FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-09141
Eaton Vance Municipal Income Trust
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(Exact Name of Registrant as Specified in Charter)
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109
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(Address of Principal Executive Offices)
Alan R. Dynner
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109
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(Name and Address of Agent for Services)
(617) 482-8260
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(Registrant's Telephone Number)
November 30, 2003
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Date of Fiscal Year End
May 31, 2003
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Date of Reporting Period
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ITEM 1. REPORTS TO STOCKHOLDERS
[EATON VANCE LOGO]
[GRAPHIC OF BRICK WALL WITH [EDUCATION] SIGN]
Semiannual Report May 31, 2003
[GRAPHIC OF HIGHWAY]
EATON VANCE
MUNICIPAL
INCOME
TRUST
[GRAPHIC OF BRIDGE]
IMPORTANT NOTICE REGARDING DELIVERY
OF SHAREHOLDER DOCUMENTS
The Securities and Exchange Commission (SEC) permits mutual funds to deliver
only one copy of shareholder documents, including prospectuses, proxy statements
and shareholder reports, to fund investors with multiple accounts at the same
residential or post office box address. This practice is often called
"householding" and it helps eliminate duplicate mailings to shareholders.
EATON VANCE, OR YOUR FINANCIAL ADVISER, MAY HOUSEHOLD THE MAILING OF YOUR
DOCUMENTS INDEFINITELY UNLESS YOU INSTRUCT EATON VANCE, OR YOUR FINANCIAL
ADVISER, OTHERWISE.
If you would prefer that your Eaton Vance documents not be householded, please
contact Eaton Vance at 1-800-262-1122, or contact your financial adviser.
Your instructions that householding not apply to delivery of your Eaton Vance
documents will be effective within 30 days of receipt by Eaton Vance or your
financial adviser.
From time to time mutual funds are required to vote proxies related to the
securities held by the funds. The Eaton Vance Funds or their underlying
Portfolios vote proxies according to a set of policies and procedures
approved by the Funds' and Portfolios' Boards. You may obtain a description
of these policies and procedures without charge, upon request, by calling
1-800-262-1122. This description is also available on the Securities and
Exchange Commission's website at http://www.sec.gov.
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
LETTER TO SHAREHOLDERS
[PHOTO Of THOMAS J. FETTER]
Thomas J. Fetter
President
In our shareholder reports, we refer frequently to "quality spreads" and their
important role in bond analysis. However, while followed closely by bond
analysts and portfolio managers, this aspect of municipal bond investing is
generally overlooked by individual investors. As part of our continuing
educational series, we thought it might be instructive to discuss quality
spreads and why they constitute a key variable for investors in the municipal
bond market.
Quality spreads: compensation for added credit risk...
The term "quality spread" refers to the difference in yields between bonds of
varying quality, but similar maturities. A bond rated BBB, for example, should
have a higher yield than an insured bond rated AAA, because investors who buy
lower-quality bonds expect to be paid for accepting a higher level of credit
risk. That risk premium comes in the form of higher yields. Spreads are
typically stated in basis points, or 1/100's of a percentage point. Thus, a bond
yielding 5.00% trades at a spread of 100 basis points (1.00%) over a bond that
yields 4.00%.
Spread fluctuations are influenced by a variety of factors...
Spreads fluctuate with changes in market conditions, with many factors
influencing spread relationships. The quality and type of bond are primary
factors. For example, an insured general obligation rated AAA - with no credit
risk - will trade at a significantly lower yield than a BBB-rated industrial
bond, which has a significantly higher credit risk. Naturally, a bond's price
will respond to changes that may impact - for better or worse - the underlying
fundamentals of an issuer. Remember, bond yields move in the opposite direction
of bond prices.
Another factor that influences spreads is supply. Assuming stable demand,
spreads are likely to widen if the supply for a specific issuer increases, as
the market must now digest a larger volume of bonds. Similarly, if supply
declines, spreads may narrow, as investors may be willing to pay more for a
credit that is increasingly scarce.
Finally, quality spreads may fluctuate with changes in the overall economy. For
example, spreads tend to narrow as the economy strengthens and the revenue
outlook improves. On the other hand, as the economy slows or enters recession,
spreads tend to widen, as investors become increasingly worried about the
direction of the economy and its impact on bonds with higher credit risk.
Spreads constitute a key factor in investment decisions...
Quality spreads have a significant influence on the investment decisions of
municipal bond portfolio managers. The widening of spreads may suggest a
developing opportunity. If spreads have widened appreciably, the investor may
detect an unusual opportunity in a lower-quality, higher-yielding bond.
Conversely, if lower-quality bonds have significantly outperformed high-quality
bonds over a period, the resulting narrowing of spreads may signal the need for
caution. This "spread compression" may prompt portfolio managers to upgrade
their portfolios with higher-quality bonds because they are no longer being
adequately compensated for the risk of owning lower-quality bonds.
While quality spreads are a key metric for municipal bond investors, they
represent just one of many factors considered in establishing a diversified bond
portfolio. At Eaton Vance, we realize that complex markets require intensive
research, a need that emphasizes once again the value of experienced,
professional portfolio management.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter
President
July 11, 2003
SHARES OF THE TRUST ARE NOT INSURED BY THE FDIC AND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED. YIELDS WILL
VARY.
2
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
MANAGEMENT DISCUSSION
[PHOTO OF THOMAS M. METZOLD]
Thomas M. Metzold
Portfolio Manager
Investment Environment
- The U.S. economy, which has slumped badly in recent years, remained
sluggish in the first half of 2003, although there were sporadic signs of
improvement. Gross Domestic Product expanded 1.9% in the first quarter of
2003, following a 1.4% rise in the fourth quarter of 2002. The nation's
unemployment rate climbed to 6.1% in May 2003, the highest monthly jobless
rate since July 1994.
- In that environment, the Federal Reserve maintained an accommodative
monetary posture. The Federal Funds rate - a key short-term interest rate
barometer - stood at 1.25%, a 40-year low, at May 31, 2003 (It was lowered
to 1.00% in June 2003).
- Ten-year Treasury Bond yields - which were 5.04% at May 31, 2002 - declined
to 3.39% by May 31, 2003, in response to the tepid economy. The sharp
decline in rates was greeted warmly by investors wary of the volatile
equity markets and helped to sustain a rally in bonds. The Lehman Brothers
Municipal Bond Index - a broad-based, unmanaged index of municipal bonds -
had a total return of 6.46% for the six months ended May 31, 2003.(1)
The Trust
Performance for the Past Six Months
- Based on share price (traded on the New York Stock Exchange), the Trust had
a total return of 11.62% for the six months ended May 31, 2003. That return
was the result of an increase in share price from $14.05 on November 30,
2002 to $15.06 on May 31, 2003, and the reinvestment of $0.555 in regular
monthly dividends.(2)
- Based on net asset value, the Trust had a total return of 11.98% for the
six months ended May 31, 2003. That return was the result of an increase in
net asset value per share from $13.02 on November 30, 2002 to $14.00 on May
31, 2003, and the reinvestment of $0.555 in regular monthly dividends.
