders who do not provide the Trust with a correct
taxpayer identification number. Withholding at that rate from taxable dividends
and capital gain distributions is also required for such shareholders who
otherwise are subject to backup withholding.
STATE TAXES
California Taxes. In the opinion of special California tax counsel,
California law provides that dividends paid by the California Trust and
designated by it as tax-exempt are exempt from California state personal income
tax on individuals who reside in California to the extent such dividends are
derived from interest payments on Municipal Obligations exempt from California
state personal income taxes, provided that a least 50% of the assets of the
California Trust at the close of each quarter of its taxable year are invested
in obligations which, if held by an individual, the interest would be is exempt
under either federal or California law from taxation by the state of California.
Distributions of short-term capital gains are treated as ordinary
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income, and distributions of long-term capital gain are treated as long-term
capital gains taxable at ordinary income rated under the California state
personal income tax.
Florida Taxes. Based on the opinion of special Florida tax counsel, APS of
the Florida Trust owned by a Florida resident will be exempt from the Florida
intangible personal property tax so long as the Florida Trust's portfolio
includes on January 1 of each year only assets, such as Florida tax-exempt
securities and U.S. government securities, that are exempt from the Florida
intangible personal property tax. The Florida Trust will normally invest in
tax-exempt obligations of the state of Florida, the U.S. government, the U.S.
Territories or political subdivisions of the U.S. government or the state of
Florida so Trust Shares should, under normal circumstances, be exempt from the
Florida intangibles tax.
Massachusetts Taxes. In the opinion of Kirkpatrick & Lockhart LLP, under
Massachusetts law, the Massachusetts Trust's interest distributions attributable
to Massachusetts obligations (debt obligations issued by the Commonwealth of
Massachusetts or its political subdivisions, including agencies or
instrumentalities thereof), obligations of U.S. territories (the Government of
Puerto Rico, Guam, or the United States Virgin Islands) or obligations of the
U.S. government can be excluded from Massachusetts gross income for individuals,
estates and trusts that are subject to Massachusetts taxation. Distributions
properly designated as capital gain dividends and attributable to gains realized
on the state of certain Massachusetts tax-exempt obligations issued pursuant to
statutes that specifically exempt such gains from Massachusetts taxation will
also be exempt from Massachusetts personal income tax. Other distributions from
the Massachusetts Trust that are included in a shareholder's federal gross
income, including distributions derived from net long-term capital gains not
described in the preceding sentence and net short-term capital gains, are
generally not exempt from Massachusetts personal income tax.
Michigan Trust. The Michigan Trust has received an opinion from special
Michigan tax counsel to the Michigan Trust to the effect that shareholders of
the Michigan Trust who are subject to the Michigan state income tax, municipal
income tax or single business tax will not be subject to such taxes on their
Michigan Trust dividends to the extent that such distributions are
exempt-interest dividends for federal income tax purposes and are attributable
to interest on obligations held by the Michigan Trust which is exempt from
federal income tax and is exempt from Michigan State and city income taxes and
Michigan single business tax ("Michigan tax-exempt obligations"). Other
distributions with respect to shares of the Michigan Trust including, but not
limited to, long or short-term capital gains, will be subject to the Michigan
income tax or single business tax and may be subject to the city income taxes
imposed by certain Michigan cities.
New Jersey Taxes. The New Jersey Trust intends to satisfy New Jersey's
statutory requirements for treatment as a "Qualified Investment Fund". The New
Jersey Trust has obtained an opinion of its New Jersey special tax counsel that,
provided the New Jersey Trust limits its investment to those described in this
Prospectus and otherwise satisfies such statutory requirements, holders of APS
of the New Jersey Trust which are individuals, estates or trusts will not be
required to include in their New Jersey gross income distributions from the New
Jersey Trust that are attributable to interest or gain realized by the New
Jersey Trust from obligations the interest on which is exempt from federal
income tax and is exempt from New Jersey State personal income tax or other
obligations statutorily free from New Jersey taxation. However, with regard to
corporate shareholders, such counsel is also of the opinion that distributions
from the New Jersey Trust will not be excluded from net income and APS of the
New Jersey Trust will not be excluded from investment capital in determining New
Jersey corporation business (franchise) and corporation income taxes for
corporate shareholders.
New York Taxes. In the opinion of special New York tax counsel, under New
York law, dividends paid by the New York Trust are exempt from New York State
and New York city personal income tax applicable to individuals who reside in
New York State and New York City to the extent such dividends are excluded from
gross income for federal income tax purposes and are derived from interest
payments on tax-exempt obligations issued by or on behalf of New York state and
its political subdivisions and agencies and the governments of Puerto Rico, the
U.S. Virgin Islands and Guam. Other distributions from the New York Trust,
including distributions derived from taxable ordinary income and net short-term
and long-term capital gains, are generally not exempt from New York state and
city personal income tax. Distributions to a
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<PAGE> 60
corporate holder of APS will be subject to New York State Corporation franchise
tax and New York City general corporation tax.
Ohio Taxes. In the opinion of special Ohio tax counsel to the Ohio Trust,
under Ohio law individuals who are otherwise subject to the Ohio personal income
tax will not be subject to such tax on dividends paid by the Ohio Trust to the
extent such dividends are properly attributable to interest on obligations
issued by or on behalf of the state of Ohio or its political subdivisions, or
the agencies or instrumentalities thereof ("Ohio obligations"). Dividends paid
by the Ohio Trust also will be excluded from the net income base of the Ohio
corporation franchise tax to the extent such dividends are excluded from gross
income for federal income tax purposes or are properly attributable to interest
on Ohio obligations. However, the Ohio Trust's APS will be included in the tax
base for purposes of computing the Ohio corporation franchise tax on the net
worth basis. These conclusions regarding Ohio taxation are based on the
assumption that the Ohio Trust will continue to qualify as RIC under the Code
and that at all times at least 50% of the value of the total assets of the Ohio
Trust will consist of Ohio obligations.
Pennsylvania Taxes. Interest derived by the Pennsylvania Trust from
obligations which are statutorily free from state taxation in Pennsylvania
("Exempt Obligations") are not taxable on pass through to holders of APS for
purposes of the Pennsylvania personal income tax. The term "Exempt Obligations"
includes (i) those obligations issued by the Commonwealth of Pennsylvania and
its political subdivision, agencies and instrumentalities, the interest from
which is statutorily free from state taxation in the Commonwealth of
Pennsylvania, and (ii) certain qualifying obligations of U.S. territories and
possessions, or U.S. Government obligations. Distributions attributable to most
other sources, including capital gains, will not be exempt from Pennsylvania
personal income tax.
Corporate holders of APS that are subject to the Pennsylvania corporate net
income tax will not be subject to corporate net income tax on distributions of
interest made by the Pennsylvania Trust, provided such distributions are
attributable to Exempt Obligations. Distributions of capital gain attributable
to Exempt Obligations are subject to the Pennsylvania corporate net income tax.
An investment in the Pennsylvania Trust is also exempt from the Pennsylvania
gross premiums tax.
APS of the Pennsylvania Trust which are held by individuals who are
Pennsylvania residents and subject to the Pennsylvania county personal property
tax will be exempt from such tax to the extent that the obligations held by the
Pennsylvania Trust consist of Exempt Obligations on the annual assessment date.
Corporations are not subject to Pennsylvania personal property taxes.
For individual holders of APS who are residents of the City of
Philadelphia, distributions of interest derived from Exempt Obligations will not
be taxable for purposes of the Philadelphia School District Investment Net
Income Tax ("Philadelphia School District Tax"), provided that the Pennsylvania
Trust reports to its investors the percentage of Exempt Obligations held by it
for the year. The Pennsylvania Trust will report such percentage to its
investors.
------------------------------
The foregoing briefly summarizes some of the important federal income tax
and state tax consequences of investing in the APS and reflects the federal and
applicable state and local tax laws, 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. Other federal, state or local tax
considerations may apply to a particular investor, including state alternative
minimum tax. Investors should consult their tax advisers.
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<PAGE> 61
DESCRIPTION OF CAPITAL STRUCTURE
Each 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 each Trust may authorize separate classes of
shares of beneficial interest. The Trustees have authorized an unlimited number
of shares of beneficial interest stock, par value $0.01 per share, all of which
shares were initially classified as Common Shares. The Declaration of Trust also
authorizes the issuance of an unlimited number of shares of beneficial interest
with preference rights, including 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. For a description of the APS, see "Description of APS." The
following table shows the amount of (i) shares authorized, (ii) shares held by a
Trust for its own account and (iii) shares outstanding, for each class of
authorized securities of each Trust as of March 1, 1999.
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING
(EXCLUSIVE OF
AMOUNT HELD BY AMOUNT HELD BY
TRUST FOR ITS OWN TRUST FOR ITS OWN
TITLE OF CLASS AMOUNT AUTHORIZED ACCOUNT ACCOUNT)
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
CALIFORNIA TRUST
Common Shares Unlimited -0- 7,021,667
Auction Preferred Shares 2,360 -0- -0-
FLORIDA TRUST
Common Shares Unlimited -0- 4,204,167
Auction Preferred Shares 1,420 -0- -0-
MASSACHUSETTS TRUST
Common Shares Unlimited -0- 2,536,667
Auction Preferred Shares 860 -0- -0-
MICHIGAN TRUST
Common Shares Unlimited -0- 2,076,667
Auction Preferred Shares 700 -0- -0-
NEW JERSEY TRUST
Common Shares Unlimited -0- 4,356,667
Auction Preferred Shares 1,520 -0- -0-
NEW YORK TRUST
Common Shares Unlimited -0- 5,106,667
Auction Preferred Shares 1,780 -0- -0-
OHIO TRUST
Common Shares Unlimited -0- 2,766,667
Auction Preferred Shares 940 -0- -0-
PENNSYLVANIA TRUST
Common Shares Unlimited -0- 2,651,667
Auction Preferred Shares 900 -0- -0-
</TABLE>
Holders of Common Shares are entitled to share equally in dividends
declared by a Board of Trustees payable to holders of Common Shares and in the
net assets of each Trust available for distribution to holders of Common Shares
after payment of the preferential amounts payable to holders of any outstanding
Preferred Shares. Neither holders of Common Shares nor holders of Preferred
Shares have pre-emptive or conversion rights and Common Shares are not
redeemable. Upon liquidation of a 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. Each Declaration of Trust provides that Shareholders
are not liable for any liabilities of a 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
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<PAGE> 62
established under Massachusetts law, in certain limited circumstances, may be
held personally liable for the obligations of a Trust as though they were
general partners, the provisions of each Declaration of Trust described in the
foregoing sentence make the likelihood of such personal liability remote.
Holders of Common Shares are entitled to one vote for each share held and
will vote with the holders of any outstanding APS or other Preferred Shares on
each matter submitted to a vote of holders of Common Shares, except as described
under "Description of APS--Voting Rights."
Shareholders are entitled to one vote for each share held. The Common
Shares, APS and any other Preferred Shares do not have cumulative voting rights,
which means that the holders of more than 50% of the Common Shares, APS and any
other Preferred Shares voting for the election of Trustees can elect all of the
Trustees standing for election by such holders, and, in such event, the holders
of the remaining Common Shares, APS and any other Preferred Shares will not be
able to elect any of such Trustees.
So long as any APS or any other Preferred Shares are outstanding, holders
of Common Shares will not be entitled to receive any dividends of or other
distributions from each Trust, unless at the time of such declaration, (1) all
accrued dividends on preferred shares or accrued interest on borrowings has been
paid and (2) the value of a 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, each Trust is 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 include
an asset coverage test more stringent than under the 1940 Act. See "Description
of APS--Restrictions on Dividends and Other Payments."
Each Trust will send unaudited reports at least semi-annually and audited
financial statements annually to all of its shareholders.
The Common Shares of each Trust commenced trading on the American Stock
Exchange ("AMEX") on January 26, 1999. At February 19, 1999, the net asset value
per share of Common Shares and the closing price per share of Common Shares on
the AMEX were as follows: California Trust -- $14.99, $15.13; Florida
Trust -- $14.99, $15.00; Massachusetts Trust -- $14.93, $15.19; Michigan
Trust -- $14.96, $15.00; New Jersey Trust -- $14.98, $15.00; New York
Trust -- $14.99, $15.00; Ohio Trust -- $14.97, $15.50; and Pennsylvania
Trust -- $14.96, $15.00.
PREFERRED SHARES
Under the 1940 Act, each Trust is permitted to have outstanding more than
one series of Preferred Shares as long as no single series has priority over
another series as to the distribution of assets of the Trust or the payment of
dividends. Neither holders of Common Shares nor holders of Preferred Shares have
pre-emptive rights to purchase any APS or any other Preferred Shares that might
be issued. It is anticipated that the net asset value per share of the APS will
equal its original purchase price per share plus accumulated dividends per
share.
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<PAGE> 63
CERTAIN PROVISIONS OF THE DECLARATIONS OF TRUST
Anti-Takeover Provisions in the Declaration of Trust. Each Declaration of
Trust includes provisions that could have the effect of limiting the ability of
other entities or persons to acquire control of a Trust or to change the
composition of its Board of Trustees, and could have the effect of depriving
holders of Common Shares 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 a Trust, which attempts could have
the effect of increasing the expenses of the Trust and interfering with the
normal operation of the Trust. Each Board of Trustees is divided into three
classes, with the term of one class expiring at each annual meeting of holders
of Common Shares and Preferred Shares. 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 each Trust that elected such Trustee and is entitled to vote
on the matter.
In addition, each Declaration of Trust requires the favorable vote of the
holders of at least 75% of the outstanding shares of each class of a 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 each Trust. The
transactions subject to these special approval requirements are: (i) the merger
or consolidation of a Trust or any subsidiary of a Trust with or into any
Principal Shareholder; (ii) the issuance of any securities of a Trust to any
Principal Shareholder for cash; (iii) the sale, lease or exchange of all or any
substantial part of the assets of a 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 a 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).
Each 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 Massachusetts law or the 1940
Act, are in the best interest of holders of Common Shares and Preferred Shares
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. Each 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 Common 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 each 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 each Trust's portfolio likely would prohibit it from complying
with regulations of the SEC applicable to open-end investment companies.
Accordingly, conversion likely would require significant changes in each Trust's
investment policies and liquidation of a substantial portion of its relatively
illiquid portfolio. Conversion of each Trust to an open-end investment company
also would require the redemption of any outstanding Preferred Shares and could
require the repayment of borrowings. Each 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 a Trust to an open-end
investment company.
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<PAGE> 64
UNDERWRITING
The underwriters named below (the "Underwriters"), acting through
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York, as
lead representative, and Prudential Securities Incorporated, Salomon Smith
Barney Inc. and A.G. Edwards & Sons, Inc., as their representatives (together
with PaineWebber Incorporated, the "Representatives"), have severally agreed,
subject to the terms and conditions of an Underwriting Agreement with each
respective Trust and Eaton Vance, 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.
<TABLE>
<CAPTION>
UNDERWRITER
--------------------------------------------------------
PRUDENTIAL SALOMON
PAINEWEBBER SECURITIES SMITH A.G. EDWARDS
TRUST INCORPORATED INCORPORATED BARNEY INC. & SONS, INC. TOTAL
----- ------------ ------------ ----------- ------------ -----
<S> <C> <C> <C> <C> <C>
California Trust.......................
Florida Trust..........................
Massachusetts Trust....................
Michigan Trust.........................
New Jersey Trust.......................
New York Trust.........................
Ohio Trust.............................
Pennsylvania Trust.....................
</TABLE>
The Underwriters have advised each Trust that they propose initially to
offer the APS to the public at the public offering price set forth on the cover
page of this Prospectus, and to certain dealers at such price less a concession
not in excess of $ per share. The Underwriters may allow, and such dealers
may reallow, a discount not in excess of $ per share to other dealers. After
the initial public offering, the public offering price, concession and discount
may be changed. Investors must pay for any APS purchased in the initial public
offering on or before March , 1999.
The Underwriters will act in Auctions as a Broker-Dealer as set forth under
"Description of APS--The Auction--General--Broker-Dealer Agreements" and will be
entitled to fees for services as a Broker-Dealer as set forth under "Description
of APS--Broker-Dealers." The Underwriters also may provide information to be
used in ascertaining the Reference Rate.
Each Trust anticipates that the Underwriters from time to time may act as
dealers in connection with the execution of the Trust's portfolio transactions.
See "Investment Restrictions" and "Portfolio Transactions."
Each Trust and the Adviser have agreed to indemnify the Underwriters
against certain liabilities including liabilities under the Securities Act of
1933, as amended.
As described below under "Shareholder Servicing Agent, Custodian and
Transfer Agency," PaineWebber Incorporated will provide shareholder services to
each 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 each 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 each Trust on an ongoing basis and to communicate holders of
Common Shares and prospective investors in Common Shares each 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 in Common Shares market price, net asset value, yield and other
information regarding each Trust, if reasonably obtainable, for the purpose of
maintaining the visibility of each 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
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<PAGE> 65
behalf of each Trust, and consult with representatives and Trustees of the Trust
in connection therewith. For these services, Eaton Vance will pay the
Shareholder Servicing Agent a fee equal on an annual basis to .10% of each
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, 200 Clarendon Street, Boston, MA 02116 is
the custodian of each Trust and will maintain custody of the securities and cash
of each Trust. IBT maintains each 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 each 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 each Trust.
LEGAL OPINIONS
It is expected that certain legal matters in connection with the APS
offered hereby will be passed upon for each Trust by Kirkpatrick & Lockhart LLP,
and for the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP and its
affiliated entities.
EXPERTS
The statement of assets, liabilities and capital of each Trust as of
January 21, 1999 included in this Prospectus and the Registration Statement has
been audited by Deloitte & Touche LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and is included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing. The selection of independent auditors is subject to ratification
by shareholders of each Trust.
ADDITIONAL INFORMATION
Each Trust is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act and in accordance therewith is required to
file reports, proxy statements and other information with the SEC. Any such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities of the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: Regional Office, at Seven World Trade Center, 61
Suite 1300, New York, New York 10048; Pacific Regional Office, at 5670 Wilshire
Boulevard, 11th Floor, Los Angeles, California 90036; and Midwest Regional
Office, at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such materials can be obtained from the
public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The SEC maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including each Trust, that file
electronically with the SEC. Reports, proxy statements and other information
concerning each Trust can also be inspected at the offices of the American Stock
Exchange, 86 Trinity Place, New York, New York 10006.
Additional information regarding each Trust and the APS is contained in the
Registration Statement on Form N-2, including amendments, exhibits and schedules
thereto, relating to such shares filed by each Trust with the SEC in Washington,
D.C. This Prospectus does not contain all of the information set forth in the
Registration Statement, including any amendments, exhibits and schedules
thereto. For further information with respect to each Trust and the APS offered
hereby, reference is made to the Registration Statement.
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<PAGE> 66
Statements contained in this Prospectus as to the contents of any contract or
other document 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, each such statement being qualified in
all respects by such reference. A copy of the Registration Statement may be
inspected without charge at the Commission's principal office in Washington,
D.C., and copies of all or any part thereof may be obtained from the Commission
upon the payment of certain fees prescribed by the Commission.
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Additional Investment Information and Restrictions.......... B-2
Trustees and Officers....................................... B-7
Investment Advisory and Other Services...................... B-11
Portfolio Trading........................................... B-12
Taxes....................................................... B-14
Other Information........................................... B-15
Auditors.................................................... B-16
Financial Statements and Independent Auditors' Reports...... B-17
Unaudited Portfolios of Investments Owned................... B-41
Appendix A: Ratings of Municipal Obligations................ B-50
Appendix B: Tax Equivalent Yield Tables..................... B-56
Appendix C: Settlement Procedures........................... B-64
Appendix D: Auction Procedures.............................. B-67
Appendix E: State and U.S. Territory Information............ B-74
</TABLE>
TRUSTEES OF EACH 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
- ---------------
* Trustees to be elected by holders of Preferred Shares
58
<PAGE> 67
GLOSSARY
"AA" (AA) "Composite Commercial Paper Rate," on any Valuation Date, means
(i) the Interest Equivalent of the rate on commercial paper placed on behalf of
issuers whose corporate bonds are rated "AA" by S&P or "Aa" by Moody's or the
equivalent of such rating by another nationally recognized statistical rating
organization, as such rate is made available on a discount basis or otherwise by
the Federal Reserve Bank of New York for the Business Day immediately preceding
such date, or (ii) in the event that the Federal Reserve Bank of New York does
not make available such a rate, then the arithmetic average of the Interest
Equivalent of the rate on commercial paper placed on behalf of such issuers, as
quoted on a discount basis or otherwise by Paine Webber Incorporated or its
successors that are Commercial Paper Dealers, to the Auction Agent for the close
of business on the Business Day immediately preceding such date. If one of the
Commercial Paper Dealers does not quote a rate required to determine the "AA"
Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate will
be determined on the basis of the quotation or quotations furnished by any
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers
selected by a Trust to provide such rate or rates not being supplied by the
Commercial Paper Dealer. If the number of Dividend Period days shall be (i) 7 or
more but fewer than 49 days, such rate shall be the Interest Equivalent of the
30-day rate on such commercial paper; (ii) 49 or more but fewer than 70 days,
such rate shall be the Interest Equivalent of the 60-day rate on such commercial
paper; (iii) 70 or more days but fewer than 85 days, such rate shall be the
arithmetic average of the Interest Equivalent of the 60-day and 90-day rates on
such commercial paper; (iv) 85 or more days but fewer than 99 days, such rate
shall be the Interest Equivalent of the 90-day rate on such commercial paper;
(v) 99 or more days but fewer than 120 days, such rate shall be the arithmetic
average of the Interest Equivalent of the 90-day and 120-day rates on such
commercial paper; (vi) 120 or more days but fewer than 141 days, such rate shall
be the Interest Equivalent of the 120-day rate on such commercial paper; (vii)
141 or more days but fewer than 162 days, such rate shall be the arithmetic
average of the Interest Equivalent of the 120-day and 180-day rates on such
commercial paper; and (viii) 162 or more days but fewer than 183 days, such rate
shall be the Interest Equivalent of the 180-day rate on such commercial paper.
"Additional Dividend" has the meaning set forth on page 40 of this
Prospectus.
"Adviser" means Eaton Vance Management.
"Agent Member" means the member of the Securities Depository that will act
on behalf of a Beneficial Owner of one or more APS or on behalf of a Potential
Beneficial Owner.
"Amended By-Laws" means the By-laws of each Trust, as amended February 21,
1999, specifying the powers, preferences and rights of the APS.
"APS" means the Auction Preferred Shares with a par value of $.01 per share
and a liquidation preference of $25,000 per share plus an amount equal to
accumulated but unpaid dividends thereon (whether or not earned or declared), of
a Trust.
"APS Basic Maintenance Amount" has the meaning set forth on page 43 of this
Prospectus.
"APS Basic Maintenance Cure Date" has the meaning set forth on page 43 of
this Prospectus.
"APS Basic Maintenance Report" has the meaning set forth on page 44 of this
Prospectus.
"Anticipation Notes" means the following Municipal Obligations: revenue
anticipation notes, tax anticipation notes, tax and revenue anticipation notes,
grant anticipation notes and bond anticipation notes.
"Applicable Percentage" has the meaning set forth on page 32 of this
Prospectus.
"Applicable Rate" means the rate per annum at which cash dividends are
payable on APS for any Dividend Period.
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means Bankers Trust Corporation unless and until another
commercial bank, trust company or other financial institution appointed by a
resolution of the Board of Trustees of each Trust or a
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duly authorized committee thereof enters into an agreement with each to follow
the Auction Procedures for the purpose of determining the Applicable Rate and to
act as transfer agent, registrar, dividend disbursing agent and redemption agent
for the APS.
"Auction Agent Agreement" means the agreement entered into between each
Trust and the Auction Agent which provides, among other things, that the Auction
Agent will follow the Auction Procedures for the purpose of determining the
Applicable Rate.
"Auction Date" has the meaning set forth on page 31 of this Prospectus.
"Auction Procedures" means the procedures for conducting Auctions set forth
in Appendix D to this Statement of Additional Information.
"Available APS" has the meaning specified in Paragraph 10(d)(i) of the
Auction Procedures.
"Beneficial Owner" means a customer of a Broker-Dealer who is listed on the
records of that Broker-Dealer (or if applicable, the Auction Agent) as a holder
of APS or a Broker-Dealer that holds APS for its own account.
"Bid" has the meaning specified in Subsection 10(b)(i) of the Auction
Procedures.
"Bidder" has the meaning specified in Subsection 10(b)(i) of the Auction
Procedures.
"Board of Trustees" or "Board" means the Board of Trustees of each Trust.
"Broker-Dealer" means any broker-dealer, or other entity permitted by law
to perform the functions required of a Broker-Dealer in the Auction Procedures,
that has been selected by each Trust and has entered into a Broker-Dealer
Agreement with the Auction Agent that remains effective.
"Broker-Dealer Agreement" means an agreement entered into between the
Auction Agent and a Broker-Dealer, including PaineWebber Incorporated,
Prudential Securities Incorporated, Salomon Smith Barney Inc. and A.G. Edwards &
Sons, Inc., pursuant to which such Broker-Dealer agrees to follow the Auction
Procedures.
"Business Day" means a day on which the New York Stock Exchange is open for
trading and which is not a Saturday, Sunday or other day on which banks in New
York City are authorized or obligated by law to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Cede & Co." means the nominee of DTC, and in whose name the shares of APS
initially will be registered.
"Commercial Paper Dealers" means PaineWebber Incorporated and such other
commercial paper dealer or dealers as each Trust from time to time may appoint
or, in lieu thereof, their respective affiliates and successors.
"Common Shares" means the Common Shares, par value $0.01 per share, of each
Trust.
"Date of Original Issue" means, with respect to each APS, the date on which
such share first is issued by each Trust.
"Declaration of Trust" means the Agreement and Declaration of Trust of each
Trust dated December 10, 1998.
"Deposit Securities" means cash and Municipal Obligations rated at least A2
(having a remaining maturity of 12 months or less), P-1, VMIG-1 or MIG-1 by
Moody's or A (having a remaining maturity of 12 months or less), A-1+ or SP-1+
by S&P.
"Discount Factor" means a S&P Discount Factor.
"Discounted Value" of any asset of each means with respect to an S&P
Eligible Asset, the quotient of the market value thereof divided by the
applicable S&P Discount Factor.
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"Dividend Payment Date" has the meaning set forth on page 37 of this
Prospectus.
"Dividend Periods" has the meaning set forth on page 37 of this Prospectus.
"DTC" means The Depository Trust Company.
"Eligible Assets" means S&P Eligible Assets.
"Existing Holder" means a Broker-Dealer or any such other person as may be
permitted by each Trust that is listed as the holder of record of APS in the
records of the Auction Agent.
"Fitch" means Fitch IBCA or its successors.
"General Obligation Bond" has the meaning set forth on page 26 of this
Prospectus.
"Hold Order" has the meaning specified in Subsection 10(b)(i) of the
Auction Procedures.
"IBT" means Investors Bank & Trust Company, the custodian of each Trust's
assets.
"Initial Dividend Payment Date" has the meaning set forth on page iii of
this Prospectus.
"Initial Dividend Period" means, with respect to the APS, the period from
and including the Date of Original Issue to but excluding the Initial Dividend
Payment Date of the APS.
"Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a financial
futures contract.
"Interest Equivalent" means a yield on a 360-day basis of a discount basis
security which is equal to the yield on an equivalent interest-bearing security.
"IRS" means the Internal Revenue Service.
"Long Term Dividend Period" has the meaning set forth on page 4 of this
Prospectus.
"Mandatory Redemption Price" has the meaning set forth on page 43 of this
Prospectus.
"Marginal Tax Rate" means the maximum marginal federal income tax rate
applicable to an individual's or a corporation's ordinary income, whichever is
greater.
"Maximum Applicable Rate" has the meaning specified under "Description of
APS -- The Auction -- Orders by Beneficial Owners, Potential Beneficial Owners,
Existing Holders and Potential Holders" in the Prospectus.
"Maximum Potential Additional Dividend Liability" has the meaning set forth
on page 43 of this Prospectus.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"Municipal Obligations" has the meaning set forth on page 17 of this
Prospectus.
"Municipal Index" has the meaning set forth on page 26 of this Prospectus.
"1940 Act" means the Investment Company Act of 1940, as amended from time
to time.
"1940 Act APS Asset Coverage" has the meaning set forth on page 40 of this
Prospectus.
"1940 Act Cure Date" has the meaning set forth on page 41 of this
Prospectus.
"Non-Call Period" has the meaning set forth under "Specific Redemption
Provisions" below.
"Non-Payment Period" has the meaning set forth on page 38 of this
Prospectus.
"Non-Payment Period Rate" has the meaning set forth on page 39 of this
Prospectus.
"Notice of Revocation" has the meaning set forth on page 37 of this
Prospectus.
"Notice of Special Dividend Period" has the meaning set forth on page 37 of
this Prospectus.
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"Optional Redemption Price" has the meaning set forth on page 43 of this
Prospectus.
"Order" has the meaning specified in Subsection 10(b)(i) of the Auction
Procedures.
"Potential Beneficial Owner" means a customer of a Broker-Dealer or a
Broker-Dealer that is not a Beneficial Owner of APS but that wishes to purchase
such shares, or that is a Beneficial Owner that wishes to purchase additional
APS.
"Potential Holder" means any Broker-Dealer or any such other person as may
be permitted by each Trust, including any Existing Holder, who may be interested
in acquiring APS (or, in the case of an Existing Holder, additional APS).
"Preference Item" has the meaning set forth on page 36 of this Prospectus.
"Preferred Shares" means preferred shares of beneficial interest, par value
$0.01 per share, of each Trust.
"Premium Call Period" has the meaning set forth under "Specific Redemption
Provisions" below.
"Receivables For Municipal Obligations Sold" has the meaning set forth on
page 24 of this Prospectus.
"Reference Rate" means: (i) with respect to a Dividend Period or a Short
Term Dividend Period having 28 or fewer days, the higher of the applicable "AA"
Composite Commercial Paper Rate and the Taxable Equivalent of the Short Term
Municipal Obligation Rate, (ii) with respect to any Short Term Dividend Period,
having more than 28 but fewer than 183 days, the applicable "AA" Composite
Commercial Paper Rate, (iii) with respect to any Short Term Dividend Period
having 183 or more but fewer than 364 days, the applicable U.S. Treasury Bill
Rate and (iv) with respect to any Long Term Dividend Period, the applicable U.S.
Treasury Note Rate.
"Request for Special Dividend Period" has the meaning set forth on page 37
of this Prospectus.
"Response" has the meaning set forth on page 37 of this Prospectus.
"Retroactive Taxable Allocation" has the meaning set forth on page 40 of
this Prospectus.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., or its successors.
"S&P Discount Factor" has the meaning set forth on page 40 of this
Prospectus.
"S&P Eligible Assets" has the meaning set forth on page 22 of this
Prospectus.
"S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the APS Basic Maintenance Cure
Date, that each Trust has under the Amended By-Laws to cure any failure to
maintain, as of such Valuation Date, a Discounted Value for its portfolio at
least equal to the APS Basic Maintenance Amount.
"S&P Hedging Transactions" has the meaning set forth on page 26 of this
Prospectus.
"S&P Volatility Factor" means 277% or such other potential dividend rate
increase factor as S&P advises each Trust in writing is applicable.
"Securities Depository" means The Depository Trust Company and its
successors and assigns or any successor securities depository selected by each
Trust that agrees to follow the procedures required to be followed by such
securities depository in connection with the APS.
"Sell Order" has the meaning specified in Subsection 10(b)(i) of the
Auction Procedures.
"7-Day Dividend Period" means a Dividend Period consisting of seven days.
"Short Term Dividend Period" has the meaning set forth on page 4 of this
Prospectus.
"Special Dividend Period" has the meaning set forth on page 4 of this
Prospectus.
"Specific Redemption Provisions" means, with respect to a Special Dividend
Period, either, or any combination of, (i) a period (a "Non-Call Period")
determined by the Board of Trustees of each Trust, after
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consultation with the Auction Agent and the Broker-Dealers, during which the APS
subject to such Dividend Period shall not be subject to redemption at the option
of a Trust and (ii) a period (a "Premium Call Period"), consisting of a number
of whole years and determined by the Board of Trustees of each Trust, after
consultation with the Auction Agent and the Broker-Dealers, during each year of
which the APS subject to such Dividend Period shall be redeemable at a Trust's
option at a price per share equal to $25,000 plus accumulated but unpaid
dividends plus a premium expressed as a percentage of $25,000, as determined by
the Board of Trustees of each Trust after consultation with the Auction Agent
and the Broker-Dealers.
"Submission Deadline" has the meaning specified in Subsection 10(a)(x) of
the Auction Procedures.
"Submitted Bid" has the meaning specified in Subsection 10(d)(i) of the
Auction Procedures.
"Submitted Hold Order" has the meaning specified in Subsection 10(d)(i) of
the Auction Procedures.
"Submitted Order" has the meaning specified in Subsection 10(d)(i) of the
Auction Procedures.
"Submitted Sell Order" has the meaning specified in Subsection 10(d)(i) of
the Auction Procedures.
"Subsequent Dividend Period" means each Dividend Period after the Initial
Dividend Period.
"Substitute Rating Agency" and "Substitute Rating Agencies" shall mean a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations, respectively, selected by
PaineWebber Incorporated, or its respective affiliates and successors, after
consultation with each Trust, to act as a substitute rating agency or substitute
rating agencies, as the case may be, to determine the credit ratings of the APS.
"Sufficient Clearing Bids" has the meaning specified in Subsection 10(d)(i)
of the Auction Procedures.
"Taxable Equivalent of the Short-Term Municipal Obligations Rate" on any
date means 90% of the quotient of (A) the per annum rate expressed on an
interest equivalent basis equal to the Kenny S&P 30 day High Grade Index (the
"Kenny Index"), or any successor index made available for the Business Day
immediately preceding such date but in any event not later than 8:30 a.m., New
York City time, on such date by Kenny Information Systems Inc. or any successor
thereto, based upon 30-day yield evaluations at par of bonds the interest on
which is excludable for federal income tax purposes under the Code of "high
grade" component issuers selected by Kenny Information Systems Inc. or any such
successor from time to time in its discretion, which component issuers shall
include, without limitation, issuers of general obligation bonds but shall
exclude any bonds the interest on which constitutes a Preference Item, divided
by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal); provided,
however, that if the Kenny Index is not made so available by 8:30 a.m., New York
City time, on such date by Kenny Information Systems Inc. or any successor, the
Taxable Equivalent of the Short-Term Municipal Obligations Rate shall mean the
quotient of (A) the per annum rate expressed on an interest equivalent basis
equal to the most recent Kenny Index so made available for any preceding
Business Day, divided by (B) 1.00 minus the marginal tax rate noted above
(expressed as a decimal). A Trust may not utilize a successor index to the Kenny
Index unless S&P provides the Trust with written confirmation that the use of
such successor index will not adversely affect the then-current S&P rating of
the APS.
"Treasury Bonds" has the meaning set forth on page 27 of this Prospectus.
"Trust" means each Eaton Vance Municipal Income Trust listed on the cover
page of this Prospectus, each a Massachusetts business trust that is the issuer
of APS.
"U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent of
the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 p.m. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate" on
any date means the Interest Equivalent of the yield as calculated by reference
to the arithmetic average of the bid price quotations of the actively traded
Treasury Bill with a maturity most nearly comparable to the length of the
related Dividend Period, as determined by bid price quotations as of any time on
the
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<PAGE> 72
Business Day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the Auction
Agent.
"U.S. Treasury Note Rate" on any date means (i) the yield as calculated by
reference to the bid price quotation of the actively traded, current coupon
Treasury Note with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 p.m. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Note
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by the bid price quotations as of any time on the Business
Day immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the Auction Agent.
"Valuation Date" has the meaning set forth on page 43 of this Prospectus.
"Variation Margin" means, in connection with an outstanding financial
futures contract owned or sold by each Trust, the amount of cash or securities
paid to or received from a broker (subsequent to the Initial Margin payment)
from time to time as the price of such financial futures contract fluctuates.
"Winning Bid Rate" has the meaning specified in Subsection 10(d)(i) of the
Auction Procedures.
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EATON VANCE CALIFORNIA MUNICIPAL INCOME TRUST
2,360 SHARES
EATON VANCE FLORIDA MUNICIPAL INCOME TRUST
1,420 SHARES
EATON VANCE MASSACHUSETTS MUNICIPAL INCOME TRUST
860 SHARES
EATON VANCE MICHIGAN MUNICIPAL INCOME TRUST
700 SHARES
EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
1,520 SHARES
EATON VANCE NEW YORK MUNICIPAL INCOME TRUST
1,780 SHARES
EATON VANCE OHIO MUNICIPAL INCOME TRUST
940 SHARES
EATON VANCE PENNSYLVANIA MUNICIPAL INCOME TRUST
900 SHARES
AUCTION PREFERRED SHARES
LIQUIDATION PREFERENCE $25,000 PER SHARE
[EATON VANCE LOGO]
----------------------
PROSPECTUS
----------------------
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
SALOMON SMITH BARNEY
A.G. EDWARDS & SONS, INC.
------------------
MARCH 1, 1999
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<PAGE> 77
STATEMENT OF
ADDITIONAL INFORMATION
MARCH 1, 1999
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
24 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(800) 225-6265
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Investment Information and Restrictions.......... B-2
Trustees and Officers....................................... B-7
Investment Advisory and Other Services...................... B-10
Portfolio Trading........................................... B-11
Taxes....................................................... B-13
Other Information........................................... B-14
Auditors.................................................... B-15
Financial Statements and Independent Auditors' Reports...... B-16
Unaudited Portfolios of Investments Owned................... B-40
Appendix A: Ratings of Municipal Bonds...................... B-49
Appendix B: Tax Equivalent Yield Tables..................... B-55
Appendix C: Settlement Procedures........................... B-63
Appendix D: Auction Procedures.............................. B-66
Appendix E: State and U.S. Territory Information............ B-73
</TABLE>
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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 THE EATON VANCE MUNICIPAL INCOME TRUSTS LISTED
ABOVE (EACH A "TRUST") DATED MARCH 1, 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 ANY TRUST AT 1-800-225-6265.
<PAGE> 78
Capitalized terms used in this Statement of Additional Information and not
otherwise defined herein have the meanings given them in the Trusts' 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 taxable securities. While most Municipal Obligations
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 federal alternative minimum tax ("AMT") ("Preference
Item"): (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 obligations in the last
category is exempt from federal income tax but is treated as a Preference Item
that could subject the recipient to, or increase the recipient's liability for,
the AMT. For corporate shareholders, each Trust's distributions derived from
interest on all Municipal Obligations (whenever issued) is included in "adjusted
current earnings" for purposes of the AMT (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, each 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
<PAGE> 79
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. Each 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,
each 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. Each 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 a
Trust as a result of any such event, and a Trust may also manage (or engage
other persons to manage) or otherwise deal with any real estate, facilities or
other assets so acquired. Each 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 it. Each
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, each 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 a
Trust. Any income derived from the ownership of operation of such assets may not
be tax-exempt. In addition, each Trust's intention to qualify as a "regulated
investment company" ("RIC") under the Code may limit the extent to which a Trust
may exercise its rights by taking possession of such assets, because as a RIC a
Trust is subject to certain limitations on its investments and on the nature of
its income. See "Taxes".
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 a Trust will be affected by such
changes.
State Concentration. Each Trust normally will invest 65% or more of its
total assets in Municipal Obligations of issuers located in the applicable
state, and may invest 25% or more of its total assets in a U.S. territory
(Puerto Rico, the U.S. Virgin Islands and Guam). When a Trust does so, it will
be sensitive to factors affecting that state or territory, 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. Each 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 described above might involve
(without limitation) the following risks.
B-3
<PAGE> 80
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible federal legislation limiting the rates of 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. Each 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 a Trust's commitment and are subject to certain conditions such as the
issuance of satisfactory legal opinions. Each 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 a Trust to buy such securities on a
settlement date that could be several months or several years in the future.
Each Trust may also purchase instruments that give a Trust the option to
purchase a Municipal Obligation when and if issued.
Each 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 a Trust enters into the
purchase commitment. When a 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 a 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 a Trust remains substantially fully invested at the same time that it has
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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.
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 a 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. Each Trust may also enter into a
separate agreement with the seller of a security or some other person granting a
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 each Trust intends to limit this type of transaction to
institutions (such as banks or securities dealers) which the Adviser believes
present minimal credit risks. Each 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 each Trust or that selling institutions will be
willing to permit a Trust to exercise a put to hedge against rising interest
rates. Each 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 each 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 each Trust's
assets may be invested in securities as to which a 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, a
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 a Trust's net asset value.
The secondary market for some Municipal Obligations issued within a state
(including issues which are privately placed with a 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 each 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, each 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 each Trust (or
of securities that each Trust expects to purchase). To hedge against changes in
rates or as a substitute for the purchase of securities, each 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
each 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. Each Trust may purchase and write call and put
options on futures contracts which are traded on a U.S. or foreign exchange or
board of trade. Each 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 each Trust's custodian for the benefit of the
futures commission merchant through whom each 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
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exchange-traded instrument, which may make the instrument temporarily illiquid
and difficult to price. Commodity exchanges may also establish daily limits on
the amount that the price of a futures contract or futures option can vary from
the previous day's settlement price. Once the daily limit is reached, no trades
may be made that day at a price beyond the limit. This may prevent each Trust
from closing out positions and limiting its losses.
Each 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. Each 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 a Trust or
which it expects to purchase. Each 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 each
Trust are designated as fundamental policies and as such cannot be changed
without the approval of the holders of a majority of a Trust's outstanding
voting securities, which as used in this Statement of Additional Information
means the lesser of (a) 67% of the shares of a 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 outstanding shares
of a Trust. As a matter of fundamental policy, each 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 a 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 a 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. Each Trust reserves the
freedom of action to hold and to sell real estate acquired as a result of
the ownership of securities; or
(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.
(8) Invest more than 25% of its total assets in securities of issuers
in any one industry.*
* 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 of 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 a Trust may invest more than 25% of its total assets in a broader 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.
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For purposes of each Trust's investment restrictions, the determination of
the "issuer" of a Municipal Obligation that 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.
Each Trust has adopted the following nonfundamental investment policy,
which may be changed by its Trustees without approval of the Trust's
shareholders. As a matter of nonfundamental policy, each 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, each 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 a 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 a Trust to dispose of such security or other asset. Notwithstanding
the foregoing, each Trust must always be in compliance with the borrowing
policies set forth above.
TRUSTEES AND OFFICERS
Each 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 each 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)(4)
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
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NORTON H. REAMER (63), TRUSTEE (3)(4)
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. Elected Trustee October 30,
1998. 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 (42), VICE PRESIDENT
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
THOMAS M. METZOLD (40), 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 in 1999.
(2) Class II Trustee whose term expires in 2000.
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(3) Class III Trustee whose term expires in 2001.
(4) Trustee to be elected exclusively by holders of Preferred Shares as
described in the Prospectus.
Messrs. Hayes (Chairman), Dwight and Reamer and Ms. Stout are members of
the Special Committee of the Board of Trustees of each 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 a 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 a Trust or its shareholders.
The Nominating Committee of the Board of Trustees of each Trust is
comprised of all Trustees who are not "interested persons" as that term is
defined under the 1940 Act ("noninterested Trustees"). 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 and Ms. Bibliowicz are members of the
Audit Committee of the Board of Trustees of each 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 each Trust.
Trustees of each 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 (a "Trustees' Plan"). Under each
Trustees' Plan, an eligible Trustee may elect to have his deferred fees invested
by each Trust in the shares of one or more funds in the Eaton Vance Family of
Funds, and the amount paid to the Trustees under each Trustees' Plan will be
determined based upon the performance of such investments. Deferral of Trustees'
fees in accordance with each Trustees' Plan will have a negligible effect on a
Trust's assets, liabilities, and net income per share, and will not obligate a
Trust to retain the services of any Trustee or obligate a Trust to pay any
particular level of compensation to the Trustee. Each Trust does not have a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of each Trust are paid
by the applicable Trust. (The Trustees of each 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 each 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 each Trust the amounts set forth below for the fiscal
year ending November 30, 1999.
<TABLE>
<CAPTION>
TOTAL COMPENSATION ESTIMATED
FROM TRUSTS AND COMPENSATION FROM
NAME FUND COMPLEX EACH TRUST
---- ------------------- ------------------
<S> <C> <C>
Jessica M. Bibliowicz............................ N/A $385
Donald R. Dwight................................. $156,250(2) 385
Samuel L. Hayes, III............................. 166,250(3) 381
Norton H. Reamer................................. 156,250 374
Lynn A. Stout.................................... N/A 385
Jack L. Treynor.................................. 165,000 421
</TABLE>
- ---------------
(1) As of January 1, 1999 the Eaton Vance fund complex consists of 143
registered investment companies or series thereof.
(2) Includes $56,250 of deferred compensation.
(3) Includes $41,563 of deferred compensation.
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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.
Each 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 each 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. Each Trust will also bear
expenses incurred in connection with any litigation in which each Trust is a
party and any legal obligation to indemnify its officers and Trustees with
respect thereto, to the extent not covered by insurance.
Each 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 a 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 a Trust
or by vote of a majority of the outstanding interests of a Trust. Each 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 each
Trust's Trustees. Each agreement may be terminated at any time without penalty
on sixty (60) days' written notice by the Trustees of each Trust or Eaton Vance,
as applicable, or by vote of the majority of the outstanding shares of a 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 a 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 each Trust (as well as Mr. Hawkes who is also
a Trustee) hold positions in the Eaton Vance organization.
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EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of each 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 each Trust and such banks.
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 each 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 each 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 each 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. Each 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 each 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 each
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 each 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 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.
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Consistent with this practice, the Adviser receives Research Services from many
broker-dealer firms with which the Adviser places each 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 each 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.
Each 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 a 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 each Trust may also be
appropriate for other investment accounts managed by the Adviser or its
affiliates. Whenever decisions are made to buy or sell securities by a 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 a 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 each
Trust from time to time, it is the opinion of the Trustees of each Trust that
the benefits from the Adviser's organization outweigh any disadvantage that may
arise from exposure to simultaneous transactions.
B-12
<PAGE> 89
TAXES
Each Trust has elected to be, and intends to qualify for treatment each
year, as a RIC under the Code. Accordingly, each 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, each Trust will avoid any federal income tax on any income and gains
it distributes to its shareholders. If a Trust failed to qualify for treatment
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, each Trust must
distribute (or be deemed to have distributed) each calendar year (i) at least
98% of the sum of (a) its ordinary income (not including tax-exempt income) for
that year and (b) 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 November 30 of that year, after
reduction by any available capital loss carryforward, and (ii) 100% of certain
other amounts. Under current law, provided that a Trust qualifies as a RIC, it
should not be liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
Each 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. A 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 its 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 a 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 a Trust's taking certain positions in connection
with ownership of distressed securities. For example, there is uncertainty
regarding (i) when a 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 each 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 a Trust to be able to pay exempt-interest dividends, it must, and
each Trust 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 federal income tax
under Section 103(a). The portion of exempt-interest dividends attributable to
interest on certain Municipal Obligations is treated as a Preference Item.
Shareholders are required to report exempt-interest dividends on their federal
income tax returns.
Each Trust will designate distributions made to holders of Common Shares
and to holders of Preferred Shares, including the APS, 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 the exempt-interest dividends paid by a Trust will not be
tax-exempt to any shareholder who is a "substantial user" of the facilities
financed by tax-exempt obligations held by that 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) purchased 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
B-13
<PAGE> 90
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 each Trust
and the value of the securities it held may be affected.
Each 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. Each 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 a Trust of those
capital gains or taxable income would be taxable to its shareholders. However,
it is expected that those amounts, if any, would normally be insubstantial in
relation to the tax-exempt interest earned by each 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.
Each Trust's transactions in options and futures contracts will be subject
to special tax rules that may affect the amount, timing and character of
distributions to its shareholders. For example, certain positions held by a
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 a Trust that substantially diminish its 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. Each Trust may have to
limit its activities in options and futures contracts to enable it to maintain
its RIC status.
