[GRAPHIC]
EDUCATION
SEMIANNUAL REPORT MAY 31, 2002
EATON VANCE MUNICIPAL INCOME TRUST
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2002
LETTER TO SHAREHOLDERS
[PHOTO OF THOMAS J. FETTER]
Thomas J. Fetter
President
Of the many variables confronting the municipal bond investor, few are as
crucial to performance as maintaining good call protection. Most municipal bonds
include call provisions, which outline the terms under which the bond issuer can
redeem the bond prior to its stated maturity date. While these provisions
increase the issuer's financial flexibility, they create an ongoing challenge
for municipal bond investors.
CALL PROTECTION IS CRITICAL TO DELIVERING A CONSISTENT DIVIDEND...
As most investors know, fund dividends are subject to changes in the prevailing
interest rate level. As rates decline, fund dividends understandably reflect
those fluctuations. However, call provisions permit bond issuers to refinance
their outstanding debt, under specific terms and timing, in much the same way a
homeowner refinances a mortgage. Not surprisingly, these calls can be disruptive
for investors, who may be forced to re-invest the proceeds of a called bond at
lower rates. Therefore, prudent investors strive to maintain adequate call
protection in an effort to insulate the portfolio from these untimely
disruptions and thereby provide a more predictable income stream.
AMPLE CALL PROTECTION ENHANCES THE POTENTIAL FOR CAPITAL APPRECIATION...
Price performance is another compelling reason to maintain adequate call
protection. As most investors know, bond prices rise as interest rates decline.
That is, bond investors will pay more for a bond as interest rates fall below
the bond's existing coupon. Because it responds to declining rates, such a bond
is said to have "positive convexity."
However, investors will NOT pay as much for a bond - even if rates are falling -
if that bond is likely to be called. As a bond approaches the point where it is
likely to be called, it tends to trade nearer its call price, usually par or a
modest premium. As a result, this tends to impede the callable bond's upside
performance. In effect, the callable bond has lost its positive convexity and is
now said to have "negative convexity," meaning it will be significantly less
responsive to declining interest rates.
[CHART]
The chart above demonstrates this relationship. Note that as yields decline
to point Y - the point where investors start to anticipate an imminent call -
the price performance of the callable bond tends to "roll-off," and thus lag
that of the non-callable bond. While it is difficult to pinpoint precisely
when this "roll-off" will occur, bonds with ample call protection are
generally considered less susceptible to this phenomenon than bonds with
waning call protection.
CALL PROTECTION IS A MAJOR ADVANTAGE OF MUNICIPAL BOND MUTUAL FUNDS...
While call features can have a profound influence on income and price
performance, these nuances may be overlooked by the individual investor, a fact
that can put the individual at a serious disadvantage. At Eaton Vance, call
provisions remain a prime strategic consideration for our fund managers and
analysts. We monitor our portfolios and individual bonds and make periodic
adjustments to update call protection, as necessary. Together with
diversification, in-depth research and professional management, we believe that
continuously updated call protection represents yet another major advantage for
the mutual fund investor.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter
President
2
MANAGEMENT DISCUSSION
[PHOTO OF THOMAS M. METZOLD]
Thomas M. Metzold
Portfolio Manager
INVESTMENT ENVIRONMENT
- While the recession of 2001 proved shallow and of short duration, the
economy has struggled in the first half of 2002 to generate a recovery of
any significance. Companies have remained reticent to resume capital
spending and have managed inventories very conservatively. Although
consumer confidence has improved significantly, recent reports suggest that
Americans are increasingly resigned to a slow-paced recovery.
- The Federal Reserve, which signaled late in 2001 that it would likely raise
rates, has since suggested a less hawkish stance. That ambiguity has been
reflected in the bond market, whose prices move in the opposite direction
of interest rates. Against this backdrop, the municipal bond market has
continued to register solidly positive returns. The Lehman Brothers
Municipal Bond Index - a broad-based, unmanaged index of municipal bonds -
posted a total return of 2.56% for the six months ended May 31, 2002.(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 9.46% for the six months ended May 31, 2002. That return
was the result of an increase in share price from $13.50 on November 30,
2001 to $14.24 on May 31, 2002, and the reinvestment of $0.491 in regular
monthly dividends.(2)
- Based on net asset value, the Trust had a total return of 2.41% for the six
months ended May 31, 2002. That return was the result of a decrease in net
asset value per share from $12.93 on November 30, 2001 to $12.76 on May 31,
2002, and the reinvestment of $0.491 in regular monthly dividends.
- Based on the most recent dividend and a share price of $14.24 the Trust had
a market yield of 7.25% at May 31, 2002.(3) The Trust's market yield is
equivalent to a taxable yield of 11.81%.(4)
MANAGEMENT DISCUSSION
- The municipal market responded well to the sluggish recovery. Municipal
bonds have also benefited from the disappointing performance of the stock
market and a less-than-robust outlook for equities in the coming year.
