Economic and Equity Market Outlook December 3, 2009

2. Economic and Equity Market Outlook December 3, 2009 For Informational and Educational Purposes Only

3. The Power of Zero • The Fed Panics Source: Baseline, 2009.

4. Why the Panic? • Bank/Economic Collapse and Negative Feedback Loops Source: Baseline, 2009. Source: Baseline, 2009.

5. Surge in Unemployment • Politically unpalatable Source: Baseline, 2009.

6. Additional Stimulus (QE) • Fed also buying Treasuries and MBS Source: Baseline, 2009. Source: St. Louis Fed, 2009.

7. Has Stimulus Worked? • Evidence that Recession ended Mid 2009

8. Heading into 2009, in the face of such a significant economic collapse, we set very aggressive cash flow targets for each of our businesses. Ground leaders and their teams have responded with great results. Third quarter free cash flow is $1.6 billion, up $769 million versus last year's third quarter. This represents a 97% year-on-year increase. The improvement was driven by many factors, but most notably by lower capital expenditures, improving that working capital, lower cash tax payments and also reduced cash pension contributions. Net working capital declined by $415 million year-on-year, with inventory down $443 million 3M CFO October 2009 Our customers are continuing to order with a request for extremely short lead times. That is a good indication they don't have any inventory. Rogers Corp CEO October 2009 It's shocking. Honestly, it's sometimes a shocking number. And I don't -- I can't get at the numbers by retailer, but we do get it from -- like one retailer we're down about 6% on point of sale at one retailer. Our inventories are down over 30%. Lifetime Brands CEO Oct 2009 Production should continue to improve Source: Baseline, 2009.

9. Dollar under attack • Why? Capital Flight? Reversal of risk aversion? Source: Baseline, 2009.

10. How are banks responding to low rates? • It is clear they are not lending (yet, hopefully!) Source: St. Louis Fed, 2009. Source: St. Louis Fed, 2009.

11. Main Street Banks suffering • Regional Bank Index underperforming Source: Baseline, 2009.

12. The Bear Case: Consumers vastly over-levered • The household debt service ratio (DSR) is an estimate of the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt. • The DSR is less encompassing than the financial obligations ratio (FOR), which adds automobile lease payments, homeowners' insurance, and property tax payments to the debt service ratio, but the charts look similar. Source: Credit Suisse

13. Permanent Shift in Consumer Attitudes? Source: St. Louis Fed, 2009.

14. Excess Consumption • Bear Case: debt fueled consumer spending will unwind and consumption will decline for several consecutive years. Source: United States Department of Commerce. PCE is U.S. Personal Consumption Expenditures

15. Consumption Components • Excluding healthcare costs, consumption as a share of GDP has been relatively constant (bottom line).

16. Consumer confidence Source: Empirical Research Partners, 2009.

17. The High End Consumer really matters Source: Empirical Research Partners, 2009.

18. Improvement in attitudes with higher income consumers Source: Empirical Research Partners, 2009.

19. Epicenter of Economic Collapse: Residential Real Estate Source: Baseline, 2009.

20. California: Epicenter of Real Estate Collapse Source: Empirical Research Partners, 2009.

21. Stabilization Source: Baseline, 2009.

22. Stock Market Discussion • No obvious excesses in US equities, Abysmal decade Source: Baseline, 2009.

23. Bull Case: Equities Have Appreciated over the Long Term • Stock markets have produced positive returns over 10-year trailing periods on average, while experiencing volatility. Source: Crestmont Research, 2009.

24. Market Valuation Source: Leuthold Group, 2009.

25. PE’s and Profitability • Profits have been relatively strong, while market no longer cheap Source: Baseline, 2009.

26. Profit trends • Excluding financials, corporate profits have been solid

27. Large-Capitalization Stocks Free Cash Flow Margins 1952 through 2008 Large-Capitalization Stocks Inventories as a Share of Sales 1952 through 2008 Encouraging Data at the Company Level Bullish indictors on both Statement of Cash Flows and Balance Sheets • Free Cash Flow Margins at record levels • Inventories at record lows will require firms to replenish inventories; increasing demand for capital, labor, materials, etc. Source: Empirical Research Partners, 2009.

28. Plenty of Cash on the Sidelines • Corporations have record high cash balances. • That cash is earning very little return on investment. • Potential for: • Mergers & Acquisitions • Share Repurchases • Increased Dividend Payouts Source: BCA Research, 2009. Wilshire 5000 Index

29. What are Investors doing with cash hoards? • Answer: Buying Bonds! • Fixed Income Funds Net Cash Inflow • YTD 2009: +$308 Billion (open end) +$ 35 Billion (ETFs) • 2008 Total: +$ 33 Billion (open end) +$ 44 Billion (ETFs) • 2007 Total: +$109 Billion (open end) +$ 21 Billion (ETFs) • 2006 Total: +$ 61 Billion (open end) +$ 11 Billion (ETFs) • 2005 Total: +$ 31 Billion (open end) +$ 16 Billion (ETFs) • YTD 2009 Through end of October • Source:Leuthold Group Source: Empirical Research Partners, 2009. Source: Leuthold Group, 2009.

30. Stocks vs. Bonds • Bonds have beaten stocks over past twenty years. Anomaly? Source: Leuthold Group, 2009.

31. The $64,000 Question. New Bull Market??? Source: Leuthold Group, 2009.

32. Disclosure This presentation is for illustrative, informational and educational purposes only. It does not constitute investment advice, a recommendation to buy or sell any particular security or to adopt any investment strategy. Any investment views and market opinions/analyses expressed constitute judgments as of the date of this presentation and are subject to change at any time without notice. Any investment views and market opinions/analyses expressed may not reflect those of Eaton Vance as a whole, and different views may be expressed based on different investment styles, objectives, views or philosophies. Each investor’s portfolio is individually managed and may differ significantly from the information discussed in terms of portfolio holdings, characteristics and performance. It should not assume that any investments in securities, companies, sectors or markets described were or will be profitable. This information should not be considered as representative of any particular investor’s experience or assume that any investor will have an investment experience similar to any returns shown or to any previous or existing investor. This presentation has been prepared on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. However, no assurances are provided regarding the reliability of such information and Eaton Vance has not sought to independently verify information taken from public and third party sources. Broad-based indices are unmanaged and are not subject to fees and expenses typically associated with investment management accounts such as those managed by Eaton Vance Investment Counsel. It is not possible to directly invest in an Index. Investing entails risks and there can be no assurance that Eaton Vance Investment Counsel will achieve profits or avoid incurring losses. Past performance does not predict future results. Eaton Vance Investment Counsel (EVIC) is a