Investments in APS are not appropriate for non-U.S. investors or qualified
retirement plans and accounts.
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 a 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. Each 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 each Trust.
OTHER INFORMATION
Each 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. Each Declaration of Trust contains an express
disclaimer of shareholder liability in connection with Trust property or the
acts, obligations or affairs of a Trust. Each 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 a Trust itself is unable to meet its obligations. Each
Trust believes the risk of any holder of APS incurring any liability for the
obligations of a Trust is remote.
Each Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law; but nothing in any Declaration of
Trust protects a Trustee against any liability to the Trust or its
B-14
<PAGE> 91
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 of a Trust 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.
Each Trust's Declaration of Trust provides that no person shall serve as a
Trustee of the Trust 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. Each Declaration of Trust further provides that the Trustees 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% of the outstanding shares.
The Trusts' Prospectus and this Statement of Additional Information do not
contain all of the information set forth in the Registration Statement that each
Trust has filed with the SEC. The complete Registration Statement of each Trust
may be obtained from the SEC upon payment of the fee prescribed by its Rules and
Regulations.
AUDITORS
Deloitte & Touche LLP, Boston, Massachusetts, are the independent
accountants for each Trust, providing audit services, tax return preparation,
and assistance and consultation with respect to the preparation of filings with
the SEC.
B-15
<PAGE> 92
EATON VANCE CALIFORNIA MUNICIPAL INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 21, 1999
<TABLE>
<S> <C>
ASSETS:
Cash................................................... $100,000
Deferred initial offering expenses..................... $100,000
Receivable from Investment Adviser for expenses subject
to expense reimbursement plan......................... $ 24,411
Receivable from Investment Adviser for expenses assumed
by Investment Adviser................................. $ 589
--------
Total assets...................................... $225,000
LIABILITIES:
Initial offering expenses accrued...................... $ 50,000
Accrued expenses....................................... $ 25,000
--------
Total liabilities................................. $125,000
--------
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
========
</TABLE>
NOTE TO FINANCIAL STATEMENT
Eaton Vance California 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 3,333,333.33 shares.
B-16
<PAGE> 93
EATON VANCE CALIFORNIA MUNICIPAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM THE DATE OF ORGANIZATION DECEMBER 10, 1998 TO JANUARY 21,
1999
<TABLE>
<S> <C>
INCOME:..................................................... $ 0
--------
EXPENSES:
Organization expenses.................................. $ 25,000
--------
Total Expenses.................................... $ 25,000
--------
Less:
Preliminary reduction of expenses reimbursement plan........ $(24,411)
Assumption of expenses by Investment Adviser................ $ (589)
--------
Net Expenses................................................ $ 0
--------
Net Income.................................................. $ 0
--------
</TABLE>
NOTE TO 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 first fiscal year of operations. In return for this
arrangement, the Trust will 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
<PAGE> 94
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholder of
Eaton Vance California Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance California 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
California 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.
Deloitte & Touche LLP
Boston, Massachusetts
January 22, 1999
B-18
<PAGE> 95
EATON VANCE FLORIDA MUNICIPAL INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 21, 1999
<TABLE>
<S> <C>
ASSETS:
Cash................................................... $100,000
Deferred initial offering expenses..................... $100,000
Receivable from Investment Adviser for expenses subject
to expense reimbursement plan......................... $ 24,411
Receivable from Investment Adviser for expenses assumed
by Investment Adviser................................. $ 589
--------
Total assets...................................... $225,000
LIABILITIES:
Initial offering expenses accrued...................... $ 50,000
Accrued expenses....................................... $ 25,000
--------
Total liabilities................................. $125,000
--------
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
========
</TABLE>
NOTE TO FINANCIAL STATEMENT
Eaton Vance Florida 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 1,666,666.67 shares.
B-19
<PAGE> 96
EATON VANCE FLORIDA MUNICIPAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM THE DATE OF ORGANIZATION DECEMBER 10, 1998 TO JANUARY 21,
1999
<TABLE>
<S> <C>
INCOME:..................................................... $ 0
--------
EXPENSES:
Organization expenses.................................. $ 25,000
--------
Total Expenses.................................... $ 25,000
--------
Less:
Preliminary reduction of expenses reimbursement plan........ $(24,411)
Assumption of expenses by Investment Adviser................ $ (589)
--------
Net Expenses................................................ $ 0
--------
Net Income.................................................. $ 0
--------
</TABLE>
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 first fiscal year of operations. In return for this
arrangement, the Trust will 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-20
<PAGE> 97
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholder of
Eaton Vance Florida Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance Florida 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 Florida
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.
Deloitte & Touche LLP
Boston, Massachusetts
January 22, 1999
B-21
<PAGE> 98
EATON VANCE MASSACHUSETTS MUNICIPAL INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 21, 1999
<TABLE>
<S> <C>
ASSETS:
Cash................................................... $100,000
Deferred initial offering expenses..................... $ 50,000
Receivable from Investment Adviser for expenses subject
to expense reimbursement plan......................... $ 24,411
Receivable from Investment Adviser for expenses assumed
by Investment Adviser................................. $ 589
--------
Total assets...................................... $175,000
LIABILITIES:
Initial offering expenses accrued...................... $ 50,000
Accrued expenses....................................... $ 25,000
--------
Total liabilities................................. $ 75,000
--------
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
========
</TABLE>
NOTE TO FINANCIAL STATEMENT
Eaton Vance Massachusetts 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 1,666,666.67 shares.
B-22
<PAGE> 99
EATON VANCE MASSACHUSETTS MUNICIPAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM THE DATE OF ORGANIZATION DECEMBER 10, 1998 TO JANUARY 21,
1999
<TABLE>
<S> <C>
INCOME:..................................................... $ 0
--------
EXPENSES:
Organization expenses.................................. $ 25,000
--------
Total Expenses.................................... $ 25,000
--------
Less:
Preliminary reduction of expenses reimbursement plan........ $(24,411)
Assumption of expenses by Investment Adviser................ $ (589)
--------
Net Expenses................................................ $ 0
--------
Net Income.................................................. $ 0
--------
</TABLE>
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 first fiscal year of operations. In return for this
arrangement, the Trust will 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-23
<PAGE> 100
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholder of
Eaton Vance Massachusetts Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance Massachusetts 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 Florida
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.
Deloitte & Touche LLP
Boston, Massachusetts
January 22, 1999
B-24
<PAGE> 101
EATON VANCE MICHIGAN MUNICIPAL INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 21, 1999
<TABLE>
<S> <C>
ASSETS:
Cash................................................... $100,000
Deferred initial offering expenses..................... $ 50,000
Receivable from Investment Adviser for expenses subject
to expense reimbursement plan......................... $ 24,411
Receivable from Investment Adviser for expenses assumed
by Investment Adviser................................. $ 589
--------
Total assets...................................... $175,000
LIABILITIES:
Initial offering expenses accrued...................... $ 50,000
Accrued expenses....................................... $ 25,000
--------
Total liabilities................................. $ 75,000
--------
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
========
</TABLE>
NOTE TO FINANCIAL STATEMENT
Eaton Vance Michigan 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 1,666,666.67 shares.
B-25
<PAGE> 102
EATON VANCE MICHIGAN MUNICIPAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM THE DATE OF ORGANIZATION DECEMBER 10, 1998 TO JANUARY 21,
1999
<TABLE>
<S> <C>
INCOME:..................................................... $ 0
--------
EXPENSES:
Organization expenses.................................. $ 25,000
--------
Total Expenses.................................... $ 25,000
--------
Less:
Preliminary reduction of expenses reimbursement plan........ $(24,411)
Assumption of expenses by Investment Adviser................ $ (589)
--------
Net Expenses................................................ $ 0
--------
Net Income.................................................. $ 0
--------
</TABLE>
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 first fiscal year of operations. In return for this
arrangement, the Trust will 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-26
<PAGE> 103
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholder of
Eaton Vance Michigan Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance Michigan 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 Florida
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.
Deloitte & Touche LLP
Boston, Massachusetts
January 22, 1999
B-27
<PAGE> 104
EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 21, 1999
<TABLE>
<S> <C>
ASSETS:
Cash................................................... $100,000
Deferred initial offering expenses..................... $100,000
Receivable from Investment Adviser for expenses subject
to expense reimbursement plan......................... $ 24,411
Receivable from Investment Adviser for expenses assumed
by Investment Adviser................................. $ 589
--------
Total assets...................................... $225,000
LIABILITIES:
Initial offering expenses accrued...................... $100,000
Accrued expenses....................................... $ 25,000
--------
Total liabilities................................. $125,000
--------
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
========
</TABLE>
NOTE TO FINANCIAL STATEMENT
Eaton Vance New Jersey 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 3,333,333.33 shares.
B-28
<PAGE> 105
EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM THE DATE OF ORGANIZATION DECEMBER 10, 1998 TO JANUARY 21,
1999
<TABLE>
<S> <C>
INCOME:..................................................... $ 0
--------
EXPENSES:
Organization expenses.................................. $ 25,000
--------
Total Expenses.................................... $ 25,000
--------
Less:
Preliminary reduction of expenses reimbursement plan........ $(24,411)
Assumption of expenses by Investment Adviser................ $ (589)
--------
Net Expenses................................................ $ 0
--------
Net Income.................................................. $ 0
--------
</TABLE>
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 first fiscal year of operations. In return for this
arrangement, the Trust will 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-29
<PAGE> 106
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholder of
Eaton Vance New Jersey Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance New Jersey 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 Florida
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.
Deloitte & Touche LLP
Boston, Massachusetts
January 22, 1999
B-30
<PAGE> 107
EATON VANCE NEW YORK MUNICIPAL INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 21, 1999
<TABLE>
<S> <C>
ASSETS:
Cash................................................... $100,000
Deferred initial offering expenses..................... $100,000
Receivable from Investment Adviser for expenses subject
to expense reimbursement plan......................... $ 24,411
Receivable from Investment Adviser for expenses assumed
by Investment Adviser................................. $ 589
--------
Total assets...................................... $225,000
LIABILITIES:
Initial offering expenses accrued...................... $100,000
Accrued expenses....................................... $ 25,000
--------
Total liabilities................................. $125,000
--------
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
========
</TABLE>
NOTE TO FINANCIAL STATEMENT
Eaton Vance New York 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 3,333,333.33 shares.
B-31
<PAGE> 108
EATON VANCE NEW YORK MUNICIPAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM THE DATE OF ORGANIZATION DECEMBER 10, 1998 TO JANUARY 21,
1999
<TABLE>
<S> <C>
INCOME:..................................................... $ 0
--------
EXPENSES:
Organization expenses.................................. $ 25,000
--------
Total Expenses.................................... $ 25,000
--------
Less:
Preliminary reduction of expenses reimbursement plan........ $(24,411)
Assumption of expenses by Investment Adviser................ $ (589)
--------
Net Expenses................................................ $ 0
--------
Net Income.................................................. $ 0
--------
</TABLE>
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 first fiscal year of operations. In return for this
arrangement, the Trust will 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-32
<PAGE> 109
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholder of
Eaton Vance New York Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance New York 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 New York
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.
Deloitte & Touche LLP
Boston, Massachusetts
January 22, 1999
B-33
<PAGE> 110
EATON VANCE OHIO INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 21, 1999
<TABLE>
<S> <C>
ASSETS:
Cash................................................... $100,000
Deferred initial offering expenses..................... $ 50,000
Receivable from Investment Adviser for expenses subject
to expense reimbursement plan......................... $ 24,411
Receivable from Investment Adviser for expenses assumed
by Investment Adviser................................. $ 589
--------
Total assets...................................... $175,000
LIABILITIES:
Initial offering expenses accrued...................... $ 50,000
Accrued expenses....................................... $ 25,000
--------
Total liabilities................................. $ 75,000
--------
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
========
</TABLE>
NOTE TO FINANCIAL STATEMENT
Eaton Vance Ohio 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
6,667.67 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 1,666,666.67 shares.
B-34
<PAGE> 111
EATON VANCE OHIO MUNICIPAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM THE DATE OF ORGANIZATION DECEMBER 10, 1998 TO JANUARY 21,
1999
<TABLE>
<S> <C>
INCOME:..................................................... $ 0
--------
EXPENSES:
Organization expenses.................................. $ 25,000
--------
Total Expenses.................................... $ 25,000
--------
Less:
Preliminary reduction of expenses reimbursement plan........ $(24,411)
Assumption of expenses by Investment Adviser................ $ (589)
--------
Net Expenses................................................ $ 0
--------
Net Income.................................................. $ 0
--------
</TABLE>
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 first fiscal year of operations. In return for this
arrangement, the Trust will 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-35
<PAGE> 112
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholder of
Eaton Vance Ohio Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance Ohio 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 Ohio
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.
Deloitte & Touche LLP
Boston, Massachusetts
January 22, 1999
B-36
<PAGE> 113
EATON VANCE PENNSYLVANIA MUNICIPAL INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 21, 1999
<TABLE>
<S> <C>
ASSETS:
Cash................................................... $100,000
Deferred initial offering expenses..................... $ 50,000
Receivable from Investment Adviser for expenses subject
to expense reimbursement plan......................... $ 24,411
Receivable from Investment Adviser for expenses assumed
by Investment Adviser................................. $ 589
--------
Total assets...................................... $175,000
LIABILITIES:
Initial offering expenses accrued...................... $ 50,000
Accrued expenses....................................... $ 25,000
--------
Total liabilities................................. $ 75,000
--------
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
========
</TABLE>
NOTE TO FINANCIAL STATEMENT
Eaton Vance Pennsylvania 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 1,666,666.67 shares.
B-37
<PAGE> 114
EATON VANCE PENNSYLVANIA MUNICIPAL INCOME TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM THE DATE OF ORGANIZATION DECEMBER 10, 1998 TO JANUARY 21,
1999
<TABLE>
<S> <C>
INCOME:..................................................... $ 0
--------
EXPENSES:
Organization expenses.................................. $ 25,000
--------
Total Expenses.................................... $ 25,000
--------
Less:
Preliminary reduction of expenses reimbursement plan........ $(24,411)
Assumption of expenses by Investment Adviser................ $ (589)
--------
Net Expenses................................................ $ 0
--------
Net Income.................................................. $ 0
--------
</TABLE>
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 first fiscal year of operations. In return for this
arrangement, the Trust will 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-38
<PAGE> 115
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholder of
Eaton Vance Pennsylvania Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance Pennsylvania 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
Pennsylvania 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.
Deloitte & Touche LLP
Boston, Massachusetts
January 22, 1999
B-39
<PAGE> 116
EACH TRUST'S UNAUDITED PORTFOLIO OF INVESTMENTS OWNED
(AS OF FEBRUARY 19, 1999)
CALIFORNIA TRUST
<TABLE>
<CAPTION>
% OF
SHARES/ NET
CUSIP SECURITY TITLE RATE MATURITY PRINCIPAL MARKET VALUE ASSETS
- ----- -------------- ---- -------- --------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
EDUCATION
1301748S7 CA Educational Authority -- Claremont McKenna College....... 5.00% 11/01/29 $3,000,000 $ 2,988,090.00 3.26%
1301746B6 CA Educational Facilities Authority......................... 5.00% 10/01/28 4,500,000 4,475,655.00 4.89%
-------------- --------
7,463,745.00 8.15%
-------------- --------
GENERAL OBLIGATIONS
120781BV0 Burbank City CA Unified School District..................... 08/01/18 3,650,000 1,382,291.50 1.50%
HEALTH
13033AC25 CA Health Facilities Financing Authority.................... 3.10% 09/01/28 4,500,000 4,500,000.00 4.92%
13077TAH0 CA Statewide Communities Development -- Memorial Health 4.92%
Services.................................................... 2.50% 10/01/26 4,500,000 4,500,000.00
13033A7L9 California Health Facilities Authority -- Sutter Health..... 5.00% 08/15/38 1,600,000 1,574,240.00 1.72%
861345CW4 Stockton CA Health -- Dameron Hospital Association.......... 5.70% 12/01/14 1,000,000 1,022,550.00 1.12%
-------------- --------
11,596,790.00 12.68%
-------------- --------
INDUSTRIAL
13033A7N5 California Health Facilities Authority -- Sutter Health..... 8.20% 08/15/28 1,070,000 1,123,360.90 1.23%
544644BC0 Los Angeles CA Unified School District...................... 5.38% 07/01/21 3,000,000 2,997,810.00 3.28%
797652X82 San Francisco City & County Airports Commission............. 4.75% 05/01/29 4,000,000 3,859,840.00 4.22%
-------------- --------
7,981,010.90 8.73%
-------------- --------
MISCELLANEOUS
1301743Y9 CA State Educational Authority.............................. 5.13% 01/01/31 4,500,000 4,544,865.00 4.97%
544712MR0 Los Angeles County CA Metropolitan Trans. Authority......... 6.51% 07/01/28 2,250,000 2,077,515.00 2.27%
54474CDE4 Los Angeles County CA Pension Obligation.................... 2.20% 06/30/07 4,000,000 4,000,000.00 4.37%
797415EH5 San Diego County CA Water Authority......................... 4.75% 05/01/28 4,500,000 4,337,910.00 4.74%
797669GE2 San Francisco CA Rapid Transit District..................... 5.00% 07/01/28 4,500,000 4,482,540.00 4.90%
-------------- --------
19,442,830.00 21.25%
-------------- --------
MULTIPLE UTILITIES
10727XCN6 Brentwood CA Infrastructure Financing Authority............. 5.63% 09/02/29 900,000 885,780.00 0.96%
-------------- --------
N/A
592663SY5 Metropolitan Water District Southern California............. 5.00% 07/01/26 5,000,000 4,988,600.00 5.44%
-------------- --------
PUBLIC FACILITIES
79727LAT6 San Diego CA Convention Center.............................. 4.75% 04/01/28 4,400,000 4,248,376.00 4.64%
799049FX4 San Mateo County CA Joint Power Authority................... 7.63% 07/15/29 2,250,000 2,228,850.00 2.44%
-------------- --------
6,477,226.00 7.08%
-------------- --------
TRANSPORTATION
010869AP0 Alameda CA Corridor Transportation Authority -- Ser Lien.... 4.75% 01/01/25 4,500,000 4,351,275.00 4.75%
798111CZ1 San Joaquin Hills CA Transportation Agency.................. 01/15/25 6,000,000 1,606,800.00 1.76%
842477HH7 South CA Public Power Authority............................. 2.20% 07/01/19 4,000,000 4,000,000.00 4.37%
-------------- --------
9,958,075.00 10.88%
-------------- --------
WATER AND SEWER
212218FW6 Contra Costa CA Water District.............................. 5.00% 10/01/24 5,000,000 4,974,700.00 5.44%
-------------- --------
TOTAL INVESTMENTS.......................................................................... 75,151,048.40 82.11%
Other Asets, Less Liabilities.............................................................. 16,371,759.75 17.89%
-------------- --------
Net Assets................................................................................. $91,522,808.15 100.00%
============== ========
</TABLE>
B-40
<PAGE> 117
FLORIDA TRUST
<TABLE>
<CAPTION>
% OF
SHARES/ NET
CUSIP SECURITY TITLE RATE MATURITY PRINCIPAL MARKET VALUE ASSETS
----- -------------- ---- -------- --------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
ELECTRIC
469364FR9 Jacksonville FL Electric Authority Revenue.................. 5.10% 10/01/32 $2,500,000 $ 2,508,350.00 4.57%
-------------- -------
GENERAL OBLIGATIONS
341150GV6 Florida State............................................... 5.00% 07/01/27 2,500,000 2,494,200.00 4.56%
HEALTH
431022DS8 Highlands County FL Health Facilities Authority Revenue..... 5.25% 11/15/28 1,500,000 1,465,440.00 2.67%
566820HT6 Maricopa County AZ IDA -- Mayo Foundation................... 5.25% 11/15/37 2,000,000 2,009,100.00 3.66%
64971SBD0 New York City NY IDA -- British Airways PLC................. 5.25% 12/01/32 1,000,000 1,001,220.00 1.83%
-------------- -------
4,475,760.00 8.16%
-------------- -------
INDUSTRIAL
687910BT5 Osceola County FL Industrial Development Authority
Revenue..................................................... 7.75% 07/01/17 500,000 539,250.00 0.99%
-------------- -------
MISCELLANEOUS
343136MM6 FL State Turnpike Authority -- Department of
Transportation.............................................. 4.50% 07/01/27 2,500,000 2,320,050.00 4.23%
402175KF9 Gulf Breeze FL Revenue...................................... 4.50% 10/01/27 2,500,000 2,319,675.00 4.23%
592041JD0 Metro. Gov't. Nashville & Davidson County TN -- Hospital
Charity..................................................... 5.13% 11/01/27 985,000 971,801.00 1.77%
677906AH2 Okaloosa County FL Retirement............................... 6.13% 02/01/14 600,000 599,976.00 1.09%
72316MAA7 Pinellas County FL -- Pooled Hospital Loan Programs......... 3.25% 12/01/15 2,500,000 2,500,000.00 4.56%
875231FT4 Tampa FL Revenue............................................ 4.75% 11/15/28 2,500,000 2,386,850.00 4.35%
875128CD0 Tampa FL Water Utility System Revenue....................... 6.78% 10/01/27 1,250,000 1,151,650.00 2.10%
-------------- -------
12,250,002.00 22.33%
-------------- -------
MULTIPLE UTILITIES
867686MM6 Sunrise FL Utilities System Revenue......................... 5.00% 10/01/28 2,500,000 2,526,425.00 4.61%
-------------- -------
PUBLIC FACILITIES
59333HBA3 Miami-Dade County FL Professional Sports Franchise Tax...... 4.75% 10/01/30 2,500,000 2,391,550.00 4.36%
684545KL9 Orange County FL Tourist Development........................ 4.75% 10/01/24 2,700,000 2,601,072.00 4.74%
-------------- -------
4,992,622.00 9.10%
-------------- -------
TRANSPORTATION
233572HV1 Dade County FL Special Obligation........................... 7.40% 10/01/35 1,200,000 1,187,892.00 2.17%
341422NM1 Florida State Board of Education............................ 4.75% 06/01/28 2,500,000 2,406,125.00 4.39%
432321BG1 Hillsborough County FL IDA -- Tampa Seaboard................ 2.75% 12/01/16 1,500,000 1,500,000.00 2.74%
675561BJ2 Ocoee FL Capital Improvement Revenue........................ 4.75% 10/01/24 1,000,000 960,570.00 1.75%
675561BK9 Ocoee FL Capital Improvement Revenue........................ 4.75% 10/01/28 750,000 718,357.50 1.31%
745290EB8 Puerto Rico Ports Authority Revenue -- AMR Corp............. 6.25% 06/01/26 1,500,000 1,624,500.00 2.96%
92706NBB8 Village Center FL Community Development District............ 4.75% 11/01/22 2,500,000 2,411,925.00 4.40%
-------------- -------
10,809,369.50 19.72%
-------------- -------
WATER AND SEWER
191783DJ5 Cocoa FL Water & Sewer Revenue.............................. 4.50% 10/01/22 2,500,000 2,335,975.00 4.26%
293146BQ8 Englewood FL Water District Utility Revenue................. 4.75% 10/01/23 2,000,000 1,928,180.00 3.52%
-------------- -------
4,264,155.00 7.78%
-------------- -------
Total Investments.......................................................................... 44,860,133.50 81.82%
-------------- -------
Other Assets, Less Liabilities............................................................. 9,970,939.51 18.18%
-------------- -------
Net Assets................................................................................. $54,831,073.01 100.00%
============== =======
</TABLE>
B-41
<PAGE> 118
MASSACHUSETTS TRUST
<TABLE>
<CAPTION>
% OF
SHARES/ NET
CUSIP SECURITY TITLE RATE MATURITY PRINCIPAL MARKET VALUE ASSETS
----- -------------- ----- -------- ---------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
ELECTRIC
745268E57 Puerto Rico Electric Power Authority........................ 5.00% 07/01/28 $1,650,000 $ 1,628,632.50 4.93%
-------------- -------
GENERAL OBLIGATIONS
575850HX3 MA State Health & Educational -- Harvard University......... 2.55% 08/01/17 1,500,000 1,500,000.00 4.55%
57585KAZ1 MA State Health & Educational Authority..................... 7.65% 10/01/27 850,000 849,906.50 2.58%
-------------- -------
2,349,906.50 7.13%
-------------- -------
HEALTH
57585JX71 MA State Health & Educational -- Boston Medical Center...... 5.00% 07/01/29 1,500,000 1,462,170.00 4.44%
57585KAL2 MA State Health & Educational -- Caritas Christi............ 5.63% 07/01/20 700,000 691,803.00 2.10%
57585JZ95 MA State Health & Educational -- Harvard Pilgrim Health
Care........................................................ 4.75% 07/01/22 1,000,000 946,590.00 2.87%
57585JYA3 MA State Health & Educational -- Milford/Whitinsville
Regional.................................................... 5.25% 07/15/18 500,000 483,440.00 1.47%
-------------- -------
3,584,003.00 10.98%
-------------- -------
INDUSTRIAL
101029KZ8 Boston MA Water & Sewer Commission.......................... 5.00% 11/01/28 1,500,000 1,475,940.00 4.48%
57583FDM0 MA State Development Agency -- Boston Biomedical Research... 5.75% 02/01/29 700,000 701,778.00 2.13%
57583FAC5 MA State Development Agency -- Clark University............. 5.00% 07/01/28 1,000,000 966,340.00 2.93%
575925MF6 MA State Health & Educational -- WGBH Educational
Foundation.................................................. 5.00% 03/01/28 1,250,000 1,226,500.00 3.72%
-------------- -------
4,370,558.00 13.26%
-------------- -------
MISCELLANEOUS
57583FEN7 MA State Development Finance Agency......................... 5.00% 07/01/29 500,000 491,155.00 1.49%
57585JE80 MA State Health & Educational -- Northeastern University.... 5.00% 10/01/28 1,125,000 1,107,000.00 3.36%
57585JXP1 MA State Health & Educational -- Southcoast Health System... 4.75% 07/01/27 1,500,000 1,409,880.00 4.28%
57585J8P9 MA State Health & Educational -- UMass Medical Ctr.......... 5.00% 07/01/28 1,500,000 1,462,710.00 4.44%
57585JM32 MA State Health & Educational -- Bentley College............ 5.00% 07/01/23 1,550,000 1,527,354.50 4.64%
57585J3N9 MA State Health & Educational -- Boston College............. 4.75% 06/01/31 1,250,000 1,178,175.00 3.58%
57585JVT5 MA State Health & Educational -- Hallmark Health System..... 5.00% 07/01/27 1,750,000 1,707,142.50 5.18%
57585JYW5 Massachusetts State Health & Educational Facilities
Authority................................................... 5.00% 11/15/28 1,500,000 1,462,485.00 4.44%
575895A31 Massachusetts State Port Authority Revenue.................. 5.00% 07/01/28 1,500,000 1,467,150.00 4.45%
-------------- -------
11,813,052.00 35.86%
-------------- -------
N/A
67061E104 Nuveen MA Premium Inc. Municipal Fund....................... 13,000 219,375.00 0.67%
92112R102 Van Kampen MA Value Municipal Income........................ 14,500 228,375.00 0.69%
-------------- -------
447,750.00 1.36%
-------------- -------
TRANSPORTATION
575567NH1 MA Bay Transportation Authority............................. 6.83% 03/01/27 850,000 812,379.00 2.47%
576018AM7 Massachusetts State Highway Turnpike Authority.............. 5.00% 01/01/37 1,700,000 1,653,454.00 5.02%
-------------- -------
2,465,833.00 7.49%
-------------- -------
WATER AND SEWER
576049PH7 MA State Water Resource Authority........................... 5.00% 08/01/24 1,200,000 1,182,132.00 3.58%
-------------- -------
Total Investments.......................................................................... 27,841,867.00 84.49%
-------------- -------
Other Assets, Less Liabilities............................................................. 5,109,817.17 15.51%
-------------- -------
Net Assets................................................................................. $32,951,684.17 100.00%
============== =======
</TABLE>
B-42
<PAGE> 119
MICHIGAN TRUST
<TABLE>
<CAPTION>
% OF
SHARES/ NET
CUSIP SECURITY TITLE RATE MATURITY PRINCIPAL MARKET VALUE ASSETS
- ----- -------------- ---- -------- --------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
EDUCATION
154123TK9 Central Michigan University Revenues........................ 5.00% 10/01/27 $1,250,000 $ 1,232,150.00 4.55%
-------------- -------
ELECTRIC
400653BF7 Guam Power Authority Revenue Bonds.......................... 5.25% 10/01/13 500,000 507,360.00 1.88%
59465MJD8 Michigan State Housing Development Authority................ 5.30% 10/01/37 1,250,000 1,252,137.50 4.63%
745268E57 Puerto Rico Electric Power Authority........................ 5.00% 07/01/28 1,300,000 1,283,165.00 4.75%
-------------- -------
3,042,662.50 11.26%
-------------- -------
GENERAL OBLIGATIONS
59465EYF4 MI State Hospital Authority -- Hospital Charity Group....... 5.13% 11/01/29 1,000,000 974,270.00 3.60%
59469WAQ2 Michigan State Strategic Fund............................... 7.38% 01/15/22 500,000 551,105.00 2.04%
735779JU5 Portage MI Public Schools................................... 4.50% 05/01/17 340,000 323,132.60 1.20%
745145HR6 Puerto Rico Commonwealth.................................... 4.75% 07/01/23 1,350,000 1,296,256.50 4.80%
745220CU5 Puerto Rico Commonwealth Infrastructure Authority........... 7.63% 07/01/28 650,000 652,080.00 2.41%
-------------- -------
3,796,844.10 14.05%
-------------- -------
HEALTH
59465CT72 MI State Hospital -- McLaren Healthcare..................... 4.50% 10/15/21 1,000,000 886,100.00 3.28%
59465EUF8 MI State Hospital -- Oakwood Group.......................... 5.00% 08/15/26 1,000,000 978,790.00 3.62%
-------------- -------
1,864,890.00 6.90%
-------------- -------
MISCELLANEOUS
251135EQ8 Detroit MI Downtown Development Authority................... 4.75% 07/01/25 1,100,000 1,052,909.00 3.90%
315361CA1 Ferris State University MI Revenue.......................... 5.00% 10/01/23 1,000,000 990,860.00 3.67%
351280HC9 Fowlerville MI Community School District.................... 4.75% 05/01/19 300,000 294,438.00 1.09%
490296GS3 Kent County MI Airport Facility Revenue..................... 5.00% 01/01/25 1,500,000 1,488,405.00 5.51%
534655CD5 Lincoln Park Michigan School District....................... 5.00% 05/01/26 1,250,000 1,232,525.00 4.56%
59465C6E2 MI State Hospital Authority -- Mt. Clemens Hospital......... 2.20% 08/15/15 1,000,000 1,000,000.00 3.70%
944314JJ3 Wayne Charter County MI Airport Revenue..................... 7.35% 12/01/28 675,000 636,221.25 2.35%
-------------- -------
6,695,358.25 24.78%
-------------- -------
N/A
084473FQ5 Berkley MI City School District............................. 4.75% 01/01/19 1,000,000 966,850.00 3.58%
-------------- -------
PUBLIC FACILITIES
032879HQ4 Anchor Bay MI School District............................... 4.75% 05/01/26 1,250,000 1,195,675.00 4.42%
-------------- -------
TRANSPORTATION
315361CB9 Ferris State University MI Revenue.......................... 5.00% 10/01/28 500,000 492,750.00 1.82%
418308LF7 Haslett MI Public School District........................... 4.75% 05/01/26 1,000,000 957,820.00 3.54%
594695ZD3 MI State Trunk Line Dep. of The Treasury.................... 4.75% 11/01/20 1,350,000 1,306,381.50 4.83%
-------------- -------
2,756,951.50 10.19%
-------------- -------
Total Investments......................................................................... 21,551,381.35 79.73%
-------------- -------
Other Assets, Less Liabilities............................................................ 5,478,180.00 20.27%
-------------- -------
Net Assets................................................................................ $27,029,561.35 100.00%
============== =======
</TABLE>
B-43
<PAGE> 120
NEW JERSEY TRUST
<TABLE>
<CAPTION>
% OF
SHARES/ NET
CUSIP SECURITY TITLE RATE MATURITY PRINCIPAL MARKET VALUE ASSETS
- ----- -------------- ---- -------- ---------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
ELECTRIC
745268E57 Puerto Rico Electric Power Authority........................ 5.00% 07/01/28 $2,800,000 $ 2,763,740.00 4.73%
-------------- -------
FINANCIAL SERVICES
670971100 Nuveen NJ Investment Quality Muni Fund...................... 40,300 685,100.00 1.17%
920933108 Van Kampen Trust/Investment Grade NJ Municipals............. 47,300 866,181.25 1.48%
-------------- -------
1,551,281.25 2.65%
-------------- -------
HEALTH
64579EPH3 NJ Health Care Facilities -- Centra State Medical Center
Inc. ....................................................... 4.50% 07/01/28 2,410,000 2,241,131.30 3.83%
64579ERM0 NJ Health Care Facilities -- St. Barnabas Medical Center.... 4.75% 07/01/28 4,750,000 4,571,447.50 7.81%
-------------- -------
6,812,578.80 11.64%
-------------- -------
HOUSING
6459056H8 NJ Economic Development Authority -- Elderly Testing
Service..................................................... 4.75% 05/15/25 3,000,000 2,914,320.00 4.99%
-------------- -------
MISCELLANEOUS
64579EET9 NJ Health Care Facilities -- Capital Health System.......... 5.25% 07/01/27 1,750,000 1,711,990.00 2.93%
64579C5G1 NJ Health Care Facilities -- St Elizabeth Hospital.......... 6.00% 07/01/20 1,150,000 1,205,073.50 2.06%
646088GA6 NJ State Highway Authority.................................. 6.00% 01/01/19 2,750,000 3,148,750.00 5.38%
745190AW8 Puerto Rico Commonwealth Highway & Transportation........... 5.00% 07/01/28 2,500,000 2,505,225.00 4.28%
932117DM3 Wall Township NJ School District............................ 4.50% 07/15/20 2,235,000 2,121,462.00 3.63%
-------------- -------
10,692,500.50 18.28%
-------------- -------
PUBLIC FACILITIES
64282NAS3 New Brunswick NJ Housing Authority -- Rutgers............... 4.63% 07/01/24 1,000,000 953,980.00 1.63%
726359AP7 Plainfield NJ Municipal Utilities Authority Sewer Revenue... 4.75% 12/15/23 1,000,000 972,230.00 1.66%
-------------- -------
1,926,210.00 3.29%
-------------- -------
TRANSPORTATION
246348AQ9 Delaware River Port Authority PA & NJ....................... 5.00% 01/01/26 3,240,000 3,251,080.80 5.56%
64578CAA9 New Jersey Economic Development -- Continental Airlines..... 5.50% 04/01/28 1,000,000 1,001,580.00 1.71%
646135PH0 New Jersey State Transportation Trust Fund Authority........ 4.50% 06/15/19 2,900,000 2,746,242.00 4.69%
6460383C1 NJ State Office of Public Finance........................... 4.50% 02/01/19 2,750,000 2,622,702.50 4.48%
646139JR7 NJ State Turnpike Authority................................. 2.45% 01/01/18 2,500,000 2,500,000.00 4.27%
745290EB8 Puerto Rico Ports Authority Revenue -- AMR Corp............. 6.25% 06/01/26 1,750,000 1,895,250.00 3.24%
-------------- -------
14,016,855.30 23.95%
-------------- -------
Total Investments......................................................................... 40,677,485.85 69.53%
-------------- -------
Other Assets, Less Liabilities............................................................ 17,828,500.71 30.47%
-------------- -------
Net Assets................................................................................ $58,505,986.56 100.00%
============== =======
</TABLE>
B-44
<PAGE> 121
NEW YORK TRUST
<TABLE>
<CAPTION>
% OF
SHARES/ NET
CUSIP SECURITY TITLE RATE MATURITY PRINCIPAL MARKET VALUE ASSETS
----- -------------- ---- -------- --------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
EDUCATION
649838QZ5 NY State Dormitory Authority -- NY State Dept. of Health.... 5.00% 07/01/18 $3,400,000 $ 3,339,786.00 4.78%
6498386N4 NY State Dormitory Authority -- State Universities.......... 4.75% 05/15/28 3,400,000 3,202,698.00 4.59%
649837M73 N.Y. State Dormitory Auth. -- N.Y. & Presbyterian
Hospital.................................................... 4.75% 08/01/27 3,250,000 3,101,215.00 4.44%
-------------- -------
9,643,699.00 13.81%
-------------- -------
ELECTRIC
745268E57 Puerto Rico Electric Power Authority........................ 5.00% 07/01/28 3,400,000 3,355,970.00 4.82%
-------------- -------
GAS
592598Z25 NY Metropolitan Transportation Authority.................... 4.75% 07/01/26 3,400,000 3,261,586.00 4.67%
-------------- -------
GENERAL OBLIGATIONS
649668RM4 New York City NY Government Obligation...................... 5.00% 08/01/22 3,500,000 3,459,435.00 4.95%
649669RL4 New York NY Office of the City Comptroller -- Ser C......... 5.00% 08/15/28 3,400,000 3,381,810.00 4.84%
-------------- -------
6,841,245.00 9.79%
-------------- -------
HEALTH
64971SBD0 New York City NY IDA -- British Airways PLC................. 5.25% 12/01/32 3,400,000 3,404,148.00 4.88%
64970KFQ5 N.Y. City NY Muni Water&Sewer System........................ 5.00% 06/15/27 1,000,000 991,690.00 1.42%
-------------- -------
4,395,838.00 6.30%
-------------- -------
INDUSTRIAL
864772FA1 Suffolk County NY IDA -- Nissequogue Cogen Partners......... 5.50% 01/01/23 650,000 654,855.50 0.94%
-------------- -------
MISCELLANEOUS
64971SAB5 New York City NY IDA - American Airlines Inc................ 5.40% 07/01/20 2,000,000 2,032,380.00 2.91%
649876QQ5 New York State Local Government Assistance Corp............. 5.38% 04/01/19 3,400,000 3,506,896.00 5.02%
626190V58 NY Municipal Assistance Corp................................ 2.45% 07/01/08 3,500,000 3,500,000.00 5.01%
649838DH9 NY State Dormitory Authority................................ 4.75% 07/01/37 2,500,000 2,383,425.00 3.41%
649839YU5 NY State Dormitory Authority -- Hamilton Dorm Authority..... 4.75% 07/01/20 2,610,000 2,543,184.00 3.64%
649845DN1 NY State Energy Research & Develop. -- Orange & Rockland 10/01/14 1,200,000 1,200,000.00
Utilities Inc............................................... 2.45% 1.72%
649845DV3 NY State Energy Research & Develop. -- Orange & Rockland 08/01/15 1,200,000 1,200,000.00
Utilities Inc............................................... 2.45% 1.72%
649716AW7 N.Y. City NY Transitional Finance Authority................. 5.00% 08/15/27 3,400,000 3,366,850.00 4.82%
-------------- -------
19,732,735.00 28.25%
-------------- -------
MULTIPLE UTILITIES
542690BK7 Long Island NY Power Authority.............................. 5.25% 12/01/26 3,400,000 3,438,692.00 4.92%
649845ED2 NY State Energy Research & Development...................... 5.15% 11/01/25 3,400,000 3,443,010.00 4.93%
-------------- -------
6,881,702.00 9.85%
-------------- -------
TRANSPORTATION
592596UV0 NY Metropolitan Transportation Authority.................... 5.25% 07/01/28 1,500,000 1,514,610.00 2.17%
896033QG5 Triborough Bridge & Tunnel Authority NY..................... 4.75% 01/01/24 3,400,000 3,267,910.00 4.68%
-------------- -------
4,782,520.00 6.85%
-------------- -------
WATER AND SEWER
64970KAD9 New York City NY Municipal Water Authority.................. 5.25% 06/15/29 2,500,000 2,528,275.00 3.62%
-------------- -------
Total Investments......................................................................... 62,078,425.50 88.90%
-------------- -------
Other Assets, Less Liabilities............................................................ 7,747,203.33 11.10%
-------------- -------
Net Assets................................................................................ $69,825,628.83 100.00%
============== =======
</TABLE>
B-45
<PAGE> 122
OHIO TRUST
<TABLE>
<CAPTION>
% OF
SHARES/ NET
CUSIP SECURITY TITLE RATE MATURITY PRINCIPAL MARKET VALUE ASSETS
----- -------------- ---- -------- --------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
BANKING
232265U22 Cuyahoga County OH -- Cleveland Clinic Foundation........... 6.45% 01/01/26 $1,200,000 $ 1,200,000.00 3.14%
-------------- -------
ELECTRIC
745268E57 Puerto Rico Electric Power Authority........................ 5.00% 07/01/28 1,750,000 1,727,337.50 4.50%
-------------- -------
GAS
840658HJ0 South-Western OH City School District Franklin & Pickway
County...................................................... 4.75% 12/01/26 1,750,000 1,680,752.50 4.38%
-------------- -------
GENERAL OBLIGATIONS
983442DS0 Wyoming Ohio City School District........................... 5.00% 12/01/23 1,000,000 996,400.00 2.60%
-------------- -------
HEALTH
701747CV7 Parma Ohio Hospital Improvement Revenue..................... 5.38% 11/01/29 1,750,000 1,777,212.50 4.63%
-------------- -------
HEALTH CARE PROVIDERS
407272G31 Hamilton County Ohio Hospital Facilities Revenue -- G....... 4.75% 05/15/28 1,770,000 1,685,287.80 4.39%
-------------- -------
HOUSING
676901SB8 Ohio Housing Financing Agency Mortgage...................... 6.38% 03/01/25 1,000,000 1,068,910.00 2.79%
676901TG6 Ohio Housing Financing Agency Mortgage...................... 6.70% 03/01/25 1,000,000 1,069,440.00 2.79%
-------------- -------
2,138,350.00 5.58%
-------------- -------
INDUSTRIAL
67766NAF9 OH State Water Development Authority........................ 5.88% 09/01/20 400,000 409,824.00 1.07%
677599AC6 Ohio State Solid Waste Disposal............................. 5.60% 08/01/32 1,100,000 1,098,306.00 2.86%
-------------- -------
1,508,130.00 3.93%
-------------- -------
MISCELLANEOUS
239874AP5 Dayton OH -- Emergency Air Freight Corp. ................... 5.63% 02/01/18 1,000,000 1,012,610.00 2.64%
273505CY1 East Liverpool OH Hospital Revenue.......................... 5.00% 10/01/21 750,000 742,440.00 1.94%
407287BR1 Hamilton County OH Sales Tax................................ 5.00% 12/01/27 1,750,000 1,735,352.50 4.52%
669147DD9 Norwalk City OH School District............................. 4.75% 12/01/26 1,610,000 1,546,292.30 4.03%
67756AKC5 Ohio State Higher Educational Commission --
Oberlin College............................................. 5.00% 10/01/29 1,750,000 1,729,612.50 4.51%
761848MY3 Reynoldsburg OH Capital Facilities.......................... 4.75% 12/01/23 2,170,000 2,124,647.00 5.54%
-------------- -------
8,890,954.30 23.18%
-------------- -------
PUBLIC FACILITIES
157447GS6 Chagrin Falls OH Exempt Village School District............. 5.38% 12/01/22 1,750,000 1,811,792.50 4.72%
186347AC4 Cleveland OH Airport Revenue -- Continental Airlines........ 5.38% 09/15/27 1,000,000 972,230.00 2.54%
-------------- -------
2,784,022.50 7.26%
-------------- -------
TRANSPORTATION
199521BS3 Columbus OH Municipal Airport Authority..................... 5.00% 01/01/28 1,500,000 1,489,710.00 3.88%
-------------- -------
WATER AND SEWER
186432UT5 Cleveland OH Water Works Revenue............................ 5.00% 01/01/28 1,500,000 1,494,240.00 3.90%
-------------- -------
Total Investments.......................................................................... 27,372,397.10 71.37%
-------------- -------
Other Assets, Less Liabilities............................................................. 10,979,472.47 28.63%
-------------- -------
Net Assets................................................................................. $38,351,869.57 100.00%
============== =======
</TABLE>
B-46
<PAGE> 123
PENNSYLVANIA TRUST
<TABLE>
<CAPTION>
% OF
SHARES/ NET
CUSIP SECURITY TITLE RATE MATURITY PRINCIPAL MARKET VALUE ASSETS
----- -------------- ----- -------- ---------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
EDUCATION
374311CJ5 Gettysburg PA Municipal Authority -- Gettysburg College..... 5.00% 08/15/23 $1,700,000 $ 1,684,581.00 4.87%
-------------- -------
ELECTRIC
745268E57 Puerto Rico Electric Power Authority........................ 5.00% 07/01/28 1,700,000 1,677,985.00 4.85%
-------------- -------
GAS
18681NAA5 Cliff House PA Trust Certificates........................... 6.63% 06/01/27 500,000 500,000.00 1.45%
717823WH7 Philadelphia PA Gas Works Revenue........................... 7.40% 07/01/28 825,000 799,920.00 2.32%
-------------- -------
1,299,920.00 3.77%
-------------- -------
GENERAL OBLIGATIONS
7091713U4 PA State Higher Education -- University of PA............... 4.63% 07/15/30 1,000,000 923,770.00 2.68%
717880Z76 Philadelphia PA School District -- Ser A.................... 4.75% 04/01/27 1,500,000 1,433,820.00 4.15%
745145HR6 Puerto Rico Commonwealth.................................... 4.75% 07/01/23 1,300,000 1,248,247.00 3.62%
745220CU5 Puerto Rico Commonwealth Infrastructure Authority........... 7.63% 07/01/28 850,000 852,720.00 2.47%
91335VAU0 University of Pittsburgh.................................... 5.13% 06/01/22 1,750,000 1,758,190.00 5.09%
915633GB1 Upper Darby PA School District.............................. 5.00% 05/01/19 1,000,000 996,780.00 2.89%
-------------- -------
7,213,527.00 20.90%
-------------- -------
HEALTH
23825EBJ2 Dauphin County PA -- Pinnacle Health System................. 5.00% 08/15/27 1,700,000 1,660,866.00 4.81%
613603MU0 Montgomery County PA Higher Education Revenue -- Pottstown
Healthcare corp............................................. 5.00% 01/01/27 1,250,000 1,221,437.50 3.54%
709221CF0 Pennsylvania State Turnpike Committee Oil Franchise......... 4.75% 12/01/27 2,000,000 1,910,780.00 5.54%
-------------- -------
4,793,083.50 13.89%
-------------- -------
HOUSING
708792TJ5 Pennsylvania Housing Finance Agency......................... 5.85% 10/01/27 1,700,000 1,784,881.00 5.16%
-------------- -------
INDUSTRIAL
230610AR8 Cumberland County PA IDA -- Beverly Enterprises Inc......... 5.50% 10/01/08 685,000 682,986.10 1.98%
708690AG7 Pennsylvania Economic Development Financing Authority....... 7.05% 12/01/10 500,000 550,955.00 1.60%
-------------- -------
1,233,941.10 3.58%
-------------- -------
MISCELLANEOUS
123776LA2 Butler PA School District -- Harriger Education Services.... 4.75% 10/01/22 1,500,000 1,439,250.00 4.17%
246579AB2 Delaware Valley PA Regioinal Finance Authority.............. 2.80% 12/01/18 1,200,000 1,200,000.00 3.48%
580734CZ2 McGuffey PA School District................................. 4.75% 08/01/28 1,000,000 954,980.00 2.77%
7091742E5 PA State Higher Education Authority -- Drexel University.... 4.80% 05/01/28 500,000 481,350.00 1.39%
80839TAB1 Schuykill County PA IDA -- Gilberton Power.................. 2.80% 12/01/02 1,000,000 1,000,000.00 2.90%
83786DCZ8 South Fork PA Municipal Authority -- Conemaugh Valley
Memorial Hospital........................................... 5.00% 07/01/28 1,700,000 1,660,237.00 4.81%
938591BC7 Washington County PA Authority.............................. 5.00% 05/15/28 1,700,000 1,675,452.00 4.85%
-------------- -------
8,411,269.00 24.37%
-------------- -------
</TABLE>
B-47
<PAGE> 124
<TABLE>
<CAPTION>
% OF
SHARES/ NET
CUSIP SECURITY TITLE RATE MATURITY PRINCIPAL MARKET VALUE ASSETS
----- -------------- ----- -------- ---------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
MULTIPLE UTILITIES
961017GV6 Westmoreland County PA Municipal Authority.................. 0.00% 08/15/19 $2,000,000 $ 717,000.00 2.08%
-------------- -------
TRANSPORTATION
717842FD5 Philadelphia PA Parking Authority........................... 5.00% 02/01/27 1,700,000 1,676,030.00 4.86%
717893KP5 Philadelphia PA Water & Wastewater.......................... 2.75% 08/01/27 1,500,000 1,500,000.00 4.35%
74752TAH4 Quakertown PA General Authority............................. 2.20% 06/01/28 700,000 700,000.00 2.03%
849534FH0 Spring Ford PA School District.............................. 4.75% 03/01/25 1,700,000 1,627,733.00 4.72%
-------------- -------
5,503,763.00 15.96%
-------------- -------
Total Investments.......................................................................... 34,319,950.60 99.43%
-------------- -------
Other Assets, Less Liabilities............................................................. 195,967.43 0.57%
-------------- -------
Net Assets................................................................................. $34,515,918.03 100.00%
============== =======
</TABLE>
B-48
<PAGE> 125
APPENDIX A
RATINGS OF MUNICIPAL BONDS
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.