Moreover, municipals have received an additional boost from efforts within
Congress and a number of state legislatures to roll back previous tax cuts.
With the possibility of higher tax rates, municipal bonds hold added appeal
for investors.
- Hospital bonds remained a significant focus of the Trust's investment
strategy. Because the national hospital market remains intensely
competitive, the Trust focused on well-positioned institutions, while
diversifying among issuers across the country.
- Industrial development revenue bonds (IDRs), particularly in the airline
sector, provided some compelling opportunities for the Trust. In a weaker
economy, management has remained very selective and emphasized
diversification within the IDR segment.
5 LARGEST CATEGORIES(5)
By total investments
[CHART]
Hospital 27.0%
Insured Transportation* 22.2%
Insured General Obligations* 13.7%
Housing 13.1%
Industrial Development Revenue 11.8%
*May not represent the Portfolio's current or future investments. Private
insurance does not decrease the risk of loss of principal associated with this
investment.
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.
TRUST INFORMATION
as of May 31, 2002
PERFORMANCE(6)
Average Annual Total Returns (by market value, New York Stock Exchange)
One Year 22.21%
Life of Trust (1/29/99) 4.83%
Average Annual Total Returns (at net asset value)
One Year 9.95%
Life of Trust (1/29/99) 1.44%(3)
RATING DISTRIBUTION(5)
By total investments
[CHART]
AAA 40.8%
AA 5.9%
A 6.6%
BBB 17.6%
BB 0.7%
CCC 0.5%
Non-Rated 27.9%
(1) It is not possible to invest directly in an Index.
(2) A portion of the Trust's income may be subject federal and state income tax
and/or federal alternative minimum 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 38.6% federal income tax rate. A
lower rate would result in a lower tax-equivalent figure.
(5) Rating Distribution and 5 Largest Categories are determined by dividing the
total market value of the holdings by the total net assets of the Trust.
Rating Distribution and 5 Largest Categories are 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.
* Private insurance does not remove the risk of loss of principal associated
with insured investments due to changes in market conditions.
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, 2002
PORTFOLIO OF INVESTMENTS (UNAUDITED)
TAX-EXEMPT INVESTMENTS -- 159.5%
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
--------------------------------------------------------------------------
Cogeneration -- 1.4%
--------------------------------------------------------------------------
$ 2,950 Maryland Energy Cogeneration, (AES
Warrior Run), (AMT), 7.40%, 9/1/19 $ 3,039,945
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$ 3,039,945
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Education -- 4.1%
--------------------------------------------------------------------------
$ 2,250 California Educational Facilities
Authority, Residual Certificates,
Variable Rate, 12/1/32(1)(2) $ 2,316,870
6,875 Massachusetts Development Finance
Agency, (Boston University),
5.45%, 5/15/59 6,366,387
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$ 8,683,257
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Electric Utilities -- 8.4%
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$ 6,500 Brazos River Authority, TX, (Reliant
Energy, Inc.), (AMT), 5.375%, 4/1/19 $ 5,538,585
3,550 Mississippi Business Finance Corp.,
(System Energy Resources, Inc.),
5.90%, 5/1/22 3,419,111
7,250 North Carolina Municipal Power Agency,
(Catawba), 6.50%, 1/1/20 7,601,335
1,250 San Antonio, TX, Electric and Natural
Gas, 4.50%, 2/1/21 1,134,375
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$ 17,693,406
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Escrowed / Prerefunded -- 6.9%
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$ 2,850 Clark County, NV, Airport, (MBIA),
Prerefunded to 7/1/10, 6.00%, 7/1/29 $ 3,266,271
35,000 Dawson Ridge, CO, Metropolitan District
#1, Escrowed to Maturity,
0.00%, 10/1/22 9,191,700
1,725 Maricopa County, AZ, IDA, (Place Five
and The Greenery), Escrowed to Maturity,
8.625%, 1/1/27 2,162,201
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$ 14,620,172
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General Obligations -- 4.3%
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$ 2,000 Kershaw County, SC, School District,
5.00%, 2/1/18 $ 2,027,200
8,225 North East Independent School District,
TX, 4.50%, 10/1/28 7,135,599
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$ 9,162,799
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Health Care - Miscellaneous -- 1.5%
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$ 655 Tax Exempt Securities Trust, Community
Health Provider, Pooled Loan Program,
6.00%, 12/1/36 $ 656,648
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
--------------------------------------------------------------------------
Health Care - Miscellaneous (continued)
