UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-09141
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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
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Date of Fiscal Year End
May 31, 2004
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Date of Reporting Period
ITEM 1. REPORTS TO STOCKHOLDERS
[EV LOGO]
SEMIANNUAL REPORT MAY 31, 2004
[GRAPHIC IMAGE]
[GRAPHIC IMAGE]
EATON VANCE MUNICIPAL INCOME TRUST
[GRAPHIC IMAGE]
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.
IMPORTANT NOTICE
REGARDING DELIVERY OF
SHAREHOLDER DOCUMENTS
The Securities and Exchange Commission permits 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, 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, 2004
LETTER TO SHAREHOLDERS
[PHOTO OF THOMAS J. FETTER]
Thomas J. Fetter
President
The municipal bond market consists of a broad array of bond issues, with widely
varying features and performance characteristics that may make them appropriate
for a specific investment scenario. In this edition of our continuing
educational series, we will feature zero coupon bonds - a variety of bond that
has seen increasing use by investors over the past 20 years - and discuss why
they can provide flexibility in managing a bond portfolio.
THE 1980'S BROUGHT NEW VARIATIONS TO THE BOND MARKET...
Any discussion of zero coupon bonds should start with the term "coupon."
Traditionally, bonds were issued in certificate form, with interest coupons
attached, which the owner would clip and present for payment. The coupon rate
indicates the rate of annual interest the issuer pays to the bondholder. For
example, a $1,000 bond with a 5% coupon makes two semiannual interest payments
of $25 each.
Today, most bonds are issued as "book-entry bonds," registered in the owner's
name, but not delivered in certificate form. That change has not only replaced
the antiquated coupon-clipping system, but also encouraged the development of
new types of bonds - including zero coupon bonds, introduced in 1982.
ZERO-COUPONS: NO INTEREST PAYMENTS, BUT A PREDICTABLE LUMP-SUM PAYMENT AT
MATURITY...
Zero coupon bonds do not have coupons attached and do not make regular interest
payments. Instead, they are issued at a discount, usually well below par, or
face value. As with coupon bonds, the bondholder receives face value if the bond
is held to its maturity date. Over time - from its issuance to its maturity -
zero coupon bonds accrete to par, meaning that their price appreciates over time
to reflect the accrual of "imputed" compound interest. An investor holding a
zero coupon bond to maturity receives a lump sum payment from the issuer for
face value reflecting the initial investment plus interest that has accrued.
Although zero coupon bonds do not pay any interest until they mature, the
accrual of "imputed" compound interest is recognized currently.
ZERO COUPON BONDS PROVIDE PORTFOLIO MANAGERS ADDITIONAL FLEXIBILITY...
For a portfolio manager, zero coupons can play a useful strategic role. Like
other bonds, zero coupon bond prices are affected by market conditions, changes
in an issuer's underlying fundamentals and fluctuations in interest rates.
Because they pay no coupon or periodic interest payments, they typically display
more price sensitivity than other bonds in response to changes in interest
rates. Therefore, zero coupon bonds can provide more appreciation potential in a
declining interest rate environment. Of course, zero coupons display increased
DOWNSIDE volatility in the event of an INCREASE in interest rates.
Some zero coupon bonds start out as coupon-bearing bonds, which are then
deposited with a trustee and subsequently "stripped" of their coupons. New
securities are then created from principal and coupon payments. This allows an
investor to choose a maturity to match the time when funds will be needed.
Moreover, because of their many permutations, zero coupon bonds can help balance
income-oriented bonds with performance oriented zero coupons, providing more
versatility in managing a municipal portfolio.
TAX-EXEMPT BONDS CONTINUE TO OFFER OPPORTUNITIES FOR ISSUERS AND INVESTORS
ALIKE...
Throughout its history, the municipal market has helped finance public projects
and has pioneered new financing options for issuers - such as zero coupon bonds
- that offer new opportunities for investors. We at Eaton Vance remain confident
that the market will continue to offer such opportunities and emphasize our
continued commitment to this exciting market.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter
President
July 7, 2004
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
MANAGEMENT DISCUSSION
[PHOTO OF THOMAS M. METZOLD]
Thomas M. Metzold
Portfolio Manager
INVESTMENT ENVIRONMENT
- The U.S. economy strengthened significantly in the six months ended May 31,
2004. Despite sometimes unsettling news from Iraq, consumers continued to
spend, while businesses began to renew capital spending programs. Not
surprisingly, amid a strengthening economy and rising inflation, the bond
markets gave back some of their gains from the previous year.
- Rising job growth was among the key developments during the six-month period
ended May 31, 2004. While monthly labor data can be quite volatile, recent
trends suggest a favorable turn in the labor market. The nation's unemployment
rate was 5.6% in May 2004, down from 6.1% a year earlier. The Federal Reserve
has maintained a close watch on employment and price data. While holding its
Federal Funds rate - a key short-term interest rate barometer - at 1.00%
through May 2004, Chairman Greenspan indicated that the Fed was prepared to
raise rates if it detected an imminent threat of inflation. (A rate increase
was announced at the end of June 2004.)
- The municipal bond market performed generally in line with the Treasury market
during the six-month period ended May 31, 2004. Ten-year Treasury bond yields
- which were around 4.37% at November 30, 2003 - rose to 4.68% by May 31,
2004, while 10-year municipal yields rose from 3.81% to 4.21%. The Lehman
Brothers Municipal Bond Index retreated slightly during the six months ended
May 31, 2004, posting a total return of -0.22%.(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 -0.57% for the six months ended May 31, 2004. That return was
the result of a decrease in share price from $15.55 on November 30, 2003, to
$14.85 on May 31, 2004, and the reinvestment of $0.595 in regular monthly
dividends.(2)
- Based on net asset value, the Trust had a total return of -0.98% for the six
months ended May 31, 2004. That return was the result of a decrease in net
asset value per share from $14.09 on November 30, 2003, to $13.40 on May 31,
2004, and the reinvestment of $0.595 in regular monthly dividends.
