FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-09157
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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
November 30, 2003
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Date of Reporting Period
ITEM 1. REPORTS TO STOCKHOLDERS
[EV LOGO]
[GRAPHIC IMAGE]
ANNUAL REPORT NOVEMBER 30, 2003
[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 November 30, 2003
LETTER TO SHAREHOLDERS
[PHOTO OF THOMAS J.FETTER]
Thomas J. Fetter
President
Amid the market volatility and external political shocks of recent years, many
investors have become more concerned with risk management. That trend has been
especially true in the municipal bond market, where the use of bond insurance
has become increasingly common. Today, roughly half of all municipal bond
issuance is composed of insured bonds. As part of our continuing educational
series, we thought it might be helpful to discuss bond insurance and its impact
on the municipal market.
THE USE OF BOND INSURANCE HAS GROWN DRAMATICALLY OVER THE YEARS...
Municipal bond insurance was initially developed in 1971, when AMBAC Assurance
Corp., the nation's first municipal insurer, offered insurance as a way to
guarantee principal and interest payments on bond issues in the event of a bond
default. Over the following three decades, the municipal market has witnessed a
surge in the use of insurance. For example, in 1980, just 3% of all municipal
issuance was insured. However, by late 2003, that figure had risen to roughly
50%. Insurance has clear benefits for purchasers: the elimination of default
risk of the underlying issuer, AAA quality ratings and an enhancement of an
issue's liquidity. (It's important to note that, while insured bonds are insured
as to principal and interest payments, they still remain subject to interest
rate and market risks.)
THE MECHANICS OF MUNICIPAL BOND INSURANCE...
We start with the underlying reality that an issuer with a AAA credit rating
will pay less in interest expense than an issuer with a lower credit rating.
Thus, an issuer must first determine whether purchasing insurance is financially
feasible. That is, will the interest savings offset the cost of insurance? If
so, the issuer must then qualify for insurance. Just as an individual must
qualify for insurance, so too must a bond issuer meet certain criteria. The
issuer provides key financial data and documents to potential insurers that are
then used to assess the issuer's financial strength and underlying fundamentals.
If the issuer qualifies, insurance is then effected by "direct purchase," with
the payment of a one-time premium by the issuer. The premium fee is calculated
as a percentage of the value of the bond issue - typically, around 50 basis
points (0.50%), but more if the credit entails higher risk. (An alternative
method of purchase involves "elective bidding," in which the insurance is
purchased by bond dealers, who determine at the time the bond is sold whether it
is more attractive as an insured or uninsured bond.)
IN-DEPTH CREDIT ANALYSIS INCLUDES INSURERS AS WELL AS BOND ISSUERS...
When analyzing municipal bonds, an investor naturally researches the issuer's
fundamentals. However, if the bond is insured, the analyst is concerned with the
soundness of the insurer as well. At Eaton Vance, analysis of the insured
segment is an integral part of our total municipal research effort. Research
includes, among other areas, analysis of an insurer's claims-paying ability, its
capital structure and the overall quality of its portfolio of policies. Based on
claims-paying ability, there are currently six bond insurers rated AAA by
Moody's Investor Services, Standard & Poor's and Fitch - the nation's leading
rating agencies.
INSURERS CAN PLAY A VALUABLE ROLE IN STRUCTURING BOND DEALS AND IMPROVING CREDIT
QUALITY...
Insurers play an important role in capital formation for municipal borrowers,
working closely with municipal officials to forge deals that raise capital for
vital projects at affordable interest rates. In so doing, the insurers can help
states and municipalities achieve more efficient fiscal management. Insurers
often re-structure bond deals by insisting on provisions that are intended to
make the deal more secure. That has proved a major benefit to investors in
recent years. In a more risk-conscious climate, we believe that an ongoing
analysis of the insured market is a necessary discipline to invest successfully
in today's municipal market.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter
President
January 7, 2004
2
EATON VANCE MUNICIPAL INCOME TRUST as of November 30, 2003
MANAGEMENT DISCUSSION
[PHOTO OF THOMAS M. METZOLD]
Thomas M. Metzold
Portfolio Manager
INVESTMENT ENVIRONMENT
- The U.S. economy saw encouraging growth in the year ended November 30, 2003.
Consumer spending picked up, as tax cuts added to discretionary incomes.