("MOODY'S") MUNICIPAL BOND RATINGS
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 edge." 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 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 risks appear somewhat larger than
in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payment 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 both 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.
Note: Those bonds in the Aa, A, Baa, Ba and B categories which Moody's
believes possess the strongest credit attributes within those categories are
designated by the symbols Aa1, A1, Baa1, Ba1 and B1.
Short-term Notes: The four ratings of Moody's for short-term notes are MIG
1/VMIG1, MIG 2/VMIG2, MIG 3/VMIG3 and MIG 4/VMIG4; MIG 1/VMIG1 denotes "best
quality . . . strong protection by established cash flows"; MIG 2/VMIG2 denotes
"high quality" with ample margins of protection; MIG 3/ VMIG3 notes are of
"favorable quality . . . but . . . lacking the undeniable strength of the
preceding grades"; MIG 4/VMIG4 notes are of "adequate quality . . . [p]rotection
commonly regarded as required of an investment security is present . . . there
is specific risk."
B-49
<PAGE> 126
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment ability of
rated issuers:
Issuers rated Prime-1 (or related supporting institutions) have a superior
ability for repayment of short-term promissory obligations. Prime-1 repayment
ability will often be evidenced by the following characteristics: leading market
positions in well established industries; high rates of return on Trusts
employed; conservative capitalization structure with moderate reliance on debt
and ample asset protection; broad margins in earning coverage of fixed financial
charges and high internal cash generation; and well established access to a
range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
ability for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
DESCRIPTION OF MUNICIPAL DEBT RATINGS OF STANDARD & POOR'S, A DIVISION
OF THE MCGRAW-HILL COMPANIES, INC. ("STANDARD & POOR'S")
A Standard & Poor's issue credit rating is a current opinion of the
creditworthiness of an obligor with respect to a specific financial obligation,
a specific class of financial obligations, or a specific financial program. It
takes into consideration the creditworthiness of guarantors, insurers or other
forms of credit enhancement on the obligation.
The issue credit rating is not a recommendation to purchase, sell or hold a
financial obligation, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the obligors or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information, or based on other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of payment-capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of
obligation;
II. Nature of and provisions of the obligation; and
III. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA Debt rated "AA" differs from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
B-50
<PAGE> 127
A Debt rated "A" is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB Debt rated "BBB" exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment to the
obligation.
<TABLE>
<S> <C>
BB Debt rated "BB," "B," "CCC," "CC" and "C" is regarded as
B having significant speculative characteristics. "BB"
CCC indicates the least degree of speculation and "C" the
CC highest degree of speculation. While such bonds will likely
C have some quality and protective characteristics, these may
be outweighed by large uncertainties or major exposures to
adverse conditions.
</TABLE>
D Debt rated "D" is in payment default. The "D" rating category is used when
payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The "D" rating
also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation 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.
DESCRIPTION OF STANDARD & POOR'S SHORT-TERM ISSUE RATINGS
A Standard & Poor's note rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the
highest-quality obligations to "D" for the lowest. These categories are as
follows:
<TABLE>
<S> <C>
A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined
to possess extremely strong safety characteristics are
denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation
is satisfactory. However, the relative degree of safety is
not as high as for issues designated "A-1".
A-3 Issues carrying this designation have an adequate capacity
for timely payment. They are, however, more vulnerable to
the adverse effects of changes in circumstances than
obligations carrying the higher designations.
B Issues rated "B" are regarded as having only speculative
capacity for timely payment.
C This rating is assigned to short-term debt obligations with
a doubtful capacity for payment.
D Debt rated "D" is in payment default. The "D" rating
category is used when interest payments or principal
payments are not made on the date due, even if the
applicable grace period has not expired, unless Standard &
Poor's believes that such payments will be made during such
grace period.
</TABLE>
A Commercial Paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information.
B-51
<PAGE> 128
DESCRIPTION OF STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS
A Standard & Poor's note rating reflects the liquidity factors and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three 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.
-- Source 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:
<TABLE>
<S> <C>
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt
service is 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.
</TABLE>
DESCRIPTION OF FITCH IBCA ("FITCH") INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The rating
represents Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guarantees unless otherwise indicated.
Bonds carrying the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
B-52
<PAGE> 129
<TABLE>
<S> <C>
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 obligor's 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.
</TABLE>
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "AAA" category.
<TABLE>
<S> <C>
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.
Suspended A rating is suspended when Fitch deems the amount of
information available from the issuer to be inadequate for
rating purposes.
Withdrawn A rating will be withdrawn when an issue matures or is
called or refinanced and, at Fitch's discretion, when an
issuer fails to furnish proper and timely information.
FitchAlert Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and
the likely direction of such change. These are designated as
"Positive," indicating a potential upgrade, "Negative," for
potential downgrade, or "Evolving," where ratings may be
raised or lowered. FitchAlert is relatively short-term, and
should be resolved within 12 months.
</TABLE>
Ratings Outlook: An outlook is used to describe the most likely direction
of any rating change over the intermediate term. It is described as "Positive"
or "Negative." The absence of a designation indicates a stable outlook.
DESCRIPTION OF FITCH'S SPECULATIVE GRADE BOND RATINGS
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.
Bonds that have the rating are of similar but not necessarily identical
credit quality since rating categories cannot fully reflect the differences in
degrees of credit risk.
B-53
<PAGE> 130
<TABLE>
<S> <C>
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 which could assist the
obligor in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and
interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity
throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if
not remedied, may lead to default. The ability to meet
obligations requires an advantageous business and economic
environment.
CC Bonds are minimally protected. Default in payment of
interest and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD Bonds are in default on interest and/or principal payments.
DD Such bonds are extremely speculative and should be valued on
the basis of their D 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.
</TABLE>
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "DDD," "DD," or "D" categories.
DESCRIPTION OF FITCH'S SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
<TABLE>
<S> <C>
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 assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned
"F-1+" and "F-1" ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate; however, near-term adverse
changes could cause these securities to be rated below in
investment grade.
F-S Weak Credit Quality. Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near-term adverse
changes in financial and economic conditions.
D Default. Issues assigned this rating are in actual or
imminent payment default.
LOC The symbol "LOC" indicates that the rating is based on a
letter of credit issued by a commercial bank.
</TABLE>
B-54
<PAGE> 131
APPENDIX B
TAX EQUIVALENT YIELD TABLES
CALIFORNIA TRUST
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 4.75% to 5.50% under the Code and the California
state personal income tax law, applying tax rates expected to be applicable to
individuals for 1999.
<TABLE>
<CAPTION>
COMBINED TAX EXEMPT YIELD OF:
(TAXABLE INCOME*) FEDERAL AND
- ----------------------------------------- CA STATE --4.75%-------5.00%-------5.25%-------5.50%--
SINGLE RETURN JOINT RETURN TAX BRACKET IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
------------- ------------ ----------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Up to $25,350 Up to $42,350 20.10% 5.94% 6.26% 6.57% 6.88%
$25,751 - $62,450 $43,051 - $104,050 34.70 7.27 7.66 8.04 8.42
$62,451 - $130,250 $104,051 - $158,550 37.4 7.59 8.39 8.79 8.79
$130,251 - $283,150 $158,551 - $283,150 41.95 8.18 8.61 9.04 9.47
over $283,150 over $283,150 45.22 8.67 9.13 9.58 10.04
</TABLE>
- ---------------
* Net amount subject to federal and California 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.
The combined federal and California tax brackets are calculated using the
highest California tax rate applicable within each bracket. Taxpayers with
taxable income within such brackets may have lower combined tax brackets and
taxable equivalent yields than indicated above. The combined tax brackets assume
that California taxes are itemized deductions for federal income tax purposes.
Investors who do not itemize deductions on their federal income tax return will
have a higher combined bracket and higher taxable equivalent yield than those
indicated above. The applicable federal tax rates within the brackets are 15%,
28%, 31%, 36% and 39.6%, over the same ranges of income.
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 and California state personal income taxes, other
income received by the Trust may be taxable. 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 federal alternative minimum tax ("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-55
<PAGE> 132
FLORIDA TRUST
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 4.75% to 5.50% under the Code, applying tax rates
expected to be applicable to individuals for 1999.
<TABLE>
<CAPTION>
TAX EXEMPT YIELD OF:
(TAXABLE INCOME*)
- ----------------------------------------- FEDERAL --4.75%-------5.00%-------5.25%-------5.50%--
SINGLE RETURN JOINT RETURN TAX BRACKET IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
------------- ------------ ----------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Up to $25,750 Up to $43,050 15.00% 5.83% 6.13% 6.42% 6.71%
$25,751 - $62,450 $43,051 - $104,050 28.00 6.89 7.23 7.58 7.93
$62,451 - $130,250
$130,251 - $283,150 $104,051 - $158,550 31.00 7.19 7.55 7.91 8.27
Over $283,150 01 - $158,551-$283,150 36.00 7.75 8.14 8.53 8.92
Over $278,450 Over $283,150 39.60 8.21 8.62 9.04 9.45
</TABLE>
- ---------------
* Net amount subject to federal income tax and Florida intangible 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.
A Florida intangibles tax on personal property of $2.00 per $1,000 is
generally imposed after exemptions on the value of stocks, bonds, other
evidences of indebtedness and mutual fund shares. An example of the effect of
the Florida intangibles tax on the tax brackets of Florida taxpayers is as
follows. A $10,000 investment subject to the tax would require payment of $20
annually in intangibles tax. If the investment yielded 5.5% annually or $550,
the intangibles tax as a percentage of income would be $20/$550 or 3.64%. If a
taxpayer were in the 36% federal income tax bracket, assuming the intangibles
taxes were deducted as an itemized deduction on the federal tax return, the
taxpayer would be on a combined federal and Florida state tax bracket of 38.33%
[36% + (1-.36) x 3.64%] with respect to such investment. A Florida taxpayer
whose intangible personal property is exempt or partially exempt from tax due to
the availability of exemptions will have a lower taxable equivalent yield than
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 in the form of an investment exempt from Florida
intangibles tax, other income received by the Trust may be taxable. 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-56
<PAGE> 133
MASSACHUSETTS TRUST
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 4.75% to 5.50% under the Code, applying tax rates
expected to be applicable to individuals for 1999.
<TABLE>
<CAPTION>
COMBINED TAX EXEMPT YIELD OF:
(TAXABLE INCOME*) FEDERAL AND
- ----------------------------------------- MA STATE --4.75%-------5.00%-------5.25%-------5.50%--
SINGLE RETURN JOINT RETURN TAX BRACKET IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
------------- ------------ ----------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Up to $25,750 Up to $43,050 20.06% 5.94% 6.25% 6.57% 6.88%
$25,751 - $62,450 $43,051 - $104,050 32.28 7.01 7.38 7.75 8.12
$62,451 - $130,250 $104,051 - $158,550 35.11 7.32 7.70 8.09 8.48
$130,251 - $283,150 $158,551 - $283,150 39.81 7.89 8.31 8.72 9.14
Over $283,150 Over $283,150 43.19 8.36 8.80 9.24 9.68
</TABLE>
- ---------------
* Net amount subject to federal and Massachusetts 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 $124,500. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income in excess of $124,500 and joint filers
with adjusted gross income in excess of $186,800. The effective tax brackets and
equivalent taxable yields of those taxpayers will be higher than those indicated
above.
The combined federal and Massachusetts tax brackets are calculated using
the highest Massachusetts tax rate applicable within each bracket. Taxpayers
with taxable income within such brackets may have lower combined tax brackets
and taxable equivalent yields than indicated above. The combined tax brackets
assume that Massachusetts taxes are itemized deductions for federal income tax
purposes. Investors who do not itemize deductions on their federal income tax
return will have a higher combined bracket and higher taxable equivalent yield
than those indicated above. The applicable federal tax rates within the brackets
are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
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 and Massachusetts state personal income taxes,
other income received by the Trust may be taxable. 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-57
<PAGE> 134
MICHIGAN TRUST
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 4.75% to 5.50% under the Code, applying tax rates
expected to be applicable to individuals for 1999.
<TABLE>
<CAPTION>
COMBINED TAX EXEMPT YIELD OF:
(TAXABLE INCOME*) FEDERAL AND
- ----------------------------------------- MI STATE --4.75%-------5.00%-------5.25%-------5.50%--
SINGLE RETURN JOINT RETURN TAX BRACKET IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
------------- ------------ ----------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Up to $25,750 Up to $43,050 19.59% 5.91% 6.22% 6.53% 6.84%
$25,751 - $62,450 $43,051 - $104,050 31.89 6.97 7.34 7.71 8.07
$62,451 - $130,250 $104,051 - $158,550 34.73 7.28 7.66 8.04 8.43
$130,251 - $283,150 $158,551 - $283,150 39.46 7.85 8.26 8.67 9.08
Over $283,150 Over $283,150 42.86 8.31 8.75 9.19 9.63
</TABLE>
- ---------------
* Net amount subject to federal income tax and Michigan intangible 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.
The tax brackets include a Michigan tax rate of 4.4%. City income tax rate
of 1% (which may vary by city) and assume that Michigan state and local taxes
are itemized deductions for federal income tax purposes. Investors who do not
itemize deductions on their federal income tax return will have a higher
combined bracket and higher taxable equivalent yield than those indicated above.
The applicable federal tax rates within the brackets are 15%, 28%, 31%, 36% and
39.6%, over the same ranges of income.
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 and Michigan state and city income and single
business taxes, other income received by the Trust may be taxable. 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-58
<PAGE> 135
NEW JERSEY TRUST
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 4.75% to 5.50% under the Code, applying regular
tax rates expected to be applicable to individuals for 1999.
<TABLE>
<CAPTION>
COMBINED TAX EXEMPT YIELD OF:
(TAXABLE INCOME*) FEDERAL AND
- ---------------------------------------- NJ STATE --4.75%-------5.00%-------5.25%-------5.50%--
SINGLE RETURN JOINT RETURN TAX BRACKET IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
------------- ------------ ----------- ---------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
Up to $25,750 Up to $43,050 16.49% 5.69% 5.99% 6.29% 6.59%
$25,751 - $62,450 $43,051 - $104,050 31.98 6.98 7.35 7.72 8.09
$62,451 - $130,250 $104,051 - $158,550 35.40 7.35 7.74 8.13 8.51
$130,251 - $283,150 $158,551 - $283,150 40.08 7.93 8.34 8.76 9.18
Over $283,150 Over $283,150 43.45 8.40 8.84 9.28 9.73
</TABLE>
- ---------------
* Net amount subject to federal income tax and New Jersey intangible 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 $124,500. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single 189,950. The effective tax brackets and equivalent taxable yields of
those taxpayers will be higher than those indicated above.
The combined federal and New Jersey tax brackets are calculated using the
highest New Jersey tax rate applicable within each bracket. Taxpayers with
taxable income within such brackets may have lower combined tax brackets and
taxable equivalent yields than indicated above. The combined tax brackets assume
that New Jersey taxes are itemized deductions for federal income tax purposes.
Investors who do not itemize deductions on their federal income tax return will
have a higher combined bracket and higher taxable equivalent yield than those
indicated above. The applicable federal tax rates within the brackets are 15%,
28%, 31%, 36% and 39.6%, over the same ranges of income.
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 and New Jersey state personal income taxes, other
income received by the Trust may be taxable. 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-59
<PAGE> 136
NEW YORK TRUST
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 4.75% to 5.50% under the Code and New York state
and New York city tax laws, applying tax rates expected to be applicable to
individuals for 1999.
<TABLE>
<CAPTION>
COMBINED TAX EXEMPT YIELD OF:
(TAXABLE INCOME*) FEDERAL, NY
- ---------------------------------------- STATE AND CITY -4.75%------5.00%------5.25%-------5.50%--
SINGLE RETURN JOINT RETURN TAX BRACKET IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
------------- ------------ -------------- ------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
$25,750 - $50,000 45,001 - $90,000 35.65% 7.38% 7.77% 8.16% 8.55%
$50,001 - $62,450 $90,001 - $104,050 35.69 7.39 7.77 8.16 8.55
$62,451 - $130,250 $104,051 - $158,550 38.37 7.71 8.11 8.52 8.92
$130,251 - $283,150 $158,551 - $283,150 42.84 8.31 8.75 9.18 9.62
Over $283,150 Over $283,150 46.05 8.80 9.27 9.73 10.19
</TABLE>
- ---------------
* Net amount subject to federal, New York State, and New York City 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.
The combined federal and New York State, and combined federal, New York
State, and New York City tax brackets are calculated using the highest New York
tax rate applicable within each bracket. Taxpayers with taxable income within
such brackets may have lower combined tax brackets and taxable equivalent yields
than indicated above. The combined tax brackets assume that New York taxes are
itemized deductions for federal income tax purposes. Investors who do not
itemize deductions on their federal income tax return will have a higher
combined bracket and higher taxable equivalent yield than those indicated above.
The applicable federal tax rates within the brackets are 28%, 31%, 36%, 36% and
39.6%. A supplemental New York State tax will also apply to filers with adjusted
gross income between $100,000 and $150,000 which phases out the benefit of lower
marginal brackets. The adjustment is not reflected 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 and New York State and New York City personal
income taxes, other income received by the Trust may be taxable. 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-60
<PAGE> 137
OHIO TRUST
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 4.75% to 5.75% under the Code, applying tax rates
expected to be applicable to individuals for 1999.
<TABLE>
<CAPTION>
COMBINED TAX EXEMPT YIELD OF:
(TAXABLE INCOME*) FEDERAL AND
- ----------------------------------------- OH STATE --4.75%-------5.00%-------5.25%-------5.50%--
SINGLE RETURN JOINT RETURN TAX BRACKET IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
------------- ------------ ----------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Up to $25,750 Up to $43,050 19.01% 5.86% 6.17% 6.48% 6.79%
$25,751 - $62,450 $43,051 - $104,050 32.50 7.04 7.41 7.78 8.15
$62,451 - $130,250 $104,051 - $158,550 35.32 7.34 7.73 8.12 8.50
$130,251 - $283,150 $158,551 - $283,150 40.35 7.96 8.38 8.80 9.22
Over $283,150 Over $283,150 43.71 8.44 8.88 9.33 9.77
</TABLE>
- ---------------
* Net amount subject to federal and Ohio 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.
The combined federal and Ohio tax brackets are calculated using the highest
Ohio tax rate applicable within each bracket. Taxpayers with taxable income
within such brackets may have lower combined tax brackets and taxable equivalent
yields than indicated above. The combined tax brackets assume that Ohio taxes
are itemized deductions for federal income tax purposes. Investors who do not
itemize deductions on their federal income tax return will have a higher
combined bracket and higher taxable equivalent yield than those indicated above.
The applicable federal tax rates within the brackets are 15%, 28%, 31%, 36% and
39.6%, over the same ranges of income.
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 and Ohio state personal income taxes, other
income received by the Trust may be taxable. 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-61
<PAGE> 138
PENNSYLVANIA TRUST
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 4.75% to 5.50% under the Code, applying tax rates
expected to be applicable to individuals for 1999.
<TABLE>
<CAPTION>
COMBINED TAX EXEMPT YIELD OF:
(TAXABLE INCOME*) FEDERAL AND
- ----------------------------------------- PA STATE --4.75%-------5.00%-------5.25%-------5.50%--
SINGLE RETURN JOINT RETURN TAX BRACKET IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
------------- ------------ ----------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Up to $25,750 Up to $43,050 17.38% 5.75% 6.05% 6.35% 6.66%
$25,751 - $62,450 $43,051 - $104,050 30.02 6.79 7.14 7.50 7.86
$62,451 - $130,250 $104,051 - $158,550 32.93 7.08 7.46 7.83 8.20
$130,251 - $283,150 $158,551 - $283,150 37.79 7.64 8.04 8.44 8.84
Over $283,150 Over $283,150 41.29 8.09 8.52 8.94 9.37
</TABLE>
- ---------------
* Net amount subject to federal and Pennsylvania 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.
This blended tax rate includes federal and state income taxes. It does not
include the effect of the county intangible tax, a City of Philadelphia tax, or
a 4.84% Philadelphia school district tax.
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 and Pennsylvania state and local taxes in the
form of an investment exempt from Pennsylvania personal property taxes, other
income received by the Trust may be taxable. 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-62
<PAGE> 139
APPENDIX C
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the procedures
expected to be followed in connection with the settlement of each Auction and
will be incorporated by reference in the Auction Agent Agreement and each
Broker-Dealer Agreement. Nothing contained in this Appendix B constitutes a
representation by a Trust that in each Auction each party referred to herein
actually will perform the procedures described herein to be performed by such
party. Capitalized terms used herein shall have the respective meanings
specified in the glossary of this Prospectus or Appendix C hereto, as the case
may be.
(a) On each Auction Date, the Auction Agent shall notify by telephone or
through the Auction Agent's Processing System the Broker-Dealers that
participated in the Auction held on such Auction Date and submitted an Order on
behalf of any Beneficial Owner or Potential Beneficial Owner of:
(i) the Applicable Rate fixed for the next succeeding Dividend Period;
(ii) whether Sufficient Clearing Bids existed for the determination of
the Applicable Rate;
(iii) if such Broker-Dealer (a "Seller's Broker-Dealer") submitted a
Bid or a Sell Order on behalf of a Beneficial Owner, the number of shares,
if any, of APS to be sold by such Beneficial Owner;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted a Bid
on behalf of a Potential Beneficial Owner, the number of shares, if any, of
APS to be purchased by such Potential Beneficial Owner;
(v) if the aggregate number of shares of APS to be sold by all
Beneficial Owners on whose behalf such Broker-Dealer submitted a Bid or a
Sell Order exceeds the aggregate number of shares of APS to be purchased by
all Potential Beneficial Owners on whose behalf such Broker-Dealer
submitted a Bid, the name or names of one or more Buyer's Broker-Dealers
(and the name of the Agent Member, if any, of each such Buyer's
Broker-Dealer) acting for one or more purchasers of such excess number of
shares of APS and the number of such shares to be purchased from one or
more Beneficial Owners on whose behalf such Broker-Dealer acted by one or
more Potential Beneficial Owners on whose behalf each of such Buyer's
Broker-Dealers acted;
(vi) if the aggregate number of shares of APS to be purchased by all
Potential Beneficial Owners on whose behalf such Broker-Dealer submitted a
Bid exceeds the aggregate number of shares of APS to be sold by all
Beneficial Owners on whose behalf such Broker-Dealer submitted a Bid or a
Sell Order, the name or names of one or more Seller's Broker-Dealers (and
the name of the Agent Member, if any, of each such Seller's Broker-Dealer)
acting for one or more sellers of such excess number of shares of APS and
the number of such shares to be sold to one or more Potential Beneficial
Owners on whose behalf such Broker-Dealer acted by one or more Beneficial
Owners on whose behalf each of such Seller's Broker-Dealers acted; and
(vii) the Auction Date of the next succeeding Auction with respect to
the APS.
(b) On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Beneficial Owner or Potential Beneficial Owner shall:
(i) in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
instruct each Potential Beneficial Owner on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, to instruct such
Potential Beneficial Owner's Agent Member to pay to such Broker-Dealer (or
its Agent Member) through the Securities Depository the amount necessary to
purchase the number of shares of APS to be purchased pursuant to such Bid
against receipt of such shares and advise such Potential Beneficial Owner
of the Applicable Rate for the next succeeding Dividend Period;
B-63
<PAGE> 140
(ii) in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Beneficial Owner on whose behalf such Broker-Dealer submitted
a Sell Order that was accepted, in whole or in part, or a Bid that was
accepted, in whole or in part, to instruct such Beneficial Owner's Agent
Member to deliver to such Broker-Dealer (or its Agent Member) through the
Securities Depository the number of shares of APS to be sold pursuant to
such Order against payment therefor and advise any such Beneficial Owner
that will continue to hold shares of APS of the Applicable Rate for the
next succeeding Dividend Period;
(iii) advise each Beneficial Owner on whose behalf such Broker-Dealer
submitted a Hold Order of the Applicable Rate for the next succeeding
Dividend Period;
(iv) advise each Beneficial Owner on whose behalf such Broker-Dealer
submitted an Order of the Auction Date for the next succeeding Auction; and
(v) advise each Potential Beneficial Owner on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in part, of
the Auction Date for the next succeeding Auction.
(c) On the basis of the information provided to it pursuant to (a) above,
each Broker-Dealer that submitted a Bid or a Sell Order on behalf of a Potential
Beneficial Owner or a Beneficial Owner shall, in such manner and at such time or
times as in its sole discretion it may determine, allocate any Trusts received
by it pursuant to (b)(i) above and any shares of APS received by it pursuant to
(b)(ii) above among the Potential Beneficial Owners, if any, on whose behalf
such Broker-Dealer submitted Bids, the Beneficial Owners, if any, on whose
behalf such Broker-Dealer submitted Bids that were accepted or Sell Orders, and
any Broker-Dealer or Broker-Dealers identified to it by the Auction Agent
pursuant to (a)(v) or (a)(vi) above.
(d) On each Auction Date:
(i) each Potential Beneficial Owner and Beneficial Owner shall
instruct its Agent Member as provided in (b)(i) or (ii) above, as the case
may be;
(ii) each Seller's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through
the Securities Depository to the Agent Member of the Beneficial Owner
delivering shares to such Broker-Dealer pursuant to (b)(ii) above the
amount necessary to purchase such shares against receipt of such shares,
and (B) deliver such shares through the Securities Depository to a Buyer's
Broker-Dealer (or its Agent Member) identified to such Seller's
Broker-Dealer pursuant to (a)(v) above against payment therefor; and
(iii) each Buyer's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through
the Securities Depository to a Seller's Broker-Dealer (or its Agent Member)
identified pursuant to (a)(vi) above the amount necessary to purchase the
shares to be purchased pursuant to (b)(i) above against receipt of such
shares, and (B) deliver such shares through the Securities Depository to
the Agent Member of the purchaser thereof against payment therefor.
(e) On the day after the Auction Date: (i) each Bidder's Agent Member
referred to in (d)
(i) above shall instruct the Securities Depository to execute the
transactions described in (b)(i) or (ii) above, and the Securities
Depository shall execute such transactions;
(ii) each Seller's Broker-Dealer or its Agent Member shall instruct
the Securities Depository to execute the transactions described in (d)(ii)
above, and the Securities Depository shall execute such transactions; and
(iii) each Buyer's Broker-Dealer or its Agent Member shall instruct
the Securities Depository to execute the transactions described in (d)(iii)
above, and the Securities Depository shall execute such transactions.
B-64
<PAGE> 141
(f) If a Beneficial Owner selling shares of APS in an Auction fails to
deliver such shares (by authorized book-entry), a Broker-Dealer may deliver to
the Potential Beneficial Owner on behalf of which it submitted a Bid that was
accepted a number of whole shares of APS that is less than the number of shares
that otherwise was to be purchased by such Potential Beneficial Owner. In such
event, the number of shares of APS to be so delivered shall be determined solely
by such Broker-Dealer. Delivery of such lesser number of shares shall constitute
good delivery. Notwithstanding the foregoing terms of this paragraph (f), any
delivery or non-delivery of shares which shall represent any departure from the
results of an Auction, as determined by the Auction Agent, shall be of no effect
unless and until the Auction Agent shall have been notified of such delivery or
non-delivery in accordance with the provisions of the Auction Agent Agreement
and the Broker-Dealer Agreements.
B-65
<PAGE> 142
APPENDIX D
AUCTION PROCEDURES
The following procedures will be set forth in provisions of the Amended
By-Laws relating to the APS, and will be incorporated by reference in the
Auction Agent Agreement and each Broker-Dealer Agreement. The terms not defined
below are defined in the forepart of this Prospectus. Nothing contained in this
Appendix C constitutes a representation by a Trust that in each Auction each
party referred to herein actually will perform the procedures described herein
to be performed by such party.
PARAGRAPH 10(a) CERTAIN DEFINITIONS.
As used in this Paragraph 10, the following terms shall have the following
meanings, unless the context otherwise requires:
(i) "APS" shall mean the shares of APS being auctioned pursuant to
this Paragraph 10.
(ii) "Auction Date" shall mean the first Business Day preceding the
first day of a Dividend Period.
(iii) "Available APS" shall have the meaning specified in Paragraph
10(d)(i) below.
(iv) "Bid" shall have the meaning specified in Paragraph 10(b)(i)
below.
(v) "Bidder" shall have the meaning specified in Paragraph 10(b)(i)
below.
(vi) "Hold Order" shall have the meaning specified in Paragraph
10(b)(i) below.
(vii) "Maximum Applicable Rate" for any Dividend Period will be the
Applicable Percentage of the Reference Rate. The Applicable Percentage will
be determined based on (i) the credit rating assigned on such date to such
shares by S&P (or if S&P shall not make such rating available, the
equivalent of such rating by a Substitute Rating Agency), and (ii) whether
a Trust has provided modification to the Auction Agent prior to the Auction
establishing the Applicable Rate for any dividend that net capital gains or
other taxable income will be included in such dividend on APS as follows:
<TABLE>
<CAPTION>
APPLICABLE
PERCENTAGE OF APPLICABLE
REFERENCE RATE -- PERCENTAGE OF
CREDIT RATINGS NO REFERENCE RATE --
S&P NOTIFICATION NOTIFICATION
- -------------- ----------------- -----------------
<S> <C> <C>
AA- or Higher 110% 150%
A- to A+ 125% 160%
BBB- to BBB+ 150% 250%
Below BBB- 200% 275%
</TABLE>
Each Trust shall take all reasonable action necessary to enable S&P to
provide a rating for the APS. If S&P shall not make such a rating available,
PaineWebber Incorporated or its affiliates and successors, after consultation
with a Trust, shall select a nationally recognized statistical rating
organization to act as a Substitute Rating Agency.
(viii) "Order" shall have the meaning specified in Paragraph 10(b)(i)
below.
(ix) "Sell Order" shall have the meaning specified in Paragraph
10(b)(i) below.
(x) "Submission Deadline" shall mean 1:00 p.m., New York City time, on
any Auction Date or such other time on any Auction Date as may be specified
by the Auction Agent from time to time as the time by which each
Broker-Dealer must submit to the Auction Agent in writing all Orders
obtained by it for the Auction to be conducted on such Auction Date.
(xi) "Submitted Bid" shall have the meaning specified in Paragraph
10(d)(i) below.
(xii) "Submitted Hold Order" shall have the meaning specified in
Paragraph 10(d)(i) below.
B-66
<PAGE> 143
(xiii) "Submitted Order" shall have the meaning specified in Paragraph
10(d)(i) below.
(xiv) "Submitted Sell Order" shall have the meaning specified in
Paragraph 10(d)(i) below.
(xv) "Sufficient Clearing Bids" shall have the meaning specified in
Paragraph 10(d)(i) below.
(xvi) "Winning Bid Rate" shall have the meaning specified in Paragraph
10(d)(i) below.
PARAGRAPH 10(b) ORDERS BY BENEFICIAL OWNERS, POTENTIAL BENEFICIAL OWNERS,
EXISTING HOLDERS AND POTENTIAL HOLDERS.
(i) Unless otherwise permitted by a Trust, Beneficial Owners and Potential
Beneficial Owners may only participate in Auctions through their Broker-Dealers.
Broker-Dealers will submit the Orders of their respective customers who are
Beneficial Owners and Potential Beneficial Owners to the Auction Agent,
designating themselves as Existing Holders in respect of shares subject to
Orders submitted or deemed submitted to them by Beneficial Owners and as
Potential Holders in respect of shares subject to Orders submitted to them by
Potential Beneficial Owners. A Broker-Dealer may also hold APS in its own
account as a Beneficial Owner. A Broker-Dealer may thus submit Orders to the
Auction Agent as a Beneficial Owner or a Potential Beneficial Owner and
therefore participate in an Auction as an Existing Holder or Potential Holder on
behalf of both itself and its customers. On or prior to the Submission Deadline
on each Auction Date:
(A) each Beneficial Owner may submit to its Broker-Dealer information
as to:
(1) the number of outstanding APS, if any, held by such Beneficial
Owner which such Beneficial Owner desires to continue to hold without
regard to the Applicable Rate for the next succeeding Dividend Period;
(2) the number of outstanding APS, if any, held by such Beneficial
Owner which such Beneficial Owner desires to continue to hold, provided
that the Applicable Rate for the next succeeding Dividend Period shall
not be less than the rate per annum specified by such Beneficial Owner,
and/or
(3) the number of outstanding APS, if any, held by such Beneficial
Owner which such Beneficial Owner offers to sell without regard to the
Applicable Rate for the next succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Beneficial Owners
that shall be maintained in good faith for the purpose of conducting a
competitive Auction, shall contact Potential Beneficial Owners, including
Persons that are not Beneficial Owners, on such list to determine the
number of outstanding APS, if any, which each such Potential Beneficial
Owner offers to purchase, provided that the Applicable Rate for the next
succeeding Dividend Period shall not be less than the rate per annum
specified by such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this Paragraph 10(b)(i) is hereinafter
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in such
capacity for its own account, is hereinafter referred to as a "Bidder"; an Order
containing the information referred to in clause (A)(1) of this Paragraph
10(b)(i) is hereinafter referred to as a "Hold Order"; an Order containing the
information referred to in clause (A)(2) or (B) of this Paragraph 10(b)(i) is
hereinafter referred to as a "Bid"; and an Order containing the information
referred to in clause (A)(3) of this Paragraph 10(b)(i) is hereinafter referred
to as a "Sell Order." Inasmuch as a Broker-Dealer participates in an Auction as
an Existing Holder or a Potential Holder only to represent the interests of a
Beneficial Owner or Potential Beneficial Owner, whether it be its customers or
itself, all discussion herein relating to the consequences of an Auction for
Existing Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented.
B-67
<PAGE> 144
(ii) (A) A Bid by an Existing Holder shall constitute an irrevocable
offer to sell:
(1) the number of outstanding APS specified in such Bid if the
Applicable Rate determined on such Auction Date shall be less than the
rate per annum specified in such Bid; or
(2) such number or a lesser number of outstanding APS to be
determined as set forth in Paragraph 10(e)(i)(D) if the Applicable Rate
determined on such Auction Date shall be equal to the rate per annum
specified therein; or
(3) a lesser number of outstanding APS to be determined as set
forth in Paragraph 10(e)(ii)(C) if such specified rate per annum shall
be higher than the Maximum Applicable Rate and Sufficient Clearing Bids
do not exist.
(B) A Sell Order by an Existing Holder shall constitute an irrevocable
offer to sell:
(1) the number of outstanding APS specified in such Sell Order, or
(2) such number or a lesser number of outstanding APS to be
determined as set forth in Paragraph 10(e)(ii)(C) if Sufficient Clearing
Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable offer
to purchase:
(1) the number of outstanding APS specified in such Bid if the
Applicable Rate determined on such Auction Date shall be higher than the
rate per annum specified in such Bid; or
(2) such number or a lesser number of outstanding APS to be
determined as set forth in Paragraph 10(e)(i)(E) if the Applicable Rate
determined on such Auction Date shall be equal to the rate per annum
specified therein.
PARAGRAPH 10(c) SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.
(i) Each Broker-Dealer shall submit in writing or through the Auction
Agent's Auction Processing System to the Auction Agent prior to the Submission
Deadline on each Auction Date all Orders obtained by such Broker-Dealer,
designating itself (unless otherwise permitted by a Trust) as an Existing Holder
in respect of shares subject to Orders submitted or deemed submitted to it by
Beneficial Owners and as a Potential Holder in respect of shares subject to
Orders submitted to it by Potential Beneficial Owners, and specifying with
respect to each Order:
(A) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by a Trust);
(B) the aggregate number of outstanding APS that are the subject of
such Order;
(C) to the extent that such Bidder is an Existing Holder
(1) the number of outstanding APS, if any, subject to any Hold
Order placed by such Existing Holder;
(2) the number of outstanding APS, if any, subject to any Bid
placed by such Existing Holder and the rate per annum specified in such
Bid; and
(3) the number of outstanding APS, if any, subject to any Sell
Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder, the rate per
annum specified in such Potential Holder's Bid.
(ii) If any rate per annum specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering all of the outstanding APS held by an
Existing Holder are not submitted to the Auction Agent prior to the Submission
Deadline, the Auction Agent shall deem a Hold
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Order (in the case of an Auction relating to a Dividend Period which is not a
Special Dividend Period) and a Sell Order (in the case of an Auction relating to
a Special Dividend Period) to have been submitted on behalf of such Existing
Holder covering the number of outstanding APS held by such Existing Holder and
not subject to Orders submitted to the Auction Agent.
(iv) If one or more Orders on behalf of an Existing Holder covering in the
aggregate more than the number of outstanding APS held by such Existing Holder
are submitted to the Auction Agent, such Orders shall be considered valid as
follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder shall
be considered valid up to and including the number of outstanding APS held
by such Existing Holder; provided that if more than one Hold Order is
submitted on behalf of such Existing Holder and the number of APS subject
to such Hold Orders exceeds the number of outstanding APS held by such
Existing Holder, the number of APS subject to each of such Hold Orders
shall be reduced pro rata so that such Hold Orders, in the aggregate, cover
exactly the number of outstanding APS held by such Existing Holder;
(B) any Bids submitted on behalf of such Existing Holder shall be
considered valid, in the ascending order of their respective rates per
annum if more than one Bid is submitted on behalf of such Existing Holder,
up to and including the excess of the number of outstanding APS held by
such Existing Holder over the number of shares of APS subject to any Hold
Order referred to in Paragraph 10(c)(iv)(A) above (and if more than one Bid
submitted on behalf of such Existing Holder specifies the same rate per
annum and together they cover more than the remaining number of shares that
can be the subject of valid Bids after application of Paragraph
10(c)(iv)(A) above and of the foregoing portion of this Paragraph
10(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per annum,
the number of shares subject to each of such Bids shall be reduced pro rata
so that such Bids, in the aggregate, cover exactly such remaining number of
shares); and the number of shares, if any, subject to Bids not valid under
this Paragraph 10(c)(iv)(B) shall be treated as the subject of a Bid by a
Potential Holder; and
(C) any Sell Order shall be considered valid up to and including the
excess of the number of outstanding APS held by such Existing Holder over
the number of APS subject to Hold Orders referred to in Paragraph
10(c)(iv)(A) and Bids referred to in Paragraph 10(c)(iv)(B); provided that
if more than one Sell Order is submitted on behalf of any Existing Holder
and the number of APS subject to such Sell Orders is greater than such
excess, the number of APS subject to each of such Sell Orders shall be
reduced pro rata so that such Sell Orders, in the aggregate, cover exactly
the number of APS equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential Holder,
each Bid submitted shall be a separate Bid with the rate per annum and number of
APS therein specified.
(vi) Any Order submitted by a Beneficial Owner or a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to
the Submission Deadline on any Auction Date shall be irrevocable.
PARAGRAPH 10(d) DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND
APPLICABLE RATE.
(i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted to it by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as
a "Submitted Order") and shall determine:
(A) the excess of the total number of outstanding APS over the number
of outstanding APS that are the subject of Submitted Hold Orders (such
excess being hereinafter referred to as the "Available APS");
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(B) from the Submitted Orders whether the number of outstanding APS
that are the subject of Submitted Bids by Potential Holders specifying one
or more rates per annum equal to or lower than the Maximum Applicable Rate
exceeds or is equal to the sum of:
(1) the number of outstanding APS that are the subject of Submitted
Bids by Existing Holders specifying one or more rates per annum higher
than the Maximum Applicable Rate, and
(2) the number of outstanding APS that are subject to Submitted
Sell Orders (if such excess or such equality exists (other than because
the number of outstanding APS in clauses (1) and (2) above are each zero
because all of the outstanding APS are the subject of Submitted Hold
Orders), such Submitted Bids by Potential Holders hereinafter being
referred to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per annum
specified in the Submitted Bids (the "Winning Bid Rate") that if:
(1) each Submitted Bid from Existing Holders specifying the Winning
Bid Rate and all other submitted Bids from Existing Holders specifying
lower rates per annum were rejected, thus entitling such Existing
Holders to continue to hold the shares of APS that are the subject of
such Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the
Winning Bid Rate and all other Submitted Bids from Potential Holders
specifying lower rates per annum were accepted, thus entitling the
Potential Holders to purchase the APS that are the subject of such
Submitted Bids, would result in the number of shares subject to all
Submitted Bids specifying the Winning Bid Rate or a lower rate per annum
being at least equal to the Available APS.
(ii) Promptly after the Auction Agent has made the determinations pursuant
to Paragraph 10(d)(i), the Auction Agent shall advise a Trust of the Maximum
Applicable Rate and, based on such determinations, the Applicable Rate for the
next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate for
the next succeeding Dividend Period shall be equal to the Winning Bid Rate;
(B) if Sufficient Clearing Bids do not exist (other than because all
of the outstanding APS are the subject of Submitted Hold Orders), that the
Applicable Rate for the next succeeding Dividend Period shall be equal to
the Maximum Applicable Rate; or
(C) if all of the outstanding APS are the subject of Submitted Hold
Orders, that the Dividend Period next succeeding the Auction automatically
shall be the same length as the immediately preceding Dividend Period and
the Applicable Rate for the next succeeding Dividend Period shall be equal
to 59% of the Reference Rate (or 90% of such rate if a Trust has provided
notification to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend that net capital gains or other taxable
income will be included in such dividend on APS) on the date of the
Auction.
PARAGRAPH 10(e) ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL
ORDERS AND ALLOCATION OF SHARES.
Based on the determinations made pursuant to Paragraph 10(d)(i), the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the provisions
of Paragraph 10(e)(iii) and Paragraph 10(e)(iv), Submitted Bids and Submitted
Sell Orders shall be accepted or rejected in the following order of priority and
all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be accepted
and the Submitted Bid of each of the Existing Holders specifying any rate
per annum that is higher than the Winning Bid Rate
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shall be accepted, thus requiring each such Existing Holder to sell the
outstanding shares of APS that are the subject of such Submitted Sell Order
or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holder specifying any
rate per annum that is lower than the Winning Bid Rate shall be rejected,
thus entitling each such Existing Holder to continue to hold the
outstanding APS that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders specifying any
rate per annum that is lower than the Winning Bid Rate shall be accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be rejected,
thus entitling each such Existing Holder to continue to hold the
outstanding APS that are the subject of such Submitted Bid, unless the
number of outstanding shares of APS subject to all such Submitted Bids
shall be greater than the number of outstanding APS ("Remaining Shares")
equal to the excess of the Available APS over the number of outstanding APS
subject to Submitted Bids described in Paragraph 10(e)(i)(B) and Paragraph
10(e)(i)(C), in which event the Submitted Bids of each such Existing Holder
shall be accepted, and each such Existing Holder shall be required to sell
outstanding shares of APS, but only in an amount equal to the difference
between (1) the number of outstanding APS then held by such Existing Holder
subject to such Submitted Bid and (2) the number of APS obtained by
multiplying (x) the number of Remaining Shares by (y) a fraction the
numerator of which shall be the number of outstanding APS held by such
Existing Holder subject to such Submitted Bid and the denominator of which
shall be the sum of the numbers of outstanding APS subject to such
Submitted Bids made by all such Existing Holders that specified a rate per
annum equal to the Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be accepted but
only in an amount equal to the number of outstanding APS obtained by
multiplying (x) the difference between the Available APS and the number of
outstanding APS subject to Submitted Bids described in Paragraph
10(e)(i)(B), Paragraph 10(e)(i)(C) and Paragraph 10(e)(i)(D) by (y) a
fraction the numerator of which shall be the number of outstanding APS
subject to such Submitted Bid and the denominator of which shall be the sum
of the number of outstanding APS subject to such Submitted Bids made by all
such Potential Holders that specified rates per annum equal to the Winning
Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because all
of the outstanding APS are subject to Submitted Hold Orders), subject to the
provisions of Paragraph 10(e)(iii), Submitted Orders shall be accepted or
rejected as follows in the following order of priority and all other Submitted
Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any rate per
annum that is equal to or lower than the Maximum Applicable Rate shall be
rejected, thus entitling such Existing Holder to continue to hold the
outstanding APS that are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate per
annum that is equal to or lower than the Maximum Applicable Rate shall be
accepted, thus requiring such Potential Holder to purchase the outstanding
APS that are the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any rate per
annum that is higher than the Maximum Applicable Rate shall be accepted and
the Submitted Sell Orders of each Existing Holder shall be accepted, in
both cases only in an amount equal to the difference between (1) the number
of outstanding APS then held by such Existing Holder subject to such
Submitted Bid or Submitted Sell Order and (2) the number of APS obtained by
multiplying (x) the difference between the Available APS and the aggregate
number of outstanding APS subject to Submitted Bids described in Paragraph
10(e)(ii)(A) and Paragraph 10(e)(ii)(B) by (y) a fraction the numerator of
which shall be the number of outstanding APS held by such Existing Holder
subject to such Submitted Bid or Submitted Sell Order and the denominator
of which shall be the number of outstanding APS subject to all such
Submitted Bids and Submitted Sell Orders.
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(iii) If, as a result of the procedures described in Paragraph
10(e)(i) or Paragraph 10(e)(ii), any Existing Holder would be entitled
or required to sell, or any Potential Holder would be entitled or
required to purchase, a fraction of a APS on any Auction Date, the
Auction Agent shall, in such manner as in its sole discretion it shall
determine, round up or down the number of APS to be purchased or sold by
any Existing Holder or Potential Holder on such Auction Date so that
each outstanding APS purchased or sold by each Existing Holder or
Potential Holder on such Auction Date shall be a whole APS.
(iv) If, as a result of the procedures described in Paragraph
10(e)(i), any Potential Holder would be entitled or required to purchase
less than a whole share of APS on any Auction Date, the Auction Agent,
in such manner as in its sole discretion it shall determine, shall
allocate APS for purchase among Potential Holders so that only whole
shares of APS are purchased on such Auction Date by any Potential
Holder, even if such allocation results in one or more of such Potential
Holders not purchasing any APS on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or
Sell Orders on behalf of Existing Holders or Potential Holders, the
aggregate number of the outstanding APS to be purchased and the
aggregate number of outstanding APS to be sold by such Potential Holders
and Existing Holders and, to the extent that such aggregate number of
outstanding shares to be purchased and such aggregate number of
outstanding shares to be sold differ, the Auction Agent shall determine
to which other Broker-Dealer or Broker-Dealers acting for one or more
purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such
Broker-Dealer shall receive, as the case may be, outstanding APS.
PARAGRAPH 10(f) MISCELLANEOUS.