- Based on the most recent dividend and a share price of $14.85, the Trust had a
market yield of 8.01% at May 31, 2004.(3) The Trust's market yield is
equivalent to a taxable yield of 12.32%.(4)
MANAGEMENT DISCUSSION
- Management continued to adjust coupon structure and call protection to address
changing market conditions. Coupon structure and call protection can have a
significant influence on the Trust's responsiveness to interest rate
fluctuations.
- The Trust remained selective within the hospital sector, its largest sector
weighting at May 31, 2004. With the industry facing pressure to contain costs,
the Trust focused on institutions that have significant market share, sound
management, and highly marketable health care specialities.
- Insured* transportation bonds were a large investment for the Trust.
Transportation-related bonds represent a significant portion of the nation's
municipal issuance and have increased in recent years amid growing
infrastructure financing needs. Many of the Trust's holdings were in issues
for airports, including Chicago's O'Hare International and Dallas-Fort Worth
International.
*Private insurance does not remove the risk of loss of principal associated
with insured investments.
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.
TRUST INFORMATION
as of May 31, 2004
PERFORMANCE
Average Annual Total Returns (by market value, New York Stock Exchange)
One Year 6.90%
Life of Trust (1/29/99) 6.97%
Average Annual Total Returns (at net asset value)
One Year 3.77%
Life of Trust (1/29/99) 4.93%
(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.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. RETURNS ARE HISTORIC AND
ARE CALCULATED BY DETERMINING THE PERCENTAGE CHANGE IN SHARE PRICE OR NET
ASSET VALUE WITH ALL DISTRIBUTIONS REINVESTED. INVESTMENT RETURN AND MARKET
PRICE WILL FLUCTUATE SO THAT SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. PERFORMANCE IS FOR THE STATED TIME PERIOD ONLY;
DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN
QUOTED.
3
EATON VANCE MUNICIPAL INCOME TRUST as of May 31, 2004
PORTFOLIO OF INVESTMENTS (UNAUDITED)
TAX-EXEMPT INVESTMENTS -- 155.7%
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
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COGENERATION -- 1.3%
$ 2,950 Maryland Energy Cogeneration, (AES Warrior Run), (AMT),
7.40%, 9/1/19 $ 2,978,261
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$ 2,978,261
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EDUCATION -- 2.6%
$ 2,250 California Educational Facilities Authority, Residual
Certificates, Variable Rate, 12/1/32(1)(2) $ 2,382,120
3,430 Massachusetts Development Finance Agency,
(Boston University), 5.45%, 5/15/59 3,379,853
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$ 5,761,973
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ELECTRIC UTILITIES -- 9.2%
$ 6,500 Brazos River Authority, TX, (Reliant Energy, Inc.),
5.20%, 12/1/18 $ 7,017,270
2,000 Brazos River Authority, TX, PCR (Texas Energy Co.), (AMT),
6.75%, 4/1/38 2,236,860
3,550 Mississippi Business Finance Corp., (System Energy
Resources, Inc.), 5.90%, 5/1/22 3,575,418
7,250 North Carolina Municipal Power Agency, (Catawba),
6.50%, 1/1/20 7,890,392
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$ 20,719,940
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ESCROWED / PREREFUNDED -- 7.7%
$ 5,000 Bakersfield, CA, (Bakersfield Assisted Living Center),
Escrowed to Maturity, 0.00%, 4/15/21 $ 2,091,950
35,000 Dawson Ridge, CO, Metropolitan District #1,
Escrowed to Maturity, 0.00%, 10/1/22 13,180,650
1,725 Maricopa County, AZ, IDA, (Place Five and The Greenery),
Escrowed to Maturity, 8.625%, 1/1/27 2,067,240
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$ 17,339,840
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GENERAL OBLIGATIONS -- 7.9%
$ 1,500 California, 5.25%, 11/1/29 $ 1,496,805
2,500 California, 5.25%, 4/1/30 2,491,050
4,950 California, 5.50%, 11/1/33 5,050,089
2,000 Kershaw County, SC, School District, 5.00%, 2/1/18 2,053,500
1,200 New York, NY, Variable Rate, 6/1/28(1)(2) 1,203,456
5,000 Puerto Rico, Variable Rate, 7/1/29(2)(3) 5,487,300
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$ 17,782,200
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HEALTH CARE - MISCELLANEOUS -- 1.3%
$ 624 Tax Exempt Securities Trust, Community Health Provider,
Pooled Loan Program, 6.00%, 12/1/36 $ 621,453
1,647 Tax Exempt Securities Trust, Community Health Provider,
Pooled Loan Program, 6.25%, 12/1/36 1,680,088
625 Tax Exempt Securities Trust, Community Health Provider,
Pooled Loan Program, 7.75%, 12/1/36 619,658
----------------------------------------------------------------------------------------------------------------
$ 2,921,199
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HOSPITAL -- 23.1%