- Based on the most recent dividend and a share price of $15.06, the Trust
had a market yield of 7.37% at May 31, 2003.(3) The Trust's market yield is
equivalent to a taxable yield of 11.34%.(4)
Management Discussion
- The Trust was well served by its broad diversification. In addition to
diversifying according to issuer, sector and insurer, management had a
mixed coupon allocation, balancing income-oriented higher-coupons with
performance-minded low- and zero-coupon bonds.
- The Trust's largest sector concentration was in hospital bonds. Management
remained very selective with respect to hospital investments, focusing on
the more competitive institutions, with favorable cost structures,
in-demand care specialties and alliances with other hospitals.
- Insured* transportation bonds represented a large investment for the Trust.
Given the nation's vast geography, the efficient transport of passengers
and freight is a key segment of the U.S. economy. The Trust's investments
included issues for highways, turnpikes, airport authorities and mass
transit.
- Insured* general obligations (GOs) were another major focus for the Trust.
In a slow economy, many states and municipalities have encountered a
shortfall in income and sales tax receipts. In that climate, insured* GOs
provided some insulation from revenue uncertainty.
*Private insurance does not remove the risk of loss of principal associated with
insured investments due to changes in market conditions.
THE VIEWS EXPRESSED IN THIS REPORT ARE THOSE OF THE PORTFOLIO MANAGER AND ARE
CURRENT ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THESE VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER
CONDITIONS, AND EATON VANCE DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS.
THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE INVESTMENT
DECISIONS FOR A FUND ARE BASED ON MANY FACTORS, MAY NOT BE RELIED ON AS AN
INDICATION OF TRADING INTENT ON BEHALF OF ANY FUND.
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TRUST INFORMATION
as of May 31, 2003
PERFORMANCE(6)
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AVERAGE ANNUAL TOTAL RETURNS (BY MARKET VALUE, NEW YORK STOCK EXCHANGE)
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One Year 14.55%
Life of Trust (1/29/99) 6.99%
AVERAGE ANNUAL TOTAL RETURNS (AT NET ASSET VALUE)
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One Year 18.83%
Life of Trust (1/29/99) 5.21%(3)
Rating Distribution(5)
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By total investments
[CHART]
AAA 41.1%
AA 4.1%
A 7.1%
BBB 18.8%
CCC 0.3%
Non-Rated 28.6%
(1) It is not possible to invest directly in an Index.
(2) A portion of the Trust's income may be subject to federal income tax and/or
federal alternative minimum tax. Income may be subject to state tax.
(3) The Trust's market yield is calculated by dividing the most recent dividend
per share by the share price at the end of the period and annualizing the
result.
(4) Taxable-equivalent yield assumes maximum 35.0% federal income tax rate. A
lower rate would result in a lower tax-equivalent figure.
(5) Rating Distribution is determined by dividing the total market value of the
holdings by the total investments of the Trust. Rating Distribution is
subject to change.
(6) Returns are historical and are calculated by determining the percentage
change in share price or net asset value with all distributions reinvested.
Past performance is no guarantee of future results. Investment return and market
price will fluctuate so that shares, when sold, may be worth more or less than
their original cost.
3
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
PORTFOLIO OF INVESTMENTS (UNAUDITED)
TAX-EXEMPT INVESTMENTS -- 153.5%
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
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Cogeneration -- 1.3%
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$ 2,950 Maryland Energy Cogeneration, (AES
Warrior Run), (AMT), 7.40%, 9/1/19 $ 3,028,381
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$ 3,028,381
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Education -- 4.4%
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$ 2,250 California Educational Facilities
Authority, Residual Certificates,
Variable Rate, 12/1/32(1)(2) $ 2,986,965
6,875 Massachusetts Development Finance
Agency, (Boston University),
5.45%, 5/15/59 7,351,506
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$ 10,338,471
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Electric Utilities -- 9.4%
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$ 6,500 Brazos River Authority, TX, (Reliant
Energy, Inc.), 5.20%, 12/1/18 $ 6,981,975
2,000 Brazos River Authority, TX, PCR (Texas
Energy Co.), (AMT), 6.75%, 4/1/38 2,111,080
1,000 Long Island Power Authority, NY,
Electric System Revenue, 5.25%, 12/1/14 1,114,840
3,550 Mississippi Business Finance Corp.,
(System Energy Resources, Inc.),
5.90%, 5/1/22 3,553,088
7,250 North Carolina Municipal Power Agency,
(Catawba), 6.50%, 1/1/20 8,173,070
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$ 21,934,053
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Escrowed / Prerefunded -- 7.0%
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$35,000 Dawson Ridge, CO, Metropolitan District
#1, Escrowed to Maturity, 0.00%, 10/1/22 $ 14,122,150
1,725 Maricopa County, AZ, IDA, (Place Five
and The Greenery), Escrowed to Maturity,
8.625%, 1/1/27 2,210,622
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$ 16,332,772
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General Obligations -- 7.2%
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$ 2,400 California State General Obligation,
5.00%, 2/1/21 $ 2,509,392
2,500 California State General Obligation,
5.25%, 4/1/30 2,610,275
2,000 Kershaw County, SC, School District,
5.00%, 2/1/18 2,171,640
2,000 New York City, 5.00%, 3/1/33 2,028,380
7,475 North East Independent School District,
TX, 4.50%, 10/1/28 7,442,110
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$ 16,761,797
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PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
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Health Care - Miscellaneous -- 1.3%
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$ 640 Tax Exempt Securities Trust, Community
Health Provider, Pooled Loan Program,
6.00%, 12/1/36 $ 653,562
1,689 Tax Exempt Securities Trust, Community
Health Provider, Pooled Loan Program,
6.25%, 12/1/36 1,814,876
641 Tax Exempt Securities Trust, Community
Health Provider, Pooled Loan Program,
7.75%, 12/1/36 652,341
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$ 3,120,779
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Hospital -- 24.3%
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$ 2,500 California Health Facilities Authority,
(Cedars Sinai Medical Center), Variable
Rate, 12/1/34(1)(3) $ 2,941,700
965 Chautauqua County, NY, IDA, (Women's
Christian Association), 6.35%, 11/15/17 918,574
1,000 Chautauqua County, NY, IDA, (Women's
Christian Association), 6.40%, 11/15/29 954,690