Each Trust may interpret the provisions of this Paragraph 10 to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other change or
modification that does not substantially adversely affect the rights of
Beneficial Owners of APS. A Beneficial Owner or an Existing Holder (A) may sell,
transfer or otherwise dispose of APS only pursuant to a Bid or Sell Order in
accordance with the procedures described in this Paragraph 10 or to or through a
Broker-Dealer, provided that in the case of all transfers other than pursuant to
Auctions such Beneficial Owner or Existing Holder, its Broker-Dealer, if
applicable, or its Agent Member advises the Auction Agent of such transfer and
(B) except as otherwise required by law, shall have the ownership of the APS
held by it maintained in book entry form by the Securities Depository in the
account of its Agent Member, which in turn will maintain records of such
Beneficial Owner's beneficial ownership. Neither a Trust nor any Affiliate shall
submit an Order in any Auction. Any Beneficial Owner that is an Affiliate shall
not sell, transfer or otherwise dispose of APS to any Person other than the
applicable Trust. All of the outstanding APS of a Series of each Trust shall be
represented by a single certificate registered in the name of the nominee of the
Securities Depository unless otherwise required by law or unless there is no
Securities Depository. If there is no Securities Depository, at a Trust's option
and upon its receipt of such documents as it deems appropriate, any APS may be
registered in the Stock Register in the name of the Beneficial Owner thereof and
such Beneficial Owner thereupon will be entitled to receive certificates
therefor and required to deliver certificates thereof or upon transfer or
exchange thereof.
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APPENDIX E
STATE AND U.S. TERRITORY INFORMATION
The following is a summary of certain selected information relating to the
economy and finances of the states and the U.S. territories listed below. It is
not a discussion of any specific factors that my affect any particular issuers
of Municipal Obligations. The information is not intended to be comprehensive
and does not include all of the economic and financial information, such as
certain information pertaining to budgets, receipts and disbursements, about
such states or U.S. Territories that would ordinarily be included in various
public documents issued thereby, such as an official statement prepared in
connection with the issuance of general obligation bonds of such states or U.S.
territories. Such an official statement, together with any updates or
supplements thereto, generally may be obtained upon request to the budget or
equivalent office of such states or U.S. Territories. The information is derived
from selected public documents of the type described above and has not been
independently verified by any Trust.
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 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
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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.
CALIFORNIA
The state's budgetary fortunes are subject to unforeseeable events. In
December, 1994, for example, Orange county, California and its Investment Pool
filed for bankruptcy. A plan of adjustment has been approved by the court and
became effective under which all non-municipal creditors are to be paid in full.
However, the ultimate financial impact on the County and the state cannot be
predicted with any certainty. In addition, constant fluctuations in other
factors affecting the state -- including health and welfare caseloads, property
tax receipts, federal funding and extraordinary expenditures related to natural
disasters -- will undoubtedly create new budget challenges.
Furthermore, certain California constitutional amendments, legislative
measures, executive orders, administrative regulations and voter initiatives
could produce the adverse effects on the California economy. Among these are
measures that have established tax, spending or appropriations limits and
prohibited the imposition of certain new taxes, authorized the transfers of tax
liabilities and reallocations of tax receipts among governmental entities and
provided for minimum levels of funding.
Finally, certain bonds in the Trust may be subject to provisions of
California law that could adversely affect payments on those bonds or limit the
remedies available to bondholders. Among these are bonds of health care
institutions which are subject to the strict rules and limits regarding
reimbursement payments of California's Medi-Cal Program for health care services
to welfare beneficiaries, and bonds secured by liens on real property.
Proposition 13. Certain of the debt obligations may be obligations of
issuers who rely in whole or in part on ad valorem real property taxes as a
source of revenue. On June 6, 1978, California votes approved an amendment to
the California Constitution known as Proposition 13, which added Article XIIIA
to the California Constitution. The effect of Article XIIIA was to limit ad
valorem taxes on real property and to restrict the ability of taxing entities to
increase real property tax revenues.
Section 1 of Article XIIIA, as amended, limits the maximum ad valorem tax
on real property to 1% of full cash value to be collected by the counties and
apportioned according to law. The 1% limitation does not apply to ad valorem
taxes or special assessments to pay the interest and redemption charges on any
bonded indebtedness for the acquisition or improvement of real property approved
by two-thirds of the votes cast by the voters voting on the proposition. Section
2 of Article XIIIA defines "full cash value" to mean "the County Assessor's
valuation of real property as shown on the 1975/76 tax bill under 'full cash
value' or, thereafter, the appraised value of real property when purchased,
newly constructed, or a change in ownership has occurred after the 1975
assessment." The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data, or reduced in the event of declining property value
caused by damage, destruction or other factors.
Legislation enacted by the California Legislature to implement Article
XIIIA provides that notwithstanding any other law, local agencies may not levy
any ad valorem property tax except to pay debt service on indebtedness approved
by the voters prior to July 1, 1978, and that each county will levy the maximum
tax permitted by Article XIIIA.
Proposition 9. On November 6, 1979, an initiative known as "Proposition 9"
or the "Gann Initiative" was approved by the California voters, which added
Article XIII B to the California Constitution. Under Article XIII B, State and
local governmental entities have an annual "appropriations limit" and are not
allowed to spend certain moneys called "appropriations subject to limitation" in
an amount higher than the "appropriations limit." Article XIII B does not affect
the appropriation of moneys which are excluded from the definition of
"appropriations subject to limitation," including debt service on indebtedness
existing or authorized as of January 1, 1979, or bonded indebtedness
subsequently approved by the voters. In general
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terms, the "appropriations limit" is required to be based on certain 1978/79
expenditures, and is to be adjusted annually to reflect changes in consumer
prices, population, and certain services provided by these entities. Article
XIII B also provides that if these entities' revenues in any year exceed the
amounts permitted to be spent, the excess is to be returned by revising tax
rates or fee schedules over the subsequent two years.
Proposition 98. On November 8, 1988, voters of the state approved
Proposition 98, a combined initiative constitutional amendment and statute
called the "Classroom Instructional improvement and Accountability Act."
Proposition 98 changed State funding of public education below the university
level and the operation of State Appropriations Limit, primarily by guaranteeing
K-14 schools a minimum share of General Fund revenues. Under Proposition 98
(modified by Proposition 111 as discussed below), K-14 schools are guaranteed
the greater of (a) in general, a fixed percent of General Fund revenues ("Test
1"), (b) the amount appropriated to K-14 schools in the prior year, adjusted for
changes in the cost of living (measured as in Article XIII B by reference to
State per capita personal income) and enrollment ("Test 2"), or (c) a third
test, which would replace Test 2 in any year when the percentage growth in per
capita General Fund revenues from the prior year plus one half of one percent is
less than the percentage growth in State per capita personal income ("Test 3").
Under Test 3, schools would receive the amount appropriated in the prior year
adjusted for changes in enrollment and per capita General Fund revenues, plus an
additional small adjustment factor. If Test 3 is used in any year, the
difference between Test 3 and Test 2 would become a "credit" to schools which
would be the basis of payments in future years when per capita General Fund
revenue growth exceeds per capita personal income growth.
Proposition 98 permits the Legislature -- by two-thirds vote of both
houses, with the Governor's concurrence -- to suspend the K-14 schools' minimum
funding formula for a one-year period. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIII B limit to
K-14 schools.
Proposition 111. On June 30, 1989, the California Legislature enacted
Senate Constitutional Amendment 1, a proposed modification of the California
constitution to alter the spending limit and the education funding provisions of
Proposition 98. Senate Constitutional Amendment 1 -- on the June 5, 1990 ballot
as Proposition 111 -- was approved by the voters and took effect on July 1,
1990. Among a number of important provisions, Proposition 111 recalculated
spending limits for the state and for local governments, allowed greater annual
increases in the limits, allowed the averaging of two years' tax revenues before
requiring action regarding excess tax revenues, reduced the amount of the
funding guarantee in recession years for school districts and community college
districts (but with a floor of 40.9 percent of state general fund tax revenues),
removed the provision of Proposition 98 which included excess moneys transferred
to school districts and community college districts in the base calculation for
the next year, limited the amount of state tax revenue over the limit which
would be transferred to school districts and community college districts, and
exempted increased gasoline taxes and truck weight fees from the state
appropriations limit. Additionally, Proposition 111 exempted from the state
appropriations limit funding for capital outlays.
Proposition 62. On November 4, 1986, California voters approved an
initiative statute known as proposition 62. This initiative provided the
following:
1. Requires that any tax for general governmental purposes imposed by
local governments be approved by resolution or ordinance adopted by a
two-thirds vote of the governmental entity's legislative body an by a
majority vote of the electorate of the governmental entity;
2. Requires that any special tax (defined as taxes levied for other
than general governmental purposes) imposed by a local governmental entity
be approved by a two-thirds vote of the voters within that jurisdiction;
3. Restricts the use of revenues from a special tax to the purposes
or for the service for which the special tax was imposed;
4. Prohibits the imposition of ad valorem taxes on real property by
local governmental entities except as permitted by Article XIIIA;
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5. Prohibits the imposition of transaction taxes and sales taxes on
the sale of real property by local governments;
6. Requires that any tax imposed by a local government on or after
August 1, 1985 be ratified by a majority vote of the electorate within two
years of the adoption of the initiative;
7. Requires that, in the event a local government fails to comply
with the provisions of this measure, a reduction in the amount of property
tax revenue allocated to such local government occurs in an amount equal to
the revenues received by such entity attributable to the tax levied in
violation of the initiative; and
8. Permits these provisions to be amended exclusively by the voters
of California.
In September 1988, the California Court of Appeal in City of Westminster v.
County of Orange, 204 Cal. App. 3d 623, 215 Cal. Rptr. 511 (Cal. Ct. App. 1988),
held that Proposition 62 is unconstitutional to the extent that it requires a
general tax by a general law city, enacted on or after August 1, 1985 and prior
to the effective date of Proposition 62, to be subject to approval by a majority
of voters. The Court held that the California Constitution prohibits the
imposition of a requirement that local tax measures be submitted to the
electorate by either referendum or initiative. It is impossible to predict the
impact of this decision on charter cities, on special taxes or on new taxes
imposed after the effective date of Proposition 62. The California Court of
Appeal in City of Woodlake v. Logan, (1991) 230 Cal. App. 3d 1058, subsequently
held that Proposition 62's popular vote requirements for future local taxes also
provided for an unconstitutional referenda. The California Supreme Court
declined to review both the City of Westminster and the City of Woodlake
decisions.
In Santa Clara Local Transportation Authority v. Guardino, (Sept. 28, 1995)
11 Cal. 4th 220, reh'g denied, modified (Dec. 14, 1995) 12 Cal. 4th 344e, the
California Supreme Court upheld the constitutionality of Proposition 62's
popular vote requirements for future taxes, and specifically disapproved of the
City of Woodlake decision as erroneous. The Court did not determine the
correctness of the City of Westminster decision, because that case appeared
distinguishable, was not relied on by the parties in Guardiano, and involved
taxes not likely to still be at issue. It is impossible to predict the impact of
the Supreme Court's decision on charter cities or on taxes imposed in reliance
on the City of Woodlake case.
In McBrearty v. City of Brawley, 59 Cal. App. 4th 1441, 69 Cal. Rptr. 2d
862 (Cal. Ct. App. 1997), the Court of Appeal held that the city of Brawley must
either hold an election or cease collection of utility taxes that were not
submitted to a vote. In 1991, the city of Brawley adopted an ordinance imposing
a utility tax on its residents and began collecting the tax without first
seeking voter approval. In 1996, the taxpayer petitioned for writ of mandate
contending that Proposition 62 required the city to submit its utility tax on
residents to vote of local electorate. The trial court issued a writ of mandamus
and the city appealed.
First, the Court of Appeal held that the taxpayer's cause of action accrued
for statute of limitation purposes at the tine of the Guardino decision rather
than at the time when the city adopted the tax ordinance which was July 1991.
Second, the Court held that the voter approval requirement in Proposition 62 was
not an invalid mechanism under the state constitution for the involvement of the
electorate in the legislative process. Third, the Court rejected the city's
argument that Guardino should only be applied on a prospective basis. Finally,
the Court held Proposition 218 (see discussion below) did not impliedly protect
any local general taxes imposed prior to January 1, 1995 against challenge.
Assembly Bill 1365 (Mazzoni), introduced February 28, 1997, which would
have made the Guardino decision inapplicable to any tax first imposed or
increased by an ordinance or resolution adopted before December 14, 1995 was
vetoed by the Governor on October 11, 1997. The California State Senate had
passed the Bill on May 16, 1996 and the California State Assembly had passed the
bill on September 11, 1997. It is not clear whether the Bill, if enacted, would
have been constitutional as a non-voted amendment to Proposition 62 or an a
non-voted change to Proposition 62's operative data.
Proposition 218. On November 5, 1996, the voters of the state approved
Proposition 218, a constitutional initiative, entitled the "Right to Vote on
Taxes Act" ("Proposition 218"). Proposition 218 adds Articles
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XIII C and XIII D to the California Constitution and contains a number of
interrelated provision affecting the ability of local governments to levy and
collect both existing and future taxes, assessments, fees and charges.
Proposition 218 became effective on November 6, 1996. The Sponsors are unable to
predict whether and to what extent Proposition 218 may be held to be
constitutional or how its terms will be interpreted and applied by the courts.
However, if upheld, Proposition 218 could substantially restrict certain local
governments' ability to raise future revenues and could subject certain existing
sources of revenue to reduction or repeal, and increase local government costs
to hold elections, calculate fees and assessments, notify the public and defend
local government fees and assessments in court.
Article XIII C of Proposition 218 requires majority voter approval for the
imposition, extension or increase of general taxes and two-thirds voter approval
for the imposition, extension or increase of special taxes, including special
taxes deposited into a local government's general fund. Proposition 218 also
provides that any general tax imposed, extended or increased without voter
approval by any local government on or after January 1, 1995 and prior to
November 6, 1996 shall continue to be imposed only if approved by a majority
vote in an election held within two years of November 6, 1996.
Article XIII C of Proposition 218 also expressly extends the initiative
power to give voters the power to reduce or repeal local taxes, assessments,
fees and charges, regardless of the date such taxes, assessments, fees or
charges were imposed. This extension of the initiative power to some extent
constitutionalizes the March 6, 1996 state Supreme Court decision in Rossi v.
Brown, which upheld an initiative that repealed a local tax and held that the
state constitution does not preclude the repeal, including the prospective
repeal, of a tax ordinance by an initiative, as contrasted with the state
constitutional prohibition on referendum powers regarding statutes and
ordinances which impose a tax. Generally, the initiative process enables
California voters to enact legislation upon obtaining requisite voter approval
at a general election. Proposition 218 extends the authority stated in Rossi v.
Brown by expanding the initiative power to include reducing or repealing
assessments, fees and charges, which had previously been considered
administrative rather than legislative matters and therefore beyond the
initiative power.
The initiative power granted under Article XIII C of Proposition 218, by
its terms, applies to all local taxes, assessments, fees and charges and is not
limited to local taxes, assessments, fees and charges that are property related.
Article XIII D of Proposition 218 adds several new requirements making it
generally more difficult for local agencies to levy and maintain "assessments"
for municipal services and programs. "Assessment" is defined to mean any levy or
charge upon real property for a special benefit conferred upon the real
property.
Article XIII D of Proposition 218 also adds several provisions affecting
"fees" and "charges" which are defined as "any levy other than an ad valorem
tax, a special tax, or an assessment, imposed by a local government upon a
parcel or upon a person as an incident of property ownership, including a user
fee or charge for a property related service." All new and, after June 30, 1997,
existing property related fees and charges must conform to requirements
prohibiting, among other things, fees and charges which (i) generate revenues
exceeding the funds required to provide the property related service, (ii) are
used for any purpose other than those for which the fees and charges are
imposed, (iii) are for a service not actually used by, or immediately available
to, the owner of the property in question, or (iv) are used for general
governmental services, including police, fire or library services, where the
service is available to the public at large in substantially the same manner as
it is to property owners. Further, before any property related fee or charge may
be imposed or increased, written notice must be given to the record owner of
each parcel of land affected by such fee or charges. The local government must
then hold a hearing upon the proposed imposition or increase of such property
based fee, and if written protests against the proposal are presented by a
majority of the owners of the identified parcels, the local government may not
impose or increase the fee or charge. Moreover, except for fees or charges for
sewer, water and refuse collection services, no property related fee or charge
may be imposed or increased without majority approval by the property owners
subject to the fee or charge or, at the option of the local agency, two-thirds
voter approval by the electorate residing in the affected area.
Proposition 87. On November 8, 1988, California voters approved
proposition 87. Proposition 87 amended Article XVI, Section 16, of the
California Constitution by authorizing the California Legislature to
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prohibit redevelopment agencies from receiving any of the property tax revenue
raised by increased property tax rates levied to repay bonded indebtedness of
local governments which is approved by voters on or after January 1, 1989.
Local Governments. The fiscal condition of local governments had been
constrained since the enactment of "Proposition 13" in 1978, which reduced and
limited the future growth of property taxes, and limited the ability of local
government to impose "special taxes" (those devoted to a specific purpose)
without two-thirds voter approval.
Counties, in particular, have had fewer options to raise revenues than many
other local government entities, and have been required to maintain many
services. The entire statewide welfare system was changed in response to the
change in federal welfare law enacted in 1996. California's response to the
federal welfare reforms is embodied in Chapter 270, Statutes of 1997. This new
basic state welfare program is called California Work Opportunity and
Responsibility to Kids Act ("CalWORKs"), which replaced the former Aid to
Families with Dependent Children (AFDC) and Greater Avenues to Independence
(GAIN) programs effective January 1, 1998. Consistent with the federal law,
CalWORKs contain new time limits on receipt of welfare aid, both lifetime as
well as for any current period on aid. The centerpiece of CalWORKs is the
linkage of eligibility to work participation requirements. Administration of the
new CalWORKs program is largely at the county level and counties are given
financial incentives for success in this program.
Although the longer-term impact of new federal law and CalWORKs cannot be
determined until there has been more experience, the state does not presently
anticipate that these new programs will have an adverse financial impact on the
state's General Fund. Overall Temporary Assistance for Needy Families (TANF)
grants from the federal government are expected to equal or exceed the amounts
the state would have received under the old AFDC program.
Under current law, counties are required to provide "general assistance"
aid to certain persons who cannot obtain welfare from other programs, but this
mandate may be eliminated as part of the overhaul.
In the aftermath of Proposition 13, the state provided aid from the General
Fund to make up some of the loss of property tax moneys, including taking over
the principal responsibility for funding local K-12 schools and community
colleges. Under the pressure of the recent recession, the Legislature has
eliminated the remnants of this post-Proposition 13 aid to entities other than
K-14 education districts, although it has also provided additional funding
sources (such as sales taxes) and reduces mandates for local services. Many
counties continue to be under severe fiscal stress. While such stress in recent
years most often been experienced by smaller, rural counties, larger urban
counties, such as Los Angeles, have also been affected.
In November of 1994, Standard & Poor's Rating Group downgraded the credit
rating of several California counties, including San Francisco, San Diego,
Marin, Los Angeles and San Bernardino. In December of 1994 and January of 1995,
Standard and Poor's and Moody's Investor Services, Inc., respectively,
downgraded Orange County to below investment grade as a result of its bankruptcy
filing (see discussion below). In August of 1995, Standard and Poor's Rating
Group again downgraded the credit rating of Los Angeles County and replaced it
on CreditWatch. Moody's Investors Services, Inc. also downgraded Los Angeles
County. In October of 1995, Standard & Poor's Rating Group placed San Diego
County's $449.3 million in general fund-supported debt issues on CreditWatch.
During the two month period following the passage of Proposition 218 in November
1996, five of the seven California cities reviewed by the major rating agencies
during such two month period had been downgraded (Los Angeles, Sacramento, San
Diego, Fresno and Anaheim). In June 1998, Standard and Poor's Rating Group
downgraded Fresno's municipal bonds, citing the County's reduced financial
flexibility due to several years of budget deficit. In April 1998, each of the
three major rating agencies upgraded San Diego county's credit rating, citing
the County's successful sale of its troubled trash plant as a key factor in
improving the County's fiscal outlook. However, in August 1998, Standard and
Poor's Rating Group announced that San Diego County's rising debt, absent new
sources of revenue, was becoming a concern, signaling a greater likelihood in
the next three years of a downgrade in the County's strong credit rating.
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On December 6, 1994, Orange County, California (the "County"), together
with its pooled investment funds (the "Funds") filed for protection under
Chapter 9 of the federal Bankruptcy Code, after reports that the Funds had
suffered significant market losses in their investments, causing a liquidity
crisis for the Funds and the County. More than 200 other public entities, most
of which, but not all, are located in the County, were also depositors in the
Funds, As of mid-January, 1995, following a restructuring of most of the Funds'
assets to increase their liquidity and reduce their exposure to interest rate
increases, the County estimated the Funds' loss at about 41.69 billion, or 23%
of their initial deposits of approximately $7.5 billion. Many of the entities
which deposited money in the Funds, including the County, are facing cash flow
difficulties because of the bankruptcy filing and may be required to reduce
programs of capital projects. This may also affect their ability to meet their
outstanding obligations. In June, 1996, Orange County emerged from bankruptcy
protection as part of a fiscal recovery plan that included the issuance of new
recovery bonds and sharp reductions in services and personnel. Moody's gave the
insured recovery bonds an underlying rating of Baa and the County's general
obligation bonds a Ba rating. Standard and Poor's gave the recovery bonds a B
underlying rating and in February 1998, Fitch Investors Services assigned the
bonds an underlying rating or BBB.
State Finances. From 1990 until 1994, the State experienced the worst
economic fiscal, ad budget conditions since the 1930's. Construction,
manufacturing (especially aerospace), and financial services, among others, have
all been severely affected. Job losses were the worst of any post-war recession.
The state's financial condition improved markedly during the 1995-1996-97
and 1997-98 fiscal years, with a combination of better than expected revenues,
slowdown in growth of social welfare programs, and continued spending restraint
based on the actions taken in earlier years. The state's cash position also
improved and no external deficit borrowing has occurred over the end of these
three fiscal years.
The economy grew strongly during these fiscal years, and as a result, the
General Fund took in substantially greater tax revenues (around $2.2 billion in
1995-96, $1.6 billion in 1996-97 and $2.2 billion in 1997-98) than were
initially planned when the budgets were enacted. These additional funds were
largely directed to school aid. The accumulated budget deficit from the
recession years were finally eliminated. The Department of Finance estimates
that the state's budget reserve (the SFEU) totaled $639.8 million as of June 30,
1997 and $1.782 billion at June 30, 1998.
As a result of the deterioration in the state's budget and cash situation
during the early 1990, rating agencies reduced the state's credit rating.
Between October 1991 and October 1992, the ratings on the general obligation
bonds was reduced by Standard and Poor's from "AAA" to "A", by Moody's Investor
Services Inc. from "Aaa" to "Aa" and by Fitch Investors Services, Inc. from
"AAA" to "AA". On July 15, 1994, all three of the rating agencies rating the
state's long-term debt again lowered their ratings of the state's general
obligation bonds. Moody's Investor Services, Inc. lowered its rating from "Aa"
to "A1", Standard and Poor's ratings Group lowered its rating from "A" to "A",
and Fitch Investor Service lowered its rating from "AA" to "A". In July 1996,
Standard and Poor's raised its rating to A from A+. In 1997, Fitch Investors
Service raised its rating to "AA-" from "A". In October 1998, Moody's Investors
Service raised its rating to Aa3 from A1. There can be no assurance that such
ratings will continue for any given period of time or that they will not in the
future be further revised or withdrawn. It should be voted that the
creditworthiness of obligations issued by local California issuers may be
unrelated to the creditworthiness of obligations issued by local the State of
California, and there is no obligation on the part of the State or California,
and there is no obligation on the part of the state to make payment on such
obligations in the event of default.
FLORIDA
Florida's constitution prohibits the levy, under the authority of the
state, of an individual income tax upon the income of natural persons who are
residents or citizens of Florida in excess of amounts which may be credited
against or deducted from any similar tax levied by the United States or any
other state. Accordingly, a constitutional amendment would be necessary to
impose a state individual income tax in excess of the foregoing constitutional
limitations. The lack of an individual income tax exposes total state tax
collections to considerably more volatility than would otherwise be the case
and, in the event of an economic downswing, could effect the state's ability to
pay principal and interest in a timely manner.
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The Florida Constitution and Statutes mandate that the state budget as a
whole, and each separate fund within the state budget, be kept in balance from
currently available revenues each State fiscal year (July 1-June 30). Pursuant
to a constitutional amendment which was ratified by the voters on November 8,
1994, the rate of growth in state revenues in a given fiscal year is limited to
no more than the average annual growth rate in Florida personal income over the
previous five years (revenues collected in excess of the limitation are
generally deposited into the Budget Stabilization Fund).
The following data is provided by the Florida Consensus Estimating
Conference, which adjusted and updated actual revenue and forecasts on November
13, 1998 in order to support the state's budgeting and planning process. For
fiscal year 1998-99, the estimated General Revenue Fund and Working Capital Fund
is $18.78 billion. The projected year end balance of the combined General
Revenue Fund and Working Capital Fund is $592.7 million. Including the $789.6
million balance currently in the Budget Stabilization Fund, total reserves are
projected to stand at $1.38 billion, or 7.6% of current year appropriations. For
fiscal year 1999-2000, the estimated General Revenue Fund and Working Capital
Fund is $19.14 billion, a 2.0% percent increase over fiscal year 1998-99 The
fiscal year 1999-2000 budget incorporates a 3.9% increase in Net General
Revenues over fiscal year 1998-99. For fiscal year 1997-98, the estimated
Florida and Untied States unemployment rates were both 4.7%. For fiscal year
1998-99, the estimated Florida and Untied States unemployment rates are 5.0% and
5.1%, respectively. For fiscal year 1999-2000, the estimated Florida and United
States unemployment rates are both 5.5%.
In 1993, the state constitution was amended to limit the annual growth in
the assessed valuation of residential property. This amendment may, over time,
constrain the growth in property taxes, a major revenue source for local
governments.
South Florida is particularly susceptible to international trade and
currency imbalances and to economic dislocations in Central and South America,
due to its geographical location and its involvement with foreign trade, tourism
and investment capital. North and Central Florida are impacted by problems in
the agricultural sector, particularly with regard to the citrus and sugar
industries. Short-term adverse economic conditions may be created in these
areas, and in the state as a whole, due to crop failures, severe weather
conditions or other agriculture-related problems. The state economy also has
historically been dependent on the tourism and construction industries and is,
therefore, sensitive to trends in those sectors. Hurricanes are a significant
threat to continuing economic activity.
MASSACHUSETTS
Effective July 1, 1990, limitations were placed on the amount of direct
bonds the state could have outstanding in a fiscal year, and the amount of the
total appropriation in any fiscal year that may be expended for debt service on
general obligation debt of the state (other than certain debt incurred to pay
the fiscal 1990 deficit and certain Medicaid reimbursement payments for prior
years) was limited to 10%. In addition, the power of Massachusetts cities and
town and certain tax-supported districts and public agencies to raise revenue
from property taxes to support their operations, including the payment of debt
service, is limited by "Proposition 2 1/2". Property taxes are virtually the
only source of tax revenues available to cities and towns to meet local costs.
Major infrastructure projects will continue over the next decade. A
reduction in the federal contributions could increase pressure on the state and
result in increased indebtedness.
The fiscal viability of the state's authorities and municipalities is
inextricably linked to that of the state. The state guarantees the debt of
several authorities, most notably the Massachusetts Bay Transportation Authority
and the University of Massachusetts Building Authority. Their ratings are based
on this guarantee and can be expected to move in tandem. Several other
authorities are funded in part or in whole by the state and their debt ratings
may be adversely affected by a negative change in those of the state. Economic
slowdown or increased capital spending pressures could result in local aid
reductions.
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MICHIGAN
Under the state Constitution, the raising of taxes by the Legislature is
limited if doing so would cause the ratio of total State Revenues (except
federal aid) to Personal Income of Michigan (as such terms are defined in the
state Constitution) to exceed certain limits. The only exceptions to this
revenue limit are a majority approval of a referendum question or a specific
emergency declared by a two-thirds vote of the Legislature. However, this limit
does not apply to taxes imposed for the payment of principal and interest on
bonds of the state, if the bonds are approved by voters and authorized by a vote
of two-thirds of the members of each House of the Legislature and certain school
district loans. Local units of government and local authorities are authorized
to issue bonds and other evidences of indebtedness in a variety of situations
without the approval of electors, but the ability of the obligor to levy taxes
for the payment of such obligations is subject to the foregoing limitations
unless the obligations were authorized before December 23, 1978 or approved by
the electors. The constitution prohibits the state from reducing the proportion
of total state spending paid to all local units of government, taken as a group,
below that proportion in effect in the 1978-79 fiscal year. The state may not
mandate new or increased levels of services to be provided by local units
without making appropriations to cover any increased costs.
Under the state Constitution, the total amount of general ad valorem taxes
imposed on taxable property in any year cannot exceed certain mileage
limitations specified by the Constitution, statute or charter. The Constitution
prohibits local units of government from levying any tax not authorized by law
or charter, or from increasing the rate of an existing tax above the rate
authorized by law or charter. The Constitution also contains mileage reduction
provisions. Under such provisions, should the value of taxable property
(exclusive of new construction and improvements) increase at a percentage
greater than the percentage increase in the consumer Price Index ("CPI"), the
maximum authorized tax rate would be reduced by a factor which would result in
the same maximum potential tax revenues to the local taxing unit as if the
valuation of taxable property (less new construction and improvements) had grown
only at the CPI rate instead of at the higher actual growth rate. Thus, if
taxable property values rise faster than consumer prices, the maximum authorized
tax rate would be increased at the CPI rate. Conversely, if taxable property
values rise slower than consumer prices, tax rates may be raised accordingly,
but never higher than the rate authorized on December 23, 1978, without elector
approval.
NEW JERSEY
In June 1997, the New Jersey Economic Development Authority issued $2.75
billion of State Pension Funding Bonds. Proceeds of this issue were used to
fully fund the state's unfunded accrued pension liability and will result in a
reduction of the General Fund costs for fiscal years 1997 and 1998 of $590
million.
Other state-related obligations include those crated pursuant to the New
Jersey Building Authority Act, which has the power to construct facilities for
leasing to the state. On September 1, 1997, the New Jersey Building Authority
issued $224 million in refunding and new state revenue bonds. The funds were
applied for various projects including restoration of the State House Complex,
construction of South Woods State Prison, and sever renovations of municipal
buildings.
The authorizing legislation for various state entities provides for
specific budgetary procedures with respect to certain obligations issued by such
entities. Bonds issued pursuant to authorizing legislation of this type are
sometimes referred to as "moral obligation" bonds. There is no statutory
limitation on the amount of moral obligation bonds which may be issued by
eligible state entities. Currently, there are two such entities available for
state appropriations to meet moral obligations. The New Jersey Housing and
Mortgagee Finance Agency has not had a deficiency in a debt service reserve
which required New Jersey to appropriate funds. It is anticipated that the
agency's revenue will continue to be sufficient to cover debt service on its
bonds. The state provides the south Jersey Port Corporation with funds to cover
all debt service and property tax requirements when earned revenues are
anticipated to be insufficient to cover these obligations. In the past,
anticipated revenues have, in some cases, been insufficient to cover debt
service and/or all property tax requirements. There are numerous other
state-created entities with outstanding debt. This debt is supported by revenues
derived from or assets of the various projects financed by such entities.
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The Local Budget Law imposes specific budgetary procedures upon counties
and municipalities, subject to review by the Director of the Division of Local
Government Services. State law also regulates the issuance of debt by counties
and municipalities by limiting the amount of tax anticipation notes that may be
issued and requiring their repayment within 120 days of the end of the fiscal
year in which they are issued. The Local Bond Law governs the issuance of bonds
and notes and bars the issuance of bonds for the payment of current expenses or
to pay outstanding obligations, except where permitted by the Local Finance
Board. State law also authorizes state officials to supervise fiscal
administration in any municipality facing financial difficulties.
NEW YORK
The state ended its 1997-1998 fiscal year balanced on a cash basis. The
projected General Fund surplus is approximately $2.04 billion which results from
revenue growth and lower than expected entitlement spending. The state projects
a General Fund balanced on a cash basis for the 1998-1999 fiscal year and
potential budget gaps for the 1999-2000 and 2000-2001 fiscal years. In July
1998, the New York State Comptroller projected these gaps to be $1.8 billion and
$5.5 billion, respectively.
The fiscal stability of New York state relates, at least in part, to the
fiscal stability of its localities and authorities. Various state agencies,
authorities and localities have issued large amounts of bonds and notes either
guaranteed or supported by the state. In some cases, the state has had to
provide special assistance in recent years to enable such agencies, authorities
and localities to meet their financial obligations and, in some cases, to
prevent or cure defaults. The extent to which state agencies and local
governments require state assistance to meet their financial obligations, may
adversely affect the ability of the state to meet its own obligations as they
become due or to obtain additional financing.
New York City currently projects revenues and expenditures for the 1999
fiscal year balanced in accordance with GAAP with total revenues projected in
excess of $34 billion and budget gaps of $2.2 billion, $2.9 billion and $2.4
billion for its 2000, 2001 and 2002 fiscal years, respectively. These gaps are
projected after implementation of a gap closing program to reduce agency
expenditures by $200 million in the 1999 fiscal year and approximately $80
billion in each of fiscal years 2000 through 2002. There can be no assurance
that additional gap-closing measures, such as tax increases or reductions in
City services, will not be required, the implementation of which could adversely
affect the City's economic base, and there is no assurance that such measures
will enable the City to achieve a balanced budget, as required by state law, for
any of the 1999 through 2002 fiscal years.
Implementation of the City's four-year annual financial plan is also
dependent upon the city's ability to market its securities successfully in the
public credit markets including its ability to issue short term notes to finance
its seasonal working capital needs. The fiscal health of New York City, which is
the largest issuer of municipal bonds in the country and a leading international
commercial center, exerts a significant influence upon the fiscal health and
bond values of issues throughout the state. Bond values of the Municipal
Assistance Corporation, the state of New York, the New York Local Government
Assistance Corporation, the New York State Dormitory Authority, the New York
City Municipal Water Finance Authority, the New York City Transitional Finance
Authority and The Metropolitan Transportation Authority would be particularly
affected by serious financial difficulties encountered by New York City. The
Trust could be expected to hold bonds issued by many, if not all of these
issuers, at any given time.
The financial condition of the State, City and other New York issuers may
be affected by many economic, social, political and international factors which
cannot be predicted with certainty. These factors include, but may not be
limited to, litigation, collective bargaining with governmental employees, the
ability of issuers to handle the "Year 2000" computer problem, changes resulting
from entitlement program reforms, the receipt of intergovernmental aid, and the
performance of the securities and financial sector which is disproportionately
more significant to the New York economy than to the national economy. Factors
particularly affecting new York City also include its ability to meet its
increasing infrastructure and other capital needs in the face of rising debt
service costs and limited volume capacity under state law for incurring
indebtedness; and costs it may incur to achieve compliance with laws pertaining
to protecting its water supply and the disposal of its solid waste.
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OHIO
The state of Ohio operates on the basis of a fiscal biennium for its
appropriations and expenditures. The state is effectively prohibited by law from
ending a fiscal year or a biennium in a deficit position. The Governor has the
power to order state agencies to operate within the state's means. The state
carries out most of its operations through the General Revenue Fund ("GRF")
which receives general state revenues not otherwise dedicated. GRF revenues are
derived mainly from personal income and sales taxes and corporate franchise
taxes. State GRF figures generally show a pattern related to national economic
conditions, evident in growth and depletion of its GRF ending fund balances,
with the June 30 (end of fiscal year) GRF fund balance reduced during less
favorable national economic periods and increased during more favorable economic
periods.
Local school districts in Ohio receive a major portion (state-wide
aggregate approximately 44% in recent years) of their operating moneys from
state subsidiaries, but are dependent on local property taxes, and in 119
districts from voter-authorized income taxes, for significant portions of their
budgets. Litigation similar to that in other states, has been pending
questioning the constitutionality of Ohio's system of school funding. The Ohio
Supreme Court has recently concluded that aspects of the system (including basic
operating assistance and the loan program referred to below) are
unconstitutional, and ordered the state to provide for and fund a system
complying with the Ohio Constitution, staying its order to permit time for
responsive corrective actions. A small number of the state's 612 local school
districts have in any year required special assistance to avoid year-end
deficits. A program has provided for school district cash need borrowing
directly from commercial lenders, with diversion of state subsidy distributions
to repayment if needed. Recent borrowings under this program totaled $113.2
million for 12 districts in 1997 (including $90 million to one for restructuring
its prior loans), and 23.4 million for 10 districts in fiscal year 1998.
For those few municipalities and school districts that on occasion have
faced significant financial programs, there are statutory procedures for a joint
state/local commission to monitor the fiscal affairs and for development of a
financial plan to eliminate deficits and cure any defaults. (Similar procedures
have recently been extended to counties and townships). Since inception for
municipalities in 1979, these "fiscal emergency" procedures have been applied to
26 cities and villages; for 20 of them the fiscal situation was resolved and the
procedures terminated (two cities are in preliminary "fiscal watch" status). As
of February 3, 1999, the 1996 school district "fiscal emergency" provision
applied to six districts, and ten were on preliminary "fiscal watch" status.
PENNSYLVANIA
The General Fund, the state's largest fund, receives all tax receipts,
revenues, federal grants and reimbursements that are not specified by law to be
deposited elsewhere. Debt service on all obligations, except those issued for
highway purposes or for the benefit of other special revenue funds, is payable
from the General Fund. The General Fund closed fiscal year 1997 with a balance
of $1,364.9 million. For 1998, the Commonwealth expects an improvement in the
state's financial position.
Certain state-created agencies have statutory authorization to incur debt
for which no legislation providing for state appropriations to pay debt service
thereon is required. The debt of these agencies is supported by assets of or
revenues derived from the various projects financed; it is not an obligation of
the state. Some of these agencies, however, are indirectly dependent on state
appropriations. State-related agencies and their outstanding debt as of June 30,
1998 include the Delaware River Joint Toll Bridge Commission ($51.4 million),
the Delaware River Port Authority ($504.1 million), the Pennsylvania Economic
Development Financing Authority ($1,106.4 million), the Pennsylvania Energy
Development Authority ($43.1 million), the Pennsylvania Higher Education
Assistance Agency ($1,633.8 million), the Pennsylvania Higher Education
Facilities Authority ($3,057.6 million), (the Pennsylvania Industrial
Development Authority ($394.5 million), the Pennsylvania Infrastructure
Investment Authority ($196.4 million), the Pennsylvania Turnpike Commission
($1,127.9 million), the Philadelphia Regional Port Authority ($59.5 million) and
the state Public School Building Authority ($343.4 million).
B-83
<PAGE> 160
The only obligations of state-created agencies in Pennsylvania which bear a
moral obligation of the state are those issued by the Pennsylvania Housing
Finance Agency; a state-created agency which provides housing for lower and
moderate income families in the state, which had $2,716.4 million in bonds
outstanding at June 30, 1998, and the Hospitals and Higher Education Facilities
Authority of Philadelphia which issued $21.1 million in bonds in 1993.
Pennsylvania is currently involved in certain litigation where adverse
decisions could have an adverse impact on its ability to pay debt service. For
instance, in County of Allegheny v. Commonwealth of Pennsylvania involves
litigation regarding the state constitutionality of the statutory scheme for
county funding of the judicial system.
B-84
<PAGE> 161
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
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1998
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
Eaton Vance Management
24 Federal Street
Boston, MA 02110
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
<PAGE> 162
EATON VANCE NEW JERSEY 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 No. 811-09155) 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 (the "Initial Common Shares
Registration Statement").
(b) (1) By-Laws are incorporated herein by reference to the
Registrant's Initial Common Shares Registration Statement.
(2) Amendment No. 1 to the By-Laws filed herewith.
(c) Not applicable.
(d) (1) Specimen Certificate representing the Registrant's Common
Shares is incorporated herein by reference to Pre-Effective
Amendment No. 1 to the Registrant's Common Shares Registration
Statement filed with the Commission on January 26, 1999
("Pre-Effective Amendment No. 1 to the Common Shares Registration
Statement").
(2) Specimen Certificate representing the Registrant's Auction
Preferred Shares of beneficial interest ("Auction Preferred
Shares") filed herewith.
(e) Dividend Reinvestment Plan with respect to Common Shares is
incorporated herein by reference to Pre-Effective Amendment No. 1
to the Common Shares Registration Statement.
(f) Not applicable.
(g) Investment Advisory Agreement dated December 21, 1998 is
incorporated by reference to Pre-Effective Amendment No. 1 to the
Common Shares Registration Statement.
(h) (1) Purchase Agreement as to the Registrant's Auction Preferred
Shares filed herewith.
(2) Master Agreement Among Underwriters as to the Registrant's
Common Shares is incorporated by reference to Pre-Effective
Amendment No. 1 to the Common Shares
<PAGE> 163
Registration Statement.
(3) Master Selected Dealers as to the Registrant's Common Shares
is incorporated by reference to Pre-Effective Amendment No. 1 to
the Common Shares Registration Statement.
(4) Underwriting Agreement dated January 26, 1999 as to the
Registrant's Common Shares is incorporated by reference to
Pre-Effective Amendment No. 1 to the Common Shares Registration
Statement.
(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 is incorporated by
reference to Pre-Effective Amendment No. 1 to the Common Shares
Registration Statement.
(k) (1) Auction Agency Agreement between the Registrant and Bankers
Trust Co. as to the Registrant's Auction Preferred Shares filed
herewith.
(2) Broker-Dealer Agreement as to the Registrant's Auction
Preferred Shares filed herewith.
(3) DTC Representations Letter as to the Registrant's Auction
Preferred Shares filed herewith.
(4) Transfer Agency and Services Agreement dated December 21, 1998
is incorporated by reference to Pre-Effective Amendment No. 1 to
the Common Shares Registration Statement.
(5) Administration Agreement dated December 21, 1998 with respect
to Common Shares is incorporated by reference to Pre-Effective
Amendment No. 1 to the Common Shares Registration Statement.
(6) Shareholder Servicing Agreement dated January 29, 1999 with
respect to Common Shares is incorporated by reference to
Pre-Effective Amendment No. 1 to the Common Shares Registration
Statement.
(l) (1) Opinion of Counsel as to the Registrant's Common Shares is
incorporated by reference to Pre-Effective Amendment No. 1 to the
Common Shares Registration Statement.
(2) Opinion and Consent of Counsel as to the Registrant's Auction
Preferred Shares filed herewith.
(m) Not applicable.
(n) (1) Consent of Independent Auditors' filed herewith.
(o) Not applicable.
(p) Letter Agreement with Eaton Vance Management dated January 21,
1999 is incorporated by reference to Pre-Effective Amendment No. 1
to the Common Shares Registration Statement.
(q) Not applicable.
(r) Financial Data Schedule filed herewith.
(s) (1) Power of Attorney dated December 21, 1998 is incorporated by
reference to Pre-Effective Amendment No. 1 to the Common Shares
Registration Statement.
2
<PAGE> 164
(2) Power of Attorney dated January 5, 1999 is incorporated by
reference to Pre-Effective Amendment No. 1 to the Common Shares
Registration Statement.
(3) Power of Attorney dated January 15, 1999 filed herewith.
ITEM 25. MARKETING ARRANGEMENTS
See the Purchase Agreement to be filed as Exhibit (h).
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):
<TABLE>
<S> <C>
Registration fees........................................... $10,179,08
National Association of Securities Dealers, Inc. Fees....... $ 4,161.54
Printing (other than stock certificates).................... $ 5,000.00
Engraving and printing stock certificates................... $ 7,500.00
Legal fees and expenses..................................... $ 3,500.00
----------
Total..................................................... $30,340.62
==========
</TABLE>
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
None.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
<S> <C>
Auction Preferred Shares of beneficial interest, 0
par value $.01 per share as of
February 16, 1999
Common Shares of beneficial interest, 2,062
par value $.01 per share as of
February 16, 1999
</TABLE>
ITEM 29. INDEMNIFICATION
The Registrant's By-Laws and Underwriting Agreement incorporated herein,
Amendment No. 1 to the By-Laws and the Purchase Agreement filed herewith 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
3
<PAGE> 165
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 Preferred Shares being registered, the Registrant will,
unless in the 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 Auction Preferred
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
4
<PAGE> 166
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-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
<PAGE> 167
NOTICE
A copy of the Agreement and Declaration of Trust of Eaton Vance New Jersey
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
<PAGE> 168
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this 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 1st
day of March, 1999.
EATON VANCE NEW JERSEY MUNICIPAL
INCOME TRUST
By: /s/ Thomas J. Fetter*
-------------------------------
Thomas J. Fetter, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
President (Principal Executive
/s/ Thomas J. Fetter* Officer) March 1, 1999
- ------------------------------------
Thomas J. Fetter
Treasurer (Principal
/s/ James L. O'Connor* Financial and Accounting March 1, 1999
- ------------------------------------ Officer)
James L. O'Connor
/s/ James B. Hawkes* Vice President and Trustee March 1, 1999
- ------------------------------------
James B. Hawkes
/s/ Jessica L. Bibliowicz* Trustee March 1, 1999
- ------------------------------------
Jessica L. Bibliowicz
/s/ Donald R. Dwight* Trustee March 1, 1999
- ------------------------------------
Donald R. Dwight
/s/ Samuel L. Hayes III* Trustee March 1, 1999
- ------------------------------------
Samuel L. Hayes
/s/ Norton H. Reamer* Trustee March 1, 1999
- ------------------------------------
Norton H. Reamer
/s/ Lynn A. Stout* Trustee March 1, 1999
- ------------------------------------
Lynn A. Stout
/s/ Jack L. Treynor* Trustee March 1, 1999
- ------------------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
--------------------------------
Alan R. Dynner (as attorney-in-fact)
</TABLE>
7
<PAGE> 169
EXHIBIT INDEX
EXHIBITS DESCRIPTION
(b)(2) Amendment No. 1 to By-Laws
(d)(2) Specimen Certificate representing Registrant's Auction Preferred
Shares
(h)(1) Purchase Agreement as to Registrant's Auction Preferred Shares
(k)(1) Auction Agent Agreement
(k)(2) Broker-Dealer Agreement
(k)(3) DTC Representation Letter
(l)(2) Opinion of Kirkpatrick & Lockhart LLP
(n)(1) Consent of Independent Auditor
(s)(3) Power of Attorney
(27) Financial Data Schedule
<PAGE> 1
EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
Amendment No. 1 to By-laws - Statement
creating one series of
Auction Preferred Shares
WHEREAS, Section 5.1 of Article VI of the Agreement and Declaration of
Trust dated December 10, 1998 of Eaton Vance New Jersey Municipal Income Trust
(the "Declaration of Trust"), a copy of which is on file in the office of the
Secretary of State of The Commonwealth of Massachusetts, provides that the
Trustees may, without shareholder approval, authorize one or more classes of
shares (which classes may be divided into two or more series), shares of each
such class or series having such preferences, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, as the Trustees may determine and as shall be set forth in the
By-laws; and
WHEREAS, pursuant to authority expressly vested in the Trustees of the
Trust by Section 5.1 of Article VI of the Declaration of Trust, the Trustees
have authorized, in addition to that Trust's common shares, a class of 1,520
auction preferred shares, without par value, liquidation preference $25,000 per
share plus accumulated but unpaid dividends thereon, if any (whether or not
earned or declared), plus the premium, if any, resulting from the designation of
a Premium Call Period, designated Auction Preferred Shares;
NOW, THEREFORE, the By-laws of Eaton Vance New Jersey Municipal Income
Trust are hereby amended as follows:
1. ARTICLES VII through XIII shall be redesignated as ARTICLES VIII
through XIV and all affected cross references therein hereby are
amended accordingly.