$ 2,500 California Health Facilities Authority, (Cedars Sinai Medical
Center), Variable Rate, 12/1/34(2)(3) $ 2,793,225
930 Chautauqua County, NY, IDA, (Women's Christian
Association), 6.35%, 11/15/17 859,525
985 Chautauqua County, NY, IDA, (Women's Christian
Association), 6.40%, 11/15/29 907,530
1,000 Halifax, FL, Medical Center,
7.25%, 10/1/24 1,054,490
6,000 Henderson, NV, Health Care Facility,
5.625%, 7/1/24 5,837,880
2,765 Highland County, OH, (Joint Township Hospital District),
6.75%, 12/1/29 2,513,357
5,000 Illinois Health Facility Authority, (Loyola University Health
System), 6.00%, 7/1/21 5,111,050
4,750 Louisiana Public Facilities Authority, (Tuoro Infirmary),
5.625%, 8/15/29 4,686,540
2,000 Martin County, MN, (Fairmont Community Hospital
Association), 6.625%, 9/1/22 1,953,240
1,150 Mecosta County, MI, General Hospital,
5.75%, 5/15/09 1,167,342
2,500 Mecosta County, MI, General Hospital,
6.00%, 5/15/18 2,402,925
4,260 New Jersey Health Care Facilities Financing Authority,
(Capital Health System), 5.25%, 7/1/27 3,986,806
1,500 New Jersey Health Care Facilities Financing Authority,
(Trinitas Hospital), 7.50%, 7/1/30 1,632,135
5,000 North Central, TX, Health Facility Development Corp.,
(Baylor Healthcare System), 5.125%, 5/15/29 4,849,250
1,470 Oneonta, AL, Eastern Health Care Facility Financing Authority,
(Eastern Health Systems, Inc.), 7.75%, 7/1/21 1,612,781
7,000 Rhode Island HEFA, (St. Joseph Health Services),
5.50%, 10/1/29 6,178,620
2,425 Southwestern Illinois, Development Authority, (Anderson
Hospital), 5.625%, 8/15/29 2,275,935
2,500 Sullivan County, TN, Health Educational and Housing Facility
Board, (Wellmont Health System), 6.25%, 9/1/32 2,468,675
----------------------------------------------------------------------------------------------------------------
$ 52,291,306
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See notes to financial statements
4
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
----------------------------------------------------------------------------------------------------------------
HOUSING -- 13.5%
$ 990 California Statewide Communities Development Authority,
Variable Rate, 6/1/09(2)(3) $ 717,978
4,000 Charter Mac Equity Trust, TN,
6.00%, 4/30/19 4,039,400
4,000 Charter Mac Equity Trust, TN, (AMT),
6.625%, 6/30/09 4,359,880
3,185 Florida Capital Projects Finance Authority, Student Housing
Revenue, (Florida University), 7.75%, 8/15/20 3,206,276
925 Lake Creek, CO, Affordable Housing Corp., Multifamily,
7.00%, 12/1/23 826,062
4,485 Louisiana Public Facilities Authority, (Eden Point),
6.25%, 3/1/34 3,872,349
4,000 Muni Mae Tax-Exempt Bond, LLC, (AMT),
6.875%, 6/30/09 4,218,920
3,175 North Little Rock, AR, Residential Housing Facilities,
(Parkstone Place), 6.50%, 8/1/21 2,851,055
3,590 Oregon Health Authority, (Trillium Affordable Housing),
(AMT), 6.75%, 2/15/29 3,151,840
970 Raleigh, NC, Housing Authority, Multifamily, (Cedar Point),
7.00%, 11/1/30(4) 101,850
3,300 Texas Student Housing Corp., (University of Northern Texas),
6.75%, 7/1/16 3,208,293
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$ 30,553,903
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INDUSTRIAL DEVELOPMENT REVENUE -- 6.7%
$ 1,911 Abia Development Corp., TX, (Austin Cargoport
Development), (AMT), 6.50%, 10/1/24 $ 1,671,611
1,835 Broward County, FL, IDR, (Lynxs Cargoport), (AMT),
6.75%, 6/1/19 1,654,630
2,500 Gulf Coast, TX, Waste Disposal Authority, (Valero Energy
Corp.) (AMT), 5.70%, 4/1/32 2,428,500
6,000 New Jersey EDA, (Continental Airlines), (AMT),
6.25%, 9/15/29 4,400,520
3,500 New York City, NY, Industrial Development Agency,
(American Airlines, Inc.), (AMT), 8.50%, 8/1/28 2,660,000
2,950 Phoenix, AZ, IDA, (America West Airlines, Inc.), (AMT),
6.25%, 6/1/19 2,287,047
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$ 15,102,308
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INSURED - EDUCATION -- 1.3%
$ 3,000 Massachusetts HEFA, (Berklee College of Music), (MBIA),
Variable Rate, 10/1/27(2)(3) $ 3,013,470
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$ 3,013,470
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INSURED - ELECTRIC UTILITIES -- 0.8%
$ 100 Los Angeles, CA, Department of Water and Power, (MBIA),
Variable Rate, 2/15/24(1)(2) $ 526,200
1,350 Wamego, KS, PCR, (MBIA),
5.30%, 6/1/31(5) 1,361,583
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$ 1,887,783
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INSURED - ESCROWED / PREREFUNDED -- 1.8%
$ 4,250 Metropolitan Transportation Authority of New York,
Escrowed to Maturity, (FGIC), 4.75%, 7/1/26 $ 4,113,788
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$ 4,113,788
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INSURED - GENERAL OBLIGATIONS -- 13.0%
$ 500 California, (FGIC), Variable Rate, 12/1/29(1)(2) $ 1,106,300