1,410 Colorado Health Facilities Authority,
(Rocky Mountain Adventist),
6.625%, 2/1/22 1,439,920
1,000 Halifax, FL, Medical Center,
7.25%, 10/1/24 1,093,840
2,805 Highland County, OH, (Joint Township
Hospital District), 6.75%, 12/1/29 2,659,729
5,000 Illinois Health Facility Authority,
(Loyola University Health System),
6.00%, 7/1/21 5,286,400
3,000 John Tolfree Health System Corp., MI,
6.00%, 9/15/23 3,089,730
3,500 Loris, SC, Community Hospital District,
5.625%, 1/1/29 3,542,875
5,250 Louisiana Public Facilities Authority,
(Tuoro Infirmary), 5.625%, 8/15/29 5,409,285
2,000 Martin County, MN, (Fairmont Community
Hospital Association), 6.625%, 9/1/22 1,990,060
1,345 Mecosta County, MI, General Hospital,
5.75%, 5/15/09 1,363,279
2,500 Mecosta County, MI, General Hospital,
6.00%, 5/15/18 2,402,700
4,260 New Jersey Health Care Facilities
Financing Authority, (Capital Health
System), 5.25%, 7/1/27 4,143,489
1,500 New Jersey Health Care Facilities
Financing Authority, (Trinitas
Hospital), 7.50%, 7/1/30 1,667,430
5,000 North Central, TX, Health Facility
Development Corp., (Baylor Healthcare
System), 5.125%, 5/15/29 5,134,600
1,510 Oneonta, AL, Eastern Health Care
Facility Financing Authority, (Eastern
Health Systems, Inc.), 7.75%, 7/1/21 1,690,007
7,000 Rhode Island HEFA, (St. Joseph Health
Services), 5.50%, 10/1/29 6,071,730
SEE NOTES TO FINANCIAL STATEMENTS
4
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
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Hospital (continued)
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$ 2,425 Southwestern Illinois, Development
Authority, (Anderson Hospital),
5.625%, 8/15/29 $ 2,432,663
2,500 Sullivan County, TN, Health Educational
and Housing Facility Board, (Wellmont
Health System), 6.25%, 9/1/32 2,654,250
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$ 56,886,951
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Housing -- 12.1%
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$ 990 California Statewide Communities
Development Authority, Variable Rate,
6/1/09(1)(3) $ 1,066,468
4,000 Charter Mac Equity Trust, TN, (AMT),
6.625%, 6/30/09 4,369,800
3,185 Florida Capital Projects Finance
Authority, Student Housing Revenue,
(Florida University), 7.75%, 8/15/20 3,303,769
925 Lake Creek, CO, Affordable Housing
Corp., Multifamily, 7.00%, 12/1/23 881,599
4,535 Louisiana Public Facilities Authority,
(Eden Point), 6.25%, 3/1/34 4,176,418
4,000 Muni Mae Tax-Exempt Bond, LLC, (AMT),
6.875%, 6/30/09 4,400,040
3,265 North Little Rock, AR, Residential
Housing Facilities, (Parkstone Place),
6.50%, 8/1/21 3,124,017
3,630 Oregon Health Authority, (Trillium
Affordable Housing), (AMT),
6.75%, 2/15/29 3,430,386
970 Raleigh, NC, Housing Authority,
Multifamily, (Cedar Point) ,
7.00%, 11/1/30(4) 213,400
3,300 Texas Student Housing Corp., (University
of Northern Texas), 6.75%, 7/1/16 3,313,695
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$ 28,279,592
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Industrial Development Revenue -- 8.3%
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$ 1,945 Abia Development Corp., TX, (Austin
Cargoport Development), (AMT),
6.50%, 10/1/24 $ 1,738,110
1,890 Broward County, FL, IDR, (Lynxs
Cargoport), (AMT), 6.75%, 6/1/19 1,722,376
2,250 Gulf Coast, TX, Waste Disposal
Authority, (Champion International),
(AMT), 6.875%, 12/1/28 2,338,447
2,500 Gulf Coast, TX, Waste Disposal
Authority, (Valero Energy Corp.) (AMT),
5.70%, 4/1/32 2,381,075
2,500 Los Angeles, CA, Regional Airports
Improvements Corp., (Terminal Four),
(AMT), 7.50%, 12/1/24 2,000,000
3,000 Minneapolis and St. Paul, MN,
Metropolitan Airport Commission,
(Northwest Airlines), (AMT),
7.00%, 4/1/25 2,304,000
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
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Industrial Development Revenue (continued)
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$ 6,000 New Jersey EDA, (Continental Airlines),
(AMT), 6.25%, 9/15/29 $ 4,464,660
3,500 New York City, NY, Industrial
Development Agency, (American Airlines,
Inc.), (AMT), 8.50%, 8/1/28 1,417,535
2,950 Phoenix, AZ, IDA, (America West
Airlines, Inc.), (AMT), 6.25%, 6/1/19 993,826
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$ 19,360,029
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Insured-Education -- 4.1%
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$13,000 Illinois Development Finance Authority,
(Local Government Program-Elgin School
District-U46), (FSA), 0.00%, 1/1/20 $ 6,204,250
3,000 Massachusetts HEFA, (Berklee College of
Music), (MBIA), Variable Rate,
10/1/27(1)(3) 3,295,620
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$ 9,499,870
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Insured-Electric Utilities -- 0.4%
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$ 100 Los Angeles, CA, Department of Water and
Power, (MBIA), Variable Rate,
12/15/24(1)(3) $ 900,150
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$ 900,150
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Insured-Escrowed/Prerefunded -- 1.9%
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$ 4,250 Metropolitan Transportation Authority of
New York, Escrowed to Maturity, (FGIC),
4.75%, 7/1/26 $ 4,504,448
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$ 4,504,448
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Insured-General Obligations -- 13.9%
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$ 500 California, (FGIC), Variable Rate,
12/1/29(1)(3) $ 1,961,700
3,500 California, (FGIC), Variable Rate,
9/1/30(1)(2) 4,172,350
4,000 Chicago, IL, (MBIA), 5.00%, 1/1/41 4,139,560
30,160 Chicago, IL, Board of Education, (FGIC),
0.00%, 12/1/22 12,031,729
4,000 Puerto Rico, FSA, Variable Rate,
7/1/27(1)(2) 5,108,600
10,000 Washington State General Obligation,
(FGIC), 0.00%, 1/1/19 5,013,000
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$ 32,426,939
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Insured-Hospital -- 9.4%
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$21,205 Kentucky EDA, (Norton Healthcare, Inc.),
(MBIA), 0.00%, 10/1/25 $ 7,223,271
23,470 Kentucky EDA, (Norton Healthcare, Inc.),
(MBIA), 0.00%, 10/1/26 7,566,728
SEE NOTES TO FINANCIAL STATEMENTS
5
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
--------------------------------------------------------------------------
Insured-Hospital (continued)
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$10,000 Kentucky EDA, (Norton Healthcare, Inc.),
(MBIA), 0.00%, 10/1/27 $ 3,057,500
4,000 New Jersey Health Care Facilities
Financing Authority, (St. Barnabas
Medical Center), (MBIA), Variable
Rate, 7/1/28(1)(2) 4,150,080
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$ 21,997,579
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Insured-Special Tax Revenue -- 0.2%
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$ 60 South Orange County, CA, Public
Financing Authority, (FGIC), DRIVERS,
Variable Rate, 8/15/15(1)(3) $ 437,580
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$ 437,580