2. A new ARTICLE VII shall be added as follows:
<PAGE> 2
ARTICLE VII
STATEMENT CREATING A SERIES OF AUCTION PREFERRED SHARES
DESIGNATION
Auction Preferred Shares: 1,520 shares of beneficial interest of Preferred
Shares, par value $.01 per share, liquidation preference $25,000 per share plus
an amount equal to accumulated but unpaid dividends (whether or not earned or
declared) thereon, is hereby designated "Auction Preferred Shares." Each share
of Auction Preferred Shares (sometimes referred to herein as "APS") may be
issued on a date to be determined by the Board of Trustees of the Trust or
pursuant to their delegated authority; have an Initial Dividend Rate and an
Initial Dividend Payment Date as shall be determined in advance of the issuance
thereof by the Board of Trustee of the Trust or pursuant to their delegated
authority; and have such other preferences, voting powers, limitations as to
dividends, qualifications and terms and conditions of redemption as are set
forth in these Amended By-Laws. The Auction Preferred Shares shall constitute a
separate series of Preferred Shares of the Trust, and each share of Auction
Preferred Shares shall be identical.
1. DEFINITIONS. (a) Unless the context or use indicates another or
different meaning or intent, in these Amended By-Laws the following terms have
the following meanings, whether used in the singular or plural:
"'AA' Composite Commercial Paper Rate," on any date of determination,
means (i) the Interest Equivalent of the rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P or "Aa" by Moody's
or the equivalent of such rating by another nationally recognized rating agency,
as such rate is made available on a discount basis or otherwise by the Federal
Reserve Bank of New York for the Business Day immediately preceding such date,
or (ii) in the event that the Federal Reserve Bank of New York does not make
available such a rate, then the arithmetic average of the Interest Equivalent of
the rate on commercial paper placed on behalf of such issuers, as quoted on a
discount basis or otherwise by Merrill Lynch, Pierce, Fenner & Smith
Incorporated or its successors that are Commercial Paper Dealers, to the Auction
Agent for the close of business on the Business Day immediately preceding such
date. If one of the Commercial Paper Dealers does not quote a rate required to
determine the "AA" Composite Commercial Paper Rate, the "AA" Composite
Commercial Paper Rate will be determined on the basis of the quotation or
quotations furnished by any Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers selected by the Trust to provide such rate or rates not
being supplied by the Commercial Paper Dealer. If the number of Dividend Period
days shall be (i) 7 or more but fewer than 49 days, such rate shall be the
Interest Equivalent of the 30-day rate on such commercial paper; (ii) 49 or more
but fewer than 70 days, such rate shall be the Interest Equivalent of the 60-day
rate on such commercial paper; (iii) 70 or more days but fewer than 85 days,
such rate shall be the arithmetic average of the Interest Equivalent on the
60-day and 90-day rates on such commercial paper; (iv) 85 or more days but fewer
than 99 days, such rate shall be the Interest Equivalent of the 90-day rate on
such commercial paper; (v) 99 or more days but fewer than 120 days, such rate
shall be the arithmetic average of the Interest Equivalent of the 90-day and
120-day rates on such commercial paper; (vi) 120 or more days but fewer than 141
days, such rate shall be the Interest Equivalent of the 120-day rate on such
commercial paper; (vii) 141 or more days but fewer than 162 days, such rate
shall be the arithmetic average of the Interest Equivalent of the 120-day and
180-day rates on such commercial paper; and (viii) 162 or more days but fewer
than 183 days, such rate shall be the Interest Equivalent of the 180-day rate on
such commercial paper.
"Accountant's Confirmation" has the meaning set forth in paragraph 7(c) of
these Amended By-Laws.
"Additional Dividend" has the meaning set forth in paragraph 2(e) of these
Amended By-Laws.
"Adviser" means the Trust's investment adviser which initially shall be
Eaton Vance Management.
"Affiliate" means any Person, other than PaineWebber Incorporated or its
successors, known to the Auction Agent to be controlled by, in control of, or
under common control with, the Trust.
<PAGE> 3
"Agent Member" means a member of the Securities Depository that will act
on behalf of a Beneficial Owner of one or more APS or a Potential Beneficial
Owner.
"Amended By-Laws" means the By-Laws of the Trust, as amended by this
Statement creating the APS and as may otherwise be amended from time-to-time.
"APS" means, as the case may be, the Auction Preferred Shares.
"APS Basic Maintenance Amount," as of any Valuation Date, means the dollar
amount equal to (i) the sum of (A) the product of the number of APS and Other
APS Outstanding on such Valuation Date multiplied by the sum of (a) $25,000 and
(b) any applicable redemption premium attributable to the designation of a
Premium Call Period; (B) the aggregate amount of cash dividends (whether or not
earned or declared) that will have accumulated for each share of APS and Other
APS Outstanding, in each case, to (but not including) the end of the current
Dividend Period for each series of APS that follows such Valuation Date in the
event the then current Dividend Period will end within 49 calendar days of such
Valuation Date or through the 49th day after such Valuation Date in the event
the then current Dividend Period for each series of APS will not end within 49
calendar days of such Valuation Date; (C) in the event the then current Dividend
Period will end within 49 calendar days of such Valuation Date, the aggregate
amount of cash dividends that would accumulate at the Maximum Applicable Rate
applicable to a Dividend Period of 28 or fewer days on any APS and Other APS
Outstanding from the end of such Dividend Period through the 49th day after such
Valuation Date, multiplied by the larger of the Moody's Volatility Factor and
the S&P Volatility Factor, determined from time to time by Moody's and S&P,
respectively (except that if such Valuation Date occurs during a Non-Payment
Period, the cash dividend for purposes of calculation would accumulate at the
then current Non-Payment Period Rate); (D) the amount of anticipated expenses of
the Trust for the 90 days subsequent to such Valuation Date (including any
premiums payable with respect to a Policy); (E) the amount of the Trust's
Maximum Potential Additional Dividend Liability as of such Valuation Date; and
(F) any current liabilities as of such Valuation Date to the extent not
reflected in any of (i)(A) through (i)(E) (including, without limitation, and
immediately upon determination, any amounts due and 5 payable by the Trust
pursuant to repurchase agreements and any amounts payable for Municipal
Obligations purchased as of such Valuation Date) less (ii) either (A) the
Discounted Value of any of the Trust's assets, or (B) the face value of any of
the Trust's assets if such assets mature prior to or on the date of redemption
of APS or payment of a liability and are either securities issued or guaranteed
by the United States Government or Deposit Securities, in both cases irrevocably
deposited by the Trust for the payment of the amount needed to redeem APS
subject to redemption or to satisfy any of (i)(B) through (i)(F).
"APS Basic Maintenance Cure Date," with respect to the failure by the
Trust to satisfy the APS Basic Maintenance Amount (as required by paragraph 7(a)
of these Amended By-Laws) as of a given Valuation Date, means the sixth Business
Day following such Valuation Date.
"APS Basic Maintenance Report" means a report signed by any of the
President, Treasurer, any Senior Vice President or any Vice President of the
Trust which sets forth, as of the related Valuation Date, the assets of the
Trust, the Market Value and the Discounted Value thereof (seriatim and in
aggregate), and the APS Basic Maintenance Amount.
"Anticipation Notes" shall mean the following Municipal Obligations:
revenue anticipation notes, tax anticipation notes, tax and revenue anticipation
notes, grant anticipation notes and bond anticipation notes.
"Applicable Percentage" has the meaning set forth in paragraph 10(a)(vii)
of these Amended By-Laws.
"Applicable Rate" means the rate per annum at which cash dividends are
payable on the APS or Other APS, as the case may be, for any Dividend Period.
"Auction" means a periodic operation of the Auction Procedures.
3
<PAGE> 4
"Auction Agent" means Bankers Trust Company unless and until another
commercial bank, trust company or other financial institution appointed by a
resolution of the Board of Trustees of the Trust or a duly authorized committee
thereof enters into an agreement with the Trust to follow the Auction Procedures
for the purpose of determining the Applicable Rate and to act as transfer agent,
registrar, dividend disbursing agent and redemption agent for the APS and Other
APS.
"Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 10 of this Article VII, Section 2 of these Amended By-Laws.
"Beneficial Owner" means a customer of a Broker-Dealer who is listed on
the records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of APS or a Broker-Dealer that holds APS for its own account.
"Broker-Dealer" means any broker-dealer, or other entity permitted by law
to perform the functions required of a Broker-Dealer in paragraph 10 of this
Article VII, Section 2 of these Amended By-Laws, that has been selected by the
Trust and has entered into a Broker-Dealer Agreement with the Auction Agent that
remains effective.
"Broker-Dealer Agreement" means an agreement between the Auction Agent and
a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in paragraph 10 of this Article VII, Section 2 of these
Amended By-Laws.
"Business Day" means a day on which the New York Stock Exchange,
Inc. is open for trading and which is not a Saturday, Sunday or other day
on which banks in The City of New York are authorized or obligated by law
to close.
"Declaration of Trust" means the Agreement and Declaration of Trust, as
amended and supplemented (including these Amended By-Laws), of the Trust.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means PaineWebber Incorporated and such other
commercial paper dealer or dealers as the Trust may from time to time appoint,
or, in lieu of any thereof, their respective affiliates or successors.
"Common Shares" means the shares of beneficial interest designated as
common shares, par value $0.01 per share, of the Trust.
"Date of Original Issue" means, with respect to any share of APS or Other
APS, the date on which the Trust originally issues such share.
"Deposit Securities" means cash and Municipal Obligations rated at least
A2 (having a remaining maturity of 12 months or less), P-1, VMIG-1 or MIG-1 by
Moody's or A (having a remaining maturity of 12 months or less), A-1+ or SP-1+
by S&P.
"Discounted Value" means the quotient of the Market Value thereof divided
by the applicable S&P Discount Factor.
"Dividend Payment Date," with respect to APS, has the meaning set forth in
paragraph 2(b)(i) of these Amended By-Laws and, with respect to Other APS, has
the equivalent meaning.
"Dividend Period" means the Initial Dividend Period, any 7-Day Dividend
Period and any Special Dividend Period.
4
<PAGE> 5
"Existing Holder" means a Broker-Dealer or any such other Person as may be
permitted by the Trust that is listed as the holder of record of APS in the
Share Books.
"Forward Commitment" has the meaning set forth in paragraph 8(c) of this
Article VII, Section 2 of these Amended By-Laws.
"Holder" means a Person identified as a holder of record of APS in the
Share Register.
"IBT" means Investors Bank & Trust Company, Custodian of the Trust's
assets.
"Independent Accountant" means a nationally recognized accountant, or firm
of accountants, that is, with respect to the Trust, an independent public
accountant or firm of independent public accountants under the Securities Act of
1933, as amended.
"Initial Dividend Payment Date" means the Initial Dividend Payment Date as
determined by the Board of Trustees of the Trust with respect to each series of
APS or Other APS, as the case may be.
"Initial Dividend Period" has the meaning set forth in paragraph 2(c)(i)
of this Article VII, Section 2 of these Amended By-Laws and, with respect to
Other APS, has the equivalent meaning.
"Initial Dividend Rate" means the rate per annum applicable to the Initial
Dividend Period for such series of APS and, with respect to Other APS, has the
equivalent meaning.
"Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a futures
contract.
"Interest Equivalent" means a yield on a 360-day basis of a discount basis
security which is equal to the yield on an equivalent interest-bearing security.
"Long Term Dividend Period" means a Special Dividend Period consisting of
a specified period of one whole year or more but not greater than five years.
"Mandatory Redemption Price" means $25,000 per share of APS plus an amount
equal to accumulated but unpaid dividends (whether or not earned or declared) to
the date fixed for redemption and excluding Additional Dividends.
"Marginal Tax Rate" means the maximum marginal Federal individual income
tax rate applicable to ordinary income or the maximum marginal regular Federal
corporate income tax rate, whichever is greater.
"Market Value" of any asset of the Trust shall be the market value thereof
determined by the Pricing Service. Market Value of any asset shall include any
interest accrued thereon. The Pricing Service shall value portfolio securities
at the quoted bid prices or the mean between the quoted bid and asked price or
the yield equivalent when quotations are not readily available. Securities for
which quotations are not readily available shall be valued at fair value as
determined by the Pricing Service using methods which include consideration of:
yields or prices of municipal obligations of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from dealers; and general
market conditions. The Pricing Service may employ electronic data processing
techniques and/or a matrix system to determine valuations. In the event the
Pricing Service is unable to value a security, the security shall be valued at
the lower of two dealer bids obtained by the Trust from dealers who are members
of the National Association of Securities Dealers, Inc. and who make a market in
the security, at least one of which shall be in writing. Futures contracts and
options are valued at closing prices for such instruments established by the
exchange or board of trade on which they are traded, or if market quotations are
not readily available, are valued at fair value on a consistent basis using
methods determined in good faith by the Board of Trustees.
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<PAGE> 6
"Maximum Applicable Rate," with respect to APS, has the meaning set forth
in paragraph 10(a)(vii) of this Articles VIII, Section 2 of these Amended
By-Laws and, with respect to Other APS, has the equivalent meaning.
"Maximum Potential Additional Dividend Liability," as of any Valuation
Date, means the aggregate amount of Additional Dividends that would be due if
the Trust were to make Retroactive Taxable Allocations, with respect to any
fiscal year, estimated based upon dividends paid and the amount of undistributed
realized net capital gains and other taxable income earned by the Trust, as of
the end of the calendar month immediately preceding such Valuation Date and
assuming such Additional Dividends are fully taxable.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"Municipal Obligations" means "Municipal Obligations" as defined in the
Trust's Registration Statement on Form N-2 (File No. 333-72039) relating to the
APS on file with the Securities and Exchange Commission, as such Registration
Statement may be amended from time to time, as well as short-term municipal
obligations.
"Municipal Index" has the meaning set forth in paragraph 8(a) of this
Article VII, Section 2 of these Amended By-Laws.
"1940 Act" means the Investment Company Act of 1940, as amended from time
to time.
"1940 Act APS Asset Coverage" means asset coverage, as defined in section
18(h) of the 1940 Act, of at least 200% with respect to all outstanding senior
securities of the Trust which are shares of beneficial interest, including all
outstanding APS and Other APS (or such other asset coverage as may in the future
be specified in or under the 1940 Act as the minimum asset coverage for senior
securities which are shares of beneficial interest of a closed-end investment
company as a condition of paying dividends on its Common Shares).
"1940 Act Cure Date," with respect to the failure by the Trust to maintain
the 1940 Act APS Asset Coverage (as required by paragraph 6 of these Amended
By-Laws) as of the last Business Day of each month, means the last Business Day
of the following month.
"Non-Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions".
"Non-Payment Period" means any period commencing on and including the day
on which the Trust shall fail to (i) declare, prior to the close of business on
the second Business Day preceding any Dividend Payment Date, for payment on or
(to the extent permitted by paragraph 2(c)(i) of this Article VII, Section 2 of
these Amended By-Laws) within three Business Days after such Dividend Payment
Date to the Holders as of 12:00 noon, New York City time, on the Business Day
preceding such Dividend Payment Date, the full amount of any dividend on APS
payable on such Dividend Payment Date or (ii) deposit, irrevocably in trust, in
same-day funds, with the Auction Agent by 12:00 noon, New York City time, (A) on
such Dividend Payment Date the full amount of any cash dividend on such shares
payable (if declared) on such Dividend Payment Date or (B) on any redemption
date for any APS called for redemption, the Mandatory Redemption Price per share
of such APS or, in the case of an optional redemption, the Optional Redemption
Price per share, and ending on and including the Business Day on which, by 12:00
noon, New York City time, all unpaid cash dividends and unpaid redemption prices
shall have been so deposited or shall have otherwise been made available to
Holders in same-day funds; provided that, a Non-Payment Period shall not end
unless the Trust shall have given at least five days' but no more than 30 days'
written notice of such deposit or availability to the Auction Agent, all
Existing Holders (at their addresses appearing in the Share Books) and the
Securities Depository. Notwithstanding the foregoing, the failure by the Trust
to deposit funds as provided for by clauses (ii)(A) or (ii)(B) above within
three Business Days after any Dividend Payment Date or redemption date, as the
case may be, in each case to the extent contemplated by paragraph 2(c)(i) of
these Amended By-Laws, shall not constitute a "Non-Payment Period."
"Non-Payment Period Rate" means, initially, 200% of the applicable
Reference Rate (or 275% of such rate if the Trust has provided notification to
the Auction Agent prior to the Auction establishing the Applicable Rate for any
dividend pursuant to paragraph 2(f) hereof that net capital gains or other
taxable income will be included in
6
<PAGE> 7
such dividend on APS), provided that the Board of Trustees of the Trust shall
have the authority to adjust, modify, alter or change from time to time the
initial Non-Payment Period Rate if the Board of Trustees of the Trust determines
and S&P (and any Substitute Rating Agency in lieu of S&P in the event such party
shall not rate the APS) advise the Trust in writing that such adjustment,
modification, alteration or change will not adversely affect its then current
ratings on the APS.
"Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i) of Article VII, Section 2 of these Amended By-Laws.
"Notice of Redemption" means any notice with respect to the redemption of
APS pursuant to paragraph 4 of Article VII, Section 2 of these Amended By-Laws.
"Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii) of
Article VII, Section 2 of these Amended By-Laws.
"Notice of Special Dividend Period" has the meaning set forth in paragraph
2(c)(iii) of Article VII, Section 2 of these Amended By-Laws.
"Optional Redemption Price" means $25,000 per share plus an amount equal
to accumulated but unpaid dividends (whether or not earned or declared) to the
date fixed for redemption and excluding Additional Dividends plus any applicable
redemption premium attributable to the designation of a Premium Call Period.
"Other APS" means the auction rate Preferred Shares of the Trust, other than the
APS.
"Outstanding" means, as of any date (i) with respect to APS, APS therefor
issued by the Trust except, without duplication, (A) any APS theretofore
canceled or delivered to the Auction Agent for cancellation, or redeemed by the
18 Trust, or as to which a Notice of Redemption shall have been given and
Deposit Securities shall have been deposited in trust or segregated by the Trust
pursuant to paragraph 4(c) and (B) any APS as to which the Trust or any
Affiliate thereof shall be a Beneficial Owner, provided that APS held by an
Affiliate shall be deemed outstanding for purposes of calculating the APS Basic
Maintenance Amount and (ii) with respect to shares of other Preferred Shares,
has the equivalent meaning.
"Parity Shares" means the APS and each other outstanding series of
Preferred Shares the holders of which, together with the holders of the APS,
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion to the
full respective preferential amounts to which they are entitled, without
preference or priority one over the other.
"Person" means and includes an individual, a partnership, a trust, an
unincorporated association, a joint venture or other entity or a government or
any agency or political subdivision thereof.
"Policy" means an insurance policy purchased by the Trust which guarantees
the payment of principal and interest on specified Municipal Obligations during
the period in which such Municipal Obligations are owned by the Trust; provided,
however, that, as long as the APS are rated by S&P, the Trust will not obtain
any Policy unless S&P advises the Trust in writing that the purchase of such
Policy will not adversely affect its then-current rating on the APS.
"Potential Beneficial Owner" means a customer of a Broker-Dealer or a
Broker-Dealer that is not a Beneficial Owner of APS but that wishes to purchase
such shares, or that is a Beneficial Owner that wishes to purchase additional
APS.
"Potential Holder" means any Broker-Dealer or any such other Person as may
be permitted by the Trust, including any Existing Holder, who may be interested
in acquiring APS (or, in the case of an Existing Holder, additional APS).
7
<PAGE> 8
"Preferred Shares" means the preferred shares of beneficial interest, par
value $.01 per share, of the Trust, and includes APS and Other APS.
"Premium Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions".
"Pricing Service" means Standard & Poor's/J.J. Kenny or any pricing
service designated by the Board of Trustees of the Trust provided the Trust
obtains written assurance from S&P that such designation will not impair the
rating then assigned by S&P to the APS.
"Quarterly Valuation Date" means the last Business Day of the last month
of each fiscal quarter of the Trust in each fiscal year of the Trust, commencing
March 31, 1999.
"Receivables for Municipal Obligations Sold" has the meaning set forth
under the definition of S&P Discount Factor.
"Reference Rate" means: (i) with respect to a Dividend Period or a Short
Term Dividend Period having 28 or fewer days, the higher of the applicable "AA"
Composite Commercial Paper Rate and the Taxable Equivalent of the Short-Term
Municipal Bond Rate, (ii) with respect to any Short Term Dividend Period having
more than 28 but fewer than 183 days, the applicable "AA" Composite Commercial
Paper Rate, (iii) with respect to any Short Term Dividend Period having 183 or
more but fewer than 364 days, the applicable U.S. Treasury Bill Rate and (iv)
with respect to any Long Term Dividend Period, the applicable U.S. Treasury Note
Rate.
"Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of Article VII, Section 2 of these Amended By-Laws.
"Response" has the meaning set forth in paragraph 2(c)(iii) of Article
VII, Section 2 of these Amended By-Laws.
"Retroactive Taxable Allocation" has the meaning set forth in paragraph
2(e) of Article VII, Section 2 of these Amended By-Laws.
"Right" has the meaning set forth in paragraph 2(e) of Article VII,
Section 2 of these Amended By-Laws and, with respect to Other APS, has the
equivalent meaning.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., or its successors.
"S&P Discount Factor" means, for purposes of determining the Discounted
Value of any Municipal Bond which constitutes an S&P Eligible Asset, the
percentage determined by reference to (a)(i) the rating by S&P or Moody's on
such Bond or (ii) in the event the Municipal Bond is insured under a Policy and
the terms of the Policy permit the Trust, at its option, to obtain other
permanent insurance guaranteeing the timely payment of interest on such
Municipal Bond and principal thereof to maturity, the S&P insurance
claims-paying ability rating of the issuer of the Policy or (iii) in the event
the Municipal Bond is insured under an insurance policy which guarantees the
timely payment of interest on such Municipal Bond and principal thereof to
maturity, the S&P insurance claims-paying ability rating of the issuer of the
insurance policy and (b) the S&P Exposure Period, in accordance with the tables
set forth below:
<TABLE>
<CAPTION>
S&P DISCOUNT FACTORS RATING CATEGORY
EXPOSURE PERIOD AAA* AA* A* BBB*
<S> <C> <C> <C> <C>
45 Business Days 202% 207% 222% 262%
25 Business Days 182 187 202 242
10 Business Days 167 172 187 227
7 Business Days 162 167 182 222
3 Business Days 142 147 162 202
</TABLE>
* S&P rating
8
<PAGE> 9
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term
Municipal Obligations will be 120%, so long as such Municipal Obligations are
rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable in 30
days or less, or 125% if such Municipal Obligations are not rated by S&P but are
rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however, such short-term
Municipal Obligations rated by Moody's but not rated by S&P having a demand
feature exercisable in 30 days or less must be backed by a letter of credit,
liquidity facility or guarantee from a bank or other financial institution
having a short-term rating of at least A-1+ from S&P; and further provided that
such short-term Municipal Obligations rated by Moody's but not rated by S&P may
comprise no more than 50% of short-term Municipal Obligations that qualify as
S&P Eligible Assets and (ii) no S&P Discount Factor will be applied to cash or
to Receivables for Municipal Obligations Sold. "Receivables for Municipal
Obligations Sold," for purposes of calculating S&P Eligible Assets as of any
Valuation Date, means the book value of receivables for Municipal Obligations
sold as of or prior to such Valuation Date if such receivables are due within
five Business Days of such Valuation Date. For purposes of the foregoing,
Anticipation Notes rated SP-1+ or, if not rated by S&P, rated VMIG-1 by Moody's,
which do not mature or have a demand feature exercisable in 30 days and which do
not have a long-term rating, shall be considered to be short-term Municipal
Obligations.
"S&P Eligible Asset" means cash, Receivables for Municipal Obligations
Sold or a Municipal Bond that (i) is issued by any of the 50 states, the
territories and their subdivisions, counties, cities, towns, villages, and
school districts, agencies, such as authorities and special districts created by
the states, and certain federally sponsored agencies such as local housing
authorities (payments made on these bonds are exempt from regular federal income
taxes and are generally exempt from state and local taxes in the state of
issuance), (ii) is interest bearing and pays interest at least semi-annually;
(iii) is payable with respect to principal and interest in United States
Dollars; (iv) is publicly rated BBB or higher by S&P or, except in the case of
Anticipation Notes that are grant anticipation notes or bond anticipation notes
which must be rated by S&P to be included in S&P Eligible Assets, if not rated
by S&P but rated by Moody's, is rated at least A by Moody's (provided that such
Moody's-rated Municipal Obligations will be included in S&P Eligible Assets only
to the extent the Market Value of such Municipal Obligations does not exceed 50%
of the aggregate Market Value of the S&P Eligible Assets; and further provided
that, for purposes of determining the S&P Discount Factor applicable to any such
Moody's-rated Municipal Bond, such Municipal Bond will be deemed to have an S&P
rating which is one full rating category lower than its Moody's rating); (v) is
not subject to a covered call or covered put option written by the Trust; (vi)
and is part of an issue of Municipal Obligations with an original issue size of
at least $10 million or, if of an issue with an original issue size below $10
million (but in no event below $5 million), is issued by an issuer with a total
of at least $25 million of securities outstanding, or part of an issue with an
original issue size of $5 million and rated A or better by S&P; provided that
the fair market value of Municipal Obligations rated A or better by S&P may not
exceed 20% of a Trust's S&P Eligible Assets.
Notwithstanding the foregoing:
(1) Municipal Obligations of any one issuer or guarantor (excluding bond
insurers) will be considered S&P Eligible Assets only to the extent the fair
market value of such obligations does not exceed 10% of the aggregate fair
market value of the S&P Eligible Assets, provided that 2% is added to the
applicable S&P Discount Factor for every 1% by which the fair market value of
such Municipal Obligations exceeds 5% of the aggregate fair market value of the
S&P Eligible Assets; and
(2) Municipal Obligations issued by issuers in any one industry, except
the utility and transportation sectors, will be considered S&P Eligible Assets
only to the extent the fair market value of such Municipal Obligations does not
exceed 20% of the aggregate fair market value of S&P Eligible Assets; provided,
however, that
(a) the fair market value of the Municipal Obligations of each (1)
electric, gas and combination issues (if the combination issue includes an
electric issue), (2) water and sewer utilities and combination issues (if
the combination issue does not include an electric issue) and (3)
irrigation, resource recovery,
9
<PAGE> 10
solid waste, and other utilities (provided the security is rated by S&P)
comprise no more than 20% of the Trust's S&P Eligible Assets, and
(b) the fair market value of the Municipal Obligations of (1)
streets and highways, toll roads, bridges and tunnels, airports and
multi-purpose port authorities (multiple revenue streams generated by toll
roads, air ports, real estate, bridges) issues and (2) mass transit,
parking, seaports and other transportation issues comprise no more than
40% of the Trust's S&P Eligible Assets; provided that the fair market
value of Municipal Obligations in subgroup (1) comprises no more than 20%
of the Trust's S&P Eligible Assets.
General Obligation Bonds of the Trust's named state may comprise up to 50%
of the Trust's S&P Eligible Assets. "General Obligation Bonds" include bonds of
issuers that are directly or indirectly guaranteed by the applicable state and
utility issuers where the utility issuer is directly or indirectly supported by
the applicable state.
Escrow bonds (defeased bonds) may comprise 100% of the Trust's S&P
Eligible Assets. Bonds that are legally defeased and secured by direct U.S.
government obligations are not required to meet any minimum issuance size
requirement. Bonds that are economically defeased or secured by other U.S.
agency paper must meet the minimum issuance size requirement for the Trust
described above. Bonds initially rated or rerated as an escrow bond by another
Rating Agency are limited to 50% of the Trust's S&P Eligible Assets, and carry
one full rating lower than the equivalent S&P rating for purposes of determining
the applicable discount factors. Bonds economically defeased and either
initially rated or rerated by S&P or another Rating Agency are assigned that
same rating level as its debt issuer, and will remain in its original industry
category.
Inverse floaters will qualify as S&P Eligible assets provided that the
ratio of aggregate dollar amount of floating rate instruments to inverse
floating rate instruments to inverse floating rate instruments issued by the
same issuer does not exceed a ratio of one to one at their time of original
issuance. Leveraged inverse floaters will not qualify as S&P Eligible Assets
unless the leveraged inverse floater has only one reset remaining before the
maturity of the floater.
"S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the APS Basic Maintenance Cure
Date, that the Trust has under these Amended By-Laws to cure any failure to
maintain, as of such Valuation Date, the Discounted Value for its portfolio at
least equal to the APS Basic Maintenance Amount (as described in paragraph 7(a)
of Article VII, Section 2 of these Amended By-Laws).
"S&P Hedging Transactions" has the meaning set forth in paragraph 8(a) of
Article VII, Section 2 of these Amended By-Laws.
"S&P Volatility Factor" means 277% or such other potential dividend rate
increase factor as S&P advises the Trust in writing is applicable.
"Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Trust as securities
depository for the APS that agrees to follow the procedures required to be
followed by such securities depository in connection with the APS.
"Service" means the United States Internal Revenue Service.
"7-Day Dividend Period" means a Dividend Period consisting of seven days.
"Short Term Dividend Period" means a Special Dividend Period consisting of
a specified number of days (other than seven), evenly divisible by seven and not
fewer than seven nor more than 364.
"Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than seven), evenly divisible by seven and not
fewer than seven nor more than 364 or (ii) a specified period of one
10
<PAGE> 11
whole year or more but not greater than five years (in each case subject to
adjustment as provided in paragraph 2(b)(i)).
"Specific Redemption Provisions" means, with respect to a Special Dividend
Period either, or any combination of, (i) a period (a "Non-Call Period")
determined by the Board of Trustees of the Trust, after consultation with the
Auction Agent and the Broker-Dealers, during which the APS subject to such
Dividend Period shall not be subject to redemption at the option of the Trust
and (ii) a period (a "Premium Call Period"), consisting of a number of whole
years and determined by the Board of Trustees of the Trust, after consultation
with the Auction Agent and the Broker-Dealers, during each year of which the APS
subject to such Dividend Period shall be redeemable at the Trust's option at a
price per share equal to $25,000 plus accumulated but unpaid dividends plus a
premium expressed as a percentage of $25,000, as determined by the Board of
Trustees of the Trust after consultation with the Auction Agent and the
Broker-Dealers.
"Share Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders of the APS.
"Share Register" means the register of Holders maintained on behalf of the
Trust by the Auction Agent in its capacity as transfer agent and registrar for
the APS.
"Subsequent Dividend Period," with respect to APS, has the meaning set
forth in paragraph 2(c)(i) of Article VII, Section 2 of these Amended By-Laws
and, with respect to Other APS, has the equivalent meaning.
"Substitute Commercial Paper Dealers" means such Substitute Commercial
Paper Dealer or Dealers as the Trust may from time to time appoint or, in lieu
of any thereof, their respective affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations, respectively, selected by
PaineWebber Incorporated or its affiliates and successors, after consultation
with the Trust, to act as the substitute rating agency or substitute rating
agencies, as the case may be, to determine the credit ratings of the APS.
"Taxable Equivalent of the Short-Term Municipal Bond Rate" on any date
means 90% of the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the Kenny S&P 30 day High Grade Index (the "Kenny
Index") or any successor index, made available for the Business Day immediately
preceding such date but in any event not later than 8:30 A.M., New York City
time, on such date by Kenny Information Systems Inc. or any successor thereto,
based upon 30-day yield evaluations at par of bonds the interest on which is
excludable for Federal income tax purposes under the Code of "high grade"
component issuers selected by Kenny Information Systems Inc. or any such
successor from time to time in its discretion, which component issuers shall
include, without limitation, issuers of general obligation bonds but shall
exclude any bonds the interest on which constitutes an item of tax preference
under Section 57(a)(5) of the Code, or successor provisions, for purposes of the
"alternative minimum tax," divided by (B) 1.00 minus the Marginal Tax Rate
(expressed as a decimal); provided, however, that if the Kenny Index is not made
so available by 8:30 A.M., New York City time, on such date by Kenny Information
Systems Inc. or any successor, the Taxable Equivalent of the Short-Term
Municipal Bond Rate shall mean the quotient of (A) the per annum rate expressed
on an interest equivalent basis equal to the most recent Kenny Index so made
available for any preceding Business Day, divided by (B) 1.00 minus the Marginal
Tax Rate (expressed as a decimal). The Trust may not utilize a successor index
to the Kenny Index unless S&P provides the Trust with written confirmation that
the use of such successor index will not adversely affect the then-current S&P
rating of the APS.
"Treasury Bonds" has the meaning set forth in paragraph 8(a) of Article
VII, Section 2 of these Amended By-Laws.
"Trust" means Eaton Vance New Jersey Municipal Income Trust, a
Massachusetts business trust.
11
<PAGE> 12
"U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent of
the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate" on
any date means the Interest Equivalent of the yield as calculated by reference
to the arithmetic average of the bid price quotations of the actively traded
Treasury Bill with a maturity most nearly comparable to the length of the
related Dividend Period, as determined by bid price quotations as of any time on
the Business Day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the Auction
Agent. 27 "U.S. Treasury Note Rate" on any date means (i) the yield as
calculated by reference to the bid price quotation of the actively traded,
current coupon Treasury Note with a maturity most nearly comparable to the
length of the related Dividend Period, as such bid price quotation is published
on the Business Day immediately preceding such date by the Federal Reserve Bank
of New York in its Composite 3:30 P.M. Quotations for U.S. Government Securities
report for such Business Day, or (ii) if such yield as so calculated is not
available, the Alternate Treasury Note Rate on such date. "Alternate Treasury
Note Rate" on any date means the yield as calculated by reference to the
arithmetic average of the bid price quotations of the actively traded, current
coupon Treasury Note with a maturity most nearly comparable to the length of the
related Dividend Period, as determined by the bid price quotations as of any
time on the Business Day immediately preceding such date, obtained from at least
three recognized primary U.S. Government securities dealers selected by the
Auction Agent.
"Valuation Date" means, for purposes of determining whether the Trust is
maintaining the APS Basic Maintenance Amount, each Business Day commencing with
the Date of Original Issue.
"Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Trust, the amount of cash or securities paid to or
received from a broker (subsequent to the Initial Margin payment) from time to
time as the price of such futures contract fluctuates.
(b) The foregoing definitions of Accountant's Confirmation, APS Basic
Maintenance Amount, APS Basic Maintenance Cure Date, APS Basic Maintenance
Report, Deposit Securities, Discounted Value, Independent Accountant, Initial
Margin, Market Value, Maximum Potential Additional Dividend Liability, S&P
Discount Factor, S&P Eligible Asset, S&P Exposure Period, S&P Hedging
Transactions, S&P Volatility Factor, Valuation Date and Variation Margin have
been determined by the Board of Trustees of the Trust in order to obtain a AAA
rating from S&P on the APS on their Date of Original Issue; and the Board of
Trustees of the Trust shall have the authority, without shareholder approval, to
amend, alter or repeal from time to time the foregoing definitions and the
restrictions and guidelines set forth thereunder if S&P or any Substitute Rating
Agency advises the Trust in writing that such amendment, alteration or repeal
will not adversely affect its then current rating on the APS.
2. DIVIDENDS. (a) The Holders shall be entitled to receive, when, as and
if declared by the Board of Trustees of the Trust, out of funds legally
available therefor, cumulative dividends each consisting of (i) cash at the
Applicable Rate, (ii) a Right to receive cash as set forth in paragraph 2(e)
below, and (iii) any additional amounts as set forth in paragraph 2(f) below,
and no more, payable on the respective dates set forth below. Dividends on the
APS so declared and payable shall be paid (i) in preference to and in priority
over any dividends declared and payable on the Common Shares, and (ii) to the
extent permitted under the Code and to the extent available, out of net
tax-exempt income earned on the Trust's investments. To the extent permitted
under the Code, dividends on APS will be designated as exempt-interest
dividends. For the purposes of this section, the term "net tax-exempt income"
shall exclude capital gains of the Trust.
(b) (i) Cash dividends on APS shall accumulate from the Date of Original
Issue and shall be payable, when, as and if declared by the Board of Trustees,
out of funds legally available therefor, commencing on the Initial Dividend
Payment Date. Following the Initial Dividend Payment Date for the APS, dividends
on the APS will be payable, at the option of the Trust, either (i) with respect
to any 7-Day Dividend Period and any Short Term Dividend Period of 35 or fewer
days, on the day next succeeding the last day thereof, or (ii) with respect to
any Short Term Dividend Period of more than 35 days and with respect to any Long
Term Dividend Period, monthly on the first Business Day of each calendar month
during such Short Term Dividend Period or Long Term Dividend
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Period and on the day next succeeding the last day thereof (each such date
referred to in clause (i) or (ii) being herein referred to as a "Normal Dividend
Payment Date"), except that if such Normal Dividend Payment Date is not a
Business Day, then the Dividend Payment Date shall be the first Business Day
next succeeding such Normal Dividend Payment Date. Although any particular
Dividend Payment Date may not occur on the originally scheduled date because of
the exception discussed above, the next succeeding Dividend Payment Date,
subject to such exception, will occur on the next following originally scheduled
date. If for any reason a Dividend Payment Date cannot be fixed as described
above, then the Board of Trustees shall fix the Dividend Payment Date. The Board
of Trustees by resolution prior to authorization of a dividend by the Board of
Trustees may change a Dividend Payment Date if such change does not adversely
affect the contract rights of the Holders of APS set forth in the Declaration of
Trust. The Initial Dividend Period, 7-Day Dividend Periods and Special Dividend
Periods are hereinafter sometimes referred to as Dividend Periods. Each dividend
payment date determined as provided above is hereinafter referred to as a
"Dividend Payment Date."
(ii) Each dividend shall be paid to the Holders as they appear in the
Stock Register as of 12:00 noon, New York City time, on the Business Day
preceding the Dividend Payment Date. Dividends in arrears for any past Dividend
Period may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the Holders as they appear on the Stock Register on a
date, not exceeding 15 days prior to the payment date therefor, as may be fixed
by the Board of Trustees of the Trust. (c) (i) During the period from and
including the Date of Original Issue to but excluding the Initial Dividend
Payment Date for each series of APS (the "Initial Dividend Period"), the
Applicable Rate shall be the Initial Dividend Rate. Commencing on the Initial
Dividend Payment Date for each series of APS, the Applicable Rate for each
subsequent dividend period (hereinafter referred to as a "Subsequent Dividend
Period"), which Subsequent Dividend Period shall commence on and include a
Dividend Payment Date and shall end on and include the calendar day prior to the
next Dividend Payment Date (or last Dividend Payment Date in a Dividend Period
if there is more than one Dividend Payment Date), shall be equal to the rate per
annum that results from implementation of the Auction Procedures.
The Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate; and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a 7-Day Dividend Period in the case of each series of APS.
Except in the case of the willful failure of the Trust to pay a dividend on a
Dividend Payment Date or to redeem any APS on the date set for such redemption,
any amount of any dividend due on any Dividend Payment Date (if, prior to the
close of business on the second Business Day preceding such Dividend Payment
Date, the Trust has declared such dividend payable on such Dividend Payment Date
to the Holders of such APS as of 12:00 noon, New York City time, on the Business
Day preceding such Dividend Payment Date) or redemption price with respect to
any APS not paid to such Holders when due may be paid to such Holders in the
same form of funds by 12:00 noon, New York City time, on any of the first three
Business Days after such Dividend Payment Date or due date, as the case may be,
provided that, such amount is accompanied by a late charge calculated for such
period of non-payment at the Non-Payment Period Rate applied to the amount of
such non-payment based on the actual number of days comprising such period
divided by 365. In the case of a willful failure of the Trust to pay a dividend
on a Dividend Payment Date or to redeem any APS on the date set for such
redemption, the preceding sentence shall not apply and the Applicable Rate for
the Dividend Period commencing during the Non-Payment Period resulting from such
failure shall be the Non-Payment Period Rate. For the purposes of the foregoing,
payment to a person in same-day funds on any Business Day at any time shall be
considered equivalent to payment to such person in New York Clearing House
(next-day) funds at the same time on the preceding Business Day, and any payment
made after 12:00 noon, New York City time, on any Business Day shall be
considered to have been made instead in the same form of funds and to the same
person before 12:00 noon, New York City time, on the next Business Day. (ii) The
amount of cash dividends per share of any series of APS payable (if declared) on
the Initial Dividend Payment Date, each 7-Day Dividend Period and each Dividend
Payment Date of each Short Term Dividend Period shall be computed by multiplying
the Applicable Rate for such Dividend Period by a fraction, the numerator of
which will be the number of days in such Dividend Period or part thereof that
such share was outstanding and the denominator of which will be 365, multiplying
the amount so obtained by $25,000, and rounding the amount so obtained to the
nearest cent. During any Long Term Dividend Period, the amount of cash dividends
per share of APS payable (if declared) on any Dividend Payment Date shall be
computed by multiplying the Applicable Rate for such Dividend Period by a
fraction, the numerator of which will be such number of days in such part of
such Dividend Period that such share was outstanding and for which
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<PAGE> 14
dividends are payable on such Dividend Payment Date and the denominator of which
will be 360, multiplying the amount so obtained by $25,000, and rounding the
amount so obtained to the nearest cent.
(iii) With respect to each Dividend Period that is a Special Dividend
Period, the Trust may, at its sole option and to the extent permitted by law, by
telephonic and written notice (a "Request for Special Dividend Period") to the
Auction Agent and to each Broker-Dealer, request that the next succeeding
Dividend Period for a series of APS be a number of days (other than seven),
evenly divisible by seven and not fewer than seven nor more than 364 in the case
of a Short Term Dividend Period or one whole year or more but not greater than
five years in the case of a Long Term Dividend Period, specified in such notice,
provided that the Trust may not give a Request for Special Dividend Period of
greater than 28 days (and any such request shall be null and void) unless, for
any Auction occurring after the initial Auction, Sufficient Clearing Bids were
made in the last occurring Auction and unless full cumulative dividends, any
amounts due with respect to redemption's, and any Additional Dividends payable
prior to such date have been paid in full. Such Request for Special Dividend
Period, in the case of a Short Term Dividend Period, shall be given on or prior
to the second Business Day but not more than seven Business Days prior to an
Auction Date for a series of APS and, in the case of a Long Term Dividend
Period, shall be given on or prior to the second Business Day but not more than
28 days prior to an Auction Date for the APS. Upon receiving such Request for
Special Dividend Period, the Broker-Dealer(s) shall jointly determine whether,
given the factors set forth below, it is advisable that the Trust issue a Notice
of Special Dividend Period for the series of APS as contemplated by such Request
for Special Dividend Period and the Optional Redemption Price of the APS during
such Special Dividend Period and the Specific Redemption Provisions and shall
give the Trust and the Auction Agent written notice (a "Response") of such
determination by no later than the second Business Day prior to such Auction
Date. In making such determination the Broker-Dealer(s) will consider (1)
existing short-term and long-term market rates and indices of such short-term
and long-term rates, (2) existing market supply and demand for short-term and
long-term securities, (3) existing yield curves for short-term and long-term
securities comparable to the APS, (4) industry and financial conditions which
may affect the APS, (5) the investment objective of the Trust, and (6) the
Dividend Periods and dividend rates at which current and potential beneficial
holders of the APS would remain or become beneficial holders. If the
Broker-Dealer(s) shall not give the Trust and the Auction Agent a Response by
such second Business Day or if the Response states that given the factors set
forth above it is not advisable that the Trust give a Notice of Special Dividend
Period for the series of APS, the Trust may not give a Notice of Special
Dividend Period in respect of such Request for Special Dividend Period. In the
event the Response indicates that it is advisable that the Trust give a Notice
of Special Dividend Period for the series of APS, the Trust may by no later than
the second Business Day prior to such Auction Date give a notice (a "Notice of
Special Dividend Period") to the Auction Agent, the Securities Depository and
each Broker-Dealer which notice will specify (i) the duration of the Special
Dividend Period, (ii) the Optional Redemption Price as specified in the related
Response and (iii) the Specific Redemption Provisions, if any, as specified in
the related Response. The Trust also shall provide a copy of such Notice of
Special Dividend Period to Moody's and S&P. The Trust shall not give a Notice of
Special Dividend Period and, if the Trust has given a Notice of Special Dividend
Period, the Trust is required to give telephonic and written notice of its
revocation (a "Notice of Revocation") to the Auction Agent, each Broker-Dealer,
and the Securities Depository on or prior to the Business Day prior to the
relevant Auction Date if (x) either the 1940 Act APS Asset Coverage is not
satisfied or the Trust shall fail to maintain S&P Eligible Assets with an
aggregate Discounted Value at least equal to the APS Basic Maintenance Amount,
on each of the two Valuation Dates immediately preceding the Business Day prior
to the relevant Auction Date on an actual basis and on a pro forma basis giving
effect to the proposed Special Dividend Period (using as a pro forma dividend
rate with respect to such Special Dividend Period the dividend rate which the
Broker-Dealers shall advise the Trust is an approximately equal rate for
securities similar to the APS with an equal dividend period), (y) sufficient
funds for the payment of dividends payable on the immediately succeeding
Dividend Payment Date have not been irrevocably deposited with the Auction Agent
by the close of business on the third Business Day preceding the related Auction
Date or (z) the Broker-Dealer(s) jointly advise the Trust that after
consideration of the factors listed above they have concluded that it is
advisable to give a Notice of Revocation. The Trust also shall provide a copy of
such Notice of Revocation to S&P. If the Trust is prohibited from giving a
Notice of Special Dividend Period as a result of any of the factors enumerated
in clause (x), (y) or (z) above or if the Trust gives a Notice of Revocation
with respect to a Notice of Special Dividend Period for any series of APS, the
next succeeding Dividend Period will be a 7-Day Dividend Period. In 35 addition,
in the event Sufficient Clearing Bids are not made in the applicable Auction or
such Auction is not held for any reason, such next succeeding Dividend Period
will be a 7-Day Dividend Period and
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<PAGE> 15
the Trust may not again give a Notice of Special Dividend Period for the APS
(and any such attempted notice shall be null and void) until Sufficient Clearing
Bids have been made in an Auction with respect to a 7-Day Dividend Period.
(d) (i) Holders shall not be entitled to any dividends, whether payable in
cash, property or stock, in excess of full cumulative dividends and applicable
late charges, as herein provided, on the APS (except for Additional Dividends as
provided in paragraph 2(e) hereof and additional payments as provided in
paragraph 2(f) hereof). Except for the late charge payable pursuant to paragraph
2(c)(i) hereof, no interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment on the APS that may be in arrears.
(ii) For so long as any share of APS is Outstanding, the Trust shall not
declare, pay or set apart for payment any dividend or other distribution (other
than a dividend or distribution paid in shares of, or options, warrants or
rights to subscribe for or purchase, Common Shares or other shares of beneficial
interest, if any, ranking junior to the APS as to dividends or upon liquidation)
in respect of the Common Shares or any other shares of beneficial interest of
the Trust ranking junior to or on a parity with the APS as to dividends or upon
liquidation, or call for redemption, redeem, purchase or otherwise acquire for
consideration any shares of the Common Shares or any other such junior shares
(except by conversion into or exchange for shares of the Trust ranking junior to
the APS as to dividends and upon liquidation) or any other such Parity Shares
(except by conversion into or exchange for stock of the Trust ranking junior to
or on a parity with the APS as to dividends and upon liquidation), unless (A)
immediately after such transaction, the Trust shall have S&P Eligible Assets
with an aggregate Discounted Value equal to or greater than the APS Basic
Maintenance Amount and the Trust shall maintain the 1940 Act APS Asset Coverage,
(B) full cumulative dividends on APS and shares of Other APS due on or prior to
the date of the transaction have been declared and paid or shall have been
declared and sufficient funds for the payment thereof deposited with the Auction
Agent, (C) any Additional Dividend required to be paid under paragraph 2(e)
below on or before the date of such declaration or payment has been paid and (D)
the Trust has redeemed the full number of APS required to be redeemed by any
provision for mandatory redemption contained herein.