Capital spending, which had been very slow to recover, rebounded. Gross
Domestic Product grew 3.3% in the second quarter of calendar year 2003,
followed by a surprisingly strong 8.2% rise in the third quarter. The labor
markets were slow to rebound. The nation's unemployment rate was 5.9% in
November 2003.
- Inflation, meanwhile, remained modest. Prices for finished goods remained
stable, although health care costs continued to rise and prices for
manufacturing inputs and commodities such as oil and natural gas remained
high. The Federal Reserve maintained an accommodative monetary policy, holding
its Federal Funds rate - a key short-term interest rate barometer - at 1.00%,
where it has stood since June.
- While signs of a more robust economy drove a strong rally in the equity
markets, the bond markets gave up some of their gains of the past year.
Ten-year Treasury bond yields - which had fallen to 3.40% in late May - rose
to 4.37% by November 30, 2003, in response to a reviving economy, prompting a
market correction. Nonetheless, the Lehman Brothers Municipal Bond Index
posted a solid total return of 6.65% for the year ended November 30, 2003.(1)
THE TRUST
PERFORMANCE FOR THE PAST YEAR
- Based on share price (traded on the New York Stock Exchange), the Trust had a
total return of 20.02% for the year ended November 30, 2003. That return was
the result of an increase in share price from $14.05 on November 30, 2002, to
$15.55 on November 30, 2003, and the reinvestment of $1.13 per share in
regular monthly dividends.(2)
TRUST INFORMATION
AS OF NOVEMBER 30, 2003
PERFORMANCE(5)
Average Annual Total Returns (by market value, New York Stock Exchange)
One Year 20.02%
Life of Trust (1/29/99) 7.84%
Average Annual Total Returns (at net asset value)
One Year 17.35%
Life of Trust (1/29/99) 5.66%
For federal income tax purposes, 99.99% of the total dividends paid by the
Trust from net investment income during the year ended November 30, 2003, was
designated as an exempt interest dividend.
- Based on net asset value, the Trust had a total return of 17.35% for the year
ended November 30, 2003. That return was the result of an increase in net
asset value per share from $13.02 on November 30, 2002, to $14.09 on November
30, 2003, and the reinvestment of $1.13 per share in regular monthly
dividends.
- Based on the most recent dividend and a share price of $15.55, the Trust had a
market yield of 7.65% at November 30, 2003.(3) The Trust's market yield is
equivalent to a taxable yield of 11.77%.(4)
MANAGEMENT DISCUSSION
- Insured* transportation bonds represented the Trust's largest sector weighting
at November 30, 2003. The Trust's investments were well-diversified and
included bonds for airports, turnpikes, and expressways.
- The Trust's second largest sector concentration was in hospital bonds. In a
competitive hospital environment, management emphasized institutions it
believes are well-regarded and whose health care specialities and financial
soundness give them a competitive advantage in their markets.
- Insured* general obligations (GOs) constituted a major investment for the
Trust and a representative geographical mix. Issuers included the state of
California; Chicago, Illinois; and Jupiter, Florida. Insured* GOs are
generally considered to provide a high-quality investment in a
still-recovering economy.
- Management continued to adjust coupon structure and upgrade call protection,
as market conditions warranted. Coupon structure and call features can have a
significant influence on the Trust's performance characteristics.
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.
(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 taxable-equivalent figure.
(5) Returns are historical and are calculated by determining the percentage
change in share price or net asset value with all distributions
reinvested. Performance results reflect the effect of leverage resulting
from the Trust's issuance of Auction Preferred Shares.
* 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.
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.