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Insured-Transportation -- 20.2%
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$ 9,000 Central Texas Turnpike Authority,
(AMBAC), 0.00%, 8/15/21 $ 3,910,320
3,500 Chicago, IL, O'Hare International
Airport, (AMBAC), (AMT), 5.375%, 1/1/32 3,655,890
2,500 Dallas-Fort Worth, TX, International
Airport, (FGIC), (AMT), 5.50%, 11/1/20 2,698,025
4,930 Dallas-Fort Worth, TX, International
Airport, (FGIC), (AMT), 5.75%, 11/1/30 5,352,156
4,500 Dallas-Fort Worth, TX, International
Airport, (FGIC), (AMT), 6.125%, 11/1/35 5,159,520
2,400 Massachusetts Turnpike Authority,
Metropolitan Highway System, (MBIA),
Variable Rate, 1/1/27(1)(2) 2,591,904
7,500 Minneapolis and St. Paul, MN,
Metropolitan Airport Commission, (FGIC),
5.25%, 1/1/32 8,068,350
5,500 Nevada Department of Business and
Industry, (Las Vegas Monorail -1st
Tier), (AMBAC), 5.375%, 1/1/40 5,988,675
2,000 Puerto Rico Highway and Transportation
Authority, (FSA), Variable Rate,
7/1/32(1)(2) 2,347,640
7,000 San Antonio, TX, Airport System,
(Improvements), (FGIC), 5.25%, 7/1/21 7,385,070
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$ 47,157,550
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Nursing Home -- 3.7%
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$ 3,580 Ohio HFA, Retirement Rental Housing,
(Encore Retirement Partners),
6.75%, 3/1/19 $ 3,153,550
750 Okaloosa County, FL, Retirement Rental
Housing, (Encore Retirement Partners),
6.125%, 2/1/14 679,688
2,000 Orange County, FL, Health Facilities
Authority, (Westminster Community Care),
6.75%, 4/1/34 1,593,360
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
--------------------------------------------------------------------------
Nursing Home (continued)
--------------------------------------------------------------------------
$ 767 Tarrant County, TX, Health Facilities
Authority, 8.00%, 9/1/25 $ 389,006
1,221 Tarrant County, TX, Health Facilities
Authority, (3927 Foundation),
10.25%, 9/1/19(4) 51,754
3,000 Wisconsin HEFA, (Wisconsin Illinois
Senior Housing), 7.00%, 8/1/29 2,905,350
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$ 8,772,708
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Other Revenue -- 11.1%
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$ 3,000 Capital Trust Agency, FL, (Seminole
Tribe Convention), 8.95%, 10/1/33 $ 3,206,940
4,000 Capital Trust Agency, FL, (Seminole
Tribe Convention), 10.00%, 10/1/33 4,553,960
4,450 Golden Tobacco Securitization Corp., CA,
6.75%, 6/1/39 4,174,768
1,500 Mohegan Tribe Indians, CT, Gaming
Authority, (Public Improvements),
6.25%, 1/1/21 1,639,320
3,900 Puerto Rico Infrastructure Financing
Authority, Variable Rate,
10/1/32(1)(2)(5) 6,496,425
3,300 Santa Fe, NM, (Crow Hobbs),
8.50%, 9/1/16 3,412,068
3,000 Tobacco Settlement Financing Corp., NJ,
Variable Rate, 6/1/39(1)(3) 2,592,900
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$ 26,076,381
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Senior Living / Life Care -- 3.7%
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$ 1,960 Cliff House Trust, PA, (AMT),
6.625%, 6/1/27 $ 1,764,372
280 Delaware County, PA, IDA, (Glen Riddle),
(AMT), 8.125%, 9/1/05 287,787
2,000 Delaware County, PA, IDA, (Glen Riddle),
(AMT), 8.625%, 9/1/25 2,118,980
3,240 Logan County, CO, Industrial Development
Revenue, (TLC Care Choices, Inc.),
6.875%, 12/1/23 3,004,193
1,400 Mesquite, TX, Health Facilities
Authority, (Christian Retirement
Facility), 7.625%, 2/15/28 1,475,138
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$ 8,650,470
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Special Tax Revenue -- 4.1%
--------------------------------------------------------------------------
$ 3,280 Bell Mountain Ranch, CO, Metropolitan
District, 6.625%, 11/15/25 $ 3,408,248
3,600 Black Hawk, CO, Business Improvement
District, 6.50%, 12/1/11 3,589,560
1,050 Longleaf, FL, Community Development
District, 6.20%, 5/1/09 982,769
SEE NOTES TO FINANCIAL STATEMENTS
6
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
--------------------------------------------------------------------------
Special Tax Revenue (continued)
--------------------------------------------------------------------------
$ 1,795 Longleaf, FL, Community Development
District, 6.65%, 5/1/20 $ 1,636,376
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$ 9,616,953
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Transportation -- 1.7%
--------------------------------------------------------------------------
$ 3,750 Kent County, MI, Airport Facility,
(AMT), Variable Rate, 1/1/25(1)(3) $ 3,950,625
--------------------------------------------------------------------------
$ 3,950,625
--------------------------------------------------------------------------
Water and Sewer -- 3.8%
--------------------------------------------------------------------------
$ 1,500 Metropolitan Water District, CA,
(Southern California Waterworks),
Variable Rate, 1/1/18(1)(3) $ 1,672,500
6,500 Sacramento County, CA, Sanitation
District Financing Authority Revenue,
5.875%, 12/1/27 7,257,055
--------------------------------------------------------------------------
$ 8,929,555
--------------------------------------------------------------------------
Total Tax-Exempt Investments -- 153.5%
(identified cost $334,617,787) $ 358,963,633
--------------------------------------------------------------------------
Other Assets, Less Liabilities -- 2.6% $ 6,039,198
--------------------------------------------------------------------------
Auction Preferred Shares Plus Cumulative Unpaid Dividends
-- (56.1)% $(131,091,990)
--------------------------------------------------------------------------
Net Assets Applicable to Common Shares -- 100.0%
$ 233,910,841
--------------------------------------------------------------------------
AMT - Interest earned from these securities may be considered a tax
preference item for purposes of the Federal Alternative Minimum Tax.
At May 31, 2003, the concentration of the Trust's investments in the various
states, determined as a percentage of net assets, is as follows:
------------------------------------------------
Texas 24.7%
California 14.8%
Illinois 14.4%
Colorado 11.3%
Others, representing less than 10% 88.3%
individually
The Trust invests primarily in debt securities issued by municipalities. The
ability of the issuers of the debt securities to meet their obligations may
be affected by economic developments in a specific industry or municipality.
In order to reduce the risk associated with such economic developments, at
May 31, 2003, 32.6% of the securities in the portfolio of investments are
backed by bond insurance of various financial institutions and financial
guaranty assurance agencies. The aggregate percentage insured by financial
institutions ranged from 3.8% to 15.8% of total investments.
(1) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(2) Security has been issued as a leveraged inverse floater bond.
(3) Security has been issued as an inverse floater bond.
(4) Non-income producing security.