3,500 California, (FGIC), Variable Rate, 9/1/30(1)(2) 3,574,235
2,000 Chicago, IL, (MBIA), 5.00%, 1/1/41 1,926,820
30,160 Chicago, IL, Board of Education, (FGIC),
0.00%, 12/1/22 11,148,644
13,000 Illinois Development Finance Authority, (Local
Government Program-Elgin School District-U46),
(FSA), 0.00%, 1/1/20 5,759,650
4,000 Puerto Rico, (FSA), Variable Rate, 7/1/27(1)(2) 4,281,000
1,500 Santa Maria, CA, (Joint Union High School District), (FSA),
5.25%, 8/1/25 1,545,270
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$ 29,341,919
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INSURED - HOSPITAL -- 8.3%
$ 19,705 Kentucky EDA, (Norton Healthcare, Inc.), (MBIA),
0.00%, 10/1/25 $ 5,971,600
23,020 Kentucky EDA, (Norton Healthcare, Inc.), (MBIA),
0.00%, 10/1/26 6,526,861
10,000 Kentucky EDA, (Norton Healthcare, Inc.), (MBIA),
0.00%, 10/1/27 2,667,600
4,000 New Jersey Health Care Facilities Financing Authority,
(St. Barnabas Medical Center), (MBIA),
Variable Rate, 7/1/28(1)(2) 3,640,520
----------------------------------------------------------------------------------------------------------------
$ 18,806,581
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INSURED - LEASE REVENUE / CERTIFICATES OF
PARTICIPATION -- 2.2%
$ 5,000 San Bernardino County, CA, Medical Center Financing
Project, (MBIA), 5.00%, 8/1/28 $ 4,920,400
----------------------------------------------------------------------------------------------------------------
$ 4,920,400
----------------------------------------------------------------------------------------------------------------
See notes to financial statements
5
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
----------------------------------------------------------------------------------------------------------------
INSURED - SPECIAL TAX REVENUE -- 0.1%
$ 60 South Orange County, CA, Public Financing Authority,
(FGIC), DRIVERS, Variable Rate, 8/15/15(1)(2) $ 214,770
----------------------------------------------------------------------------------------------------------------
$ 214,770
----------------------------------------------------------------------------------------------------------------
INSURED - TRANSPORTATION -- 21.7%
$ 9,000 Central Texas Turnpike Authority, (AMBAC),
0.00%, 8/15/21 $ 3,614,760
3,500 Chicago, IL, O'Hare International Airport, (AMBAC), (AMT),
5.375%, 1/1/32 3,512,810
2,500 Dallas-Fort Worth, TX, International Airport, (FGIC), (AMT),
5.50%, 11/1/20(6) 2,593,575
4,930 Dallas-Fort Worth, TX, International Airport, (FGIC), (AMT),
5.75%, 11/1/30 5,084,210
4,500 Dallas-Fort Worth, TX, International Airport, (FGIC), (AMT),
6.125%, 11/1/35 4,789,125
2,400 Massachusetts Turnpike Authority, Metropolitan Highway
System, (MBIA), Variable Rate, 1/1/27(1)(2) 2,235,528
3,500 Miami-Dade County, FL, International Airport, (FGIC),
5.00%, 10/1/37 3,425,275
7,500 Minneapolis and St. Paul, MN, Metropolitan Airport
Commission, (FGIC), 5.25%, 1/1/32 7,584,975
5,500 Nevada Department of Business and Industry, (Las Vegas
Monorail -1st Tier), (AMBAC), 5.375%, 1/1/40 5,581,840
2,000 Puerto Rico Highway and Transportation Authority, (FSA),
Variable Rate, 7/1/32(1)(2) 2,002,400
7,000 San Antonio, TX, Airport System, (Improvements), (FGIC),
5.25%, 7/1/21 7,112,630
1,500 South Carolina Transportation Infrastructure, (AMBAC),
5.00%, 10/1/33 1,476,075
----------------------------------------------------------------------------------------------------------------
$ 49,013,203
----------------------------------------------------------------------------------------------------------------
INSURED - WATER AND SEWER -- 0.9%
$ 1,150 Jupiter, FL, (AMBAC), 4.75%, 10/1/28 $ 1,093,248
1,000 Jupiter, FL, (AMBAC), 4.75%, 10/1/33 943,340
----------------------------------------------------------------------------------------------------------------
$ 2,036,588
----------------------------------------------------------------------------------------------------------------
NURSING HOME -- 3.6%
$ 3,445 Ohio HFA, Retirement Rental Housing, (Encore Retirement
Partners), 6.75%, 3/1/19 $ 2,932,487
750 Okaloosa County, FL, Retirement Rental Housing,
(Encore Retirement Partners), 6.125%, 2/1/14 664,733
2,000 Orange County, FL, Health Facilities Authority, (Westminster
Community Care), 6.75%, 4/1/34 1,697,560
767 Tarrant County, TX, Health Facilities Authority,
8.00%, 9/1/25(4) 114,800
1,154 Tarrant County, TX, Health Facilities Authority,
(3927 Foundation), 10.25%, 9/1/19(4) 34,628
2,960 Wisconsin HEFA, (Wisconsin Illinois Senior Housing),
7.00%, 8/1/29 2,727,168
----------------------------------------------------------------------------------------------------------------
$ 8,171,376
----------------------------------------------------------------------------------------------------------------