--------------------------------------------------------------------------
$ 1,728 Tax Exempt Securities Trust, Community
Health Provider, Pooled Loan Program,
6.25%, 12/1/36 $ 1,781,429
656 Tax Exempt Securities Trust, Community
Health Provider, Pooled Loan Program,
7.75%, 12/1/36 655,814
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$ 3,093,891
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Hospital -- 27.0%
--------------------------------------------------------------------------
$ 2,500 California Health Facilities Authority,
(Cedars Sinai Medical Center), Variable
Rate, 12/1/34(1)(3) $ 2,776,625
1,000 Chautauqua County, NY, IDA, (Women's
Christian Association), 6.35%, 11/15/17 924,970
1,000 Chautauqua County, NY, IDA, (Women's
Christian Association), 6.40%, 11/15/29 890,660
1,410 Colorado Health Facilities Authority,
(Rocky Mountain Adventist),
6.625%, 2/1/22 1,449,367
1,000 Halifax, FL, Medical Center,
7.25%, 10/1/24 1,053,370
2,840 Highland County, OH, (Joint Township
Hospital District), 6.75%, 12/1/29 2,608,852
5,000 Illinois Health Facility Authority,
(Loyola University Health System),
6.00%, 7/1/21 5,067,800
3,000 John Tolfree Health System Corp., MI,
6.00%, 9/15/23 2,953,650
1,215 Loris, SC, Community Hospital District,
5.625%, 1/1/20 1,164,578
3,500 Loris, SC, Community Hospital District,
5.625%, 1/1/29 3,280,235
5,250 Louisiana Public Facilities Authority,
(Tuoro Infirmary), 5.625%, 8/15/29 5,163,323
2,000 Martin County, MN, (Fairmont Community
Hospital Association), 6.625%, 9/1/22 1,933,840
1,530 Mecosta County, MI, General Hospital,
5.75%, 5/15/09 1,519,244
2,500 Mecosta County, MI, General Hospital,
6.00%, 5/15/18 2,300,600
4,260 New Jersey Health Care Facilities
Financing Authority, (Capital Health
System), 5.25%, 7/1/27 3,474,541
1,500 New Jersey Health Care Facilities
Financing Authority, (Trinitas
Hospital), 7.50%, 7/1/30 1,618,665
5,000 North Central, TX, Health Facility
Development Corp., (Baylor Healthcare
System), 5.125%, 5/15/29 4,694,550
1,550 Oneonta, AL, Eastern Health Care
Facility Financing Authority, (Eastern
Health Systems, Inc.), 7.75%, 7/1/21 1,694,786
7,000 Rhode Island HEFA, (St. Joseph Health
Services), 5.50%, 10/1/29 5,677,490
SEE NOTES TO FINANCIAL STATEMENTS
4
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2002
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
--------------------------------------------------------------------------
Hospital (continued)
--------------------------------------------------------------------------
$ 2,425 Southwestern Illinois, Development
Authority, (Anderson Hospital),
5.625%, 8/15/29 $ 2,223,264
2,500 Sullivan County, TN, Health Educational
and Housing Facility Board, (Wellmont
Health System), 6.25%, 9/1/32 2,481,225
2,000 Weber County, UT, (IHC Health Services,
Inc.), 5.00%, 8/15/30 1,847,960
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$ 56,799,595
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Housing -- 13.1%
--------------------------------------------------------------------------
$ 990 California Statewide Communities
Development Authority, Variable Rate,
6/1/09(1)(3) $ 1,004,672
4,000 Charter Mac Equity Trust, TN, (AMT),
6.625%, 6/30/09 4,124,600
3,185 Florida Capital Projects Finance
Authority, Student Housing Revenue,
(Florida University), 7.75%, 8/15/20 3,164,489
940 Lake Creek, CO, Affordable Housing
Corp., Multifamily, 7.00%, 12/1/23 885,442
4,575 Louisiana Public Facilities Authority,
(Eden Point), 6.25%, 3/1/34 4,039,725
4,000 Muni Mae Tax-Exempt Bond, LLC, (AMT),
6.875%, 6/30/09 4,157,920
3,350 North Little Rock, AR, Residential
Housing Facilities, (Parkstone Place),
6.50%, 8/1/21 3,167,559
3,660 Oregon Health Authority, (Trillium
Affordable Housing), (AMT),
6.75%, 2/15/29 3,415,183
970 Raleigh, NC, Housing Authority,
Multifamily, (Cedar Point),
7.00%, 11/1/30(4) 436,500
3,300 Texas Student Housing Corp., (University
of Northern Texas), 6.75%, 7/1/16 3,242,514
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$ 27,638,604
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Industrial Development Revenue -- 11.8%
--------------------------------------------------------------------------
$ 1,970 Abia Development Corp., TX, (Austin
Cargoport Development), (AMT),
6.50%, 10/1/24 $ 1,770,263
1,890 Broward County, FL, IDR, (Lynxs
Cargoport), (AMT), 6.75%, 6/1/19 1,752,503
2,500 Denver, CO, City and County, (United
Airlines), Variable Rate, 10/1/32(1)(3) 701,550
1,000 Gloucester County, NJ, Improvements
Authority, (Waste Management, Inc.),
(AMT), 7.00%, 12/1/29 1,086,700
2,500 Gulf Coast, TX, Waste Disposal
Authority, (Valero Energy Corp.) (AMT),
5.70%, 4/1/32 2,358,225
2,250 Gulf Coast, TX, Waste Disposal,
(Champion International), (AMT),
6.875%, 12/1/28 2,322,765
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
--------------------------------------------------------------------------
Industrial Development Revenue (continued)