(5) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
SEE NOTES TO FINANCIAL STATEMENTS
7
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
AS OF MAY 31, 2003
Assets
------------------------------------------------------
Investments, at value
(identified cost, $334,617,787) $358,963,633
Cash 519,705
Receivable for investments sold 40,000
Interest receivable 6,770,037
Receivable for daily variation margin on
open financial futures contracts 109,712
Prepaid expenses 25,628
------------------------------------------------------
TOTAL ASSETS $366,428,715
------------------------------------------------------
Liabilities
------------------------------------------------------
Payable for open swap contracts $ 1,296,524
Payable to affiliate for Trustees' fees 1,599
Accrued expenses 127,761
------------------------------------------------------
TOTAL LIABILITIES $ 1,425,884
------------------------------------------------------
AUCTION PREFERRED SHARES (5,240 SHARES
OUTSTANDING) AT LIQUIDATION VALUE
PLUS CUMULATIVE UNPAID DIVIDENDS $131,091,990
------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES $233,910,841
------------------------------------------------------
Sources of Net Assets
------------------------------------------------------
Common Shares, $0.01 par value,
unlimited number of shares
authorized, 16,707,678 shares issued
and outstanding $ 167,077
Additional paid-in capital 247,282,452
Accumulated net realized loss (computed
on the basis of identified cost) (39,667,721)
Accumulated undistributed net investment
income 3,958,169
Net unrealized appreciation (computed on
the basis of identified cost) 22,170,864
------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES $233,910,841
------------------------------------------------------
Net Asset Value Per Common Share
------------------------------------------------------
($233,910,841 DIVIDED BY 16,707,678
COMMON SHARES ISSUED AND OUTSTANDING) $ 14.00
------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
MAY 31, 2003
Investment Income
------------------------------------------------------
Interest $ 12,621,396
------------------------------------------------------
TOTAL INVESTMENT INCOME $ 12,621,396
------------------------------------------------------
Expenses
------------------------------------------------------
Investment adviser fee $ 1,236,309
Administration fee 353,231
Trustees' fees and expenses 7,319
Transfer and dividend disbursing agent
fees 110,816
Preferred shares remarketing agent fee 163,302
Custodian fee 74,817
Legal and accounting services 45,739
Printing and postage 13,113
Miscellaneous 51,781
------------------------------------------------------
TOTAL EXPENSES $ 2,056,427
------------------------------------------------------
NET INVESTMENT INCOME $ 10,564,969
------------------------------------------------------
Realized and Unrealized Gain (Loss)
------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ (2,879,244)
Financial futures contracts (7,647,295)
------------------------------------------------------
NET REALIZED LOSS $(10,526,539)
------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 28,593,900
Financial futures contracts (878,458)
Interest rate swap contracts (1,296,524)
------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 26,418,918
------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $ 15,892,379
------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
FROM NET INVESTMENT INCOME $ (868,722)
------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 25,588,626
------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
8
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
INCREASE (DECREASE) MAY 31, 2003 YEAR ENDED
IN NET ASSETS (UNAUDITED) NOVEMBER 30, 2002
-----------------------------------------------------------------------------
From operations --
Net investment income $ 10,564,969 $ 20,723,542
Net realized gain (loss) (10,526,539) 1,491,014
Net change in unrealized
appreciation (depreciation) 26,418,918 (1,429,416)
Distributions to preferred
shareholders from net investment
income (868,722) (2,445,875)
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 25,588,626 $ 18,339,265
-----------------------------------------------------------------------------
Distributions to common shareholders --
From net investment income $ (9,243,031) $ (17,028,398)
-----------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO
COMMON SHAREHOLDERS $ (9,243,031) $ (17,028,398)
-----------------------------------------------------------------------------
Capital share transactions --
Reinvestment of distributions to
common shareholders $ 1,290,395 $ 2,648,507
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS $ 1,290,395 $ 2,648,507
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 17,635,990 $ 3,959,374
-----------------------------------------------------------------------------
Net Assets Applicable
to Common Shares
-----------------------------------------------------------------------------
At beginning of period $ 216,274,851 $ 212,315,477
-----------------------------------------------------------------------------
AT END OF PERIOD $ 233,910,841 $ 216,274,851
-----------------------------------------------------------------------------
Accumulated undistributed net investment income included
in net assets applicable to common shares
-----------------------------------------------------------------------------
AT END OF PERIOD $ 3,958,169 $ 3,504,953
-----------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
9
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING DURING THE PERIODS STATED
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 2003 ----------------------------------------------------------------------
(UNAUDITED)(1) 2002(1)(2) 2001(1) 2000(1) 1999(1)(3)
----------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning
of period (Common shares) $13.020 $12.930 $11.950 $11.720 $15.000
----------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
----------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.634 $ 1.255 $ 1.124 $ 1.083 $ 0.837
Net realized and unrealized
gain (loss) 0.953 0.013 0.873 0.260 (3.246)
Distribution to preferred
shareholders (0.052) (0.148) (0.240) (0.328) (0.197)
----------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ 1.535 $ 1.120 $ 1.757 $ 1.015 $(2.606)
----------------------------------------------------------------------------------------------------------------------------
Less distributions to common shareholders
----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.555) $(1.030) $(0.777) $(0.785) $(0.550)
----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO COMMON
SHAREHOLDERS $(0.555) $(1.030) $(0.777) $(0.785) $(0.550)
----------------------------------------------------------------------------------------------------------------------------
PREFERRED AND COMMON SHARES
OFFERING COSTS CHARGED TO
PAID-IN CAPITAL $ -- $ -- $ -- $ -- $(0.042)
----------------------------------------------------------------------------------------------------------------------------
PREFERRED SHARES UNDERWRITING
DISCOUNTS $ -- $ -- $ -- $ -- $(0.082)
----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF
PERIOD (COMMON SHARES) $14.000 $13.020 $12.930 $11.950 $11.720
----------------------------------------------------------------------------------------------------------------------------
MARKET VALUE -- END OF PERIOD
(COMMON SHARES) $15.060 $14.050 $13.500 $11.125 $11.688
----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(4) 11.62% 12.32% 28.95% 2.05% (18.74)%
----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
10
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING DURING THE PERIODS STATED
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 2003 ----------------------------------------------------------------------
(UNAUDITED)(1) 2002(1)(2) 2001(1) 2000(1) 1999(1)(3)
----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+ ++
----------------------------------------------------------------------------------------------------------------------------
Net assets applicable to
common shares, end of
period (000's omitted) $233,911 $216,275 $212,315 $194,676 $190,209
Ratios (As a percentage of
average net assets
applicable to common
shares):
Net expenses(5) 1.85%(6) 1.89% 1.88% 1.95% 1.76%(6)
Net expenses after
custodian fee
reduction(5) 1.85%(6) 1.88% 1.88% 1.91% 1.70%(6)
Net investment income(5) 9.48%(6) 9.69% 8.79% 9.47% 7.38%(6)
Portfolio Turnover 9% 14% 60% 66% 151%
+ The expenses of the Trust may reflect a reduction of the investment adviser fee. Had such action not been taken, the
ratios and the net investment income would have been as follows:
Ratios (As a percentage of
average net assets
applicable to common
shares):
Expenses(5) 1.76%(6)
Expenses after custodian
fee reduction(5) 1.70%(6)
Net investment income(5) 7.38%(6)
Net investment income per
share $ 0.837
----------------------------------------------------------------------------------------------------------------------------
++ The ratios reported above are based on net assets applicable solely to common shares. The ratios based on net assets,
including amounts related to preferred shares, are as follows:
Ratios (As a percentage of
average total net assets):
Net expenses 1.16%(6) 1.17% 1.15% 1.15% 1.14%(6)
Net expenses after
custodian fee reduction 1.16%(6) 1.17% 1.15% 1.12% 1.10%(6)
Net investment income 5.98%(6) 6.01% 5.40% 5.56% 4.77%(6)
+ The expenses of the Trust may reflect a reduction of the investment adviser fee. Had such action not been taken, the
ratios would have been as follows:
Ratios (As a percentage of
average total net assets):
Expenses 1.14%(6)
Expenses after custodian
fee reduction 1.10%(6)
Net investment income 4.77%(6)
----------------------------------------------------------------------------------------------------------------------------
Senior Securities:
Total preferred shares
outstanding 5,240 5,240 5,240 5,240 5,240
Asset coverage per
preferred share(7) $ 69,657 $ 66,291 $ 65,548 $ 62,155 $ 61,308
Involuntary liquidation
preference per preferred
share(8) $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
Approximate market value
per preferred share(8) $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
----------------------------------------------------------------------------------------------------------------------------
(1) Computed using average common shares outstanding.