3
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2003
PORTFOLIO OF INVESTMENTS
TAX-EXEMPT INVESTMENTS -- 150.1%
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 $ 2,998,321
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$ 2,998,321
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EDUCATION -- 2.6%
$ 2,250 California Educational Facilities Authority, Residual
Certificates, Variable Rate, 12/1/32(1)(2) $ 2,706,525
3,430 Massachusetts Development Finance Agency, (Boston
University), 5.45%, 5/15/59 3,520,415
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$ 6,226,940
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ELECTRIC UTILITIES -- 8.8%
$ 6,500 Brazos River Authority, TX, (Reliant Energy, Inc.),
5.20%, 12/1/18 $ 7,053,215
2,000 Brazos River Authority, TX, PCR (Texas Energy Co.), (AMT),
6.75%, 4/1/38 2,201,260
3,550 Mississippi Business Finance Corp., (System Energy
Resources, Inc.), 5.90%, 5/1/22 3,558,520
7,250 North Carolina Municipal Power Agency, (Catawba),
6.50%, 1/1/20 8,047,500
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$ 20,860,495
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ESCROWED / PREREFUNDED -- 6.6%
$ 35,000 Dawson Ridge, CO, Metropolitan District #1, Escrowed to
Maturity, 0.00%, 10/1/22 $ 13,412,700
1,725 Maricopa County, AZ, IDA, (Place Five and The Greenery),
Escrowed to Maturity, 8.625%, 1/1/27 2,147,125
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$ 15,559,825
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GENERAL OBLIGATIONS -- 8.8%
$ 2,400 California State General Obligation, 5.00%, 2/1/21 $ 2,420,040
1,500 California State General Obligation, 5.25%, 11/1/29 1,506,270
2,500 California State General Obligation, 5.25%, 4/1/30 2,507,350
4,950 California State General Obligation, 5.50%, 11/1/33 5,096,668
2,000 Kershaw County, SC, School District, 5.00%, 2/1/18 2,123,320
1,200 New York, NY, Variable Rate, 6/1/28(1)(2) 1,289,628
5,000 Puerto Rico Commonwealth, Variable Rate, 7/1/29(1)(3) 5,861,550
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$ 20,804,826
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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 $ 627,038
1,647 Tax Exempt Securities Trust, Community Health Provider,
Pooled Loan Program, 6.25%, 12/1/36 1,706,572
625 Tax Exempt Securities Trust, Community Health Provider,
Pooled Loan Program, 7.75%, 12/1/36 626,395
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$ 2,960,005
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HOSPITAL -- 20.0%
$ 2,500 California Health Facilities Authority, (Cedars Sinai Medical
Center), Variable Rate, 12/1/34(1)(3) $ 2,873,150
930 Chautauqua County, NY, IDA, (Women's Christian
Association), 6.35%, 11/15/17 866,472
985 Chautauqua County, NY, IDA, (Women's Christian
Association), 6.40%, 11/15/29 909,175
1,000 Halifax, FL, Medical Center, 7.25%, 10/1/24 1,071,580
2,765 Highland County, OH, (Joint Township Hospital District),
6.75%, 12/1/29 2,538,021
5,000 Illinois Health Facility Authority, (Loyola University Health
System), 6.00%, 7/1/21 5,179,800
4,750 Louisiana Public Facilities Authority, (Tuoro Infirmary),
5.625%, 8/15/29 4,778,547
2,000 Martin County, MN, (Fairmont Community Hospital
Association), 6.625%, 9/1/22 1,956,720
1,345 Mecosta County, MI, General Hospital, 5.75%, 5/15/09 1,348,766
2,500 Mecosta County, MI, General Hospital, 6.00%, 5/15/18 2,355,275
4,260 New Jersey Health Care Facilities Financing Authority,
(Capital Health System), 5.25%, 7/1/27 4,117,247
1,500 New Jersey Health Care Facilities Financing Authority,
(Trinitas Hospital), 7.50%, 7/1/30 1,638,330
5,000 North Central, TX, Health Facility Development Corp.,
(Baylor Healthcare System), 5.125%, 5/15/29 5,033,800
1,510 Oneonta, AL, Eastern Health Care Facility Financing
Authority, (Eastern Health Systems, Inc.), 7.75%, 7/1/21 1,674,228
7,000 Rhode Island HEFA, (St. Joseph Health Services),
5.50%, 10/1/29 5,946,710
2,425 Southwestern Illinois, Development Authority,
(Anderson Hospital), 5.625%, 8/15/29 2,338,621
2,500 Sullivan County, TN, Health Educational and Housing
Facility Board, (Wellmont Health System),
6.25%, 9/1/32 2,591,150
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$ 47,217,592
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HOUSING -- 11.5%
$ 990 California Statewide Communities Development
Authority, Variable Rate, 6/1/09(1)(3) $ 886,278
See notes to financial statements.