--------------------------------------------------------------------------
$ 2,500 Los Angeles, CA, Regional Airports
Improvements Corp., (Terminal Four),
(AMT), 7.50%, 12/1/24 $ 2,439,125
3,000 Minneapolis and St. Paul, MN,
Metropolitan Airport Commission,
(Northwest Airlines), (AMT),
7.00%, 4/1/25 2,720,430
3,000 Missouri Development Finance Authority,
Solid Waste Disposal, (Proctor and
Gamble Paper Products), (AMT),
5.20%, 3/15/29 2,946,570
6,000 New Jersey EDA, (Continental Airlines),
(AMT), 6.25%, 9/15/29 5,226,480
3,550 Phoenix, AZ, IDA, (America West
Airlines, Inc.), (AMT), 6.25%, 6/1/19 1,541,055
--------------------------------------------------------------------------
$ 24,865,666
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Insured - Education -- 1.4%
--------------------------------------------------------------------------
$ 3,000 Massachusetts HEFA, (Berklee College of
Music), (MBIA), Variable Rate,
10/1/27(1)(3) $ 2,945,670
--------------------------------------------------------------------------
$ 2,945,670
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Insured - Electric Utilities -- 0.5%
--------------------------------------------------------------------------
$ 100 Los Angeles, CA, Department of Water and
Power, (MBIA), Variable Rate,
12/15/24(1)(2) $ 1,038,350
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$ 1,038,350
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Insured - General Obligations -- 13.7%
--------------------------------------------------------------------------
$ 500 California General Obligation, (FGIC),
Variable Rate, 12/1/29(1)(2) $ 1,057,450
3,500 California General Obligation, (FGIC),
Variable Rate, 9/1/30(1)(2) 3,530,485
11,250 Chicago, IL, (MBIA), 5.00%, 1/1/41 10,531,463
30,160 Chicago, IL, Board Education, (FGIC),
0.00%, 12/1/22 9,551,974
10,000 Washington State General Obligation,
(FGIC), 0.00%, 1/1/19 4,112,900
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$ 28,784,272
--------------------------------------------------------------------------
Insured - Hospital -- 8.4%
--------------------------------------------------------------------------
$21,305 Kentucky EDA, (Norton Healthcare, Inc.),
(MBIA), 0.00%, 10/1/25 $ 5,753,415
23,470 Kentucky EDA, (Norton Healthcare, Inc.),
(MBIA), 0.00%, 10/1/26 5,978,278
10,000 Kentucky EDA, (Norton Healthcare, Inc.),
(MBIA), 0.00%, 10/1/27 2,401,400
SEE NOTES TO FINANCIAL STATEMENTS
5
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2002
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
--------------------------------------------------------------------------
Insured - Hospital (continued)
--------------------------------------------------------------------------
$ 4,000 New Jersey Health Care Facilities
Financing Authority, (St. Barnabas
Medical Center), (MBIA), Variable
Rate, 7/1/28(1)(2) $ 3,537,840
--------------------------------------------------------------------------
$ 17,670,933
--------------------------------------------------------------------------
Insured - Special Tax Revenue -- 4.5%
--------------------------------------------------------------------------
$15,905 Metropolitan Pier and Exposition
Authority, IL, (MBIA), 0.00%, 6/15/23 $ 4,915,440
4,000 Puerto Rico Infrastructure Financing
Authority, (FSA), Variable Rate,
7/1/27(1)(2) 4,162,120
60 South Orange County, CA, Public
Financing Authority, (FGIC), DRIVERS,
Variable Rate, 8/15/15(1)(3) 347,070
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$ 9,424,630
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Insured - Transportation -- 22.2%
--------------------------------------------------------------------------
$ 3,500 Chicago, IL, O'Hare International
Airport, (AMBAC), (AMT), 5.375%, 1/1/32 $ 3,464,020
2,500 Dallas-Fort Worth, TX, International
Airport, (FGIC), (AMT), 5.50%, 11/1/20 2,524,575
4,930 Dallas-Fort Worth, TX, International
Airport, (FGIC), (AMT), 5.75%, 11/1/30 5,029,537
4,500 Dallas-Fort Worth, TX, International
Airport, (FGIC), (AMT), 6.125%, 11/1/35 4,727,790
3,500 Florida Turnpike Authority, (Department
of Transportation), (FGIC),
4.50%, 7/1/27 3,135,230
2,400 Massachusetts Turnpike Authority,
Metropolitan Highway System, (MBIA),
Variable Rate, 1/1/37(1)(2) 1,977,600
4,250 Metropolitan Transportation Authority,
NY, Commuter Revenue (FGIC),
4.75%, 7/1/26 4,064,743
7,500 Minneapolis and St. Paul, MN,
Metropolitan Airport Commission, (FGIC),
5.25%, 1/1/32 7,482,900
5,500 Nevada Department of Business and
Industry, (Las Vegas Monorail -1st
Tier), (AMBAC), 5.375%, 1/1/40 5,455,835
2,000 Puerto Rico Highway and Transportation
Authority, (FSA), Variable Rate,
7/1/32(1)(3) 1,935,300
7,000 San Antonio, TX, Airport System,
(Improvements), (FGIC), 5.25%, 7/1/21 6,896,050
--------------------------------------------------------------------------
$ 46,693,580
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PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