OTHER REVENUE -- 16.5%
$ 4,000 California Statewide Communities Development Authority,
(East Valley Tourist Development Authority),
8.25%, 10/1/14 $ 4,051,960
3,000 Capital Trust Agency, FL, (Seminole Tribe Convention),
8.95%, 10/1/33 3,499,320
4,000 Capital Trust Agency, FL, (Seminole Tribe Convention),
10.00%, 10/1/33 4,830,680
4,450 Golden Tobacco Securitization Corp., CA,
6.75%, 6/1/39 3,923,031
2,900 Golden Tobacco Securitization Corp., CA,
Variable Rate, 6/1/31(2)(3) 2,865,142
1,500 Mohegan Tribe Indians, CT, Gaming Authority,
(Public Improvements), 6.25%, 1/1/21 1,596,210
1,000 New Jersey EDA, (School Facilities),
5.00%, 6/15/26 991,400
5,000 New Jersey EDA, (School Facilities),
Variable Rate, 6/15/28(2)(3) 4,879,800
3,900 Puerto Rico Infrastructure Financing Authority,
Variable Rate, 10/1/32(1)(2)(7) 4,888,767
3,300 Santa Fe, NM, (Crow Hobbs), 8.50%, 9/1/16 3,344,649
3,000 Tobacco Settlement Financing Corp., NJ,
Variable Rate, 6/1/39(2)(3) 2,322,030
----------------------------------------------------------------------------------------------------------------
$ 37,192,989
----------------------------------------------------------------------------------------------------------------
SENIOR LIVING / LIFE CARE -- 3.6%
$ 1,960 Cliff House Trust, PA, (AMT), 6.625%, 6/1/27 $ 1,556,436
190 Delaware County, PA, IDA, (Glen Riddle), (AMT),
8.125%, 9/1/05 192,101
2,000 Delaware County, PA, IDA, (Glen Riddle), (AMT),
8.625%, 9/1/25 2,083,780
3,240 Logan County, CO, Industrial Development Revenue,
(TLC Care Choices, Inc.), 6.875%, 12/1/23 2,885,900
1,400 Mesquite, TX, Health Facilities Authority, (Christian
Retirement Facility), 7.625%, 2/15/28 1,460,984
----------------------------------------------------------------------------------------------------------------
$ 8,179,201
----------------------------------------------------------------------------------------------------------------
SPECIAL TAX REVENUE -- 4.0%
$ 3,280 Bell Mountain Ranch, CO, Metropolitan District,
6.625%, 11/15/25 $ 3,321,886
3,600 Black Hawk, CO, Business Improvement District,
6.50%, 12/1/11 3,511,548
See notes to financial statements
6
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
----------------------------------------------------------------------------------------------------------------
SPECIAL TAX REVENUE (CONTINUED)
$ 695 Longleaf, FL, Community Development District,
6.20%, 5/1/09 $ 669,834
1,725 Longleaf, FL, Community Development District,
6.65%, 5/1/20 1,583,153
----------------------------------------------------------------------------------------------------------------
$ 9,086,421
----------------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 4.6%
$ 3,750 Kent County, MI, Airport Facility, (AMT),
Variable Rate, 1/1/25(2)(3) $ 3,567,000
7,000 Port Authority of New York and New Jersey,
5.00%, 9/1/33 6,857,130
----------------------------------------------------------------------------------------------------------------
$ 10,424,130
----------------------------------------------------------------------------------------------------------------
TOTAL TAX-EXEMPT INVESTMENTS -- 155.7%
(IDENTIFIED COST $350,569,718) $ 351,853,549
----------------------------------------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES -- 2.3% $ 5,293,537
----------------------------------------------------------------------------------------------------------------
AUCTION PREFERRED SHARES PLUS CUMULATIVE
UNPAID DIVIDENDS -- (58.0)% $ (131,069,641)
----------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON
SHARES -- 100.0% $ 226,077,445
----------------------------------------------------------------------------------------------------------------
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
AMBAC - AMBAC Financial Group, Inc.
FGIC - Financial Guaranty Insurance Company
FSA - Financial Security Assurance, Inc.
MBIA - Municipal Bond Insurance Association
At May 31, 2004, the concentration of the Trust's investments in the various
states, determined as a percentage of net assets, is as follows:
California 17.6%
Colorado 10.5%
Florida 10.8%
Illinois 13.1%
Texas 20.4%
Others, representing less than 10% individually 83.3%
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,
2004, 32.2% 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 an individual financial
institution ranged from 3.9% to 14.4% of total investments.
(1) Security has been issued as a leveraged inverse floater bond.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 2004,
the aggregate value of the securities is $51,701,241 or 22.9% of the
Trust's net assets.
(3) Security has been issued as an inverse floater bond.
(4) Non-income producing security.
(5) When-issued security.
(6) Security (or a portion thereof) has been segregated to cover when-issued
securities.