(2) The Trust has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies and began using the interest
method to amortize premiums on fixed-income securities. The effect of
this change for the year ended November 30, 2002 was to increase net
investment income per share by $0.011, decrease net realized and
unrealized gains per share by $0.011, increase the ratio of net
investment income to average net assets applicable to common shares from
9.61% to 9.69% and increase the ratio of net investment income to
average total net assets from 5.96% to 6.01%. Per share data and ratios
for the periods prior to December 1, 2001 have not been restated to
reflect this change in presentation.
(3) For the period from the start of business, January 29, 1999, to November
30, 1999.
(4) Returns are historical and are calculated by determining the percentage
change in market value with all distributions reinvested. Total return
is not computed on an annualized basis.
(5) Ratios do not reflect the effect of dividend payments to preferred
shareholders. Ratios to average net assets applicable to common shares
reflect the Trust's leveraged capital structure.
(6) Annualized.
(7) Calculated by subtracting the Trust's total liabilities (not including
the preferred shares) from the Trust's total assets, and dividing this
by the number of preferred shares outstanding.
(8) Plus accumulated and unpaid dividends.
SEE NOTES TO FINANCIAL STATEMENTS
11
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1 Significant Accounting Policies
-------------------------------------------
Eaton Vance Municipal Income Trust (the Trust) is an entity commonly known as
a Massachusetts business trust and is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company.
The Trust was organized under the laws of the Commonwealth of Massachusetts
by an Agreement and Declaration of Trust dated December 10, 1998. The Trust's
investment objective is to achieve current income exempt from regular federal
income tax by investing primarily in investment grade municipal obligations.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with accounting principles generally accepted in
the United States of America.
A Investment Valuation -- Municipal bonds are normally valued on the basis of
valuations furnished by a pricing service. Taxable obligations, if any, for
which price quotations are readily available are normally valued at the mean
between the latest bid and asked prices. Futures contracts listed on the
commodity exchanges are valued at closing settlement prices. Short-term
obligations, maturing in sixty days or less, are valued at amortized cost,
which approximates value. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B Investment Transactions -- Investment transactions are recorded on a trade
date basis. Realized gains and losses from such transactions are determined
using the specific identification method. Securities purchased or sold on a
when-issued or delayed delivery basis may be settled a month or more after
the transaction date. The securities so purchased are subject to market
fluctuations during this period. To the extent that when-issued or delayed
delivery purchases are outstanding, the Trust instructs the custodian to
segregate assets in a separate account, with a current value at least equal
to the amount of its purchase commitments.
C Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount.
D Federal Income Taxes -- The Trust's policy is to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and
to distribute to shareholders each year all of its taxable income, if any,
and tax-exempt income, including any net realized gain on investments.
Therefore, no provision for federal income or excise tax is necessary. At
November 30, 2002, the Trust, for federal income tax purposes, had a capital
loss carryover of $29,387,222 which will reduce the taxable income arising
from future net realized gain on investments, if any, to the extent permitted
by the Internal Revenue Code and thus will reduce the amount of distributions
to shareholders which would otherwise be necessary to relieve the Trust of
any liability for federal income or excise tax. Such capital loss carryover
will expire on November 30, 2007 ($9,497,591) November 30, 2008 ($14,623,294)
and November 30, 2009 ($5,266,337). In addition, the Trust intends to satisfy
conditions which will enable it to designate distributions from the interest
income generated by its investments in municipal obligations, which are
exempt from regular federal income taxes when received by the Trust, as
exempt-interest dividends. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986, may be considered a tax
preference item for investors.
E Financial Futures Contracts -- Upon the entering of a financial futures
contract, the Trust is required to deposit (initial margin) either in cash or
securities an amount equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Trust (margin maintenance) each day, dependent on the daily
fluctuations in the value of the underlying security, and are recorded for
book purposes as unrealized gains or losses by the Trust. The Trust's
investment in financial futures contracts is designed for both hedging
against anticipated future changes in interest rates and investment purposes.
Should interest rates move unexpectedly, the Trust may not achieve the
anticipated benefits of the financial futures contracts and may realize a
loss.
F Options on Financial Futures Contracts -- Upon the purchase of a put option
on a financial futures contract by the Trust, the premium paid is recorded as
an investment, the value of which is marked-to-market daily. When a purchased
option expires, the Trust will realize a loss in the amount of the cost of
the option. When the Trust enters into a closing sale transaction, the Trust
will realize a gain or loss depending on whether the sales proceeds from the
closing sale transaction are greater or less than the cost of the option.
When the Trust exercises a put option, settlement is made in cash. The risk
associated with purchasing put options is limited to the premium originally
paid.
12
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
G Interest Rate Swaps -- The Trust has entered into interest rate swap
agreements to enhance return, to hedge against fluctuations in securities
prices or interest rates or as substitution for the purchase or sale of
securities. Pursuant to these agreements, the Trust makes semi-annual
payments at a fixed interest rate. In exchange, the Trust receives payments
based on the interest rate of a benchmark industry index. During the term of
the outstanding swap agreement, changes in the underlying value of the swap
are recorded as unrealized gains and losses. Payments received or made at the
end of a measurement period are recorded as realized gains and losses. The
value of the swap is determined by changes in the relationship between two
rates of interest. The Trust is exposed to credit loss in the event of
non-performance by the swap counterparty. However, the Trust does not
anticipate non-performance by the counterparty. Risk may also arise from the
unanticipated movements in value of interest rates.
H Use of Estimates -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expense during the
reporting period. Actual results could differ from those estimates.
I Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
of the Trust. Pursuant to the custodian agreement, IBT receives a fee reduced
by credits which are determined based on the average daily cash balance the
Trust maintains with IBT. All significant credit balances used to reduce the
Trust's custodian fees are reported as a reduction of total expenses in the
Statement of Operations.
J Interim Financial Statements -- The interim financial statements relating to
May 31, 2003 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the Trust's
management reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Auction Preferred Shares (APS)
-------------------------------------------
The Trust issued 2,620 shares of Auction Preferred Shares Series A and 2,620
shares of Auction Preferred Shares Series B on March 1, 1999 in a public
offering. The underwriting discount and other offering costs were recorded as
a reduction of the capital of the common shares. Dividends on the APS, which
accrue daily, are cumulative at a rate which was established at the offering
of the APS and have been reset every 7 days thereafter by an auction.