--------------------------------------------------------------------------
Insured - Water and Sewer -- 2.1%
--------------------------------------------------------------------------
$ 5,000 Charleston, SC, Waterworks and Sewer,
(FGIC), 4.50%, 1/1/24 $ 4,489,100
--------------------------------------------------------------------------
$ 4,489,100
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Nursing Home -- 4.4%
--------------------------------------------------------------------------
$ 3,700 Ohio HFA, Retirement Rental Housing,
(Encore Retirement Partners),
6.75%, 3/1/19 $ 3,173,453
750 Okaloosa County, FL, Retirement Rental
Housing, (Encore Retirement Partners),
6.125%, 2/1/14 660,555
2,000 Orange County, FL, Health Facilities
Authority, (Westminster Community Care),
6.75%, 4/1/34 1,683,160
779 Tarrant County, TX, Health Facilities
Authority, 8.00%, 9/1/25 770,313
1,221 Tarrant County, TX, Health Facilities
Authority, (3927 Foundation),
10.25%, 9/1/19(4) 54,928
3,000 Wisconsin HEFA, (Wisconsin Illinois
Senior Housing), 7.00%, 8/1/29 2,823,330
--------------------------------------------------------------------------
$ 9,165,739
--------------------------------------------------------------------------
Other Revenue -- 9.6%
--------------------------------------------------------------------------
$ 2,000 Badger Tob Asset Securitization Corp.,
WI, 6.375%, 6/1/32 $ 1,955,580
4,000 Capital Trust Agency, FL, (Seminole
Tribe Convention), 10.00%, 10/1/33 4,013,800
1,500 Mohegan Tribe Indians, CT, Gaming
Authority, (Public Improvements),
6.25%, 1/1/21 1,534,620
3,900 Puerto Rico Infrastructure Financing
Authority, Variable Rate, 10/1/32(1)(2) 4,704,375
3,300 Santa Fe, NM, (Crow Hobbs),
8.50%, 9/1/16 3,425,565
5,000 Tobacco Settlement Financing Corp., LA,
5.875%, 5/15/39 4,567,500
--------------------------------------------------------------------------
$ 20,201,440
--------------------------------------------------------------------------
Senior Living / Life Care -- 4.1%
--------------------------------------------------------------------------
$ 1,960 Cliff House Trust, PA, (AMT),
6.625%, 6/1/27 $ 1,790,166
360 Delaware County, PA, IDA, (Glen Riddle),
(AMT), 8.125%, 9/1/05 371,372
2,000 Delaware County, PA, IDA, (Glen Riddle),
(AMT), 8.625%, 9/1/25 2,127,400
3,236 Logan County, CO, Industrial Development
Revenue, (TLC Care Choices, Inc.),
6.875%, 12/1/23 2,907,925
1,400 Mesquite, TX, Health Facilities
Authority, (Christian Retirement
Facility), 7.625%, 2/15/28 1,444,156
--------------------------------------------------------------------------
$ 8,641,019
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SEE NOTES TO FINANCIAL STATEMENTS
6
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2002
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
--------------------------------------------------------------------------
Special Tax Revenue -- 4.5%
--------------------------------------------------------------------------
$ 3,280 Bell Mountain Ranch, CO, Metropolitan
District, 6.625%, 11/15/25 $ 3,211,153
3,600 Black Hawk, CO, Business Improvement
District, 6.50%, 12/1/11 3,524,076
1,230 Longleaf, FL, Community Development
District, 6.20%, 5/1/09 1,140,764
1,855 Longleaf, FL, Community Development
District, 6.65%, 5/1/20 1,656,496
--------------------------------------------------------------------------
$ 9,532,489
--------------------------------------------------------------------------
Transportation -- 1.6%
--------------------------------------------------------------------------
$ 3,750 Kent County, MI, Airport Facility,
(AMT), Variable Rate, 1/1/25(1)(3) $ 3,393,788
--------------------------------------------------------------------------
$ 3,393,788
--------------------------------------------------------------------------
Water and Sewer -- 4.0%
--------------------------------------------------------------------------
$ 1,500 Metropolitan Water District, CA,
(Southern California Waterworks),
Variable Rate, 1/1/18(1)(3) $ 1,290,825
6,500 Sacramento County, CA, Sanitation
District Financing Authority Revenue,
5.875%, 12/1/27 7,178,535
--------------------------------------------------------------------------
$ 8,469,360
--------------------------------------------------------------------------
Total Tax-Exempt Investments -- 159.5%
(identified cost $342,755,791) $ 336,047,705
--------------------------------------------------------------------------
Other Assets, Less Liabilities -- 2.7% $ 5,766,044
--------------------------------------------------------------------------
Auction Preferred Shares Plus Cumulative Unpaid
Dividends -- (62.2)% $(131,155,652)
--------------------------------------------------------------------------
Net Assets Applicable to Common
Shares -- 100.0% $ 210,658,097
--------------------------------------------------------------------------
AMT - Interest earned from these securities may be considered a tax
preference item for purposes of the Federal Alternative Minimum Tax.