(7) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.7
See notes to financial statements
7
EATON VANCE MUNICIPAL INCOME TRUST as of May 31, 2004
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
AS OF MAY 31, 2004
ASSETS
Investments, at value (identified cost, $350,569,718) $ 351,853,549
Receivable for investments sold 40,000
Interest receivable 7,214,038
Receivable for daily variation margin on open financial futures contracts 495,315
Prepaid expenses 182,603
----------------------------------------------------------------------------------------------
TOTAL ASSETS $ 359,785,505
----------------------------------------------------------------------------------------------
LIABILITIES
Payable to affiliate for Trustees' fees $ 2,278
Payable for when-issued securities 1,350,000
Due to bank 1,193,206
Accrued expenses 92,935
----------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 2,638,419
----------------------------------------------------------------------------------------------
AUCTION PREFERRED SHARES (5,240 SHARES OUTSTANDING) AT LIQUIDATION VALUE PLUS
CUMULATIVE UNPAID DIVIDENDS $ 131,069,641
----------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES $ 226,077,445
----------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS
Common Shares, $0.01 par value, unlimited number of shares authorized,
16,872,006 shares issued and outstanding $ 168,720
Additional paid-in capital 249,651,203
Accumulated net realized loss (computed on the basis of identified cost) (31,732,936)
Accumulated undistributed net investment income 4,098,936
Net unrealized appreciation (computed on the basis of identified cost) 3,891,522
----------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES $ 226,077,445
----------------------------------------------------------------------------------------------
NET ASSET VALUE PER COMMON SHARE
($226,077,445 DIVIDED BY 16,872,006 COMMON SHARES ISSUED AND OUTSTANDING) $ 13.40
----------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS
ENDED MAY 31, 2004
INVESTMENT INCOME
Interest $ 12,848,980
----------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 12,848,980
----------------------------------------------------------------------------------------------
EXPENSES
Investment adviser fee $ 1,282,777
Administration fee 366,507
Trustees' fees and expenses 11,050
Transfer and dividend disbursing agent fees 124,282
Preferred shares remarketing agent fee 164,200
Custodian fee 74,750
Legal and accounting services 29,440
Printing and postage 28,974
Miscellaneous 50,026
----------------------------------------------------------------------------------------------
TOTAL EXPENSES $ 2,132,006
----------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 10,716,974
----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,725,638
Financial futures contracts (1,228,441)
----------------------------------------------------------------------------------------------
NET REALIZED GAIN $ 497,197
----------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ (14,118,007)
Financial futures contracts 1,995,139
----------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $ (12,122,868)
----------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (11,625,671)
----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM INCOME $ (698,395)
----------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (1,607,092)
----------------------------------------------------------------------------------------------
See notes to financial statements
8
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
INCREASE (DECREASE) MAY 31, 2004 YEAR ENDED
IN NET ASSETS (UNAUDITED) NOVEMBER 30, 2003
------------------------------------------------------------------------------------------
From operations --
Net investment income $ 10,716,974 $ 21,202,621
Net realized gain (loss) 497,197 (3,246,611)
Net change in unrealized
appreciation (depreciation) (12,122,868) 20,262,444
Distributions to preferred shareholders
from net investment income (698,395) (1,586,402)
------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS $ (1,607,092) $ 36,632,052
------------------------------------------------------------------------------------------
Distributions to common shareholders --
From net investment income $ (10,012,004) $ (18,871,152)
------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS $ (10,012,004) $ (18,871,152)
------------------------------------------------------------------------------------------
Capital share transactions --
Reinvestment of distributions to
common shareholders $ 1,136,067 $ 2,524,723
------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS $ 1,136,067 $ 2,524,723
------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ (10,483,029) $ 20,285,623
------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES
At beginning of period $ 236,560,474 $ 216,274,851
------------------------------------------------------------------------------------------
AT END OF PERIOD $ 226,077,445 $ 236,560,474
------------------------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME
INCLUDED IN NET ASSETS APPLICABLE TO COMMON SHARES
AT END OF PERIOD $ 4,098,936 $ 4,092,361
------------------------------------------------------------------------------------------
See notes to financial statements
9
Financial Highlights
Selected data for a common share outstanding during the periods stated
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 2004 ----------------------------------------
(UNAUDITED)(1) 2003(1) 2002(1)(2) 2001(1)
---------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning of period (Common shares) $ 14.090 $ 13.020 $ 12.930 $ 11.950
---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
Net investment income $ 0.637 $ 1.269 $ 1.255 $ 1.124
Net realized and unrealized gain (loss) (0.691) 1.026 0.013 0.873
Distribution to preferred shareholders from net
investment income (0.041) (0.095) (0.148) (0.240)
---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ (0.095) $ 2.200 $ 1.120 $ 1.757
---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income $ (0.595) $ 1.130 $ (1.030) $ (0.777)
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS $ (0.595) $ (1.130) $ (1.030) $ (0.777)
---------------------------------------------------------------------------------------------------------------------------
PREFERRED AND COMMON SHARES OFFERING COSTS CHARGED TO
PAID-IN CAPITAL $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------------------
PREFERRED SHARES UNDERWRITING DISCOUNTS $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD (COMMON SHARES) $ 13.400 $ 14.090 $ 13.020 $ 12.930
---------------------------------------------------------------------------------------------------------------------------
MARKET VALUE -- END OF PERIOD (COMMON SHARES) $ 14.850 $ 15.550 $ 14.050 $ 13.500
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(4) (0.57)% 20.02% 12.32% 28.95%
---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
-------------------------
2000(1) 1999(1)(3)
---------------------------------------------------------------------------------------
Net asset value -- Beginning of period (Common shares) $ 11.720 $ 15.000
---------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
Net investment income $ 1.083 $ 0.837
Net realized and unrealized gain (loss) 0.260 (3.246)
Distribution to preferred shareholders from net
investment income (0.328) (0.197)
---------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ 1.015 $ (2.606)
---------------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income $ (0.785) $ (0.550)
---------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS $ (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) $ 11.950 $ 11.720
---------------------------------------------------------------------------------------