(e) Each dividend shall consist of (i) cash at the Applicable Rate, (ii)
an uncertificated right (a "Right") to receive an Additional Dividend (as
defined below), and (iii) any additional amounts as set forth in paragraph 2(f)
below. Each Right shall thereafter be independent of the share or APS on which
the dividend was paid. The Trust shall cause to be maintained a record of each
Right received by the respective Holders. A Right may not be transferred other
than by operation of law. If the Trust retroactively allocates any net capital
gains or other income subject to regular Federal income taxes to APS without
having given advance notice thereof to the Auction Agent as described in
paragraph 2(f) hereof solely by reason of the fact that such allocation is made
as a result of the redemption of all or a portion of the outstanding APS or the
liquidation of the Trust (the amount of such allocation referred to herein as a
"Retroactive Taxable Allocation"), the Trust will, within 90 days (and generally
within 60 days) after the end of the Trust's fiscal year for which a Retroactive
Taxable Allocation is made, provide notice thereof to the Auction Agent and to
each holder of a Right applicable to such APS (initially as nominee of The
Depository Trust Company) during such fiscal year at such holder's address as
the same appears or last appeared on the Stock Books of the Trust. The Trust
will, within 30 days after such notice is given to the Auction Agent, pay to the
Auction Agent (who will then distribute to such holders of Rights), out of funds
legally available therefor, an amount equal to the aggregate Additional Dividend
with respect to all Retroactive Taxable Allocations made to such holders during
the fiscal year in question.
An "Additional Dividend" means payment to a present or former holder of
APS of an amount which, when taken together with the aggregate amount of
Retroactive Taxable Allocations made to such holder with respect to the fiscal
year in question, would cause such holder's dividends in dollars (after Federal
and New Jersey personal income tax consequences) from the aggregate of both the
Retroactive Taxable Allocations and the Additional Dividend to be equal to the
dollar amount of the dividends which would have been received by such holder if
the amount of the aggregate Retroactive Taxable Allocations would have been
excludable from the gross income of such holder. Such Additional Dividend shall
be calculated (i) without consideration being given to the time value of money;
(ii) assuming that no holder of APS is subject to the Federal alternative
minimum tax with respect to dividends received from the Trust; and (iii)
assuming that each Retroactive Taxable Allocation would be taxable in the hands
of each holder of APS at the greater of: (x) the maximum marginal regular
Federal and New Jersey
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individual income tax rate applicable to ordinary income or capital gains
depending on the taxable character of the distribution (including any surtax);
or (y) the maximum marginal Federal corporate income tax rate applicable to
ordinary income or capital gains depending on the taxable character of the
distribution (disregarding in both (x) and (y) the effect of any other state or
local taxes and the phase out of, or provision limiting, personal exemptions,
itemized deductions, or the benefit of lower tax brackets).
(f) Except as provided below, whenever the Trust intends to include any
net capital gains or other income subject to regular Federal income taxes in any
dividend on APS, the Trust will notify the Auction Agent of the amount to be so
included at least five Business Days prior to the Auction Date on which the
Applicable Rate for such dividend is to be established. The Trust may also
include such income in a dividend on shares of a series of APS without giving
advance notice thereof if it increases the dividend by an additional amount
calculated as if such income was a Retroactive Taxable Allocation and the
additional amount was an Additional Dividend, provided that the Trust will
notify the Auction Agent of the additional amounts to be included in such
dividend at least five Business Days prior to the applicable Dividend Payment
Date.
(g) No fractional APS shall be issued.
3. LIQUIDATION RIGHTS. Upon any liquidation, dissolution or winding up of
the Trust, whether voluntary or involuntary, the Holders shall be entitled to
receive, out of the assets of the Trust available for distribution to
shareholders, before any distribution or payment is made upon any Common Shares
or any other shares of beneficial interest ranking junior in right of payment
upon liquidation to the APS, the sum of $25,000 per share plus accumulated but
unpaid dividends (whether or not earned or declared) thereon to the date of
distribution, and after such payment the Holders will be entitled to no other
payments other than Additional Dividends as provided in paragraph 2(e) hereof.
If upon any liquidation, dissolution or winding up of the Trust, the amounts
payable with respect to the APS and any other Outstanding class or series of
Preferred Shares of the Trust ranking on a parity with the APS as to payment
upon liquidation are not paid in full, the Holders and the holders of such other
class or series will share ratably in any such distribution of assets in
proportion to the respective preferential amounts to which they are entitled.
After payment of the full amount of the liquidating distribution to which they
are entitled, the Holders will not be entitled to any further participation in
any distribution of assets by the Trust except for any Additional Dividends. A
consolidation, merger or statutory share exchange of the Trust with or into any
other Trust or entity or a sale, whether for cash, shares of stock, securities
or properties, of all or substantially all or any part of the assets of the
Trust shall not be deemed or construed to be a liquidation, dissolution or
winding up of the Trust.
4. REDEMPTION. (a) APS shall be redeemable by the Trust as provided below:
(i) To the extent permitted under the 1940 Act and Massachusetts
law, upon giving a Notice of Redemption, the Trust at its option may
redeem APS, in whole or in part, out of funds legally available therefor,
at the Optional Redemption Price per share, on any Dividend Payment Date;
provided that no share of APS may be redeemed at the option of the Trust
during (A) the Initial Dividend Period with respect to a series of shares
or (B) a Non-Call Period to which such share is subject. In addition,
holders of APS which are redeemed shall be entitled to receive Additional
Dividends to the extent provided herein. The Trust may not give a Notice
of Redemption relating to an optional redemption as described in this
paragraph 4(a)(i) unless, at the time of giving such Notice of Redemption,
the Trust has available Deposit Securities with maturity or tender dates
not later than the day preceding the applicable redemption date and having
a value not less than the amount due to Holders by reason of the
redemption of their APS on such redemption date.
(ii) The Trust shall redeem, out of funds legally available
therefor, at the Mandatory Redemption Price per share, APS to the extent
permitted under the 1940 Act and Massachusetts law, on a date fixed by the
Board of Trustees, if the Trust fails to maintain S&P Eligible Assets with
an aggregate Discounted Value equal to or greater than the APS Basic
Maintenance Amount as provided in paragraph 7(a) or to satisfy the 1940
Act APS Asset Coverage as provided in paragraph 6 and such failure is not
cured on or before the APS Basic Maintenance Cure Date or the 1940 Act
Cure Date (herein collectively referred to as
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a "Cure Date"), as the case may be. In addition, holders of APS so
redeemed shall be entitled to receive Additional Dividends to the extent
provided herein. The number of APS to be redeemed shall be equal to the
lesser of (i) the minimum number of APS the redemption of which, if deemed
to have occurred immediately prior to the opening of business on the Cure
Date, together with all shares of other Preferred Shares subject to
redemption or retirement, would result in the Trust having S&P Eligible
Assets with an aggregate Discounted Value equal to or greater than the APS
Basic Maintenance Amount or satisfaction of the 1940 Act APS Asset
Coverage, as the case may be, on such Cure Date (provided that, if there
is no such minimum number of APS and shares of other Preferred Shares the
redemption of which would have such result, all APS and shares of other
Preferred Shares then Outstanding shall be redeemed), and (ii) the maximum
number of APS, together with all shares of other Preferred Shares subject
to redemption or retirement, that can be redeemed out of funds expected to
be legally available therefor on such redemption date. In determining the
number of APS required to be redeemed in accordance with the foregoing,
the Trust shall allocate the number required to be redeemed which would
result in the Trust having S&P Eligible Assets with an aggregate
Discounted Value equal to or greater than the APS Basic Maintenance Amount
or satisfaction of the 1940 Act APS Asset Coverage, as the case may be,
pro rata among APS of all series, Other APS and other Preferred Shares
subject to redemption pursuant to provisions similar to those contained in
this paragraph 4(a)(ii); provided that, APS which may not be redeemed at
the option of the Trust due to the designation of a Non-Call Period
applicable to such shares (A) will be subject to mandatory redemption only
to the extent that other shares are not available to satisfy the number of
shares required to be redeemed and (B) will be selected for redemption in
an ascending order of outstanding number of days in the Non-Call Period
(with shares with the lowest number of days to be redeemed first) and by
lot in the event of shares having an equal number of days in such Non-Call
Period. The Trust shall effect such redemption on a Business Day which is
not later than 35 days after such Cure Date, except that if the Trust does
not have funds legally available for the redemption of all of the required
number of APS and shares of other Preferred Shares which are subject to
mandatory redemption or the Trust otherwise is unable to effect such
redemption on or prior to 35 days after such Cure Date, the Trust shall
redeem those APS which it is unable to redeem on the earliest practicable
date on which it is able to effect such redemption out of funds legally
available therefor.
(b) Notwithstanding any other provision of this paragraph 4, no APS may be
redeemed pursuant to paragraph 4(a)(i) of Article VII, Section 2 of these
Amended By-Laws (i) unless all dividends in arrears on all remaining outstanding
shares of Parity Shares shall have been or are being contemporaneously paid or
declared and set apart for payment and (ii) if redemption thereof would result
in the Trust's failure to maintain S&P Eligible Assets with an aggregate
Discounted Value equal to or greater than the APS Basic Maintenance Amount. In
the event that less than all the outstanding shares of a series of APS are to be
redeemed and there is more than one Holder, the shares of that series of APS to
be redeemed shall be selected by lot or such other method as the Trust shall
deem fair and equitable.
(c) Whenever APS are to be redeemed, the Trust, not less than 17 nor more
than 30 days prior to the date fixed for redemption, shall mail a notice
("Notice of Redemption") by first-class mail, postage prepaid, to each Holder of
APS to be redeemed and to the Auction Agent. The Trust shall cause the Notice of
Redemption to also be published in the eastern and national editions of The Wall
Street Journal. The Notice of Redemption shall set forth (i) the redemption
date, (ii) the amount of the redemption price, (iii) the aggregate number of APS
of such series to be redeemed, (iv) the place or places where APS of such series
are to be surrendered for payment of the redemption price, (v) a statement that
dividends on the shares to be redeemed shall cease to accumulate on such
redemption date (except that holders may be entitled to Additional Dividends)
and (vi) the provision of these Amended By-Laws pursuant to which such shares
are being redeemed. No defect in the Notice of Redemption or in the mailing or
publication thereof shall affect the validity of the redemption proceedings,
except as required by applicable law.
If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Trust shall have deposited in trust with the
Auction Agent, or segregated in an account at the Trust's custodian bank for the
benefit of the Auction Agent, Deposit Securities (with a right of substitution)
having an aggregate Discounted Value (utilizing in the case of S&P an S&P
Exposure Period of 22 Business Days) equal to the redemption payment for the APS
as to which such Notice of Redemption has been given with irrevocable
instructions and authority to
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pay the redemption price to the Holders of such shares, then upon the date of
such deposit or, if no such deposit is made, then upon such date fixed for
redemption (unless the Trust shall default in making the redemption payment),
all rights of the Holders of such shares as shareholders of the Trust by reason
of the ownership of such shares will cease and terminate (except their right to
receive the redemption price in respect thereof and any Additional Dividends,
but without interest), and such shares shall no longer be deemed outstanding.
The Trust shall be entitled to receive, from time to time, from the Auction
Agent the interest, if any, on such Deposit Securities deposited with it and the
Holders of any shares so redeemed shall have no claim to any of such interest.
In case the Holder of any shares so called for redemption shall not claim the
redemption payment for his shares within one year after the date of redemption,
the Auction Agent shall, upon demand, pay over to the Trust such amount
remaining on deposit and the Auction Agent shall thereupon be relieved of all
responsibility to the Holder of such shares called for redemption and such
Holder thereafter shall look only to the Trust for the redemption payment.
5. VOTING RIGHTS. (a) General. Except as otherwise provided in the
Declaration of Trust or Amended By-Laws, each Holder of APS shall be entitled to
one vote for each share held on each matter submitted to a vote of shareholders
of the Trust, and the holders of outstanding shares of Preferred Shares,
including APS, and of shares of Common Shares shall vote together as a single
class; provided that, at any meeting of the shareholders of the Trust held for
the election of trustees, the holders of outstanding shares of Preferred Shares,
including APS, shall be entitled, as a class, to the exclusion of the holders of
all other securities and classes of capital stock of the Trust, to elect two
trustees of the Trust. Subject to paragraph 5(b) hereof, the holders of
outstanding shares of capital stock of the Trust, including the holders of
outstanding shares of Preferred Shares, including APS, voting as a single class,
shall elect the balance of the trustees.
(b) Right to Elect Majority of Board of Trustees. During any period in
which any one or more of the conditions described below shall exist (such period
being referred to herein as a "Voting Period"), the number of trustees
constituting the Board of Trustees shall be automatically increased by the
smallest number that, when added to the two directors elected exclusively by the
holders of shares of Preferred Shares, would constitute a majority of the Board
of Trustees as so increased by such smallest number; and the holders of shares
of Preferred Shares shall be entitled, voting separately as one class (to the
exclusion of the holders of all other securities and classes of shares of
beneficial interest of the Trust), to elect such smallest number of additional
trustees, together with the two trustees that such holders are in any event
entitled to elect. A Voting Period shall commence:
(i) if at any time accumulated dividends (whether or not earned or
declared, and whether or not funds are then legally available in an amount
sufficient therefor) on the outstanding APS equal to at least two full
years' dividends shall be due and unpaid and sufficient cash or specified
securities shall not have been deposited with the Auction Agent for the
payment of such accumulated dividends; or
(ii) if at any time holders of any other shares of Preferred Shares
are entitled to elect a majority of the trustees of the Trust under the
1940 Act. Upon the termination of a Voting Period, the voting rights
described in this paragraph 5(b) shall cease, subject always, however, to
the reverting of such voting rights in the Holders upon the further
occurrence of any of the events described in this paragraph 5(b)
(c) Right to Vote with Respect to Certain Other Matters. So long as any
APS are outstanding, the Trust shall not, without the affirmative vote of the
holders of a majority of the shares of Preferred Shares Outstanding at the time,
voting separately as one class: (i) authorize, create or issue any class or
series of shares of beneficial interest ranking prior to the APS or any other
series of Preferred Shares with respect to payment of dividends or the
distribution of assets on liquidation, or (ii) amend, alter or repeal the
provisions of the Declaration of Trust, whether by merger, consolidation or
otherwise, so as to adversely affect any of the contract rights expressly set
forth in the Declaration of Trust of holders of APS or any other Preferred
Shares. To the extent permitted under the 1940 Act, in the event shares of more
than one series of APS are outstanding, the Trust shall not approve any of the
actions set forth in clause (i) or (ii) which adversely affects the contract
rights expressly set forth in the Declaration of Trust of a Holder of shares of
a series of APS differently than those of a Holder of shares of any other series
of APS without the affirmative vote of the holders of at least a majority of the
APS of each series adversely affected and outstanding at such time (each such
adversely affected series voting separately as a class). The Trust shall notify
S&P ten Business Days prior to any such vote described in clause (i) or (ii).
Unless a higher percentage is provided for under
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the Declaration of Trust, the affirmative vote of the holders of a majority of
the outstanding shares of Preferred Shares, including APS, voting together as a
single class, will be required to approve any plan of reorganization (including
bankruptcy proceedings) adversely affecting such shares or any action requiring
a vote of security holders under Section 13(a) of the 1940 Act. The class vote
of holders of shares of Preferred Shares, including APS, described above will in
each case be in addition to a separate vote of the requisite percentage of
shares of Common Shares and shares of Preferred Shares, including APS, voting
together as a single class necessary to authorize the action in question.
(d) Voting Procedures.
(i) As soon as practicable after the accrual of any right of the holders
of shares of Preferred Shares to elect additional trustees as described in
paragraph 5(b) above, the Trust shall call a special meeting of such holders and
instruct the Auction Agent to mail a notice of such special meeting to such
holders, such meeting to be held not less than 10 nor more than 20 days after
the date of mailing of such notice. If the Trust fails to send such notice to
the Auction Agent or if the Trust does not call such a special meeting, it may
be called by any such holder on like notice. The record date for determining the
holders entitled to notice of and to vote at such special meeting shall be the
close of business on the fifth Business Day preceding the day on which such
notice is mailed. At any such special meeting and at each meeting held during a
Voting Period, such Holders, voting together as a class (to the exclusion of the
holders of all other securities and classes of shares of beneficial interest of
the Trust), shall be entitled to elect the number of directors prescribed in
paragraph 5(b) above. At any such meeting or adjournment thereof in the absence
of a quorum, a majority of such holders present in person or by proxy shall have
the power to adjourn the meeting without notice, other than by an announcement
at the meeting, to a date not more than 120 days after the original record date.
(ii) For purposes of determining any rights of the Holders to vote on any
matter or the number of shares required to constitute a quorum, whether such
right is created by these Amended By-Laws, by the other provisions of the
Declaration of Trust, by statute or otherwise, a share of APS which is not
Outstanding shall not be counted.
(iii) The terms of office of all persons who are trustees of the Trust at
the time of a special meeting of Holders and holders of other Preferred Shares
to elect trustees shall continue, notwithstanding the election at such meeting
by the Holders and such other holders of the number of trustees that they are
entitled to elect, and the persons so elected by the Holders and such other
holders, together with the two incumbent trustees elected by the Holders and
such other holders of Preferred Shares and the remaining incumbent trustees
elected by the holders of the Common Shares and Preferred Shares, shall
constitute the duly elected trustees of the Trust.
(iv) Simultaneously with the expiration of a Voting Period, the terms of
office of the additional trustees elected by the Holders and holders of other
Preferred Shares pursuant to paragraph 5(b) above shall terminate, the remaining
trustees shall constitute the trustees of the Trust and the voting rights of the
Holders and such other holders to elect additional trustees pursuant to
paragraph 5(b) above shall cease, subject to the provisions of the last sentence
of paragraph 5(b).
(e) Exclusive Remedy. Unless otherwise required by law, the Holders of APS
shall not have any rights or preferences other than those specifically set forth
herein. The Holders of APS shall have no preemptive rights or rights to
cumulative voting. In the event that the Trust fails to pay any dividends on the
APS, the exclusive remedy of the Holders shall be the right to vote for trustees
pursuant to the provisions of this paragraph 5.
(f) Notification to S&P and Moody's. In the event a vote of Holders of APS
is required pursuant to the provisions of Section 13(a) of the 1940 Act, the
Trust shall, not later than ten Business Days prior to the date on which such
vote is to be taken, notify S&P that such vote is to be taken and the nature of
the action with respect to which such vote is to be taken and, not later than
ten Business Days after the date on which such vote is taken, notify S&P of the
result of such vote.
6. 1940 ACT APS ASSET COVERAGE. The Trust shall maintain, as of the last
Business Day of each month in which any share of APS is outstanding, the 1940
Act APS Asset Coverage.
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<PAGE> 20
7. APS BASIC MAINTENANCE AMOUNT. (a) The Trust shall maintain, on each
Valuation Date, and shall verify to its satisfaction that it is maintaining on
such Valuation Date S&P Eligible Assets having an aggregate Discounted Value
equal to or greater than the APS Basic Maintenance Amount. Upon any failure to
maintain the required Discounted Value, the Trust will use its best efforts to
alter the composition of its portfolio to retain a Discounted Value at least
equal to the APS Basic Maintenance Amount on or prior to the APS Basic
Maintenance Cure Date.
(b) On or before 5:00 p.m., New York City time, on the third Business Day
after a Valuation Date on which the Trust fails to satisfy the APS Basic
Maintenance Amount, the Trust shall complete and deliver to the Auction Agent,
and S&P, a complete APS Basic Maintenance Report as of the date of such failure,
which will be deemed to have been delivered to the Auction Agent if the Auction
Agent receives a copy or telecopy, telex or other electronic transcription
thereof and on the same day the Trust mails to the Auction Agent for delivery on
the next Business Day the complete APS Basic Maintenance Report. The Trust will
deliver an APS Basic Maintenance Report to the Auction Agent and S&P, on or
before 5:00 p.m., New York City time, on the third Business Day after a
Valuation Date on which the Trust cures its failure to maintain S&P Eligible
Assets, with an aggregate Discounted Value equal to or greater than the APS
Basic Maintenance Amount or on which the Trust fails to maintain S&P Eligible
Assets, with an aggregate Discounted Value which exceeds the APS Basic
Maintenance Amount by 5% or more. The Trust will also deliver an APS Basic
Maintenance Report to the Auction Agent and S&P as of each Quarterly Valuation
Date on or before the third Business Day after such date. Additionally, on or
before 5:00 p.m., New York City time, on the third Business Day after the first
day of a Special Dividend Period, the Trust will deliver an APS Basic
Maintenance Report to S&P and the Auction Agent. The Trust shall also provide
S&P with an APS Basic Maintenance Report when specifically requested by S&P. A
failure by the Trust to deliver an APS Basic Maintenance Report under this
paragraph 7(b) shall be deemed to be delivery of an APS Basic Maintenance Report
indicating the Discounted Value for S&P Eligible Assets of the Trust is less
than the APS Basic Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of an APS Basic
Maintenance Report in accordance with paragraph 7(b) above relating to a
Quarterly Valuation 50 Date, the Independent Accountant will confirm in writing
to the Auction Agent and S&P (i) the mathematical accuracy of the calculations
reflected in such Report (and in any other APS Basic Maintenance Report,
randomly selected by the Independent Accountant, that was delivered by the Trust
during the quarter ending on such Quarterly Valuation Date), (ii) that, in such
Report (and in such randomly selected Report), the Trust correctly determined
the assets of the Trust which constitute S&P Eligible Assets at such Quarterly
Valuation Date in accordance with these Amended By-Laws, (iii) that, in such
Report (and in such randomly selected Report), the Trust determined whether the
Trust had, at such Quarterly Valuation Date (and at the Valuation Date addressed
in such randomly selected Report) in accordance with these Amended By-Laws, S&P
Eligible Assets of an aggregate Discounted Value at least equal to the APS Basic
Maintenance Amount, (iv) with respect to the S&P ratings on Municipal
Obligations, the issuer name, issue size and coupon rate listed in such Report,
that the Independent Accountant has requested that S&P verify such information
and the Independent Accountant shall provide a listing in its letter of any
differences, (v) with respect to the Moody's ratings on Municipal Obligations,
the issuer name, issue size and coupon rate listed in such Report, that such
information has been verified by Moody's (in the event such information is not
verified by Moody's, the Independent Accountant will inquire of Moody's what
such information is, and provide a listing in its letter of any differences),
(vi) with respect to the bid or mean price (or such alternative permissible
factor used in calculating the Market Value) provided by the custodian of the
Trust's assets to the Trust for purposes of valuing securities in the Trust's
portfolio, the Independent Accountant has traced the price used in such Report
to the bid or mean price listed in such Report as provided to the Trust and
verified that such information agrees (in the event such information does not
agree, the Independent Accountant will provide a listing in its letter of such
differences) and (vii) with respect to such confirmation to Moody's, that the
Trust has satisfied the requirements of paragraph 8(b) of these Amended By-Laws
(such confirmation is herein called the "Accountant's Confirmation").
(d) Within ten Business Days after the date of delivery to the Auction
Agent and S&P of an APS Basic Maintenance Report in accordance with paragraph
7(b) above relating to any Valuation Date on which the Trust failed to maintain
S&P Eligible Assets with an aggregate Discounted Value equal to or greater than
the APS Basic
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<PAGE> 21
Maintenance Amount, and relating to the APS Basic Maintenance Cure Date with
respect to such failure, the Independent Accountant will provide to the Auction
Agent and S&P an Accountant's Confirmation as to such APS Basic Maintenance
Report.
(e) If any Accountant's Confirmation delivered pursuant to subparagraph
(c) or (d) of this paragraph 7 shows that an error was made in the APS Basic
Maintenance Report for a particular Valuation Date for which such Accountant's
Confirmation as required to be delivered, or shows that a lower aggregate
Discounted Value for the aggregate of all S&P Eligible Assets of the Trust was
determined by the Independent Accountant, the calculation or determination made
by such Independent Accountant shall be final and conclusive and shall be
binding on the Trust, and the Trust shall accordingly amend and deliver the APS
Basic Maintenance Report to the Auction Agent and S&P promptly following receipt
by the Trust of such Accountant's Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of the APS, the Trust will complete and deliver
to S&P an APS Basic Maintenance Report as of the close of business on such Date
of Original Issue. Within five Business Days of such Date of Original Issue, the
Independent Accountant will confirm in writing to S&P (i) the mathematical
accuracy of the calculations reflected in such Report and (ii) that the
aggregate Discounted Value of S&P Eligible Assets reflected thereon equals or
exceeds the APS Basic Maintenance Amount reflected thereon. Also, on or before
5:00 p.m., New York City time, on the first Business Day after shares of Common
Shares are repurchased by the Trust, the Trust will complete and deliver to S&P
an APS Basic Maintenance Report as of the close of business on such date that
Common Shares is repurchased.
8. CERTAIN OTHER RESTRICTIONS AND REQUIREMENTS.
(a) For so long as any APS are rated by S&P, the Trust will not purchase
or sell futures contracts, write, purchase or sell options on futures contracts
or write put options (except covered put options) or call options (except
covered call options) on portfolio securities unless it receives written
confirmation from S&P that engaging in such transactions will not impair the
ratings then assigned to the APS by S&P, except that the Trust may purchase or
sell futures contracts based on the Bond Buyer Municipal Bond Index (the
"Municipal Index") or United States Treasury Bonds or Notes ("Treasury Bonds")
and write, purchase or sell put and call options on such contracts
(collectively, "S&P Hedging Transactions"), subject to the following
limitations:
(i) the Trust will not engage in any S&P Hedging Transaction based on the
Municipal Index (other than transactions which terminate a futures contract or
option held by the Trust by the Trust's taking an opposite position thereto
("Closing Transactions")), which would cause the Trust at the time of such
transaction to own or have sold the least of (A) more than 1,000 outstanding
futures contracts based on the Municipal Index, (B) outstanding futures
contracts based on the Municipal Index exceeding in number 25% of the quotient
of the Market Value of the Trust's total assets divided by $1,000 or (C)
outstanding futures contracts based on the Municipal Index exceeding in number
10% of the average number of daily traded futures contracts based on the
Municipal Index in the 30 days preceding the time of effecting such transaction
as reported by The Wall Street Journal;
(ii) the Trust will not engage in any S&P Hedging Transaction based on
Treasury Bonds (other than Closing Transactions) which would cause the Trust at
the time of such transaction to own or have sold the lesser of (A) outstanding
futures contracts based on Treasury Bonds and on the Municipal Index exceeding
in number 25% of the quotient of the Market Value of the Trust's total assets
divided by $100,000 ($200,000 in the case of the two-year United States Treasury
Note) or (B) outstanding futures contracts based on Treasury Bonds exceeding in
number 10% of the average number of daily traded futures contracts based on
Treasury Bonds in the 30 days preceding the time of effecting such transaction
as reported by The Wall Street Journal;
(iii) the Trust will engage in Closing Transactions to close out any
outstanding futures contract which the Trust owns or has sold or any outstanding
option thereon owned by the Trust in the event (A) the Trust does not have S&P
Eligible Assets with an aggregate Discounted Value equal to or greater than the
APS Basic Maintenance Amount on two consecutive Valuation Dates and (B) the
Trust is required to pay Variation Margin on the second such Valuation Date;
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<PAGE> 22
(iv) the Trust will engage in a Closing Transaction to close out any
outstanding futures contract or option thereon in the month prior to the
delivery month under the terms of such futures contract or option thereon unless
the Trust holds the securities deliverable under such terms; and
(v) when the Trust writes a futures contract or option thereon, it will
either maintain an amount of cash, cash equivalents or high grade (rated A or
better by S&P), fixed-income securities in a segregated account with the Trust's
custodian, so that the amount so segregated plus the amount of Initial Margin
and Variation Margin held in the account of or on behalf of the Trust's broker
with respect to such futures contract or option equals the Market Value of the
futures contract or option, or, in the event the Trust writes a futures contract
or option thereon which requires delivery of an underlying security, it shall
hold such underlying security in its portfolio.
For purposes of determining whether the Trust has S&P Eligible Assets with
a Discounted Value that equals or exceeds the APS Basic Maintenance Amount, the
Discounted Value of cash or securities held for the payment of Initial Margin or
Variation Margin shall be zero and the aggregate Discounted Value of S&P
Eligible Assets shall be reduced by an amount equal to (i) 30% of the aggregate
settlement value, as marked to market, of any outstanding futures contracts
based on the Municipal Index which are owned by the Trust plus (ii) 25% of the
aggregate settlement value, as marked to market, of any outstanding futures
contracts based on Treasury Bonds which contracts are owned by the Trust.
For so long as APS are rated by S&P, the Trust will not, unless it has
received written confirmation from S&P that such action would not impair the
rating then assigned to APS by S&P (i) borrow money except for the purpose of
clearing transactions in portfolio securities (which borrowings shall under any
circumstances be limited to the lesser of $10 million and an amount equal to 5%
of the Market Value of the Trust's assets at the time of such borrowings and
which borrowings shall be repaid within 60 days and not be extended or renewed
and shall not cause the aggregate Discounted Value of S&P Eligible Assets to be
less than the APS Basic Maintenance Amount), (ii) engage in short sales of
securities, (iii) lend any securities, (iv) issue any class or series of stock
ranking prior to or on a parity with the APS with respect to the payment of
dividends or the distribution of assets upon dissolution, liquidation or winding
up of the Trust, (v) reissue any APS previously purchased or redeemed by the
Trust, (vi) merge or consolidate into or with any other Trust or entity, (vii)
change the Pricing Service or (viii) engage in reverse repurchase agreements.
9. NOTICE. All notices or communications, unless otherwise specified in
the Amended By-Laws of the Trust or these Amended By-Laws, shall be sufficiently
given if in writing and delivered in person or mailed by first-class mail,
postage prepaid. Notice shall be deemed given on the earlier of the date
received or the date seven days after which such notice is mailed.
10. AUCTION PROCEDURES. (a) Certain definitions. As used in this paragraph
10, the following terms shall have the following meanings, unless the context
otherwise requires:
(i) "APS" means the APS being auctioned pursuant to this paragraph 10.
(ii) "Auction Date" means the first Business Day preceding the first day
of a Dividend Period.
(iii) "Available APS" has the meaning specified in paragraph 10(d)(i)
below.
(iv) "Bid" has the meaning specified in paragraph 10(b)(i) below.
(v) "Bidder" has the meaning specified in paragraph 10(b)(i) below.
(vi) "Hold Order" has the meaning specified in paragraph 10(b)(i) below.
(vii) "Maximum Applicable Rate" for any Dividend Period will be the
Applicable Percentage of the Reference Rate. The Applicable Percentage will be
determined based on (i) the credit rating assigned on such date
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<PAGE> 23
to such shares by S&P (or if S&P shall not make such rating available, the
equivalent of such rating by a Substitute Rating Agency) and (ii) whether the
Trust has provided notification to the Auction Agent prior to the Auction
establishing the Applicable Rate for any dividend pursuant to paragraph 2(f)
hereof that net capital gains or other taxable income will be included in such
dividend on APS as follows:
<TABLE>
<CAPTION>
APPLICABLE
PERCENTAGE OF APPLICABLE PERCENTAGE OF
S&P CREDIT RATINGS REFERENCE RATE -- NO REFERENCE RATE --
NOTIFICATION NOTIFICATION
<S> <C> <C>
AA- or higher 110% 150%
A- to A+ 125% 160%
BBB- to BBB+ 150% 250%
Below BBB- 200% 275%
</TABLE>
The Trust shall take all reasonable action necessary to enable S&P to
provide a rating for the APS. If S&P shall not make such a rating available,
PaineWebber Incorporated or its affiliates and successors, after consultation
with the Trust, shall select a nationally recognized statistical rating
organization to act as a Substitute Rating Agency.
(viii) "Order" has the meaning specified in paragraph 10(b)(i) below.
(ix) "Sell Order" has the meaning specified in paragraph 10(b)(i) below.
(x) "Submission Deadline" means 1:00 P.M., New York City time, on any
Auction Date or such other time on any Auction Date as may be specified by the
Auction Agent from time to time as the time by which each Broker-Dealer must
submit to the Auction Agent in writing all Orders obtained by it for the Auction
to be conducted on such Auction Date.
(xi) "Submitted Bid" has the meaning specified in paragraph 10(d)(i)
below.
(xii) "Submitted Hold Order" has the meaning specified in paragraph
10(d)(i) below.
(xiii) "Submitted Order" has the meaning specified in paragraph 10(d)(i)
below.
(xiv) "Submitted Sell Order" has the meaning specified in paragraph
10(d)(i) below.
(xv) "Sufficient Clearing Bids" has the meaning specified in paragraph
10(d)(i) below.
(xvi) "Winning Bid Rate" has the meaning specified in paragraph 10(d)(i)
below.
(b) Orders by Beneficial Owners, Potential Beneficial Owners, Existing
Holders and Potential Holders.
(i) Unless otherwise permitted by the Trust, Beneficial Owners and
Potential Beneficial Owners may only participate in Auctions through their
Broker-Dealers. Broker-Dealers will submit the Orders of their respective
customers who are Beneficial Owners and Potential Beneficial Owners to the
Auction Agent, designating themselves as Existing Holders in respect of shares
subject to Orders submitted or deemed submitted to them by Beneficial Owners and
as Potential Holders in respect of shares subject to Orders submitted to them by
Potential Beneficial Owners. A Broker-Dealer may also hold APS in its own
account as a Beneficial Owner. A Broker-Dealer may thus submit Orders to the
Auction Agent as a Beneficial Owner or a Potential Beneficial Owner and
therefore participate in an Auction as an Existing Holder or Potential Holder on
behalf of both itself and its customers. On or prior to the Submission Deadline
on each Auction Date:
A. each Beneficial Owner may submit to its Broker-Dealer information as
to:
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<PAGE> 24
(1) the number of Outstanding shares, if any, of APS held by such
Beneficial Owner which such Beneficial Owner desires to continue to hold
without regard to the Applicable Rate for the next succeeding Dividend
Period;
(2) the number of Outstanding shares, if any, of APS held by such
Beneficial Owner which such Beneficial Owner desires to continue to hold,
provided that the Applicable Rate for the next succeeding Dividend Period
shall not be less than the rate per annum specified by such Beneficial
Owner; and/or
(3) the number of Outstanding shares, if any, of APS held by such
Beneficial Owner which such Beneficial Owner offers to sell without regard
to the Applicable Rate for the next succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Beneficial Owners that
shall be maintained in good faith for the purpose of conducting a competitive
Auction, shall contact Potential Beneficial Owners, including Persons that are
not Beneficial Owners, on such list to determine the number of Outstanding
shares, if any, of APS which each such Potential Beneficial Owner offers to
purchase, provided that the Applicable Rate for the next succeeding Dividend
Period shall not be less than the rate per annum specified by such Potential
Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this paragraph 10(b)(i) is hereinafter
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in such
capacity for its own account, is hereinafter referred to as a "Bidder"; an Order
containing the information referred to in clause (A)(1) of this paragraph
10(b)(i) is hereinafter referred to as a "Hold Order"; an Order containing the
information referred to in clause (A)(2) or (B) of this paragraph 10(b)(i) is
hereinafter referred to as a "Bid"; and an Order containing the information
referred to in clause (A)(3) of this paragraph 10(b)(i) is hereinafter referred
to as a "Sell Order". Inasmuch as a Broker-Dealer participates in an Auction as
an Existing Holder or a Potential Holder only to represent the interests of a
Beneficial Owner or Potential Beneficial Owner, whether it be its customers or
itself, all discussion herein relating to the consequences of an Auction for
Existing Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented.
(ii) (A) A Bid by an Existing Holder shall constitute an irrevocable offer
to sell:
(1) the number of Outstanding APS specified in such Bid if the
Applicable Rate determined on such Auction Date shall be less than
the rate per annum specified in such Bid; or (1) such number or a
lesser number of Outstanding APS to be determined as set forth in
paragraph 10(e)(i)(D) if the Applicable Rate determined on such
Auction Date shall be equal to the rate per annum specified therein;
or
(2) a lesser number of Outstanding APS to be determined as set forth in
paragraph 10(e)(ii)(C) if such specified rate per annum shall be
higher than the Maximum Applicable Rate and Sufficient Clearing Bids
do not exist.
(B) A Sell Order by an Existing Holder shall constitute an irrevocable
offer to sell:
(1) the number of Outstanding APS specified in such Sell
Order; or
(2) such number or a lesser number of Outstanding APS to be
determined as set forth in paragraph 10(e)(ii)(C) if Sufficient Clearing
Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable offer to
purchase:
(1) the number of Outstanding APS specified in such Bid if the
Applicable Rate determined on such Auction Date shall be higher than the
rate per annum specified in such Bid; or
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<PAGE> 25
(2) such number or a lesser number of Outstanding APS to be
determined as set forth in paragraph 10(e)(i)(E) if the Applicable Rate
determined on such Auction Date shall be equal to the rate per annum
specified therein.
(c) Submission of Orders by Broker-Dealers to Auction Agent
(i) Each Broker-Dealer shall submit in writing or through the
Auction Agent's Auction Processing System to the Auction Agent prior to
the Submission Deadline on each Auction Date all Orders obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by the
Trust) as an Existing Holder in respect of shares subject to Orders
submitted or deemed submitted to it by Beneficial Owners and as a
Potential Holder in respect of shares subject to Orders submitted to it by
Potential Beneficial Owners, and specifying with respect to each Order:
(A) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Trust);
(B) the aggregate number of Outstanding APS that are the subject of
such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding shares, if any, of APS subject
to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding shares, if any, of APS subject
to any Bid placed by such Existing Holder and the rate
per annum specified in such Bid; and
(3) the number of Outstanding shares, if any, of APS subject
to any Sell Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder, the rate per
annum specified in such Potential Holder's Bid.
(ii) If any rate per annum specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering all of the Outstanding APS held by an
Existing Holder are not submitted to the Auction Agent prior to the Submission
Deadline, the Auction Agent shall deem a Hold Order (in the case of an Auction
relating to a Dividend Period which is not a Special Dividend Period) and a Sell
Order (in the case of an Auction relating to a Special Dividend Period) to have
been submitted on behalf of such Existing Holder covering the number of
Outstanding APS held by such Existing Holder and not subject to Orders submitted
to the Auction Agent.
(iv) If one or more Orders on behalf of an Existing Holder covering in the
aggregate more than the number of Outstanding APS held by such Existing Holder
are submitted to the Auction Agent, such Order shall be considered valid as
follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder shall
be considered valid up to and including the number of Outstanding APS held
by such Existing Holder; provided that if more than one Hold Order is
submitted on behalf of such Existing Holder and the number of APS subject
to such Hold Orders exceeds the number of Outstanding APS held by such
Existing Holder, the number of APS subject to each of such Hold Orders
shall be reduced pro rata so that such Hold Orders, in the aggregate, will
cover exactly the number of Outstanding APS held by such Existing Holder;
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<PAGE> 26
(B) any Bids submitted on behalf of such Existing Holder shall be
considered valid, in the ascending order of their respective rates per
annum if more than one Bid is submitted on behalf of such Existing Holder,
up to and including the excess of the number of Outstanding APS held by
such Existing Holder over the number of APS subject to any Hold Order
referred to in paragraph 10(c)(iv)(A) above (and if more than one Bid
submitted on behalf of such Existing Holder specifies the same rate per
annum and together they cover more than the remaining number of shares
that can be the subject of valid Bids after application of paragraph
10(c)(iv)(A) above and of the foregoing portion of this paragraph
10(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per
annum, the number of shares subject to each of such Bids shall be reduced
pro rata so that such Bids, in the aggregate, cover exactly such remaining
number of shares); and the number of shares, if any, subject to Bids not
valid under this paragraph 10(c)(iv)(B) shall be treated as the subject of
a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and including the
excess of the number of Outstanding APS held by such Existing Holder over
the number of APS subject to Hold Orders referred to in paragraph
10(c)(iv)(A) and Bids referred to in paragraph 10(c)(iv)(B); provided that
if more than one Sell Order is submitted on behalf of any Existing Holder
and the number of APS subject to such Sell Orders is greater than such
excess, the number of APS subject to each of such Sell Orders shall be
reduced pro rata so that such Sell Orders, in the aggregate, cover exactly
the number of APS equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential Holder,
each Bid submitted shall be a separate Bid with the rate per annum and number of
APS therein specified.
(vi) Any Order submitted by a Beneficial Owner as a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to
the Submission Deadline on any Auction Date shall be irrevocable.
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted to it by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order", a "Submitted Bid" or a "Submitted Sell Order", as the case may be, or as
a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding APS over the
number of Outstanding APS that are the subject of Submitted Hold Orders
(such excess being hereinafter referred to as the "Available APS");
(B) from the Submitted Orders whether the number of Outstanding APS
that are the subject of Submitted Bids by Potential Holders specifying one
or more rates per annum equal to or lower than the Maximum Applicable Rate
exceeds or is equal to the sum of:
(1) the number of Outstanding APS that are the subject of Submitted
Bids by Existing Holders specifying one or more rates per annum
higher than the Maximum Applicable Rate, and
(2) the number of Outstanding APS that are subject to Submitted Sell
Orders (if such excess or such equality exists (other than because
the number of Outstanding APS in clause (1) above and this clause
(2) are each zero because all of the Outstanding APS are the subject
of Submitted Hold Orders), such Submitted Bids by Potential Holders
being hereinafter referred to collectively as "Sufficient Clearing
Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per annum specified
in the Submitted Bids (the "Winning Bid Rate") that if:
26
<PAGE> 27
(1) each Submitted Bid from Existing Holders specifying the Winning
Bid Rate and all other Submitted Bids from Existing Holders specifying
lower rates per annum were rejected, thus entitling such Existing Holders
to continue to hold the APS that are the subject of such Submitted Bids,
and
(2) each Submitted Bid from Potential Holders specifying the Winning
Bid Rate and all other Submitted Bids from Potential Holders specifying
lower rates per annum were accepted, thus entitling the Potential Holders
to purchase the APS that are the subject of such Submitted Bids, would
result in the number of shares subject to all Submitted Bids specifying
the Winning Bid Rate or a lower rate per annum being at least equal to the
Available APS.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to paragraph 10(d)(i), the Auction Agent shall advise the Trust
of the Maximum Applicable Rate and, based on such determinations, the
Applicable Rate for the next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate
for the next succeeding Dividend Period shall be equal to the
Winning Bid Rate;
(B) if Sufficient Clearing Bids do not exist (other than because
all of the Outstanding APS are the subject of Submitted Hold
Orders), that the Applicable Rate for the next succeeding
Dividend Period shall be equal to the Maximum Applicable Rate;
or
(C) if all of the Outstanding APS are the subject of Submitted
Hold Orders, that the Dividend Period next succeeding the
Auction shall automatically be the same length as the
immediately preceding Dividend Period and the Applicable Rate
for the next succeeding Dividend Period shall be equal to 40%
of the Reference Rate (or 60% of such rate if the Trust has
provided notification to the Auction Agent prior to the
Auction establishing the Applicable Rate for any dividend
pursuant to paragraph 2(f) hereof that net capital gains or
other taxable income will be included in such dividend on APS)
on the date of the Auction.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares. Based on the determinations made pursuant
to paragraph 10(d)(i), the Submitted Bids and Submitted Sell Orders shall
be accepted or rejected and the Auction Agent shall take such other action
as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the provisions
of paragraph 10(e)(iii) and paragraph 10(e)(iv), Submitted Bids and Submitted
Sell Orders shall be accepted or rejected in the following order of priority and
all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be accepted
and the Submitted Bid of each of the Existing Holders specifying any rate
per annum that is higher than the Winning Bid Rate shall be accepted, thus
requiring each such Existing Holder to sell the Outstanding APS that are
the subject of such Submitted Sell Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying any
rate per annum that is lower than the Winning Bid Rate shall be rejected,
thus entitling each such Existing Holder to continue to hold the
Outstanding APS that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders specifying
any rate per annum that is lower than the Winning Bid Rate shall be
accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be rejected,
thus entitling each such Existing Holder to continue to hold the
Outstanding APS that are the subject of such Submitted Bid, unless the
number of Outstanding APS subject to all such Submitted Bids shall be
greater than the number of Outstanding APS ("Remaining Shares")
27
<PAGE> 28
equal to the excess of the Available APS over the number of Outstanding
APS subject to Submitted Bids described in paragraph 10(e)(i)(B) and
paragraph 10(e)(i)(C), in which event the Submitted Bids of each such
Existing Holder shall be accepted, and each such Existing Holder shall be
required to sell Outstanding APS, but only in an amount equal to the
difference between (1) the number of Outstanding APS then held by such
Existing Holder subject to such Submitted Bid and (2) the number of APS
obtained by multiplying (x) the number of Remaining Shares by (y) a
fraction the numerator of which shall be the number of Outstanding APS
held by such Existing Holder subject to such Submitted Bid and the
denominator of which shall be the sum of the number of Outstanding APS
subject to such Submitted Bids made by all such Existing Holders that
specified a rate per annum equal to the Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be accepted but
only in an amount equal to the number of Outstanding APS obtained by
multiplying (x) the difference between the Available APS and the number of
Outstanding APS subject to Submitted Bids described in paragraph
10(e)(i)(B), paragraph 10(e)(i)(C) and paragraph 10(e)(i)(D) by (y) a
fraction the numerator of which shall be the number of Outstanding APS
subject to such Submitted Bid and the denominator of which shall be the
sum of the number of Outstanding APS subject to such 74 Submitted Bids
made by all such Potential Holders that specified rates per annum equal to
the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because
all of the Outstanding APS are subject to Submitted Hold Orders), subject to the
provisions of paragraph 10(e)(iii), Submitted Orders shall be accepted or
rejected as follows in the following order of priority and all other Submitted
Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate shall
be rejected, thus entitling such Existing Holder to continue to hold the
Outstanding APS that are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate shall
be accepted, thus requiring such Potential Holder to purchase the
Outstanding APS that are the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any rate
per annum that is higher than the Maximum Applicable Rate shall be
accepted and the Submitted Sell Orders of each Existing Holder shall be
accepted, in both cases only in an amount equal to the difference between
(1) the number of Outstanding APS then held by such Existing Holder
subject to such Submitted Bid or Submitted Sell Order and (2) the number
of APS obtained by multiplying (x) the difference between the Available
APS and the aggregate number of Outstanding APS subject to Submitted Bids
described in paragraph 10(e)(ii)(A) and paragraph 10(e)(ii)(B) by (y) a
fraction the numerator of which shall be the number of Outstanding APS
held by such Existing Holder subject to such Submitted Bid or Submitted
Sell Order and the denominator of which shall be the number of Outstanding
APS subject to all such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph 10(e)(i) or
paragraph 10(e)(ii), any Existing Holder would be entitled or required to sell,
or any Potential Holder would be entitled or required to purchase, a fraction of
a share of APS on any Auction Date, the Auction Agent shall, in such manner as
in its sole discretion it shall determine, round up or down the number of APS to
be purchased or sold by any Existing Holder or Potential Holder on such Auction
Date so that each Outstanding share of APS purchased or sold by each Existing
Holder or Potential Holder on such Auction Date shall be a whole share of APS.