Effective July 9, 2002, a special dividend period of 364 days was set on the
series A shares. The dividend rate, which matures on July 8, 2003, is 1.62%.
Dividend rates ranged from 0.74% to 1.50% for Series B Shares, during the six
months ended May 31, 2003. Series A and Series B are identical in all
respects except for the dates of reset for the dividend rates.
The APS are redeemable at the option of the Trust, at a redemption price
equal to $25,000 per share, plus accumulated and unpaid dividends on any
dividend payment date. The APS are also subject to mandatory redemption at a
redemption price equal to $25,000 per share, plus accumulated and unpaid
dividends, if the Trust is in default for an extended period on its asset
maintenance requirements with respect to the APS. If the dividends on the APS
shall remain unpaid in an amount equal to two full years' dividends, the
holders of the APS as a class have the right to elect a majority of the Board
of Trustees. In general, the holders of the APS and the common shares have
equal voting rights of one vote per share, except that the holders of the
APS, as a separate class, have the right to elect at least two members of the
Board of Trustees. The APS have a liquidation preference of $25,000 per
share, plus accumulated and unpaid dividends. The Trust is required to
maintain certain asset coverage with respect to the APS as defined in the
Trust's By-Laws and the Investment Company Act of 1940. The Trust pays an
annual fee equivalent to 0.25% of the preferred shares' liquidation value for
the remarketing efforts associated with the preferred auctions.
3 Distributions to Shareholders
-------------------------------------------
The Trust intends to make monthly distributions of net investment income,
after payment of any dividends on any outstanding Auction Preferred Shares.
Distributions are recorded on the ex-dividend date. Distributions to
preferred shareholders are recorded daily and are payable at the end of each
dividend period. Each dividend payment period for the Auction Preferred
Shares is generally seven days. Effective July 10, 2001, the Series A shares
set a special dividend period of 364 days. The applicable dividend rate for
the Auction Preferred Shares on May 31, 2003 was 1.62% and 1.00%, for Series
A and Series B Shares, respectively. For the six months ended May 31, 2003,
the Trust paid dividends to Auction Preferred shareholders amounting to
$544,879 and $323,843 for
13
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
Series A and Series B Shares, respectively, representing an average APS
dividend rate for such period of 1.62% and 1.03%, respectively.
The Trust distinguishes between distribution on a tax basis and a financial
reporting basis. Accounting principles generally accepted in the United
States of America require that only distributions in excess of tax basis
earnings and profits be reported in the financial statements as a return of
capital. Permanent differences between book and tax accounting relating to
distributions are reclassified to paid in capital. These differences relate
primarily to the method for amortizing premiums.
4 Investment Adviser Fee and Other Transactions with Affiliates
-------------------------------------------
The investment adviser fee, computed at an annual rate of 0.70% of the
Trust's average weekly gross assets, was earned by Eaton Vance Management
(EVM) as compensation for management and investment advisory services
rendered to the Trust. Except for Trustees of the Trust who are not members
of EVM's organization, officers and Trustees receive remuneration for their
services to the Trust out of such investment adviser fee. For the six months
ended May 31, 2003, the fee was equivalent to 0.70% of the Trust's average
weekly gross assets and amounted to $1,236,309. EVM also serves as the
administrator of the Trust. An administration fee, computed at the annual
rate of 0.20% of the average weekly gross assets of the Trust, is paid to EVM
for managing and administering business affairs of the Trust. For the six
months ended May 31, 2003, the administrative fee amounted to $353,231.
Trustees of the Trust that are not affiliated with EVM may elect to defer
receipt of all or a percentage of their annual fees in accordance with the
terms of the Trustees Deferred Compensation Plan. For the six months ended
May 31, 2003, no significant amounts have been deferred.
Certain officers and Trustees of the Trust are officers of EVM.
5 Investments
-------------------------------------------
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $30,379,683 and $38,959,652, respectively,
for the six months ended May 31, 2003.
6 Federal Income Tax Basis of Unrealized Appreciation (Depreciation)
-------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned by the Trust at May 31, 2003, as computed for federal
income tax purposes, are as follows:
AGGREGATE COST $334,253,303
------------------------------------------------------
Gross unrealized appreciation $ 36,520,751
Gross unrealized depreciation (11,810,421)
------------------------------------------------------
NET UNREALIZED APPRECIATION $ 24,710,330
------------------------------------------------------
7 Shares of Beneficial Interest
-------------------------------------------
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional $0.01 par value common shares. Transactions in common
shares were as follows:
SIX MONTHS ENDED
MAY 31, 2003 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 2002
------------------------------------------------------------------------------------------
Shares issued pursuant to the Trust's
dividend reinvestment plan
94,694 197,404
------------------------------------------------------------------------------------------
NET INCREASE
94,694 197,404
------------------------------------------------------------------------------------------
8 Financial Instruments
-------------------------------------------
The Trust regularly trades in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include futures
contracts and interest rate swaps and may involve, to a varying degree,
elements of risk in excess of the amounts recognized for financial statement
purposes. The notional or contractual amounts of these instruments represent
the investment the Trust has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered.
14
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2003
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
A summary of obligations under these financial instruments at May 31, 2003 is
as follows:
FUTURES CONTRACTS
----------------------------------------------------------------
EXPIRATION NET UNREALIZED
DATE(S) CONTRACTS POSITION DEPRECIATION
----------------------------------------------------------------
9/03 700 U.S. Treasury Bond Short (675,631)
9/03 656 U.S. Treasury Note Short (202,827)
----------------------------------------------------------------
$(878,458)
----------------------------------------------------------------
At May 31, 2003, the Trust had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
The Trust has entered into an interest rate swap agreement with Morgan
Stanley Capital Services, Inc. where by the Trust makes semi-annual payments
at a fixed rate 4.423% on the notional amount of $25,000,000. In exchange,
the Trust receives payments quarterly equal to three month LIBOR on the same
notional amount. The value of the contract, which terminates at September 4,
2013, is recorded as a payable for open swap contracts of $1,296,524 at May
31, 2003.
9 Annual Meeting of Shareholders
-------------------------------------------
The Trust held its Annual Meeting of Shareholders on March 21, 2003. The
following action was taken by the shareholders:
ITEM 1: The election of Jessica M. Bibliowicz and Donald R. Dwight as
Trustees of the Trust for a three-year term expiring in 2006.
NUMBER OF SHARES
NOMINEE FOR TRUSTEE ----------------------
ELECTED BY ALL SHAREHOLDERS FOR WITHHELD
----------------------------------------------------------------
Jessica M. Bibliowicz 16,157,422 215,694
Donald R. Dwight 16,139,504 233,612
10 Subsequent Event
-------------------------------------------
At their June 2003 Board meeting, the Trustees of the Trust appointed two new
Trustees, William H. Park and Ronald A. Pearlman, to replace Jack L. Treynor
and Donald R. Dwight, respectively, as Trustees of the Trust, such
appointments being effective upon Mr. Treynor's and Mr. Dwight's retirement.
As of July 1, 2003, both Mr. Treynor and Mr. Dwight had retired from the
Trust's Board of Trustees. In addition, as of June 2003, the Trust's Audit
Committee membership has changed and now consists of the following
independent Trustees: Norton H. Reamer (chairman), Samual L. Hayes, III,
William H. Park, and Lynn A. Stout.