MARKET VALUE -- END OF PERIOD (COMMON SHARES) $ 11.125 $ 11.688
---------------------------------------------------------------------------------------
TOTAL RETURN(4) 2.05% (18.74)%
---------------------------------------------------------------------------------------
See notes to financial statements
10
Selected data for a common share outstanding during the periods stated
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 2004 ----------------------------------------
(UNAUDITED)(1) 2003(1) 2002(1)(2) 2001(1)
---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA+ ++
Net assets applicable to common shares, end of period
(000's omitted) $ 226,077 $ 236,560 $ 216,275 $ 212,315
Ratios (As a percentage of average net assets
applicable to common shares):
Net expenses(5) 1.81%(6) 1.80% 1.89% 1.88%
Net expenses after custodian fee reduction(5) 1.81%(6) 1.80% 1.88% 1.88%
Net investment income(5) 9.10%(6) 9.37% 9.69% 8.79%
Portfolio Turnover 12% 30% 14% 60%
---------------------------------------------------------------------------------------------------------------------------
+ The expenses of the Trust may reflect a voluntary
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)
Expenses after custodian fee reduction(5)
Net investment income(5)
Net investment income per share
++ 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) 1.14% 1.17% 1.15%
Net expenses after custodian fee reduction 1.16%(6) 1.14% 1.17% 1.15%
Net investment income 5.85%(6) 5.93% 6.01% 5.40%
---------------------------------------------------------------------------------------------------------------------------
+ The expenses of the Trust reflect a voluntary
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
Expenses after custodian fee reduction
Net investment income
---------------------------------------------------------------------------------------------------------------------------
Senior Securities:
Total preferred shares outstanding 5,240 5,240 5,240 5,240
Asset coverage per preferred share(7) $ 68,158 $ 70,154 $ 66,291 $ 65,548
Involuntary liquidation preference per preferred
share(8) $ 25,000 $ 25,000 $ 25,000 $ 25,000
Approximate market value per preferred share(8) $ 25,000 $ 25,000 $ 25,000 $ 25,000
---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
-------------------------
2000(1) 1999(1)(3)
---------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA+ ++
Net assets applicable to common shares, end of period
(000's omitted) $ 194,676 $ 190,209
Ratios (As a percentage of average net assets
applicable to common shares):
Net expenses(5) 1.95% 1.76%(6)
Net expenses after custodian fee reduction(5) 1.91% 1.70%(6)
Net investment income(5) 9.47% 7.38%(6)
Portfolio Turnover 66% 151%
---------------------------------------------------------------------------------------
+ The expenses of the Trust may reflect a voluntary
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 1.15% 1.14%(6)
Net expenses after custodian fee reduction 1.12% 1.10%(6)
Net investment income 5.56% 4.77%(6)
---------------------------------------------------------------------------------------
+ The expenses of the Trust reflect a voluntary
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
Asset coverage per preferred share(7) $ 62,155 $ 61,308
Involuntary liquidation preference per preferred
share(8) $ 25,000 $ 25,000
Approximate market value per preferred share(8) $ 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, 2004
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 provide 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 and options on
futures contracts listed on commodity exchanges are valued at closing
settlement prices. Over-the-counter options on futures contracts are normally
valued at the mean between the latest bid and asked prices. Interest rate
swaps are normally valued on the basis of valuations furnished by a broker.
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 not readily available 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, 2003, the Trust, for federal income tax purposes, had a capital
loss carryover of $31,928,458 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), November 30, 2009 ($5,266,337), and November 30, 2011
($2,541,236). 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
12
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.
G INTEREST RATE SWAPS -- The Trust may enter 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 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, 2004 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 the 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 8, 2003, a special dividend period of 733 days was set on the
series A shares. The dividend rate, which matures on July 12, 2005, is 1.25%.
Dividend rates ranged from 0.45% to 1.25% for Series B Shares, during the six
months ended May 31, 2004. 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 8, 2003, the Series A shares
set a special dividend period of 733 days. The applicable dividend rate for
13
the Auction Preferred Shares on May 31, 2004 was 1.25% and 1.150%, for Series
A and Series B Shares, respectively. For the six months ended May 31, 2004,
the Trust paid dividends to Auction Preferred shareholders amounting to
$420,985 and $277,410 for Series A and Series B Shares, respectively,
representing an average APS dividend rate for such period of 1.25% and 88%,
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, 2004, the fee was equivalent to 0.70% (annualized) of the
Trust's average weekly gross assets and amounted to $1,282,777. EVM also
serves as the administrator of the Trust. An administration fee, computed at
the annual rate of 0.20% (annualized) 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, 2004, the administrative fee
amounted to $366,507.
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 $50,810,842 and $43,134,105, respectively,
for the six months ended May 31, 2004.
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, 2004, as computed for Federal
income tax purposes, are as follows:
AGGREGATE COST $ 350,107,648
------------------------------------------------------------------
Gross unrealized appreciation $ 14,160,605
Gross unrealized depreciation (12,414,704)
------------------------------------------------------------------
NET UNREALIZED APPRECIATION $ 1,745,901
------------------------------------------------------------------
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, 2004 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 2003
-----------------------------------------------------------------------------
Shares issued pursuant to the Trust's
dividend reinvestment plan 77,127 181,895
-----------------------------------------------------------------------------
NET INCREASE 77,127 181,895
-----------------------------------------------------------------------------
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. A summary
of obligations under these financial instruments at May 31, 2004 is as
follows:
FUTURES CONTRACTS
EXPIRATION NET UNREALIZED
DATE(S) CONTRACTS POSITION APPRECIATION
-----------------------------------------------------------------------------
6/04 400 U.S. Treasury Bond Short $ 1,729,306
6/04 500 U.S. Treasury Note Short 878,385
-----------------------------------------------------------------------------
$ 2,607,691
-----------------------------------------------------------------------------
14
At May 31, 2004, the Trust had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
9 ANNUAL MEETING OF SHAREHOLDERS OF MUNICIPAL INCOME TRUST
The Trust held its Annual Meeting of Shareholders on March 19, 2004. The
following action was taken by the shareholders:
ITEM 1: The election of James B. Hawkes and Samuel L. Hayes, III as Class II
Trustees of the Trust for a three-year term expiring in 2007.