4
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
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HOUSING (CONTINUED)
$ 4,000 Charter Mac Equity Trust, TN, (AMT), 6.625%, 6/30/09 $ 4,335,480
3,185 Florida Capital Projects Finance Authority, Student
Housing Revenue, (Florida University), 7.75%, 8/15/20 3,255,197
925 Lake Creek, CO, Affordable Housing Corp., Multifamily,
7.00%, 12/1/23 852,387
4,510 Louisiana Public Facilities Authority, (Eden Point),
6.25%, 3/1/34 3,999,378
4,000 Muni Mae Tax-Exempt Bond, LLC, (AMT),
6.875%, 6/30/09 4,363,640
3,175 North Little Rock, AR, Residential Housing Facilities,
(Parkstone Place), 6.50%, 8/1/21 2,939,415
3,590 Oregon Health Authority, (Trillium Affordable Housing),
(AMT), 6.75%, 2/15/29 3,266,002
970 Raleigh, NC, Housing Authority, Multifamily,
(Cedar Point), 7.00%, 11/1/30(4) 97,000
3,300 Texas Student Housing Corp., (University of Northern
Texas), 6.75%, 7/1/16 3,303,300
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$ 27,298,077
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INDUSTRIAL DEVELOPMENT REVENUE -- 6.7%
$ 1,911 Abia Development Corp., TX, (Austin Cargoport
Development), (AMT), 6.50%, 10/1/24 $ 1,705,301
1,835 Broward County, FL, IDR, (Lynxs Cargoport), (AMT),
6.75%, 6/1/19 1,682,142
2,500 Gulf Coast, TX, Waste Disposal Authority, (Valero Energy
Corp.) (AMT), 5.70%, 4/1/32 2,385,100
6,000 New Jersey EDA, (Continental Airlines), (AMT),
6.25%, 9/15/29 5,106,780
3,500 New York City, NY, Industrial Development Agency,
(American Airlines, Inc.), (AMT), 8.50%, 8/1/28 2,653,735
2,950 Phoenix, AZ, IDA, (America West Airlines, Inc.),
(AMT), 6.25%, 6/1/19 2,372,803
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$ 15,905,861
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INSURED - EDUCATION -- 3.8%
$ 13,000 Illinois Development Finance Authority, (Local Government
Program-Elgin School District-U46),
(FSA), 0.00%, 1/1/20 $ 5,890,820
3,000 Massachusetts HEFA, (Berklee College of Music),
(MBIA), Variable Rate, 10/1/27(1)(3) 3,126,210
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$ 9,017,030
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INSURED - ELECTRIC UTILITIES -- 0.3%
$ 100 Los Angeles, CA, Department of Water and Power,
(MBIA), Variable Rate, 12/15/24(1)(2) $ 779,500
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$ 779,500
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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 $ 4,335,297
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$ 4,335,297
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INSURED - GENERAL OBLIGATIONS -- 13.8%
$ 500 California, (FGIC), Variable Rate, 12/1/29(1)(2) $ 1,534,000
3,500 California, (FGIC), Variable Rate, 9/1/30(1)(2) 3,888,780
4,000 Chicago, IL, (MBIA), 5.00%, 1/1/41 4,024,960
30,160 Chicago, IL, Board of Education, (FGIC),
0.00%, 12/1/22 11,451,450
1,150 Jupiter, FL, (AMBAC), 4.75%, 10/1/28 1,148,264
1,000 Jupiter, FL, (AMBAC), 4.75%, 10/1/33 992,840
4,000 Puerto Rico, FSA, Variable Rate, 7/1/27(1)(2) 4,825,880
10,000 Washington State General Obligation, (FGIC),
0.00%, 1/1/19 4,834,100
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$ 32,700,274
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INSURED - HOSPITAL -- 9.6%
$ 2,700 Franklin County, OH, (Ohio Health Corp.), (MBIA),
5.00%, 5/15/33 $ 2,745,765
20,205 Kentucky EDA, (Norton Healthcare, Inc.), (MBIA),
0.00%, 10/1/25 6,328,812
23,320 Kentucky EDA, (Norton Healthcare, Inc.), (MBIA),
0.00%, 10/1/26 6,897,123
10,000 Kentucky EDA, (Norton Healthcare, Inc.), (MBIA),
0.00%, 10/1/27 2,795,600
4,000 New Jersey Health Care Facilities Financing Authority,
(St. Barnabas Medical Center), (MBIA),
Variable Rate, 7/1/28(1)(2) 3,953,720
----------------------------------------------------------------------------------------
$ 22,721,020
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INSURED - SPECIAL TAX REVENUE -- 0.1%
$ 60 South Orange County, CA, Public Financing Authority,
(FGIC), DRIVERS, Variable Rate, 8/15/15(1)(2) $ 334,710
----------------------------------------------------------------------------------------
$ 334,710
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INSURED - TRANSPORTATION -- 20.1%
$ 9,000 Central Texas Turnpike Authority, (AMBAC),
0.00%, 8/15/21 $ 3,707,370
3,500 Chicago, IL, O'Hare International Airport, (AMBAC),
(AMT), 5.375%, 1/1/32 3,615,465
2,500 Dallas-Fort Worth, TX, International Airport, (FGIC),
(AMT), 5.50%, 11/1/20 2,645,375
4,930 Dallas-Fort Worth, TX, International Airport, (FGIC),
(AMT), 5.75%, 11/1/30 5,310,645
See notes to financial statements.