(iv) If, as a result of the procedures described in paragraph 10(e)(i),
any Potential Holder would be entitled or required to purchase less than a whole
share of APS on any Auction Date, the Auction Agent shall, in such manner as in
its sole discretion it shall determine, allocate APS for purchase among
Potential Holders so that only
28
<PAGE> 29
whole APS are purchased on such Auction Date by any Potential Holder, even if
such allocation results in one or more of such Potential Holders not purchasing
any APS on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell Orders
on behalf of Existing Holders or Potential Holders, the aggregate number of
Outstanding APS to be purchased and the aggregate number of the Outstanding APS
to be sold by such Potential Holders and Existing Holders and, to the extent
that such aggregate number of Outstanding shares to be purchased and such
aggregate number of Outstanding shares to be sold differ, the Auction Agent
shall determine to which other Broker-Dealer or Broker-Dealers acting for one or
more purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such
Broker-Dealer shall receive, as the case may be, Outstanding APS
(f) Miscellaneous. The Trust may interpret the provisions of this
paragraph 10 to resolve any inconsistency or ambiguity, remedy any formal defect
or make any other change or modification that does not substantially adversely
affect the rights of Beneficial Owners of APS. A Beneficial Owner or an Existing
Holder (A) may sell, transfer or otherwise dispose of APS only pursuant to a Bid
or Sell Order in accordance with the procedures described in this paragraph 10
or to or through a Broker-Dealer, provided that in the case of all transfers
other than pursuant to Auctions such Beneficial Owner or Existing Holder, its
Broker-Dealer, if applicable, or its Agent Member advises the Auction Agent of
such transfer and (B) except as otherwise required by law, shall have the
ownership of the APS held by it maintained in book entry form by the Securities
Depository in the account of its Agent Member, which in turn will maintain
records of such Beneficial Owner's beneficial ownership. Neither the Trust nor
any Affiliate shall submit an Order in any Auction. Any Beneficial Owner that is
an Affiliate shall not sell, transfer or otherwise dispose of APS to any Person
other than the Trust. All of the Outstanding APS of a series shall be
represented by a single certificate registered in the name of the nominee of the
Securities Depository unless otherwise required by law or unless there is no
Securities Depository. If there is no Securities Depository, at the Trust's
option and upon its receipt of such documents as it deems appropriate, any APS
may be registered in the Stock Register in the name of the Beneficial Owner
thereof and such Beneficial Owner thereupon will be entitled to receive 77
certificates therefor and required to deliver certificates therefor upon
transfer or exchange thereof.
11. SECURITIES DEPOSITORY; SHARE CERTIFICATES. (a) If there is a
Securities Depository, one certificate for all of the APS of each series shall
be issued to the Securities Depository and registered in the name of the
Securities Depository or its nominee. Additional certificates may be issued as
necessary to represent APS. All such certificates shall bear a legend to the
effect that such certificates are issued subject to the provisions restricting
the transfer of APS contained in these Amended By-Laws. Unless the Trust shall
have elected, during a Non-Payment Period, to waive this requirement, the Trust
will also issue stop-transfer instructions to the Auction Agent for the APS.
Except as provided in paragraph (b) below, the Securities Depository or its
nominee will be the Holder, and no Beneficial Owner shall receive certificates
representing its ownership interest in such shares.
(b) If the Applicable Rate applicable to all APS of a series shall be the
Non-Payment Period Rate or there is no Securities Depository, the Trust may at
its option issue one or more new certificates with respect to such shares
(without the legend referred to in paragraph 11(a)) registered in the names of
the Beneficial Owners or their nominees and rescind the stop-transfer
instructions referred to in paragraph 11(a) with respect to such shares.
29
<PAGE> 1
Exhibit (d)(2)
CERTIFICATE NUMBER OF
NUMBER SHARES
1 1,520
EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
Organized Under the Laws of The Commonwealth of Massachusetts
Auction Preferred Shares
$.01 Par Value Per Share
$25,000 Liquidation Preference Per Share
Cusip No._____________
This certifies that__________________ is the owner of
__________________fully paid and non-assessable shares of Auction Preferred
Shares, $.01 par value per share, $25,000 liquidation preference per share, of
Eaton Vance New Jersey Municipal Income Trust (the "Trust") transferable only on
the books of the Trust by the holder thereof in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid unless countersigned by the transfer agent and registrar.
A statement in full, of all the designations, preferences,
qualifications, limitations, restrictions and special or relative rights of the
shares of each class authorized to be issued, will be furnished by the Trust to
any shareholders upon request and without charge.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed by
its duly authorized officers and its Seal to be hereunto affixed
this___________________ day of_________________ A.D. 1999.
BANKERS TRUST COMPANY EATON VANCE NEW JERSEY MUNICIPAL
As Transfer Agent and Registrar INCOME TRUST
By:____________________________ By:____________________________
Authorized Signature President
Attest:________________________
Secretary
FOR VALUE RECEIVED, ____________________________________ hereby sells,
assigns and transfers unto _____________________________ Shares represented by
this Certificate, and do hereby irrevocably constitute and appoint
____________________________________ Attorney to transfer the said Shares on the
books of the within named Trust with full power of substitution in the premises.
Dated ______________________________, ________________
In presence of
_____________________________________ ________________________________
Shares of Auction Preferred Shares evidenced by this Certificate
may be sold, transferred, or otherwise disposed of only pursuant
to the provisions of the Trust's Agreement and Declaration of
Trust, as amended, a copy of which may be at the office of the
Secretary of the Commonwealth of Massachusetts.
The Trust will furnish to any shareholder, upon request and
without charge, a full statement of the designations,
preferences, limitations and relative rights of the shares of
each class of series of capital stock of the Trust authorized to
be issued, so far as they have been determined, and the authority
of the Board of Trustees to determine the relative rights and
preferences of subsequent classes or series. Any such request
should be addressed to the Secretary of the Trust.
<PAGE> 1
EXHIBIT (h)(1)
EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
1,520 AUCTION PREFERRED SHARES
UNDERWRITING AGREEMENT
March 1, 1999
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
Eaton Vance New Jersey Municipal Income Trust, a Massachusetts
business trust (the "Trust"), proposes to issue and sell to the underwriters
named in Schedule 1 hereto (the "Underwriters"), an aggregate of 1,520 preferred
shares of beneficial interest, par value $0.01 per share, designated Auction
Preferred Shares of the Trust, with a liquidation preference of $25,000 per
share (the "APS").
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
Investment Adviser, dated as of December 21, 1998 (the "Investment Advisory
Agreement"). The Trust has engaged Eaton Vance to act as its administrator
pursuant to an Administration Agreement, dated as of December 21, 1998.
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 December 21, 1998 (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 December 21, 1998 (the "Transfer Agency Agreement"). Banker's Trust
Corporation will act as the Trust's auction agent (the "Auction Agent") pursuant
to an Auction Agency Agreement, dated as of March 4, 1999 (the "Auction
<PAGE> 2
Agency Agreement"). The Trust has entered into a Letter Agreement, dated as of
March 4, 1999 with the Depository Trust Company (the "DTC 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 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 APS
set forth opposite such Underwriter's name in Schedule 1 hereto, at the purchase
price per share of $24,750.
(b) 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.
2. Payment and Delivery. Delivery by the Trust of the APS (the
"APS Closing") to the Underwriters against payment of the purchase price by wire
transfer of Federal Funds or similar same day funds to the Trust for the APS,
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 "APS Closing Date").
A certificate in definitive form representing the APS to be
purchased by the Underwriters registered in the name of Cede & Co., as nominee
for the Depository Trust Company, shall be delivered by or on behalf of the
Trust to DTC for the account of 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
2
<PAGE> 3
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. 333-72039 and 811-09141) relating
to the APS (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 APS. 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 Managing Representative 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 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 APS, as described in the
Prospectus, as soon after the Effective Date (or, if later, after the date this
Underwriting Agreement is
3
<PAGE> 4
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 APS 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 APS is completed) became or becomes effective or
any amendment or supplement to the Prospectus was or is filed with the
Commission and (C) the APS Closing Date, 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-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 APS 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 APS
Closing Date, 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 representa-
4
<PAGE> 5
tions 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 Underwriters
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 and is
validly existing as a business trust under the laws of The Commonwealth
of Massachusetts; the Agreement and Declaration of Trust of the Trust,
as amended through the date hereof (the "Declaration of Trust"), and
the Amended Bylaws of the Trust, adopted in connection with the
issuance of the APS and as amended through the date hereof (the
"Amended Bylaws"), confer upon the Trust 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; 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 common
shares of beneficial interest of the Trust, par value $.01 per share
(the "Common Shares"), and the APS conform in all material respects to
the description of them in the Prospectus. All the outstanding Common
Shares have been duly authorized and are validly issued, fully paid and
nonassessable (except as described in the Registration Statement). The
APS 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
5
<PAGE> 6
preemptive or other similar rights in connection with the issuance of
the APS.
(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 APS 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 Administration Agreement, the Custody
Agreement, the Transfer Agency Agreement, the Auction Agency Agreement
and the DTC 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 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 APS as contemplated by this Underwriting Agreement and (C)
the performance by the Trust of its obligations under any of the Trust
6
<PAGE> 7
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 Agreement and
Declaration of Trust of the Trust, dated as of December 10, 1998 (the
"Declaration of Trust") or the Bylaws of the Trust, as amended through
the date hereof, establishing the powers, preferences and rights of the
APS (the "Amended Bylaws") 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 APS 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
connection with the purchase and distribution of the APS by the
Underwriters pursuant to this Underwriting Agreement.
(x) Deloitte & Touche LLP, whose report
appears in the Prospectus, are independent public accountants with
respect to the
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Trust as required by the Securities Act, the Investment Company Act,
the Securities Act Rules and the Investment Company Act Rules.
(xi) The financial statements included in
the Registration Statement and the Prospectus present fairly in all
material respects, in accordance with generally accepted accounting
principles in the United States applied on a consistent basis, the
financial condition of the Trust at the dates and for the periods
indicated.
(xii) 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.
(xiii) Other than as set forth in the
Prospectus, subsequent to the date of the unaudited financial
statements in the Registration Statement and Prospectus, (A) the Trust
has not incurred any liabilities or obligations, direct or contingent
(whether or not in the ordinary course of business), or entered into
any transactions, not in the ordinary course of business, that are
material to the Trust, (B) there has not been any material change in
the Common Shares or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, shareholders' equity
or results of operations of the Trust, that might materially and
adversely affect the property or assets thereof, (C) there has been no
dividend or distribution paid or declared in respect of any class of
the Trust's shares of beneficial interest, and (D) the Trust has not
incurred any debt or issued any senior security;
(xiv) 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,
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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.
(xv) The Trust intends to direct the
investment of the proceeds of the offering of the APS in such a manner
as to comply with the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code").
(xvi) The Common Shares are listed on the
New York Stock Exchange.
(xvii) The APS have been, or prior to the
APS Closing Date will be, assigned a rating of "AAA" by Standard &
Poor's Ratings Group ("Standard & Poor's").
(xviii) All advertisements and other sales
literature (collectively, "sales materials") authorized in writing or
prepared by the Trust for use in connection with the public offering of
the APS complied and comply with the requirements of the Securities
Act, the Securities Act Rules and the rules and interpretations of the
NASD and no such sales materials contained or contain any untrue
statement of a material fact or omitted or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading in light of the circumstances in
which they were made, including the Securities Act and the Securities
Act Rules.
(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
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<PAGE> 10
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 investment 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 Servicing Agreement (collectively, this Underwriting
Agreement, the Investment Advisory Agreement, the Administration
Agreement and the Shareholder Servicing 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
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<PAGE> 11
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 Bylaws 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 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 under state securities or
"blue sky" laws, in connection with the purchase and distribution of
the APS 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
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<PAGE> 12
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) 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 APS
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 APS 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
APS after the Effective Date. In either case, the Trust will provide the
Managing Representative satisfactory evidence of the filing. The Trust will not
file with the Commission any Prospectus or any other amendment (except any
post-
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<PAGE> 13
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
distribution of the APS 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 Managing Representative 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 APS 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 Managing Representative,
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 APS 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 APS is completed) (excluding exhibits) as the Managing
Representative may reasonably request.
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<PAGE> 14
(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 Underwriters and any dealers, at such office or offices
as the Underwriters may designate, as many copies of the Prospectus as the
Underwriters 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 APS, 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 Managing Representative will furnish to the
Trust) to whom APS 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 Managing
Representative reasonably requests in order to qualify the APS for offer and
sale under the securities or "blue sky" laws of such jurisdictions as the
Underwriters 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) The Trust will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the Trust's counsel and
accountants in connection with the registration of the APS and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary
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<PAGE> 15
Prospectus and the Prospectus and amendments and supplements thereto and the
mailing and delivering of copies thereof to the Underwriters and dealers; (ii)
the cost of printing or reproducing this Underwriting Agreement and any other
documents in connection with the offering, purchase, sale and delivery of the
APS (including advertising expenses of the Underwriters, if any); (iii) the cost
of preparing share certificates; (iv) the expenses (including, but not limited
to, travel, hotels and other accommodations) incurred by the Trust's or the
Investment Adviser's directors, officers, employees and other personnel in
connection with meetings held with registered brokers in connection with the
offering of the APS, the preparing to market and the marketing of the APS; (v)
any fees charged by securities rating services for rating the APS; (vi) the fees
and expenses of the Depository Trust Company and its nominee, the Custodian and
the Auction Agent; and (vii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for. It is understood, however, that, except as provided in this
Section 5 and Section 7 hereof, the Underwriters will pay all of their own costs
and expenses, including the fees of their counsel and stock transfer taxes, if
any, on resale of any of the APS by them, except any advertising expenses
connected with any offers they may make.
(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 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 APS and (2) no Underwriter
who has failed or refused to purchase the APS agreed to be purchased by it under
this Underwriting Agreement, in breach of its obligations 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 Managing
Representative, 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 APS as described in the Prospectus and
any issuances of Common Shares pursuant to the dividend reinvestment plan
established by the Trust.
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<PAGE> 16
(j) The Trust will direct the investment of the net
proceeds of the offering of the APS in such a manner as to comply with the
investment objective and policies of the Trust as described in the Prospectus.
(k) No later than the APS Closing Date, the
Underwriters will provide, and will cause any selling group member to whom they
have sold APS to provide, the Auction Agent with a list of the record names of
the persons to whom they have sold APS, the number of APS sold to each such
person, and the number of APS they are holding as of the APS Closing Date;
provided that in lieu of thereof, an Underwriter may provide the Auction Agent
with a list indicating itself as the sole holder of all the APS sold by such
Underwriter.
6. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters to purchase the APS are subject to the accuracy
on the date of this Underwriting Agreement, and on the APS Closing Date, 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 Managing Representative or its 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 Commission, 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 Common Shares, the APS or the liabilities of the
Trust except as set forth in or contemplated by the Prospectus; (2) there must
not have been any material adverse
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<PAGE> 17
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 APS pursuant to this Underwriting Agreement by the
Underwriters, at the initial public offering price of the APS.
(d) The Managing Representative must have received on
the APS 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 Investment 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 APS 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
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<PAGE> 18
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 the APS Closing Date (to the extent not waived in
writing by the Managing Representative).
(e) The Underwriters must receive on the APS Closing
Date the opinions dated such date substantially in the form of Annexes A, B and
C to this Underwriting Agreement from the counsel identified in each such Annex.
(f) The Underwriters must receive on the APS Closing
Date from Skadden, Arps, Slate, Meagher & Flom LLP and its affiliated entities,
their counsel, an opinion dated such date with respect to the Trust, the APS,
the Registration Statement and the Prospectus, this Underwriting Agreement and
the proceedings taken in connection with the sale and delivery of the APS. 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 Managing
Representative. 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 Underwriters must receive on the date this
Underwriting Agreement is signed and delivered by the Underwriters a signed
letter, dated such date, substantially in the form of Annex D to this
Underwriting Agreement from the firm of accountants designated in such Annex.
The Underwriters also must receive on the APS Closing Date a signed letter from
such accountants, dated as of such 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 date, that would
require any change in their letter referred to in the foregoing sentence.
(h) The APS shall have been accorded a rating of
"AAA" by Standard & Poor's and a letter to such effect, dated the APS Closing
Date, shall have been delivered to the Managing Representative.
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(i) As of the APS Closing Date and assuming the
receipt of the net proceeds from the sale of the APS, the 1940 Act Asset
Coverage and the APS Basic Maintenance Amount (each as defined in the
Prospectus) each will be met.
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.
(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 APS 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
APS or the offering contemplated hereby, and which
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<PAGE> 20
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
such Underwriter expressly for inclusion in the Registration 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
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<PAGE> 21
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 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.
21
<PAGE> 22
(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,
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,
22
<PAGE> 23
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 this Underwriting 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 APS set
forth opposite their names in Schedule 1 (or such number of APS 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 Underwriting 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 APS as set
forth on the cover page of and (2) the statements relating 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 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.
23
<PAGE> 24
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 APS are first generally
offered pursuant to this Underwriting Agreement by the Managing Representative
to dealers by letter or telegram;
(b) at or before the APS Closing Date if, in the sole
judgment of the Managing Representative, payment for and delivery of any APS is
rendered impracticable or inadvisable because (1) trading in the APS or the
Common Shares of the Trust is suspended by the Commission or trading in the
Common Shares is suspended by the principal exchange that lists the Common
Shares, (2) 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, (3) 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, (4) a general banking moratorium has been established by U.S. 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 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 APS on the terms and in the manner
contemplated by the Prospectus; or
(c) at or before the APS 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 the APS Closing Date
the APS agreed to be purchased on such date by such Underwriter or Underwriters,
the Managing Representative may find one or more substitute underwriters to
purchase such APS or make such other arrangements as the Managing Representative
deems advisable, or one or more of the remaining Underwriters may agree to
purchase such APS in such proportions as may be approved by the Managing
Representative, in each case upon the terms set forth in this
24
<PAGE> 25
Underwriting Agreement. If no such arrangements have been made within 36 hours
after such date, and
(a) the number of APS to be purchased by the
defaulting Underwriters on such date does not exceed 10% of the APS that the
Underwriters are obligated to purchase on the APS Closing Date, each of the
nondefaulting Underwriters will be obligated to purchase such APS on the terms
set forth in this Underwriting Agreement in proportion to their respective
obligations under this Underwriting Agreement, or
(b) the number of APS to be purchased by the
defaulting Underwriters on the APS Closing Date exceeds 10% of the APS to be
purchased by all the Underwriters on the APS 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 APS 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 APS 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 APS to be purchased on the APS Closing Date by such defaulting
Underwriter or Underwriters exceeds 10% of the APS that the Underwriters are
obligated to purchase on such 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 APS 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 9 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
an Underwriter for all purposes of this Underwriting Agreement.
25
<PAGE> 26
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 APS Closing Date 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 APS.
(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 APS 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
Underwriters 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
State of The
26
<PAGE> 27
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.
27
<PAGE> 28
Please confirm that the foregoing correctly sets
forth the agreement between us.
Very truly yours,
Eaton Vance New Jersey Municipal Income
Trust
By:_____________________________________
Name:
Title:
Eaton Vance Management
By:_____________________________________
Name:
Title:
Confirmed:
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Smith Barney Inc.
A.G. Edwards & Sons, Inc.
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
<PAGE> 29
SCHEDULE 1
NAME NUMBER OF APS TO BE PURCHASED
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Smith Barney Inc.
A.G. Edwards & Sons, Inc.
<PAGE> 30
ANNEX A
FORM OF OPINION OF
KIRKPATRICK & LOCKHART LLP 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 Common Shares and the APS conform
in all respects to the description of them in the Prospectus. All the
outstanding Common Shares have been duly authorized and are validly issued,
fully paid and nonassessable. The APS 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 in connection with the issuance of the APS.
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 the public offering and consummate the sale of the APS as
provided in the Underwriting Agreement has or will have been taken by the Trust.
<PAGE> 31
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, the Auction Agency Agreement and
the DTC 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 APS 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 Amended Bylaws 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 APS
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 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 connection with the purchase and distribution
of the APS by the Underwriters pursuant to the Underwriting Agreement.
A-2
<PAGE> 32
9. 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.
10. The Common Shares are listed on the New York Stock
Exchange.
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 "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 APS.
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 APS, 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 reviews 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
A-3
<PAGE> 33
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).
A-4
<PAGE> 34
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 conflicts or will conflict with, or results or will result
in a breach of, the Agreement and
B-1
<PAGE> 35
Declaration of Trust or Bylaws 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 my opinion, I 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 APS, I have advised
Eaton Vance 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 Eaton Vance in the course of
the preparation of the
B-2
<PAGE> 36
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. I also participated in conferences with representatives of the
Trust and its accountants and Eaton Vance at which the contents of the
Registration Statement and Prospectus and related matters were discussed. With
your permission, I 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 my
attention that would lead me 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 I
express no view).
B-3
<PAGE> 37
ANNEX C
FORM OF OPINION OF WILENTZ, GOLDMAN & SPITZER
1. The statements contained in the Prospectus under the
heading "TAXES - State Taxes - New Jersey Taxes" and in Appendix E to the
Statement of Additional Information under the heading "STATE AND U.S. TERRITORY
INFORMATION - New Jersey," to the extent that such statements constitute matters
of law or legal conclusions, provide a fair summary of such law or conclusions.
Such statements are based on current New Jersey tax laws and our understanding
of the Trust's proposed operations, as disclosed in the Prospectus.
2. Although we do not pass upon or assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, and have not made any independent
check or verification thereof, no facts have come to our attention which would
lead us to believe that the material contained in the Prospectus under the
heading "TAXES - State Taxes - New Jersey Taxes" and in Appendix E to the
Statement of Additional Information under the heading "STATE AND U.S. TERRITORY
INFORMATION - New Jersey," at the time the Registration Statement 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.
In rendering the foregoing opinions, we have relied as to matters of
fact, to the extent we deem proper, on certificates of responsible officers of
the Trust and of the Investment Adviser, and of public officials.
C-1
<PAGE> 38
ANNEX D
FORM OF ACCOUNTANT'S LETTER
March , 1999
The Board of Trustees of
Eaton Vance New Jersey 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 New Jersey Municipal Income Trust (the "Trust") as of February 19,
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- 72039) and under the
Investment Company Act of 1940 (the "1940 Act") (File No. 811-09155); 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. We have not audited any financial statements of the Trust
as of any date or for any period subsequent to January 21,
1999, although have conducted an audit of the statement of
assets and liabilities as of January 21, 1999. Therefore, we
are unable to and do no express out opinion on the unaudited
statement of assets and liabilities as of February 19, 1999,
and the unaudited statements of operations, changes in net
assets and the
D-1
<PAGE> 39
unaudited condensed financial information for the period from
January 21, 1999 to February 19, 1999 or on any other
financial statements or condensed financial information for
any period subsequent to January 21, 1999.
4. 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 minutes of all such
meetings through March ___, 1999, were set forth therein. We
have carried out other procedures to March , 1999 as
follows:
(a) With respect to the period from January 21, 1999
to February 19, 1999, we have:
(i) Read the unaudited statement of assets
and liabilities as of February 19, 1999, and the unaudited statements
of operations, changes in net assets and the unaudited condensed
financial information for the period from January 21, 1999 to February
19, 1999; and
(ii) Made inquiries of certain officials of
the Trust who have responsibility for financial and accounting matters
regarding (1) whether the unaudited financial statements and unaudited
financial information referred to in 4(a)(i) comply in form in all
material respects with the applicable accounting requirements of the
Act and the 1940 Act and the related published rules and regulations
and (2) whether those unaudited financial statements and unaudited
condensed financial information are in conformity with generally
accepted accounting principles.
The foregoing procedures do not constitute an audit made in accordance with
generally accepted auditing standards. Also, they would not necessarily reveal
matters of significance with respect to the comments in the following paragraph.
Accordingly, we make no representations as to the sufficiency of the foregoing
procedures for your purposes.
5. Nothing came to our attention as a result of the foregoing
procedures, however, that caused us to believe that (1) the
unaudited financial statements and unaudited condensed
financial information described in 4(a)(i) do not comply in
form in all material respects with the applicable accounting
requirements of the Act and the 1940 Act and the related
published rules and regulations and (2) the unaudited
financial statements
D-2
<PAGE> 40
and unaudited condensed financial information are not in
conformity with generally accepted accounting principles
6. Trust officials have advised us that no financial
statements as of any date subsequent to February 19, 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 March ___,
1999, in the capital shares or net assets of the Trust as
compared with amounts shown in the February 19, 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.
7. For the purposes of this letter, we have also read the
following and performed the procedures referenced below, set
forth in the Registration Statement under the headings
indicated:
(a) Cover Page. We have verified the mathematical
accuracy of the dollar amounts listed with respect to the Trust under the
headings "Sales load" and "Proceeds to Trust."
(b) "Prospectus Summary - Asset Maintenance." We have
verified the accuracy of the approximate percentage of the Trust's capital
attributable to the preferred shares of beneficial interest, par value $0.01 per
share, of the Trust (the "APS").
(c) "The Trust." We have verified the accuracy of the
dollar amount of the proceeds of the initial public offering of the Trust's
common shares of beneficial interest, par value $0.01 per share (the "Common
Shares") after the payment of organizational and offering expenses and the
number of additional Common Shares that the underwriters were given an option to
purchase to cover over-allotments.
(d) "Use of Proceeds." We have verified the accuracy
of the net proceeds of the offering of the APS of the Trust after payment of
offering expenses and the sales load.
(e) "Capitalization." We have verified accuracy of
unaudited capitalization of the Trust as of February 19, 1999 (as if the
over-allotment Common Shares of the Trust were issued on such date) and as
adjusted to give effect to the issuance of the APS is asset forth under such
heading.
D-3
<PAGE> 41
(f) "Portfolio Composition." We have verified that
the number of issues, market value and percentage of total market value, by
rating category, which were invested in long-term and intermediate-term
municipal obligations by the Trust as of February 19, 1999, was as set forth
under such heading.
(g) "Description of the APS - Dividends -
Restrictions on Dividends and Other Payments." We have verified the accuracy of
the approximate asset coverage percentage set forth on the first paragraph under
such heading.
(h) "Description of the APS - Asset Maintenance -
1940 Act Asset Coverage." We have confirmed the accuracy of the dollar amounts
and percentages set forth with respect to the Trust in the table under such
heading.
(i) "Description of Capital Structure." We have
verified the accuracy of the numbers of authorized Common Shares and Auction
Preferred Shares and the numbers of outstanding Common Shares and Auction
Preferred Shares outstanding (exclusive of shares held by the Trust for its own
account).
(j) "Description of Capital Structure." We have
verified the accuracy of the net asset value per share and the closing price per
share for the Common Shares of the Trust as of February 19, 1999.
(k) "Statement of Additional Information - Appendix
B: Tax Equivalent Yield Tables." Based on the percentages set forth in the tax
equivalent yield table with respect to the Trust, we have verified the
mathematical accuracy of the percentages under the columns labeled "is
equivalent to a fully taxable yield of" set forth in such table.
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
D-4
<PAGE> 1
Exhibit (K)(1)
- --------------------------------------------------------------------------------
AUCTION AGENT AGREEMENT
between
EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
and
BANKERS TRUST COMPANY
Dated as of March 4, 1999
Relating to
AUCTION PREFERRED SHARES
of
EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
I. DEFINITIONS AND RULES OF CONSTRUCTION.......................................................1
1.1 Terms Defined by Reference to the Amended By-laws.............................1
1.2 Terms Defined Herein..........................................................1
1.3 Rules of Construction.........................................................3
II. THE AUCTION................................................................................3
2.1 Purpose; Incorporation by Reference of Auction Procedures
and Settlement Procedures.....................................................3
2.2 Preparation for Each Auction; Maintenance of Registry of
Existing Holders..............................................................4
2.3 Auction Schedule..............................................................8
2.4 Notice of Auction Results.....................................................9
2.5 Broker-Dealers................................................................9
2.6 Ownership of Shares of APS and Submission of Bids by
the Trust and its Affiliates.................................................10
2.7 Access to and Maintenance of Auction Records.................................10
III. THE AUCTION AGENT AS PAYING AGENT........................................................11
3.1 The Paying Agent.............................................................11
3.2 The Trust's Notices to the Paying Agent......................................11
3.3 The Trust to Provide Funds for Dividends, Redemptions
and Additional Dividends. ................................................12
3.4 Disbursing Dividends, Redemption Price and Additional
Dividends....................................................................12
IV. THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR..........................................13
4.1 Original Issue of Stock Certificates.........................................13
4.2 Registration of Transfer or Exchange of Shares...............................13
4.3 Removal of Legend............................................................14
4.4 Lost, Stolen or Destroyed Stock Certificates.................................14
4.5 Disposition of Canceled Certificates; Record Retention.......................14
4.6 Stock Register...............................................................15
4.7 Return of Funds..............................................................15
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
V. REPRESENTATIONS AND WARRANTIES.............................................................16
5.1 Representations and Warranties of the Trust..................................16
5.2 Representations and Warranties of the Auction Agent..........................17
VI. THE AUCTION AGENT.........................................................................17
6.1 Duties and Responsibilities..................................................17
6.2 Rights of the Auction Agent..................................................18
6.3 Auction Agent's Disclaimer...................................................18
6.4 Compensation, Expenses and Indemnification...................................18
VII. MISCELLANEOUS............................................................................19
7.1 Term of Agreement............................................................19
7.2 Communications...............................................................20
7.3 Entire Agreement.............................................................21
7.4 Benefits.....................................................................21
7.5 Amendment; Waiver............................................................21
7.6 Successors and Assigns.......................................................21
7.7 Severability.................................................................22
7.8 Execution in Counterparts....................................................22
7.9 Governing Law................................................................22
7.10 Limitation of Liability......................................................22
</TABLE>
ii
<PAGE> 4
THIS AUCTION AGENT AGREEMENT, dated as of March 4, 1999, is
between EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST, a Massachusetts business
trust (the "Trust"), and BANKERS TRUST COMPANY, a New York banking corporation.
The Trust proposes to issue 1,520 preferred shares of
beneficial interest, par value $.01 per share, liquidation preference $25,000
per share (the "APS"), pursuant to the Trust's Amended By-laws (as defined
below). The Trust desires that Bankers Trust Company perform certain duties as
agent in connection with each Auction of shares of APS (in such capacity, the
"Auction Agent"), and as the transfer agent, registrar, dividend disbursing
agent and redemption agent with respect to the shares of APS (in such capacity,
the "Paying Agent"), upon the terms and conditions of this Agreement, and the
Trust hereby appoints Bankers Trust Company as said Auction Agent and Paying
Agent in accordance with those terms and conditions (hereinafter generally
referred to as the "Auction Agent," except in Sections 3 and 4 below).
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the Trust and the Auction Agent agree as
follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1 Terms Defined by Reference to
the Amended By-laws.
Capitalized terms not defined herein shall have the respective meanings
specified in the Amended By-laws.
1.2 Terms Defined Herein.
As used herein and in the Settlement Procedures (as defined below), the
following terms shall have the following meanings, unless the context otherwise
requires:
(a) "Affiliate" shall mean any Person made known to the Auction Agent
to be controlled by, in control of, or under common control with, the Trust or
its successors.
<PAGE> 5
(b) "Agent Member" of any Person shall mean such Person's agent member
of the Securities Depository that will act on behalf of a Bidder.
(c) "Amended By-laws" shall mean the Amended By-laws of the Trust,
establishing the powers, preferences and rights of the APS, as amended to the
date hereof.
(d) "Auction" shall have the meaning specified in Section 2.1 hereof.
(e) "Auction Procedures" shall mean the Auction Procedures that are set
forth in Section 10 of Article VII of the Amended By-laws.
(f) "Authorized Officer" shall mean each Senior Vice President, Vice
President, Assistant Vice President, Trust Officer, and Assistant Secretary and
Assistant Treasurer of the Auction Agent and every other officer or employee of
the Auction Agent designated as an "Authorized Officer" for purposes hereof in a
communication to the Trust.
(g) "Broker-Dealer Agreement" shall mean each agreement between the
Auction Agent and a Broker-Dealer substantially in the form attached hereto as
Exhibit A.
(h) "Holder" shall be a holder of record of one or more shares of APS,
listed as such in the stock register maintained by the Paying Agent pursuant to
Section 4.6 hereof.
(i) "Settlement Procedures" shall mean the Settlement Procedures
attached as Exhibit A to the Broker-Dealer Agreement.
(j) "Trust Officer" shall mean the Chairman and Chief Executive
Officer, the President, each Vice President (whether or not designated by a
number or word or words added before or after the title "Vice President"), the
Secretary, the Treasurer, each Assistant Secretary and each Assistant Treasurer
of the Trust and every other officer or employee of the Trust designated as a
"Trust Officer" for purposes hereof in a notice from the Trust to the Auction
Agent.
1.3 Rules of Construction.
2
<PAGE> 6
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number
and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
II. THE AUCTION.
2.1 Purpose; Incorporation by Reference of Auction
Procedures and Settlement Procedures.
(a) The Amended By-laws provide that the Applicable Rate on shares of
each series of APS, as the case may be, for each Dividend Period therefor after
the Initial Dividend Period shall be the rate per annum that a commercial bank,
trust company or other financial institution appointed by the Trust advises
results from implementation of the Auction Procedures. The Board of Trustees of
the Trust has adopted a resolution appointing Bankers Trust Company as Auction
Agent for purposes of the Auction Procedures. The Auction Agent hereby accepts
such appointment and agrees that, on each Auction Date, it shall follow the
procedures set forth in this Section 2 and the Auction Procedures for the
purpose of determining the Applicable Rate for the APS for the next Dividend
Period therefor. Each periodic operation of such procedures is hereinafter
referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and in
the Settlement Procedures are incorporated herein by reference in their entirety
and shall be deemed to be a part hereof to the same extent as if such provisions
were set forth fully herein.
3
<PAGE> 7
2.2 Preparation for Each Auction; Maintenance
of Registry of Existing Holders.
(a) Pursuant to Section 2.5 hereof, the Trust shall not designate any
Person to act as a Broker-Dealer without the prior written approval of the
Auction Agent (which approval shall not be withheld unreasonably). As of the
date hereof, the Trust shall provide the Auction Agent with a list of the
Broker-Dealers previously approved by the Auction Agent and shall cause to be
delivered to the Auction Agent for execution by the Auction Agent a
Broker-Dealer Agreement signed by each such Broker-Dealer. The Auction Agent
shall keep such list current and accurate and shall indicate thereon, or on a
separate list, the identity of each Existing Holder, if any, whose most recent
Order was submitted by a Broker-Dealer on such list and resulted in such
Existing Holder continuing to hold or purchasing shares of APS. Not later than
five Business Days prior to any Auction Date for which any change in such list
of Broker-Dealers is to be effective, the Trust shall notify the Auction Agent
in writing of such change and, if any such change is the addition of a
Broker-Dealer to such list, the Trust shall cause to be delivered to the Auction
Agent for execution by the Auction Agent a Broker-Dealer Agreement signed by
such Broker-Dealer. The Auction Agent shall have entered into a Broker-Dealer
Agreement with each Broker-Dealer prior to the participation of any such
Broker-Dealer in any Auction.
(b) In the event that the Auction Date for any Auction shall be changed
after the Auction Agent shall have given the notice referred to in clause (vii)
of Paragraph (a) of the Settlement Procedures, the Auction Agent, by such means
as the Auction Agent deems practicable, shall give notice of such change to the
Broker-Dealers not later than the earlier of 9:15 A.M. on the new Auction Date
or 9:15 A.M. on the old Auction Date.
(c) The provisions contained in Section 2 of Article VII of the Amended
By-laws concerning Special Dividend Periods and the notification of a Special
Dividend Period will be followed by the Trust and, to the extent applicable, the
Auction Agent, and the provisions contained therein are incorporated herein by
reference in their entirety and shall be deemed to be a part of this Agreement
to the same extent as if such provisions were set forth fully herein.
(d) (i) Except as otherwise provided in Sections 2(e) and 2(f) of
Article VII of the Amended By-laws, whenever the Trust intends to include any
4
<PAGE> 8
net capital gains or other income subject to regular Federal income tax in any
dividend on shares of APS, the Trust will notify the Auction Agent of the amount
to be so included at least five Business Days prior to the Auction Date on which
the Applicable Rate for such dividend is to be established. Whenever the Auction
Agent receives such notice from the Trust, in turn it will notify each Broker-
Dealer, who, on or prior to such Auction Date, in accordance with its Broker-
Dealer Agreement, will notify its Beneficial Owners and Potential Beneficial
Owners believed to be interested in submitting an Order in the Auction to be
held on such Auction Date. Whenever the Trust includes any additional amounts in
a dividend as provided in Section 2(e) of Article VII of the Amended By-laws,
the Trust will notify the Auction Agent of such additional amounts to be so
included in such dividend at least five Business Days prior to the applicable
Dividend Payment Date. Whenever the Auction Agent receives such notice from the
Trust, in turn it will notify the Securities Depository and each Broker-Dealer,
who, on or prior to the applicable Dividend Payment Date, in accordance with its
Broker-Dealer Agreement, will notify its Beneficial Owners.
(ii) If the Trust makes a Retroactive Taxable Allocation, the
Trust, within 90 days (and generally within 60 days) after the end of its fiscal
year for which a Retroactive Taxable Allocation is made, will provide notice
thereof to the Auction Agent and to each Holder (initially the Securities
Depository) during such fiscal year at such Holder's address as the same appears
or last appeared on the stock books of the Trust. The Trust, within 30 days
after such notice is given to the Auction Agent, will pay to the Auction Agent
(who then will distribute to such Holders), out of funds legally available
therefor, a cash amount equal to the aggregate Additional Dividend with respect
to all Retroactive Taxable Allocations made to such Holders during the fiscal
year in question.
(e) (i) On each Auction Date, the Auction Agent shall determine
the Reference Rate and the Maximum Applicable Rate. If the Reference Rate is not
quoted on an interest basis but is quoted on a discount basis, the Auction Agent
shall convert the quoted rate to an Interest Equivalent, as set forth in Section
1 of the Amended By-laws; or, if the rate obtained by the Auction Agent is not
quoted on an interest or discount basis, the Auction Agent shall convert the
quoted rate to an interest rate after consultation with the Trust as to the
method of such conversion. Not later than 9:30 A.M. on each Auction Date, the
Auction Agent shall notify the Trust and the Broker-Dealers of the Reference
Rate so determined and of the Maximum Applicable Rate.
5
<PAGE> 9
(ii) If the Reference Rate is the applicable "AA" Composite
Commercial Paper Rate and such rate is to be based on rates supplied by
Commercial Paper Dealers and one or more of the Commercial Paper Dealers shall
not provide a quotation for the determination of the applicable "AA" Composite
Commercial Paper Rate, the Auction Agent immediately shall notify the Trust so
that the Trust can determine whether to select a Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers to provide the quotation or
quotations not being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers. The Trust promptly shall advise the Auction Agent of any such
selection. If the Trust does not select any such Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers, then the rates shall be supplied
by the remaining Commercial Paper Dealer or Commercial Paper Dealers.
(iii) If, after the date of this Agreement, there is any
change in the prevailing rating of APS by Standard & Poor's Ratings Group (or
substitute or successor rating agencies), thereby resulting in any change in the
corresponding applicable percentage for the APS, as set forth in the definition
of Maximum Application Rate (the "Percentage"), the Trust shall notify the
Auction Agent in writing of such change in the Percentage prior to 9:00 A.M. on
the Auction Date for APS next succeeding such change. The Percentage for the APS
on the date of this Agreement is 110%. The Auction Agent shall be entitled to
rely on the last Percentage of which it has received notice from the Trust (or,
in the absence of such notice, the Percentage set forth in the preceding
sentence) in determining the Maximum Applicable Rate as set forth in Section
2.2(e)(i) hereof.
(f) (i) The Auction Agent shall maintain a current registry of the
Existing Holders of the shares of APS for purposes of each Auction. The Trust
shall use its best efforts to provide or cause to be provided to the Auction
Agent within ten Business Days following the date of the Closing a list of the
initial Existing Holders of APS, and the Broker-Dealer of each such Existing
Holder through which such Existing Holder purchased such shares. The Auction
Agent may rely upon, as evidence of the identities of the Existing Holders, such
list, the results of each Auction and notices from any Existing Holder, the
Agent Member of any Existing Holder or the Broker-Dealer of any Existing Holder
with respect to such Existing Holder's transfer of any shares of APS to another
Person.
(ii) In the event of any partial redemption of APS, upon
notice by the Trust to the Auction Agent of such partial redemption, the Auction
Agent
6
<PAGE> 10
promptly shall request the Securities Depository to notify the Auction Agent of
the identities of the Agent Members (and the respective numbers of shares) from
the accounts of which shares have been called for redemption and the person or
department at such Agent Member to contact regarding such redemption, and at
least two Business Days prior to the Auction preceding the date of redemption,
the Auction Agent shall request each Agent Member so identified to disclose to
the Auction Agent (upon selection by such Agent Member of the Existing Holders
whose shares are to be redeemed) the number of shares of APS of each such
Existing Holder, if any, to be redeemed by the Trust, provided that the Auction
Agent has been furnished with the name and telephone number of a person or
department at such Agent Member from which it is to request such information. In
the absence of receiving any such information with respect to an Existing
Holder, from such Existing Holder's Agent Member or otherwise, the Auction Agent
may continue to treat such Existing Holder as having ownership of the number of
shares of APS shown in the Auction Agent's registry of Existing Holders.
(iii) The Auction Agent shall register a transfer of the
ownership of shares of APS from an Existing Holder to another Existing Holder,
or to another Person if permitted by the Trust, only if (A) such transfer is
made pursuant to an Auction or (B) if such transfer is made other than pursuant
to an Auction, the Auction Agent has been notified of such transfer in writing
in a notice substantially in the form of Exhibit C to the Broker-Dealer
Agreements, by such Existing Holder or by the Agent Member of such Existing
Holder. The Auction Agent is not required to accept any notice of transfer
delivered for an Auction unless it is received by the Auction Agent by 3:00 P.M.
on the Business Day next preceding the applicable Auction Date. The Auction
Agent shall rescind a transfer made on the registry of the Existing Holders of
any shares of APS if the Auction Agent has been notified in writing, in a notice
substantially in the form of Exhibit D to the Broker-Dealer Agreement, by the
Agent Member or the Broker-Dealer of any Person that (i) purchased any shares
of APS and the seller failed to deliver such shares or (ii) sold any shares of
APS and the purchaser failed to make payment to such Person upon delivery to the
purchaser of such shares.
(g) The Auction Agent may request that the Broker Dealers, as set forth
in Section 3.2(c) of the Broker-Dealer Agreements, provide the Auction Agent
with a list of their respective customers that such Broker-Dealers believe are
Beneficial Owners of shares of APS. The Auction Agent shall keep confidential
any such information and shall not disclose any such information so
7
<PAGE> 11
provided to any Person other than the relevant Broker-Dealer and the Trust,
provided that the Auction Agent reserves the right to disclose any such
information if it is advised by its counsel that its failure to do so would be
unlawful.
2.3 Auction Schedule.
The Auction Agent shall conduct Auctions in accordance with the
schedule set forth below. Such schedule may be changed by the Auction Agent with
the consent of the Trust, which consent shall not be withheld unreasonably. The
Auction Agent shall give notice of any such change to each Broker-Dealer. Such
notice shall be received prior to the first Auction Date on which any such
change shall be effective.
<TABLE>
<CAPTION>
Time Event
---- -----
<S> <C>
By 9:30 A.M. Auction Agent advises the Trust and the Broker-
Dealers of the Reference Rate and the Maximum
Applicable Rate as set forth in Section 2.2(e)(i)
hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information communicated to
it by Broker-Dealers as provided in Section 10(d)(i) of
Article VII of the Amended By-laws. Submission
deadline is 1:00 P.M.
Not earlier than Auction Agent makes determinations pursuant to
1:00 P.M. Section 10(d)(i) of Article VII of the Amended By-
laws.
By approximately Auction Agent advises the Trust of the results of the
3:00 P.M. Auction as provided in Section 10(d)(ii) of Article VII
of the Amended By-laws.
Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and
shares of APS allocated as provided in Section
10(e) of Article VII of the Amended By-laws.
Auction Agent gives notice of the Auction results
as set forth in Section 2.4 hereof.
</TABLE>
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<PAGE> 12
2.4 Notice of Auction Results.
On each Auction Date, the Auction Agent shall notify Broker-Dealers of
the results of the Auction held on such date by telephone or through the Auction
Agent's Auction Processing System as set forth in Paragraph (a) of the
Settlement Procedures.
2.5 Broker-Dealers.
(a) Not later than 12:00 noon on each Auction Date, the Trust shall pay
to the Auction Agent in Federal Funds or similar same-day funds an amount in
cash equal to (i) in the case of any Auction Date immediately preceding a 7-Day
Dividend Period, the product of (A) a fraction the numerator of which is the
number of days in such Dividend Period (calculated by counting the first day of
such Dividend Period but excluding the last day thereof) and the denominator of
which is 360, times (B) 1/4 of 1%, times (C) $25,000 times (D) the sum of the
aggregate number of outstanding shares of APS for which the Auction is conducted
and (ii) in the case of any Special Dividend Period, the amount determined by
mutual consent of the Trust and the Broker-Dealers pursuant to Section 3.5 of
the Broker-Dealer Agreements. The Auction Agent shall apply such moneys as set
forth in Section 3.5 of the Broker-Dealer Agreements and shall thereafter remit
to the Trust any remaining funds paid to the Auction Agent pursuant to this
Section 2.5(a).
(b) The Trust shall not designate any Person to act as a Broker-
Dealer, or permit a Existing Holder or a Potential Beneficial Owner to
participate in Auctions through any Person other than a Broker-Dealer, without
the prior written approval of the Auction Agent, which approval shall not be
withheld unreasonably. The Trust may designate an Affiliate or PaineWebber
Incorporated to act as a Broker-Dealer.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as
set forth therein if so directed by the Trust.
(d) Subject to Section 2.5(b) hereof, the Auction Agent from time to
time shall enter into such Broker-Dealer Agreements as the Trust shall request.
(e) The Auction Agent shall maintain a list of Broker-Dealers.
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<PAGE> 13
2.6 Ownership of Shares of APS and Submission of Bids
by the Trust and its Affiliates.
Neither the Trust nor any Affiliate of the Trust may submit any Sell
Order or Bid, directly or indirectly, in any Auction, except that an Affiliate
of the Trust that is a Broker-Dealer may submit a Sell Order or Bid on behalf of
a Beneficial Owner or a Potential Beneficial Owner. The Trust shall notify the
Auction Agent if the Trust or, to the best of the Trust's knowledge, any
Affiliate of the Trust becomes a Beneficial Owner of any shares of APS. Any
shares of APS redeemed, purchased or otherwise acquired (i) by the Trust shall
not be reissued, except in accordance with the requirements of the Securities
Act of 1933, as amended, or (ii) by its Affiliates shall not be transferred
(other than to the Trust). The Auction Agent shall have no duty or liability
with respect to enforcement of this Section 2.6.
2.7 Access to and Maintenance of Auction Records.
The Auction Agent shall afford to the Trust, its agents, independent
public accountants and counsel, access at reasonable times during normal
business hours to review and make extracts or copies (at the Trust's sole cost
and expense) of all books, records, documents and other information concerning
the conduct and results of Auctions, provided that any such agent, accountant or
counsel shall furnish the Auction Agent with a letter from the Trust requesting
that the Auction Agent afford such person access. The Auction Agent shall
maintain records relating to any Auction for a period of two years after such
Auction (unless requested by the Trust to maintain such records for such longer
period not in excess of four years, then for such longer period), and such
records, in reasonable detail, shall accurately and fairly reflect the actions
taken by the Auction Agent hereunder. The Trust agrees to keep confidential any
information regarding the customers of any Broker-Dealer received from the
Auction Agent in connection with this Agreement or any Auction, and shall not
disclose such information or permit the disclosure of such information without
the prior written consent of the applicable Broker-Dealer to anyone except such
agent, accountant or counsel engaged to audit or review the results of Auctions
as permitted by this Section 2.7, provided that the Trust reserves the right to
disclose any such information if it is advised by its counsel that its failure
to do so would (i) be unlawful or (ii) expose it to liability, unless the
Broker-Dealer shall have offered indemnification satisfactory to the Trust. Any
such agent, accountant or counsel, before having access to such information,
shall agree to keep such information confidential and
10
<PAGE> 14
not to disclose such information or permit disclosure of such information
without the prior written consent of the applicable Broker-Dealer, provided that
such agent, accountant or counsel may reserve the right to disclose any such
information if it is advised by its counsel that its failure to do so would (i)
be unlawful or (ii) expose it to liability, unless the Broker-Dealer shall have
offered indemnification satisfactory to such agent, accountant or counsel.
III. THE AUCTION AGENT AS PAYING AGENT.
3.1 The Paying Agent.
The Board of Trustees of the Trust has adopted a resolution appointing
Bankers Trust Company as transfer agent, registrar, dividend disbursing agent
and redemption agent for the Trust in connection with any shares of APS (in such
capacity, the "Paying Agent"). The Paying Agent hereby accepts such appointment
and agrees to act in accordance with its standard procedures and the provisions
of the Amended By-laws which are specified herein with respect to the shares of
APS and as set forth in this Section 3.