At May 31, 2002, the concentration of the Trust's investments in
the various states, determined as a percentage of net assets, is as follows:
-----------------------------------------------
Texas 23.6%
Illinois 17.0%
California 10.9%
Colorado 10.4%
Others, representing less than 10% 97.6%
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, 2002, 34.0% 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 1.8% to 16.9% 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.
SEE NOTES TO FINANCIAL STATEMENTS
7
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2002
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
AS OF MAY 31, 2002
Assets
------------------------------------------------------
Investments, at value (identified cost,
$342,755,791) $336,047,705
Receivable for investments sold 80,000
Interest receivable 6,487,654
Prepaid expenses 60,223
------------------------------------------------------
TOTAL ASSETS $342,675,582
------------------------------------------------------
Liabilities
------------------------------------------------------
Due to bank $ 784,053
Payable to affiliate for Trustees' fees 1,826
Accrued expenses 75,954
------------------------------------------------------
TOTAL LIABILITIES $ 861,833
------------------------------------------------------
AUCTION PREFERRED SHARES (5,240 SHARES
OUTSTANDING) AT LIQUIDATION VALUE
PLUS CUMULATIVE UNPAID DIVIDENDS $131,155,652
------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES $210,658,097
------------------------------------------------------
Sources of Net Assets
------------------------------------------------------
Common Shares, $0.01 par value;
unlimited number of shares
authorized, 16,513,582 shares issued
and outstanding $ 165,136
Additional paid-in capital 244,641,825
Accumulated net realized loss (computed
on the basis of identified cost) (30,883,120)
Accumulated undistributed net investment
income 3,442,342
Net unrealized depreciation (computed on
the basis of identified cost) (6,708,086)
------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES $210,658,097
------------------------------------------------------
Net Asset Value Per Common Share
------------------------------------------------------
($210,658,097 DIVIDED BY 16,513,582
COMMON SHARES ISSUED AND OUTSTANDING) $ 12.76
------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 2002
Investment Income
-----------------------------------------------------
Interest $12,283,121
-----------------------------------------------------
TOTAL INVESTMENT INCOME $12,283,121
-----------------------------------------------------
Expenses
-----------------------------------------------------
Investment adviser fee $ 1,184,890
Administration fee 338,654
Trustees' fees and expenses 8,569
Transfer and dividend disbursing agent
fees 93,065
Preferred shares remarketing agent fee 163,303
Custodian fee 61,868
Legal and accounting services 53,141
Printing and postage 51,354
Miscellaneous 34,790
-----------------------------------------------------
TOTAL EXPENSES $ 1,989,634
-----------------------------------------------------
NET INVESTMENT INCOME $10,293,487
-----------------------------------------------------
Realized and Unrealized Gain (Loss)
-----------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 161,260
Interest rate swap contracts (51,063)
-----------------------------------------------------
NET REALIZED GAIN $ 110,197
-----------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(3,980,218)
Interest rate swap contracts 90,770
-----------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $(3,889,448)
-----------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(3,779,251)
-----------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS $(1,387,730)
-----------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 5,126,506
-----------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
8
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2002
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
INCREASE (DECREASE) MAY 31, 2002 YEAR ENDED
IN NET ASSETS (UNAUDITED) NOVEMBER 30, 2001
------------------------------------------------------------------------------
From operations --
Net investment income $ 10,293,487 $ 18,368,683
Net realized gain (loss) 110,197 (5,499,488)
Net change in unrealized
appreciation (depreciation) (3,889,448) 19,844,258
Distributions to preferred
shareholders (1,387,730) (4,064,981)
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 5,126,506 $ 28,648,472
------------------------------------------------------------------------------
Distributions to common shareholders --
From net investment income $ (8,080,219) $ (12,687,380)
------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (8,080,219) $ (12,687,380)
------------------------------------------------------------------------------
Capital share transactions --
Reinvestment of distributions
to shareholders $ 1,296,333 $ 1,678,324
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS $ 1,296,333 $ 1,678,324
------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ (1,657,380) $ 17,639,416
------------------------------------------------------------------------------
Net Assets Applicable to Common Shares
------------------------------------------------------------------------------
At beginning of period $ 212,315,477 $ 194,676,061
------------------------------------------------------------------------------
AT END OF PERIOD $ 210,658,097 $ 212,315,477