Mr. Hayes was designated the Nominee to be elected solely by APS
shareholders:
NUMBER OF SHARES
NOMINEE FOR CLASS II TRUSTEE -------------------------
ELECTED BY APS SHAREHOLDERS FOR WITHHELD
------------------------------------------------------------------------
Samuel L. Hayes, III 4,682 4
NUMBER OF SHARES
NOMINEE FOR CLASS II TRUSTEE -------------------------
ELECTED BY ALL SHAREHOLDERS FOR WITHHELD
------------------------------------------------------------------------
James B. Hawkes 16,114,071 165,112
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.
---------------------------------------------
Please print exact name on account:
---------------------------------------------
Shareholder signature Date
---------------------------------------------
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 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, 2004, our records indicate that there are 172 registered
shareholders and approximately 7,900 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
Samuel L. Hayes, III
William H. Park
Ronald A. Pearlman
Norton H. Reamer
Lynn A. Stout
18
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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 MUNICIPAL INCOME TRUST
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
151-7/04 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, Samuel L. Hayes, III and
Norton H. Reamer, each an independent trustee, as its audit committee financial
experts. Mr. Park is a certified public accountant who is the President and
Chief Executive Officer of Prizm Capital Management, LLC (investment management
firm). Previously, he served as Executive Vice President and Chief Financial
Officer of United Asset Management Corporation ("UAM") (a holding company owning
institutional investment management firms). Mr. Hayes is the Jacob H. Schiff
Professor of Investment Banking Emeritus of the Harvard University Graduate
School of Business Administration. Mr. Reamer is the President, Chief Executive
Officer and a Director of Asset Management Finance Corp. (a specialty finance
company serving the investment management industry) and is President of Unicorn
Corporation (an investment and financial advisory services company). Formerly,
Mr. Reamer was Chairman of Hellman, Jordan Management Co., Inc. (an investment
management company) and Advisory Director of Berkshire Capital Corporation (an
investment banking firm), Chairman of the Board of UAM and Chairman, President
and Director of the UAM Funds (mutual funds).
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. SCHEDULE OF INVESTMENTS
Please see schedule of investments contained in the Report to Stockholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
The Board of Trustees of the Trust has adopted a proxy voting policy and
procedure (the "Fund Policy"), pursuant to which the Trustees have delegated
proxy voting responsibility to the Fund's investment adviser and adopted the
investment adviser's proxy voting policies and procedures (the "Policies") which
are described below. The Trustees will review the Fund's proxy voting records
from time to time and will annually consider approving the Policies for the
upcoming year. In the event that a conflict of interest arises between the
Fund's shareholders and the investment adviser, the administrator, or any of
their affiliates or any affiliate of the Fund, the investment adviser will
generally refrain from voting the proxies related to the companies giving rise
to such conflict until it consults with the Board of the Fund except as
contemplated under the Fund Policy. The Board's Special Committee will instruct
the investment adviser on the appropriate course of action.
The Policies are designed to promote accountability of a company's management to
its shareholders and to align the interests of management with those
shareholders. The investment adviser will generally support company management
on proposals relating to environmental and social policy issues and on matters
regarding the state of organization of the company. On all other matters, the
investment adviser will take management's proposals under advisement but will
consider each matter in light of the guidelines set forth in the Policies.
Except in the instance of routine matters related to corporate administration
which are not expected to have a significant economic impact on the company or
its shareholders (on which the investment adviser will routinely vote with
management), the investment adviser will review each matter on a case-by-case
basis and reserves the right to deviate from the Policies guidelines when it
believes the situation warrants such a deviation. The Policy includes voting
guidelines for matters relating to, among other things, the election of
directors, approval of independent auditors, executive compensation, corporate
structure and anti-takeover defenses. The investment adviser may abstain from
voting from time to time where it determines that the costs associated with
voting a proxy outweighs the benefits derived from exercising the right to vote.
In addition, the investment adviser will monitor situations that may result in a
conflict of interest between the Fund's shareholders and the investment adviser,
the administrator, or any of their affiliates or any affiliate of the Fund by
maintaining a list of significant existing and prospective corporate clients.
The investment adviser's personnel responsible for reviewing and voting proxies
on behalf of the Fund will report any proxy received or expected to be received
from a company included on that list to the investment adviser's general counsel
or chief equity investment officer. The general counsel or chief equity
investment officer will determine if a conflict exists. If a conflict does
exist, the proxy will either be voted strictly in accordance with the Policy or
the investment adviser will seek instruction on how to vote from the Board.
Effective August 31, 2004, information on how the Fund voted proxies relating to
portfolio securities during the 12 month period ended June 30, 2004 [is/will be]
available (1) without charge, upon request, by calling 1-800-262-1122, and (2)
on the Securities and Exchange Commission's website at http://www.sec.gov.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not required in this filing.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Effective February 9, 2004, the Governance Committee of the Board of Trustees
formalized the procedures by which a Fund's shareholders may recommend nominees
to the registrant's Board of Trustees. The Governance Committee shall, when
identifying candidates for the position of Independent Trustee, consider any
such candidate recommended by a shareholder of a Fund if such recommendation
contains sufficient background information concerning the candidate, and is
received in a sufficiently timely manner (and in any event no later than the
date specified for receipt of shareholder proposals in any applicable proxy
statement with respect to a Fund). Shareholders shall be directed to address any
such recommendations to the attention of the Governance Committee, c/o the
Secretary of the Fund.
ITEM 10. 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 changes in the registrant's internal controls over
financial reporting during the period that has materially affected, or is
reasonably likely to materially affect the registrant's internal control over
financial reporting.
ITEM 11. 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 20, 2004
-------------
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 20, 2004
--------------
By: /s/ Thomas J. Fetter
--------------------------------------------
Thomas J. Fetter
President
Date: July 20, 2004
-------------