3.2 The Trust's Notices to the Paying Agent.
Whenever any shares of APS are to be redeemed, the Trust promptly shall
deliver to the Paying Agent a Notice of Redemption, which will be mailed by the
Trust to each Holder at least five Business Days prior to the date such Notice
of Redemption is required to be mailed pursuant to the Amended By-laws. The
Paying Agent shall have no responsibility to confirm or verify the accuracy of
any such Notice.
3.3 The Trust to Provide Funds for Dividends,
Redemptions and Additional Dividends.
(a) Not later than noon on each Dividend Payment Date, the Trust shall
deposit with the Paying Agent an aggregate amount of Federal Funds or similar
same-day funds equal to the declared dividends to be paid to Holders on such
Dividend Payment Date, and shall give the Paying Agent irrevocable instructions
to apply such funds to the payment of such dividends on such Dividend Payment
Date.
11
<PAGE> 15
(b) If the Trust shall give a Notice of Redemption, then by noon of the
date fixed for redemption, the Trust shall deposit in trust with the Paying
Agent an aggregate amount of Federal Funds or similar same-day funds sufficient
to redeem such shares of APS called for redemption and shall give the Paying
Agent irrevocable instructions and authority to pay the redemption price to the
Holders of shares of APS called for redemption upon surrender of the certificate
or certificates therefor.
(c) If the Trust provides notice to the Auction Agent of a Retroactive
Taxable Allocation, the Trust, within 30 days after such notice is given and by
noon of the date fixed for payment of an Additional Dividend, shall deposit in
trust with the Paying Agent an aggregate amount of Federal Funds or similar
same-day funds equal to such Additional Dividend and shall give the Paying Agent
irrevocable instructions and authority to pay the Additional Dividend to Holders
(or former Holders) entitled thereto.
3.4 Disbursing Dividends, Redemption Price
and Additional Dividends.
After receipt of the Federal Funds or similar same-day funds and
instructions from the Trust described in Sections 3.3(a), (b) and (c) above, the
Paying Agent shall pay to the Holders (or former Holders) entitled thereto (i)
on each corresponding Dividend Payment Date, dividends on the shares of APS,
(ii) on any date fixed for redemption, the redemption price of any shares of APS
called for redemption and (iii) on the date fixed for payment of an Additional
Dividend, such Additional Dividend. The amount of dividends for any Dividend
Period to be paid by the Paying Agent to Holders will be determined by the Trust
as set forth in Section 2 of the Amended By-laws. The redemption price to be
paid by the Paying Agent to the Holders of any shares of APS called for
redemption will be determined as set forth in Section 4 of the Amended By-laws.
The amount of Additional Dividends to be paid by the Paying Agent in the event
of a Retroactive Taxable Allocation to Holders will be determined by the Trust
pursuant to Section 2(e) of the Amended By-laws. The Trust shall notify the
Paying Agent in writing of a decision to redeem any shares of APS on or prior to
the date specified in Section 3.2 above, and such notice by the Trust to the
Paying Agent shall contain the information required to be stated in a Notice of
Redemption required to be mailed by the Trust to such Holders. The Paying Agent
shall have no duty to determine the redemption price and may rely on the amount
thereof set forth in a Notice of Redemption.
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<PAGE> 16
IV. THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR.
4.1 Original Issue of Stock Certificates.
On the Date of Original Issue for any share of APS, one certificate for
each series, if any, of APS shall be issued by the Trust and registered in the
name of Cede & Co., as nominee of the Securities Depository, and countersigned
by the Paying Agent. The Trust will give the Auction Agent prior written notice
and instruction as to the issuance and redemption of APS.
4.2 Registration of Transfer or Exchange of Shares.
Except as provided in this Section 4.2, the shares of each series of
APS, if any, shall be registered solely in the name of the Securities Depository
or its nominee. If the Securities Depository shall give notice of its intention
to resign as such, and if the Trust shall not have selected a substitute
Securities Depository acceptable to the Paying Agent prior to such resignation,
then upon such resignation, the shares of each series of APS, if any, at the
Trust's request, may be registered for transfer or exchange, and new
certificates thereupon shall be issued in the name of the designated transferee
or transferees, upon surrender of the old certificate in form deemed by the
Paying Agent properly endorsed for transfer with (a) all necessary endorsers'
signatures guaranteed in such manner and form as the Paying Agent may require by
a guarantor reasonably believed by the Paying Agent to be responsible, (b) such
assurances as the Paying Agent shall deem necessary or appropriate to evidence
the genuineness and effectiveness of each necessary endorsement and (c)
satisfactory evidence of compliance with all applicable laws relating to the
collection of taxes in connection with any registration of transfer or exchange
or funds necessary for the payment of such taxes. If the certificate or
certificates for shares of APS are not held by the Securities Depository or its
nominee, payments upon transfer of shares in an Auction shall be made in Federal
Funds or similar same-day funds to the Auction Agent against delivery of
certificates therefor.
4.3 Removal of Legend.
Any request for removal of a legend indicating a restriction on
transfer from a certificate evidencing shares of APS shall be accompanied by an
opinion of counsel stating that such legend may be removed and such shares may
be transferred free of the restriction described in such legend, said opinion to
be
13
<PAGE> 17
delivered under cover of a letter from a Company Officer authorizing the Paying
Agent to remove the legend on the basis of said opinion.
4.4 Lost, Stolen or Destroyed Stock Certificates.
The Paying Agent shall issue and register replacement certificates for
certificates represented to have been lost, stolen or destroyed, upon the
fulfillment of such requirements as shall be deemed appropriate by the Trust and
by the Paying Agent, subject at all times to provisions of law, the Amended
By-Laws of the Trust governing such matters and resolutions adopted by the Trust
with respect to lost, stolen or destroyed securities. The Paying Agent may issue
new certificates in exchange for and upon the cancellation of mutilated
certificates. Any request by the Trust to the Paying Agent to issue a
replacement or new certificate pursuant to this Section 4.4 shall be deemed to
be a representation and warranty by the Trust to the Paying Agent that such
issuance will comply with provisions of applicable law and the By-Laws and
resolutions of the Trust.
4.5 Disposition of Canceled Certificates;
Record Retention.
The Paying Agent shall retain stock certificates which have been
canceled in transfer or in exchange and accompanying documentation in accordance
with applicable rules and regulations of the Securities and Exchange Commission
for two calendar years from the date of such cancellation. The Paying Agent,
upon written request by the Trust, shall afford to the Trust, its agents and
counsel access at reasonable times during normal business hours to review and
make extracts or copies (at the Trust's sole cost and expense) of such
certificates and accompanying documentation. Upon request by the Trust at any
time after the expiration of this two-year period, the Paying Agent shall
deliver to the Trust the canceled certificates and accompanying documentation.
The Trust, at its expense, shall retain such records for a minimum additional
period of four calendar years from the date of delivery of the records to the
Trust and shall make such records available during this period at any time, or
from time to time, for reasonable periodic, special, or other examinations by
representatives of the Securities and Exchange Commission. The Trust also shall
undertake to furnish to the Securities and Exchange Commission, upon demand,
either at their principal office or at any regional office, complete, correct
and current hard copies of any and all such records. Thereafter, such records
shall not be destroyed by the Trust without the
14
<PAGE> 18
approval of the Paying Agent, which approval shall not be withheld unreasonably,
but will be safely stored for possible future reference.
4.6 Stock Register.
The Paying Agent shall maintain the stock register, which shall contain
a list of the Holders, the number of shares held by each Holder and the address
of each Holder. The Paying Agent shall record in the stock register any change
of address of a Holder upon notice by such Holder. In case of any written
request or demand for the inspection of the stock register or any other books of
the Trust in the possession of the Paying Agent, the Paying Agent will notify
the Trust and secure instructions as to permitting or refusing such inspection.
The Paying Agent reserves the right, however, to exhibit the stock register or
other records to any person in case it is advised by its counsel that its
failure to do so would (i) be unlawful or (ii) expose it to liability, unless
the Trust shall have offered indemnification satisfactory to the Paying Agent.
4.7 Return of Funds.
Any funds deposited with the Paying Agent by the Trust for any reason
under this Agreement, including for the payment of dividends or the redemption
of APS, that remain with the Paying Agent after 12 months shall be repaid to the
Trust upon written request by the Trust.
V. REPRESENTATIONS AND WARRANTIES.
5.1 Representations and Warranties of the Trust.
The Trust represents and warrants to the Auction Agent that:
(i) the Trust is duly organized and is validly existing as a
business trust in good standing under the laws of The Commonwealth of
Massachusetts, and has full power to execute and deliver this Agreement and to
authorize, create and issue the shares of APS;
(ii) the Trust is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified, management investment company;
15
<PAGE> 19
(iii) this Agreement has been duly and validly authorized,
executed and delivered by the Trust and constitutes the legal, valid and binding
obligation of the Trust, enforceable against the Trust in accordance with its
terms, subject as to such enforceability to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equitable principles;
(iv) the forms of the certificates evidencing the shares of
APS comply with all applicable laws of The Commonwealth of Massachusetts;
(v) the shares of APS have been duly and validly authorized by
the Trust and, upon completion of the initial sale of the shares of APS and
receipt of payment therefor, will be validly issued, fully paid and
nonassessable;
(vi) at the time of the offering of the shares of APS, the
shares offered will be registered under the Securities Act of 1933, as amended,
and no further action by or before any governmental body or authority of the
United States or of any state thereof is required in connection with the
execution and delivery of this Agreement or will be required in connection with
the issuance of the shares of APS, except such action as required by applicable
state securities laws, all of which action will have been taken;
(vii) the execution and delivery of this Agreement and the
issuance and delivery of the shares of APS do not and will not conflict with,
violate, or result in a breach of, the terms, conditions or provisions of, or
constitute a default under, the Declaration of Trust or the Amended By-Laws of
the Trust, any law or regulation applicable to the Trust, any order or decree of
any court or public authority having jurisdiction over the Trust, or any
mortgage, indenture, contract, agreement or undertaking to which the Trust is a
party or by which it is bound; and
(viii) no taxes are payable upon or in respect of the
execution of this Agreement or will be payable upon or in respect of the
issuance of the shares of APS.
5.2 Representations and Warranties of the Auction Agent.
The Auction Agent represents and warrants to the Trust that the Auction
Agent is duly organized and is validly existing as a banking corporation in good
16
<PAGE> 20
standing under the laws of the State of New York, and has the corporate power to
enter into and perform its obligations under this Agreement.
VI. THE AUCTION AGENT.
6.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trust hereunder
and owes no fiduciary duties to any Person except as provided by this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are set forth specifically in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered or omitted by it or for
any error of judgment made by it in the performance of its duties under this
Agreement. The Auction Agent shall not be liable for any error of judgment made
in good faith unless the Auction Agent shall have been negligent in ascertaining
(or failing to ascertain) the pertinent facts.
6.2 Rights of the Auction Agent.
(a) The Auction Agent may rely upon, and shall be protected in acting
or refraining from acting upon, any communication authorized hereby and any
written instruction, notice, request, direction, consent, report, certificate,
share certificate or other instrument, paper or document reasonably believed by
it to be genuine. The Auction Agent shall not be liable for acting upon any
telephone communication authorized hereby which the Auction Agent believes in
good faith to have been given by the Trust or by a Broker-Dealer. The Auction
Agent may record telephone communications with the Trust or with the
Broker-Dealers or with both.
(b) The Auction Agent may consult with counsel of its choice, and the
written advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
17
<PAGE> 21
(c) The Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder. The Auction Agent shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Trust.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys.
6.3 Auction Agent's Disclaimer.
The Auction Agent makes no representation as to the validity or the
adequacy of this Agreement, the Broker-Dealer Agreements or the APS.
6.4 Compensation, Expenses and Indemnification.
(a) The Trust shall pay to the Auction Agent from time to time
reasonable compensation for all services rendered by it under this Agreement and
under the Broker-Dealer Agreements as shall be set forth in a separate writing
signed by the Trust and the Auction Agent, subject to adjustments if the APS no
longer are held of record by the Securities Depository or its nominee or if
there shall be such other change as shall increase materially the Auction
Agent's obligations hereunder or under the Broker-Dealer Agreements.
(b) The Trust shall reimburse the Auction Agent upon its request for
all reasonable expenses, disbursements and advances incurred or made by the
Auction Agent in accordance with any provision of this Agreement and of the
Broker-Dealer Agreements (including the reasonable compensation, expenses and
disbursements of its agents and counsel), except any expense, disbursement or
advance attributable to its negligence or bad faith.
(c) The Trust shall indemnify the Auction Agent for, and hold it
harmless against, any loss, liability or expense incurred without negligence or
bad faith on its part arising out of or in connection with its agency under this
Agreement and under the Broker-Dealer Agreements, including the costs and
expenses of defending itself against any claim of liability in connection with
its exercise or performance of any of its duties hereunder and thereunder,
except such as may result from its negligence or bad faith.
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<PAGE> 22
VII. MISCELLANEOUS.
7.1 Term of Agreement.
(a) The term of this Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Trust may terminate this
Agreement at any time by so notifying the Auction Agent, provided that if any
APS remain outstanding the Trust shall have entered into an agreement in
substantially the form of this Agreement with a successor auction agent. The
Auction Agent may terminate this Agreement upon prior notice to the Trust on the
date specified in such notice, which date shall be no earlier than 60 days after
delivery of such notice. If the Auction Agent resigns while any shares of APS
remain outstanding, the Trust shall use its best efforts to enter into an
agreement with a successor auction agent containing substantially the same terms
and conditions as this Agreement.
(b) Except as otherwise provided in this Section 7.1(b), the respective
rights and duties of the Trust and the Auction Agent under this Agreement shall
cease upon termination of this Agreement. The Trust's representations,
warranties, covenants and obligations to the Auction Agent under Sections 5 and
6.4 hereof shall survive the termination hereof. Upon termination of this
Agreement, the Auction Agent shall (i) resign as Auction Agent under the Broker-
Dealer Agreements, (ii) at the Trust's request, deliver promptly to the Trust
copies of all books and records maintained by it in connection with its duties
hereunder, and (iii) at the request of the Trust, transfer promptly to the Trust
or to any successor auction agent any funds deposited by the Trust with the
Auction Agent (whether in its capacity as Auction Agent or as Paying Agent)
pursuant to this Agreement which have not been distributed previously by the
Auction Agent in accordance with this Agreement.
7.2 Communications.
Except for (i) communications authorized to be made by telephone
pursuant to this Agreement or the Auction Procedures and (ii) communications in
connection with Auctions (other than those expressly required to be in writing),
all notices, requests and other communications to any party hereunder shall be
in writing (including telecopy or similar writing) and shall be given to such
party at its address or telecopier number set forth below:
19
<PAGE> 23
If to the Trust, Eaton Vance New Jersey Municipal Income Trust
addressed to: 24 Federal Street [before May 1, 1999]
Boston, MA 02110
255 State Street [after May 1, 1999]
Boston, MA 02109
Attention: Treasurer
Telephone No.: (617) 482-8260
If to the Auction Agent, Bankers Trust Company
addressed to: Corporate Trust and Agency Group
Four Albany Street
New York, NY 10006
Attention: Auction Rate Securities
Telecopier No.: (212) 250-6215
Telephone No.: (212) 250-6850
or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Trust by a Trust Officer and on
behalf of the Auction Agent by an Authorized Officer.
7.3 Entire Agreement.
This Agreement contains the entire agreement between the parties
relating to the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or inferred,
between the parties relating to the subject matter hereof, except for agreements
relating to the compensation of the Auction Agent.
7.4 Benefits.
Nothing herein, express or implied, shall give to any Person, other
than the Trust, the Auction Agent and their respective successors and assigns,
any benefit of any legal or equitable right, remedy or claim hereunder.
7.5 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
20
<PAGE> 24
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged. The Trust shall notify the Auction Agent of any change in the Amended
By-laws prior to the effective date of any such change. If any such change in
the Amended By-laws materially increases the Auction Agent's obligations
hereunder, the Trust shall obtain the written consent to the Auction Agent prior
to the effective date of such change.
(b) Failure of either party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
7.6 Successors and Assigns.
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and permitted assigns of each of the
Trust and the Auction Agent. This Agreement may not be assigned by either party
hereto absent the prior written consent of the other party, which consent shall
not be withheld unreasonably.
7.7 Severability.
If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
7.8 Execution in Counterparts.
This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
7.9 Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in said state.
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<PAGE> 25
7.10 Limitation of Liability.
The names "Eaton Vance New Jersey Municipal Income Trust" and "Trustees
of the Eaton Vance New Jersey Municipal Income Trust" refer, respectively, to
the Trust and the Trustees of the Trust, as trustees but not individually or
personally, acting from time to time under the Trust's Agreement and Declaration
of Trust dated December 10, 1998, as amended, which is hereby referred to and a
copy of which is on file at the office of the Secretary of The Commonwealth of
Massachusetts and the principal office of the Trust. The obligations of "Eaton
Vance New Jersey Municipal Income Trust" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents of the Trust are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, holders of shares of beneficial interest of the Trust or
representatives of the Trustees personally, but bind only the Trust assets, and
all persons dealing with the Trust must look solely to the Trust property for
the enforcement of any claims against the Trust.
22
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the date first above written.
EATON VANCE NEW JERSEY
MUNICIPAL INCOME TRUST
By:
--------------------------------
Title:
BANKERS TRUST COMPANY
By:
--------------------------------
Title:
23
<PAGE> 1
EXHIBIT (k)(2)
BROKER-DEALER AGREEMENT
between
BANKERS TRUST COMPANY
and
[NAME OF BROKER-DEALER]
Dated as of March 4, 1999
Relating to
AUCTION PREFERRED SHARES
of
EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
<PAGE> 2
BROKER-DEALER AGREEMENT dated as of March 4, 1999, between BANKERS
TRUST COMPANY, a New York banking corporation (the "Auction Agent") (not in its
individual capacity, but solely as agent of Eaton Vance New Jersey Municipal
Income Trust, a Massachusetts business trust (the "Trust"), pursuant to
authority granted to it in the Auction Agency Agreement dated as of March 4,
1999, between the Trust and the Auction Agent (the "Auction Agency Agreement"))
and [NAME OF BROKER-DEALER] (together with its successors and assigns, "BD").
The Trust proposes to issue 1,520 preferred shares of beneficial
interest, par value $.01 per share, liquidation preference $25,000 per share,
designated Auction Preferred Shares (the "APS"), pursuant to the Trust's Amended
By-laws (as defined below).
The Trust's Amended By-laws provide that the dividend rate on the APS
for each Dividend Period therefor after the Initial Dividend Period shall be the
Applicable Rate therefor, which in each case, in general shall be the rate per
annum that a commercial bank, trust company or other financial institution
appointed by the Company advises results from implementation of the Auction
Procedures (as defined below). The Board of Trustees of the Trust has adopted a
resolution appointing Bankers Trust Company as Auction Agent for purposes of the
Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement,
the Trust has requested and directed the Auction Agent to execute and deliver
this Agreement.
The Auction Procedures require the participation of one or more
Broker-Dealers.
2
<PAGE> 3
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. Terms Defined by Reference to the Amended By-laws.
Capitalized terms not defined herein shall have the respective meanings
specified in the Amended By-laws of the Trust.
1.2. Terms Defined Herein. As used herein and in the Settlement Procedures
(as defined below), the following terms shall have the following meanings,
unless the context otherwise requires:
(a) "Amended By-laws" shall mean the By-laws of the Trust, as amended
through the date hereof, establishing the powers, preferences and rights of the
APS.
(b) "Auction" shall have the meaning specified in Section 3.1 hereof.
(c) "Auction Procedures" shall mean the Auction Procedures that are set
forth in Section 10 of Article VII of the Amended By-laws.
(d) "Authorized Officer" shall mean each Senior Vice President, Vice
President, Assistant Vice President, Trust Officer, Assistant Secretary and
Assistant Treasurer of the Auction Agent and every other officer or employee of
the Auction Agent designated as an "Authorized Officer" for purposes of this
Agreement in a communication to BD.
(e) "BD Officer" shall mean each officer or employee of BD designated
as a "BD Officer" for purposes of this Agreement in a communication to the
Auction Agent.
(f) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a Broker-Dealer.
(g) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit A.
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1.3. Rules of Construction. Unless the context or use indicates another
or different meaning or intent, the following rules shall apply to the
construction of this Agreement:
(a) Words importing the singular number shall include the plural number
and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
II. NOTIFICATION OF DIVIDEND PERIOD AND ADVANCE NOTICE OF ALLOCATION OF TAXABLE
INCOME.
2.1. The provisions contained in paragraph 2 of Article VII of the Amended
By-laws concerning the notification of a Special Dividend Period will be
followed by the Auction Agent and BD, and the provisions contained therein are
incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were set forth
fully herein.
2.2. Except as otherwise provided in paragraph 2 of Article VII of the
Amended By-laws, whenever the Trust intends to include any net capital gains or
other income subject to regular Federal income tax in any dividend on shares of
APS, the Trust will notify the Auction Agent of the amount to be so included at
least five Business Days prior to the Auction Date on which the Applicable Rate
for such dividend is to be established. Whenever the Auction Agent receives such
notice from the Trust, in turn it will notify BD, who, on or prior to such
Auction Date, will notify its Beneficial Owners and Potential Beneficial Owners
believed to be interested in submitting an Order in the Auction to be held on
such Auction Date. Whenever the Trust intends to include any additional amounts
in a dividend as provided in paragraph 2 of Article VII of the Amended By-laws,
the Trust will notify the Auction Agent of such additional amounts to be so
included in such dividend at least five Business Days
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prior to the applicable Dividend Payment Date. Whenever the Auction Agent
receives such notice from the Trust, in turn it will notify the Securities
Depository and BD, who, on or prior to the applicable Dividend Payment Date,
will notify its Beneficial Owners.
III. THE AUCTION.
3.1. Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will
be followed by the Auction Agent for the purpose of determining the Applicable
Rate for the of APS, for the next Dividend Period therefor. Each periodic
operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations
and restrictions placed upon, a Broker-Dealer under this Agreement. BD
understands that other Persons meeting the requirements specified in the
definition of "Broker-Dealer" contained in Paragraph 10 of Article VII of the
Amended By-laws may execute a Broker-Dealer Agreement and participate as
Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their
own accounts. However, the Trust, by notice to BD and all other Broker Dealers,
may prohibit all Broker-Dealers from submitting Bids in Auctions for their own
accounts, provided that Broker-Dealers may continue to submit Hold Orders and
Sell Orders.
3.2. Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for the APS, the
Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum
Applicable Rate in effect on such Auction Date.
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(b) In the event that the Auction Date for any Auction shall be changed
after the Auction Agent has given the notice referred to in of the
Settlement Procedures, the Auction Agent, by such means as the Auction Agent
deems practicable, shall give notice of such change to BD not later than the
earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old Auction
Date. Thereafter, BD promptly shall notify customers of BD that BD believes are
Beneficial Owners of shares of APS of such change in the Auction Date.
(c) The Auction Agent from time to time may request BD to provide it
with a list of the respective customers BD believes are Beneficial Owners of
shares of APS. BD shall comply with any such request, and the Auction Agent
shall keep confidential any such information, including information received as
to the identity of Bidders in any Auction, and shall not disclose any such
information so provided to any Person other than the Trust; and such information
shall not be used by the Auction Agent or its officers, employees, agents or
representatives for any purpose other than such purposes as are described
herein. The Auction Agent shall transmit any list of customers BD believes are
Beneficial Owners of shares of APS and information related thereto only to its
officers, employees, agents or representatives who need to know such information
for the purposes of acting in accordance with this Agreement, and the Auction
Agent shall prevent the transmission of such information to others and shall
cause its officers, employees, agents and representatives to abide by the
foregoing confidentiality restrictions; provided, however, that the Auction
Agent shall have no responsibility or liability for the actions of any of its
officers, employees, agents or representatives after they have left the employ
of the Auction Agent.
3.3. Auction Schedule; Method of Submission of Orders.
(a) The Trust and the Auction Agent shall conduct Auctions for
APS in accordance with the schedule set forth below. Such schedule may be
changed at any time by the Auction Agent with the consent of the Trust, which
consent shall not be withheld unreasonably. The Auction Agent shall give notice
of any such change to BD. Such notice shall be received prior to the first
Auction Date on which any such change shall be effective.
Time Event
By 9:30 A.M. Auction Agent advises the
Trust and Broker-Dealers
of the Reference Rate and
the Maximum
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Applicable Rate as set
forth in Section 3.2(a)
hereof.
9:30 A.M. - 1:30 P.M. Auction Agent assembles
information communicated
to it by Broker-Dealers as
provided in Section
10(d)(i) of Article VII of
the Amended By-laws.
Submission Deadline is
1:00 P.M.
Not earlier than 1:30 P.M. Auction Agent makes
determinations pursuant to
Section 10(d)(i) of
Article VII of the Amended
By-laws.
By approximately 3:00 P.M. Auction Agent advises the
Trust of the results of
the Auction as provided in
Section 10(d)(ii) of
Article VII of the Amended
By-laws. Submitted Bids
and Submitted Sell Orders
are accepted and rejected
in whole or in part and
shares of APS are
allocated as provided in
Section 10(e) of Article
VII of the Amended
By-laws. Auction Agent
gives notice of the
Auction results as set
forth in Section 3.4(a)
hereof.
(b) BD agrees to maintain a list of Potential Beneficial
Owners and to contact the Potential Beneficial Owners on such list on or prior
to each Auction Date for the purposes set forth in Section 10 of Article VII of
the Amended By-laws.
(c) BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit B. BD shall submit separate
Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial
Owner on whose behalf BD is submitting an Order and shall not net or aggregate
the Orders of
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<PAGE> 8
Potential Beneficial Owners or Beneficial Owners on whose behalf BD is
submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written
notice, substantially in the form attached hereto as Exhibit C, of transfers of
shares of APS, made through BD by an Existing Holder to another Person other
than pursuant to an Auction, and (ii) a written notice, substantially in the
form attached hereto as Exhibit D, of the failure of shares of APS to be
transferred to or by any Person that purchased or sold shares of APS through BD
pursuant to an Auction. The Auction Agent is not required to accept any notice
delivered pursuant to the terms of the foregoing sentence with respect to an
Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business
Day next preceding the applicable Auction Date.
3.4. Notice of Auction Results.
(a) On each Auction Date, the Auction Agent shall notify BD by
telephone as set forth in paragraph (a) of the Settlement Procedures. On the
Business Day next succeeding such Auction Date, the Auction Agent shall notify
BD in writing of the disposition of all Orders submitted by BD in the Auction
held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential
Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has
submitted an Order as set forth in paragraph (b) of the Settlement Procedures,
and take such other action as is required of BD pursuant to the Settlement
Procedures.
If any Beneficial Owner or Existing Holder selling shares of
APS in an Auction fails to deliver such shares, the BD of any Person that was to
have purchased shares of APS in such Auction may deliver to such Person a number
of whole shares of APS that is less than the number of shares that otherwise was
to be purchased by such Person. In such event, the number of shares of APS to be
so delivered shall be determined by such BD. Delivery of such lesser number of
shares shall constitute good delivery. Upon the occurrence of any such failure
to deliver shares, such BD shall deliver to the Auction Agent the notice
required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of
this Section 3.4(b), any delivery or non-delivery of shares of APS which
represents any departure from the results of an Auction, as determined by the
Auction Agent, shall be of no effect unless and until the Auction Agent shall
have been notified of such delivery or non-
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<PAGE> 9
delivery in accordance with the terms of Section 3.3(d) hereof. The Auction
Agent shall have no duty or liability with respect to enforcement of this
Section 3.4(b).
3.5. Service Charge to Be Paid to BD.
On the Business Day next succeeding each Auction Date, the
Auction Agent shall pay to BD from moneys received from the Trust an amount
equal to: (a) in the case of any Auction Date immediately preceding a Dividend
Period of 7 days or less, the product of (i) a fraction the numerator of which
is the number of days in such Dividend Period (calculated by counting the first
day of such Dividend Period but excluding the last day thereof) and the
denominator of which is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times
(iv) the sum of (A) the aggregate number of APS placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of a Beneficial Owner
submitted by BD and continued to be held as a result of such submission and (y)
the subject of a Submitted Bid of a Potential Beneficial Owner submitted by BD
and were purchased as a result of such submission plus (B) the aggregate number
of APS subject to valid Hold Orders (determined in accordance with Section 10 of
Article VII of the Amended By-laws) submitted to the Auction Agent by BD plus
(C) the number of APS deemed to be subject to Hold Orders by Beneficial Owners
pursuant to Section 10 of Article VII of the Amended By-laws that were acquired
by such Beneficial Owners through BD; and (b) in the case of any Auction Date
immediately preceding a Special Dividend Period, that amount as mutually agreed
upon by the Trust and BD, based on the selling concession that would be
applicable to an underwriting of fixed or variable rate preferred shares with a
similar final maturity or variable rate dividend period, at the commencement of
such Special Dividend Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Beneficial Owner who acquired shares of APS through BD transfers those shares to
another Person other than pursuant to an Auction, then the Broker-Dealer for the
shares so transferred shall continue to be BD, provided, however, that if the
transfer was effected by, or if the transferee is, a Broker-Dealer other than
BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
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<PAGE> 10
IV. THE AUCTION AGENT.
4.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trust
hereunder and owes no fiduciary duties to any other Person by reason of this
Agreement.
(b) The Auction Agent undertakes to perform such duties and
only such duties as are set forth specifically in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Auction
Agent.
(c) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or omitted by
it, or for any error of judgment made by it in the performance of its duties
under this Agreement. The Auction Agent shall not be liable for any error of
judgment made in good faith unless the Auction Agent shall have been negligent
in ascertaining (or failing to ascertain) the pertinent facts.
4.2. Rights of the Auction Agent.
(a) The Auction Agent may rely upon, and shall be protected in
acting or refraining from acting upon, any communication authorized by this
Agreement and any written instruction, notice, request, direction, consent,
report, certificate, share certificate or other instrument, paper or document
believed by it to be genuine. The Auction Agent shall not be liable for acting
upon any telephone communication authorized by this Agreement which the Auction
Agent believes in good faith to have been given by the Trust or by BD. The
Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own
choice, and the advice of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
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<PAGE> 11
(c) The Auction Agent shall not be required to advance, expend
or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys.
4.3. Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the validity or adequacy of this Agreement or the APS.
V. MISCELLANEOUS.
5.1. Termination. Any party may terminate this Agreement at any time
upon five days' prior written notice to the other party; provided, however, that
if BD is PaineWebber Incorporated, Prudential Securities Incorporated, Salomon
Smith Barney Inc. or A.G. Edwards & Sons, Inc., neither BD nor the Auction Agent
may terminate this Agreement without first obtaining the prior written consent
of the Trust to such termination, which consent shall not be withheld
unreasonably.
5.2. Participant in Securities Depository; Payment of Dividends in
Same-Day Funds.
(a) BD is, and shall remain for the term of this Agreement, a
member of, or a participant in, the Securities Depository (or an affiliate of
such a member or participant).
(b) BD represents that it (or if BD does not act as Agent
Member, one of its affiliates) shall make all dividend payments on the APS
available in same-day funds on each Dividend Payment Date to customers that use
BD (or its affiliate) as Agent Member.
5.3. Agent Member. At the date hereof, BD is a participant of the
Securities Depository.
5.4. Communications. Except for (i) communications authorized to be
made by telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder
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<PAGE> 12
shall be in writing (including telecopy or similar writing) and shall be given
to such party at its address or telecopier number set forth below:
If to BD, ___________________________________
addressed to:
___________________________________
___________________________________
Attention: ____________________
Telecopier No.: ___________________
Telephone No.: ___________________
If to the Auction Bankers Trust Company
Agent, addressed to: Corporate Trust and Agency Group
Four Albany Street
New York, NY 10006
Attention: Auction Rate Securities
Telecopier No.: (212) 250-6215
Telephone No.: (212) 250-6850
or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction Agent by an Authorized Officer. BD may record telephone
communications with the Auction Agent.
5.5. Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter
hereof.
5.6. Benefits. Nothing in this Agreement, express or implied, shall
give to any person, other than the Trust, the Auction Agent and BD and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim under this Agreement.
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5.7. Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part, except by
a written instrument signed by a duly authorized representative of the party to
be charged.
(b) Failure of either party to this Agreement to exercise any
right or remedy hereunder in the event of a breach of this Agreement by the
other party shall not constitute a waiver of any such right or remedy with
respect to any subsequent breach.
5.8. Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the respective successors and
permitted assigns of each of BD and the Auction Agent. This Agreement may not be
assigned by either party hereto absent the prior written consent of the other
party; provided, however, that this Agreement may be assigned by the Auction
Agent to a successor Auction Agent selected by the Trust without the consent of
BD.
5.9. Severability. If any clause, provision or section of this
Agreement shall be ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity or unenforceability of such clause, provision or
section shall not affect any remaining clause, provision or section hereof.
5.10. Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
5.11. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
made and to be performed in said state.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
BANKERS TRUST COMPANY
___________________________
By:
Title:
[NAME OF BROKER-DEALER]
____________________________
By:
Title:
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<PAGE> 15
EXHIBIT A
SETTLEMENT PROCEDURES
[Included as Appendix C to the Statement of Additional Information of
the Trust]
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<PAGE> 16
EXHIBIT B
BANKERS TRUST COMPANY
AUCTION BID FORM
Submit To: Bankers Trust Company Issue: Eaton Vance New Jersey
Corporate Trust and Agency Group Municipal Income Trust
Four Albany Street
New York, NY 10006
Attention: Auction Rate Securities
Telecopier No.: (212) 250-6215
Telephone No.: (212) 250-6850
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder: ________________________
BENEFICIAL OWNER
Shares now held _______________ HOLD _____________
BID at rate of _____________
SELL _____________
POTENTIAL BENEFICIAL OWNER
# of shares bid _____________
BID at rate of _____________ Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction Bid
Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Beneficial Owner are submitted, such bid shall be
considered valid in the order of priority set forth in the Auction Procedures on
the above issue.
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<PAGE> 17
(3) A Hold or Sell Order may be placed only by a Beneficial Owner covering a
number of shares not greater than the number of shares currently held.
(4) Potential Beneficial Owners may make only Bids, each of which must specify a
rate. If more than one Bid is submitted on behalf of any Potential Beneficial
Owner, each Bid submitted shall be a separate Bid with the rate specified.
(5) Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%). Fractions will not be accepted.
NAME OF BROKER-DEALER ________________________
Authorized Signature ________________________
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<PAGE> 18
EXHIBIT C
(Note: To be used only for transfers made
other than pursuant to an Auction)
TRANSFER FORM
Re: Eaton Vance New Jersey Municipal Income Trust
Auction Preferred Shares
We are (check one):
[ ] the Existing Holder named below;
[ ] the Broker-Dealer for such Existing Holder; or
[ ] the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred _____ APS
to ______________.
___________________________
(Name of Existing Holder)
___________________________
(Name of Broker-Dealer)
___________________________
(Name of Agent Member)
By: _________________________
Printed Name:
Title:
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EXHIBIT D
(Note: To be used only for failures to deliver
APS sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for ____________________ (the "Purchaser"),
which purchased _____ shares of APS of Eaton Vance New Jersey Municipal Income
Trust in the Auction held on ____________________ from the seller of such
shares.
II. We are a Broker-Dealer for _____________________ (the "Seller"),
which sold ____ shares of APS of Eaton Vance New Jersey Municipal Income Trust,
in the Auction held on ______________ to the Purchaser of such shares.
We hereby notify you that (check one):
_______ the Seller failed to deliver such shares to the Purchaser
_______ the Purchaser failed to make payment to the Seller upon
delivery of such shares
Name: _______________________
(Name of Broker-Dealer)
By: _______________________
Printed Name:
Title:
19
<PAGE> 1
Form of
EATON VANCE NEW JERSEY MUNICIPAL INCOME TRUST
24 Federal Street
Boston, Massachusetts 02110
March __, 1999
The Depository Trust Company
55 Water Street
49th Floor
New York, New York 10041
Attention: General Counsel's Office
Dear Sirs:
The purpose of this letter is to set out certain matters relating to
the issuance by Eaton Vance New Jersey Municipal Income Trust (the "Issuer") of
______ shares of its Auction Preferred Shares, Series A, without par value (the
"APS").
In accordance with the Auction Agent Agreement dated as of March ____,
1999 between the Issuer and Bankers Trust Company, Bankers Trust Company will
act as auction agent, transfer agent, registrar, dividend disbursing agent and
redemption agent with respect to the APS (the "Auction Agent").
Pursuant to an Underwriting Agreement dated March ____, 1999, by and
among the Issuer, Eaton Vance Management and PaineWebber Incorporated,
Prudential Securities Incorporated, Salomon Smith Barney Inc. and A.G. Edwards
& Sons, Inc. (the "Underwriters"), the Underwriters have agreed to purchase, at
the purchase price per share set forth in Section 2 of the Underwriting
Agreement, and the Issuer has agreed to issue, _____ shares of the APS. The APS
have been registered under the Securities Act of 1933. The Issuer has prepared
and filed with the Securities and Exchange Commission a Registration Statement
on Form N-2 (Reg. Nos. 333-72039 and 811-09155) concerning the issuance of the
APS which includes a prospectus for the APS (the "Prospectus") describing, among
other things, the role of The Depository Trust Company ("DTC") as Securities
Depository. Attached is a copy of the Prospectus. Capitalized terms not defined
herein shall have the respective meanings set forth in the Prospectus.
To induce DTC to accept the APS as eligible for deposit at DTC and to
act in accordance with its rules with respect to the APS, the Issuer and the
Auction Agent make the following representations to DTC:
<PAGE> 2
1. As of the Date of the Original Issue, which is scheduled for March
_____, 1999, the Issuer will cause the Underwriters to deposit with DTC one
certificate for the APS (the "APS Certificate"), registered in the name of DTC's
nominee, Cede & Co., which represents the total number of APS to be issued, and
the APS Certificate shall remain in DTC's custody except as provided below.
2. The Issuer's Bylaws, as amended (the "Bylaws"), provide for the
solicitation of consents from and voting by holders of the APS under certain
circumstances. The Issuer shall establish a record date for such purposes and
the Issuer shall give DTC notice of such record date not less than 15 calendar
days in advance of such record date.
3. In the event of a full or partial redemption of any outstanding APS,
the Issuer shall give DTC notice of such event not less than 30 days, nor more
than 45 days prior to the redemption date.
4. In the event of a partial redemption of the APS, the Issuer or the
Auction Agent shall send DTC a notice specifying the number of shares of APS to
be redeemed and the date such notice is to be mailed to holders or published
(the "Publication Date"). Such notice shall be sent to DTC by a secure means
(e.g., legible facsimile transmission, registered or certified mail, overnight
express delivery) in a timely manner designed to assure that such notice is in
DTC's possession no later than the close of business on the business day before
the Publication Date. (The Issuer or the Auction Agent sending such notice shall
have a method to verify subsequently the use of such means and timeliness of the
notice). In the event of a partial redemption, the Publication Date shall not be
less than 30 days, nor more than 45 days prior to the redemption date.
5. The Bylaws provide that the dividend rate for shares of the APS may
vary from time to time based upon the results of the Auctions for the APS
described in the Prospectus. The Auction Agent or the Issuer shall give DTC
telephonic notice (a) of each such change in the dividend rate on each Auction
Date after such new rate for the APS is determined and (b) on each dividend
payment date for the APS, the date of the next scheduled dividend payment date
for the APS. Such telephonic notice shall be directed to the Supervisor of the
Dividend Announcement Section (Telephone No. (212) 709-1270) and shall be
followed by prompt written confirmation, forwarded by hand delivery (with
receipt), to:
Manager, Announcement, Dividend Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, New York 10004
6. The Bylaws provide that, in the event of the occurrence of certain
contingencies specified therein, the Issuer may adjust the number of days in
Dividend Periods for the APS. If the Issuer determines to make such an
adjustment for the APS, the Issuer shall give DTC notice of such change at least
10 calendar days prior to commencement of the Dividend Period
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<PAGE> 3
preceding the first Dividend Period for which such change is to be effective.
Such notice shall be in writing and shall be forwarded by secure means to the
address set forth in paragraph 5 hereof.
7. As described in the Prospectus, each purchaser of the APS must have
signed and delivered to the Auction Agent, a Master Purchaser's Letter which
contains provisions restricting the transfer of the APS purchased. The Issuer
and the Auction Agent acknowledge that for so long as Cede & Co. is the sole
record owner of the APS, it shall be entitled to exercise all voting rights
applicable to the APS and to receive the full amount of all dividends and
liquidation and redemption proceeds payable with respect to the APS. The Issuer
and the Auction Agent acknowledge that DTC shall treat any member of, or
participant in, DTC (a "DTC Participant") having any shares of the APS credited
to its DTC account as entitled to the full benefits of ownership of such shares
of the APS even if the crediting of such shares of the APS to the DTC account of
such DTC Participant results from any transfer or failure to transfer in
violation of the provisions of the Master Purchaser's Letter. Without limiting
the generality of the preceding sentence, the Issuer and the Auction Agent
acknowledge that DTC shall treat any DTC Participant having any shares of the
APS credited to its DTC account as entitled to receive dividends and liquidation
and redemption proceeds and to exercise voting rights, if any, in respect to
such shares of the APS. (The treatment by DTC of the effects of the crediting by
it of shares of the APS to the accounts of DTC Participants described in the
preceding two sentences shall not affect any rights the Issuer, participants in
Auctions, or purchasers, sellers or holders of the APS may have against any DTC
Participants.) DTC shall have no responsibility to ascertain that any transfer
of shares of the APS is made in accordance with the provisions of the Master
Purchaser's Letter.
8. All notices and payments addressed or sent to DTC with respect to
the APS shall contain the CUSIP number set forth in the APS Certificate or any
new APS Certificate, as the case may be.
9. Except as provided in paragraphs 5 and 6 hereof, notices to DTC
shall be in writing and shall be forwarded by hand delivery (with receipt) to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004
Notice to DTC by facsimile transmission
shall be sent to (212) 709-1093 or
(212) 709-1094 (confirmation number (212) 709-6884)
10. Dividend payments for the APS shall be received by Cede & Co., as
nominee of DTC, or its registered assigns in same-day funds ("Fed Funds") on
each dividend payment date or additional dividend payment date. Dividend
payments shall be made payable to the order of "Cede & Co." and shall be
delivered to:
3
<PAGE> 4
Manager, Cash Receipts, Dividends
The Depository Trust Company
7 Hanover Square, 24th Floor
New York, New York 10004
or by such other means as shall be agreed upon by DTC and the Issuer.
11. Redemption payments for the APS shall be made in same day funds by
the Auction Agent in the manner set forth in the SDFS Paying Agent Operating
Procedures (a copy of which previously has been furnished to the Auction Agent).
12. DTC may direct the Auction Agent to use any other address or
department of DTC as the address or department to which payments of dividends,
liquidation or redemption proceeds or notices may be delivered. If requested,
DTC will provide such instructions in writing.
13. In the event of a redemption which effects a reduction in the
number of shares of the APS outstanding, DTC shall direct the Auction Agent to
issue and countersign a new APS Certificate representing the remaining
outstanding shares of the APS, which shall be deposited promptly with DTC in
exchange for the certificate previously representing the outstanding APS.
14. In the event that the Issuer determines that the beneficial owners
of the APS shall obtain certificates representing the ownership of shares of the
APS, the Issuer or the Auction Agent shall notify DTC of the availability of
such certificates, and shall issue, transfer and exchange certificates for the
APS as required in appropriate amounts as indicated by DTC and others. Whenever
DTC requests the Issuer or the Auction Agent to do so, the Issuer and the
Auction Agent will cooperate with DTC in taking appropriate action, at the
Issuer's option, (a) to select and arrange for another securities depository to
maintain custody of the APS Certificate, (b) to make available certificates
representing the APS to Holders, if applicable, or (c) to redeem the APS in
accordance with the Bylaws.
15. The Issuer hereby authorizes DTC to provide to the Auction Agent
position listings of its DTC Participants with respect to the APS from time to
time at the request of the Auction Agent, and also authorizes DTC, in the event
of a partial redemption of the APS, to provide the Auction Agent, upon request,
with the names of those DTC Participants whose shares of the APS are selected
for redemption by DTC. The Issuer authorizes the Auction Agent to provide DTC
with such signatures, exemplars of signatures and authorizations to act as may
be deemed necessary by DTC to permit DTC to discharge its obligations to its DTC
Participants and appropriate regulatory authorities.
16. Nothing herein shall be deemed to require the Auction Agent to
advance funds on behalf of the issuer.
17. This letter may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
4
<PAGE> 5
NOTICE
A copy of the Agreement and Declaration of Trust of the Issuer 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 Issuer
by an officer of the Issuer as such officer and not individually and 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 Issuer.
Very truly yours,
EATON VANCE NEW JERSEY MUNICIPAL
INCOME TRUST, as Issuer
By:____________________________________
Authorized Officer
BANKERS TRUST COMPANY,
as Auction Agent
By:____________________________________
Authorized Officer
Received and accepted
THE DEPOSITORY TRUST COMPANY
By:_______________________________
Authorized Officer
cc: PaineWebber Incorporated
Prudiential Securities Incorporated
Salomon Smith Barney Inc.
A.G. Edwards & Sons, Inc.
5
<PAGE> 1
Exhibit (l)(2)
KIRKPATRICK & LOCKHART LLP
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
(617) 261-3100
MARK P. GOSHKO
(617) 261-3163
[email protected]
March 1, 1999
Eaton Vance New Jersey Municipal Income Trust
24 Federal Street
Boston, MA 02110
Dear Sirs:
This opinion is furnished in connection with the registration by Eaton
Vance New Jersey Municipal Income Trust, a business trust organized under the
laws of the Commonwealth of Massachusetts ("Fund"), of 1,520 Auction Preferred
Shares of beneficial interest, par value $.01 per share ("Shares") liquidation
preference $25,000 per share plus accumulated but unpaid dividends, if any,
under the Securities Act of 1933, as amended, pursuant to a registration
statement on Form N-2 (File No. 333-72039), 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, as amended, 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 beneficial interest 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
-----------------------------
Kirkpatrick & Lockhart LLP
<PAGE> 1
Exhibit (n)(1)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Registration Statement on Form N-2 of Eaton Vance
New Jersey Municipal Income Trust relating to its auction preferred shares of
beneficial interest of our report, dated January 22, 1999, appearing in the
Statement of Additional Information, which is part of this Registration
Statement.
We also consent to the reference to us under the headings "Experts" in the
Prospectus, which is part of such Registration Statement and "Auditors" in such
Statement of Additional Information.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Boston, Massachusetts
March 1, 1999
<PAGE> 1
EXHIBIT (s)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Eaton Vance New Jersey
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 New Jersey Municipal Income Trust with the Securities and
Exchange Commission in respect of preferred shares 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 January 15, 1999
- ------------------------- Executive Officer
Thomas J. Fetter
/s/ James L. O'Connor Treasurer and Principal Financial January 15, 1999
- ------------------------- and Accounting Officer
James L. O'Connor
/s/ Jessica M. Bibliowicz Trustee January 15, 1999
- -------------------------
Jessica M. Bibliowicz
/s/ Donald R. Dwight Trustee January 15, 1999
- -------------------------
Donald R. Dwight
/s/ James B. Hawkes Trustee January 15, 1999
- -------------------------
James B. Hawkes
/s/ Samuel L. Hayes, III Trustee January 15,1999
- -------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer Trustee January 15, 1999
- -------------------------
Norton H. Reamer
/s/ Lynn A. Stout Trustee January 15, 1999
- -------------------------
Lynn A. Stout
/s/ Jack L. Treynor Trustee January 15, 1999
- -------------------------
Jack L. Treynor
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> JAN-21-1999
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 25
<ASSETS-OTHER> 100
<OTHER-ITEMS-ASSETS> 200
<TOTAL-ASSETS> 325
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 250
<TOTAL-LIABILITIES> 250
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100
<SHARES-COMMON-STOCK> 7
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 0
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 100
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