------------------------------------------------------------------------------
Accumulated undistributed net
investment income included in
net assets applicable to common shares
------------------------------------------------------------------------------
AT END OF PERIOD $ 3,442,342 $ 2,434,569
------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
9
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2002
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING DURING PERIODS STATED
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 2002 ------------------------------------------------
(UNAUDITED)(1)(2) 2001(2) 2000(2) 1999(2)(3)
-------------------------------------------------------------------------------------------------------
Net asset value -- Beginning
of period (Common shares) $12.930 $11.950 $11.720 $15.000
-------------------------------------------------------------------------------------------------------
Income (loss) from operations
-------------------------------------------------------------------------------------------------------
Net investment income $ 0.626 $ 1.124 $ 1.083 $ 0.837
Net realized and unrealized
gain (loss) (0.221) 0.873 0.260 (3.246)
Distributions to preferred
shareholders (0.084) (0.240) (0.328) (0.197)
-------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ 0.321 $ 1.757 $ 1.015 $(2.606)
-------------------------------------------------------------------------------------------------------
Less distributions to common shareholders
-------------------------------------------------------------------------------------------------------
From net investment income $(0.491) $(0.777) $(0.785) $(0.550)
-------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $(0.491) $(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) $12.760 $12.930 $11.950 $11.720
-------------------------------------------------------------------------------------------------------
MARKET VALUE -- END OF PERIOD
(COMMON SHARES) $14.240 $13.500 $11.125 $11.688
-------------------------------------------------------------------------------------------------------
TOTAL RETURN(4) 9.46% 28.95% 2.05% (18.74)%
-------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
10
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2002
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING DURING PERIODS STATED
Ratios/Supplemental Data+ ++
-------------------------------------------------------------------------------------------------------
Net assets applicable to
common shares, end of
period (000's omitted) $210,658 $212,315 $194,676 $190,209
Ratios (As a percentage of
average net assets
applicable to common
shares):
Net expenses(5) 1.91%(6) 1.88% 1.95% 1.76%(6)
Net expenses after
custodian fee
reduction(5) 1.91%(6) 1.88% 1.91% 1.70%(6)
Net investment income(5) 9.86%(6) 8.79% 9.47% 7.38%(6)
Portfolio Turnover 10% 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 net investment income per share 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 1.17%(6) 1.15% 1.15% 1.14%(6)
Net expenses after
custodian fee reduction 1.17%(6) 1.15% 1.12% 1.10%(6)
Net investment income 6.06%(6) 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
Asset coverage per
preferred share(7) $65,232 $65,548 $62,155 $61,308
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
-------------------------------------------------------------------------------------------------------
(1) 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 six months ended May 31, 2002 was to increase net
investment income per share by $0.005, increase net realized and
unrealized losses per share by $0.005, increase the ratio of net
investment income to average net assets applicable to common shares from
9.77% to 9.86% and increase the ratio of net investment income to
average total net assets from 6.01% to 6.06%. Per share data and ratios
for the periods prior to December 1, 2001 have not been restated to
reflect this change in presentation.
(2) Computed using average common shares outstanding.
(3) For the period from the start of business, January 29, 1999, to November
30, 1999.
(4) Total return is calculated assuming a purchase at the current market
price on the first day and a sale at the current market price on the
last day of each period reported. Dividends and distributions, if any,
are assumed reinvested at the net asset value on the reinvestment date.
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 attributable 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, 2002
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. Effective December 1, 2001,
the Trust adopted the provisions of the revised AICPA Audit and Accounting
Guide for Investment Companies and began amortizing premiums on fixed-income
securities using the interest method of amortization. Prior to December 1,
2001, the Trust amortized market premiums on fixed-income securities using
the proportional method of amortization. The cumulative effect of this
accounting change had no impact on the Trust's net assets, but resulted in a
$182,235 increase in cost of securities and a corresponding $182,235 decrease
in net unrealized appreciation, based on securities held on May 31, 2002.
The effect of this change for the six months ended May 31, 2002 was to
increase net investment income by $89,797, increase net realized loss by
$5,111, and increase net unrealized depreciation by $84,686.
The statement of changes in net assets and financial highlights for prior
periods have not been restated to reflect these changes.