15
EATON VANCE MUNICIPAL INCOME TRUST
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the Plan) pursuant to which
shareholders automatically have dividends and capital gains distributions
reinvested in common shares (the Shares) of the Trust unless they elect
otherwise through their investment dealer. On the distribution payment date, if
the net asset value per Share is equal to or less than the market price per
Share plus estimated brokerage commissions then new Shares will be issued. The
number of Shares shall be determined by the greater of the net asset value per
Share or 95% of the market price. Otherwise, Shares generally will be purchased
on the open market by the Plan Agent. Distributions subject to income tax (if
any) are taxable whether or not shares are reinvested.
If your shares are in the name of a brokerage firm, bank, or other nominee, you
can ask the firm or nominee to participate in the Plan on your behalf. If the
nominee does not offer the Plan, you will need to request that your shares be
re-registered in your name with the Trust's transfer agent, PFPC, Inc. or you
will not be able to participate.
The Plan Agent's service fee for handling distributions will be paid by the
Trust. Each participant will be charged their pro rata share of brokerage
commissions on all open-market purchases.
Plan participants may withdraw from the Plan at any time by writing to the Plan
Agent at the address noted on the following page. If you withdraw, you will
receive shares in your name for all Shares credited to your account under the
Plan. If a participant elects by written notice to the Plan Agent to have the
Plan Agent sell part or all of his or her Shares and remit the proceeds, the
Plan Agent is authorized to deduct a $5.00 fee plus brokerage commissions from
the proceeds.
If you wish to participate in the Plan and your shares are held in your own
name, you may complete the form on the following page and deliver it to the Plan
Agent.
Any inquires regarding the Plan can be directed to the Plan Agent, PFPC, Inc.,
at 1-800-331-1710.
16
EATON VANCE MUNICIPAL INCOME TRUST
APPLICATION FOR PARTICIPATION IN DIVIDEND REINVESTMENT PLAN
This form is for shareholders who hold their common shares in their own names.
If your common shares are held in the name of a brokerage firm, bank, or other
nominee, you should contact your nominee to see if it will participate in the
Plan on your behalf. If you wish to participate in the Plan, but your brokerage
firm, bank, or nominee is unable to participate on your behalf, you should
request that your common shares be re-registered in your own name which will
enable your participation in the Plan.
The following authorization and appointment is given with the understanding that
I may terminate it at any time by terminating my participation in the Plan as
provided in the terms and conditions of the Plan.
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Please print exact name on account:
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Shareholder signature Date
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Shareholder signature Date
Please sign exactly as your common shares are registered.
All persons whose names appear on the share certificate
must sign.
YOU SHOULD NOT RETURN THIS FORM IF YOU WISH TO CONTINUE TO RECEIVE YOUR
DIVIDENDS AND DISTRIBUTIONS IN CASH. THIS IS NOT A PROXY.
THIS AUTHORIZATION FORM, WHEN SIGNED, SHOULD BE MAILED TO THE FOLLOWING ADDRESS:
Eaton Vance Municipal Income Trust
c/o PFPC, Inc.
P.O. Box 43027
Providence, RI 02940-3027
800-331-1710
--------------------------------------------------------------------------------
NUMBER OF EMPLOYEES
The Trust is organized as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as a closed-end,
non-diversified, management investment company and has no employees.
NUMBER OF SHAREHOLDERS
As of May 31, 2003, our records indicate that there are 179 registered
shareholders and approximately 7,808 shareholders owning the Trust shares in
street name, such as through brokers, banks, and financial intermediaries.
If you are a street name shareholder and wish to receive our reports directly,
which contain important information about the Trust, please write or call:
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
NEW YORK STOCK EXCHANGE SYMBOL
The New York Stock Exchange symbol is EVN.
17
EATON VANCE MUNICIPAL INCOME TRUST
INVESTMENT MANAGEMENT
EATON VANCE MUNICIPAL INCOME TRUST
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President and Trustee
Robert B. MacIntosh
Vice President
Thomas M. Metzold
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
Samuel L. Hayes, III
Norton H. Reamer
Lynn A. Stout
William H. Park
Ronald A. Pearlman
18
INVESTMENT ADVISER AND ADMINISTRATOR OF EATON VANCE MUNICIPAL INCOME TRUST
EATON VANCE MANAGEMENT
The Eaton Vance Building
255 State Street
Boston, MA 02109
CUSTODIAN
INVESTORS BANK & TRUST COMPANY
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
PFPC INC.
P.O. Box 43027
Providence, RI 02940-3027
(800) 331-1710
EATON VANCE FUNDS
EATON VANCE MANAGEMENT
BOSTON MANAGEMENT AND RESEARCH
EATON VANCE DISTRIBUTORS,INC.
PRIVACY NOTICE
The Eaton Vance organization is committed to ensuring your financial privacy.
This notice is being sent to comply with privacy regulations of the Securities
and Exchange Commission. Each of the above financial institutions has in effect
the following policy with respect to nonpublic personal information about its
customers:
- Only such information received from you, through application forms or
otherwise, and information about your Eaton Vance fund transactions will be
collected.
- None of such information about you (or former customers) will be disclosed
to anyone, except as permitted by law (which includes disclosure to
employees necessary to service your account).
- Policies and procedures (including physical, electronic and procedural
safeguards) are in place that are designed to protect the confidentiality
of such information.
For more information about Eaton Vance's privacy policies,
call: 1-800-262-1122
EATON VANCE MUNICIPAL INCOME TRUST
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
151-7/03 CE-NASRC
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics applicable to its Principal
Executive Officer, Principal Financial Officer and Principal Accounting Officer.
The registrant undertakes to provide a copy of such code of ethics to any person
upon request, without charge, by calling 1-800-262-1122.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The registrant's Board has designated William H. Park, an independent trustee,
as its audit committee financial expert.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not required in this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not required in this filing.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not required in this filing since the registrant invests exclusively in
non-voting securities.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) It is the conclusion of the registrant's principal executive officer and
principal financial officer that the effectiveness of the registrant's current
disclosure controls and procedures (such disclosure controls and procedures
having been evaluated within 90 days of the date of this filing) provide
reasonable assurance that the information required to be disclosed by the
registrant has been recorded, processed, summarized and reported within the time
period specified in the Commission's rules and forms and that the information
required to be disclosed by the registrant has been accumulated and communicated
to the registrant's principal executive officer and principal financial officer
in order to allow timely decisions regarding required disclosure.
(b) There have been no significant changes in the registrant's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS
(a)(1) Registrant's Code of Ethics - Not applicable (please see Item 2).
(a)(2)(i) Treasurer's Section 302 certification.
(a)(2)(ii) President's Section 302 certification.
(b) Combined Section 906 certification.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Eaton Vance Municipal Income Trust
By: /s/ Thomas J. Fetter
--------------------
Thomas J. Fetter
President
Date: July 16,2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ James L. O'Connor
---------------------
James L. O'Connor
Treasurer
Date: July 16, 2003
By: /s/ Thomas J. Fetter
--------------------
Thomas J. Fetter
President
Date: July 16, 2003