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, 2001, the Trust, for federal income tax purposes, had a capital
loss carryover of $30,838,841 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 ($10,949,210) 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 Organization and Offering Costs -- Costs incurred by the Trust in connection
with its organization have been expensed. Costs incurred by the Trust in
connection with the offerings of the common shares and preferred shares were
recorded as a reduction of capital paid in excess of par applicable to common
shares.
F Financial Futures Contracts -- Upon the entering of a financial futures
contract, the Trust is
12
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2002
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
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.
G 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.
H 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.
I 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.
J 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.
K Interim Financial Statements -- The interim financial statements relating to
May 31, 2002 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 10, 2001, a special dividend period of 364 days was set on the
Series A shares. The dividend rate, which matures on July 9, 2002, is 2.80%.
Dividend rates ranged from 1.10% to 1.85% for Series B Shares, during the six
months ended May 31, 2002. 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 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
13
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2002
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
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. The Trust pays annual fees equivalent to
0.25% of the preferred shares' liquidation value for the remarketing efforts
associated with the preferred auctions.
In accordance with the provisions of EITF D-98, "Classification and
Measurement of Redeemable Securities", effective for the current period, the
Trust has reclassified its APS Shares outside of permanent equity in the net
assets section of the statement of assets and liabilities. In addition,
distributions to APS shareholders are now classified as a component of the
"Net increase in net assets from operations" on the statements of operations
and statement of changes in net assets, and as a component of the "Total
income (loss) from operations" in the financial highlights. Prior year
amounts presented have been restated to conform to this period's
presentation. This change has no impact on the net assets applicable to
common shares of the Trust.
3 Distributions to Shareholders
-------------------------------------------
The Trust intends to make monthly distributions of net investment income,
after payment of any dividends on any outstanding 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, 2002 was 2.80% and 1.50%, for
Series A and Series B Shares, respectively. For the six months ended May 31,
2002, the Trust paid dividends to Auction Preferred shareholders amounting to
$922,778 and $465,317 for Series A and Series B Shares, respectively,
representing an average APS dividend rate for such period of 2.80% and
1.41%, respectively.
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, 2002, the fee was equivalent to 0.70% of the Trust's average
weekly gross assets and amounted to $1,184,890. 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, 2002, the administrative fee amounted to $338,654.
Trustees of the Trust that are not affiliated with the Investment Adviser 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, 2002, 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 $31,891,175 and $32,037,820, respectively,
for the six months ended May 31, 2002.
6 Federal Income Tax Basis of Unrealized Appreciation (Depreciation)
-------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investment owned by the Trust at May 31, 2002, as computed for Federal income
tax purposes, are as follows:
AGGREGATE COST $342,488,870
------------------------------------------------------
Gross unrealized appreciation $ 9,661,335
Gross unrealized depreciation (16,102,500)
------------------------------------------------------
NET UNREALIZED DEPRECIATION $ (6,441,165)
------------------------------------------------------
14
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 2002
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
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, 2002 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 2001
--------------------------------------------------------------------------------
Shares issued pursuant to the Trust's
dividend reinvestment plan 98,002 130,619
--------------------------------------------------------------------------------
NET INCREASE 98,002 130,619
--------------------------------------------------------------------------------
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 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.
9 Annual Meeting of Shareholders
-------------------------------------------
The Trust held its Annual Meeting of Shareholders on March 22, 2002. The
following action was taken by the shareholders:
ITEM 1: The election of Norton H. Reamer, Lynn A. Stout and Jack L. Treynor
as Trustees of the Trust for a three-year term expiring in 2005. Mr. Reamer
was designated the Nominee to be elected solely by APS shareholders:
NUMBER OF SHARES
NOMINEE FOR TRUSTEE ----------------------
ELECTED BY APS SHAREHOLDERS FOR WITHHELD
----------------------------------------------------------------
Norton H. Reamer
5,003 33
NUMBER OF SHARES
NOMINEE FOR TRUSTEE ---------------------
ELECTED BY ALL SHAREHOLDERS FOR WITHHELD
---------------------------------------------------------------
Lynn A. Stout
16,052,682 168,456
Jack L. Treynor
16,024,541 196,597
15
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.
16
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 8030
Boston, MA 02266-8030
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, 2002, our records indicate that there are 197 registered
shareholders and approximately 7,100 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 AS OF MAY 31, 2002
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
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking Emeritus, Harvard University
Graduate School of Business Administration
Norton H. Reamer
President, Unicorn Corporation
Chairman, Hellman, Jordan Management Co., Inc.
Lynn A. Stout
Professor of Law,
UCLA School of Law
Jack L. Treynor
Investment Adviser and Consultant
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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.
Attn: Eaton Vance Municipal Income Trust
P.O. Box 8030
Boston, MA 02266-8030
(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
151-7/02 CE-NASRC