5
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
----------------------------------------------------------------------------------------
INSURED - TRANSPORTATION (CONTINUED)
$ 4,500 Dallas-Fort Worth, TX, International Airport, (FGIC),
(AMT), 6.125%, 11/1/35 $ 5,113,080
2,400 Massachusetts Turnpike Authority, Metropolitan Highway
System, (MBIA), Variable Rate, 1/1/27(1)(2) 2,459,232
7,500 Minneapolis and St. Paul, MN, Metropolitan Airport
Commission, (FGIC), 5.25%, 1/1/32 7,801,950
5,500 Nevada Department of Business and Industry, (Las Vegas
Monorail -1st Tier), (AMBAC), 5.375%, 1/1/40 5,848,810
2,000 Puerto Rico Highway and Transportation Authority,
(FSA), Variable Rate, 7/1/32(1)(2) 2,157,800
7,000 San Antonio, TX, Airport System, (Improvements),
(FGIC), 5.25%, 7/1/21 7,251,720
1,500 South Carolina State Transportation Infrastructure Bank,
(AMBAC), 5.00%, 10/1/33 1,524,015
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$ 47,435,462
----------------------------------------------------------------------------------------
INSURED - WATER AND SEWER -- 1.2%
$ 2,720 Deltona, FL, Utility System, (MBIA), 4.75%, 10/1/29 $ 2,713,798
----------------------------------------------------------------------------------------
$ 2,713,798
----------------------------------------------------------------------------------------
LEASE REVENUE / CERTIFICATES OF PARTICIPATION -- 1.7%
$ 4,000 New Jersey EDA, (School Facilities), 5.00%, 6/15/26 $ 4,080,560
----------------------------------------------------------------------------------------
$ 4,080,560
----------------------------------------------------------------------------------------
MISCELLANEOUS -- 13.9%
$ 4,000 California Statewide Communities Development Authority,
(East Valley Tourist Development Authority),
8.25%, 10/1/14 $ 3,770,560
3,000 Capital Trust Agency, FL, (Seminole Tribe Convention),
8.95%, 10/1/33 3,517,620
4,000 Capital Trust Agency, FL, (Seminole Tribe Convention),
10.00%, 10/1/33 4,968,960
4,450 Golden Tobacco Securitization Corp., CA, 6.75%, 6/1/39 4,296,386
2,900 Golden Tobacco Securitization Corp., CA, Variable
Rate, 6/1/31(1)(3) 2,890,082
1,500 Mohegan Tribe Indians, CT, Gaming Authority,
(Public Improvements), 6.25%, 1/1/21 1,616,160
3,900 Puerto Rico Infrastructure Financing Authority, Variable
Rate, 10/1/32(1)(2)(5) 5,703,750
3,300 Santa Fe, NM, (Crow Hobbs), 8.50%, 9/1/16 3,376,329
3,000 Tobacco Settlement Financing Corp., NJ, Variable
Rate, 6/1/39(1)(3) 2,792,910
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$ 32,932,757
----------------------------------------------------------------------------------------
NURSING HOME -- 3.5%
$ 3,580 Ohio HFA, Retirement Rental Housing, (Encore
Retirement Partners), 6.75%, 3/1/19 $ 3,079,265
750 Okaloosa County, FL, Retirement Rental Housing,
(Encore Retirement Partners), 6.125%, 2/1/14 667,125
2,000 Orange County, FL, Health Facilities Authority, (Westminster
Community Care), 6.75%, 4/1/34 1,543,240
767 Tarrant County, TX, Health Facilities Authority,
8.00%, 9/1/25(4) 115,030
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 2,772,539
----------------------------------------------------------------------------------------
$ 8,211,827
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SENIOR LIVING / LIFE CARE -- 3.5%
$ 1,960 Cliff House Trust, PA, (AMT), 6.625%, 6/1/27 $ 1,676,388
190 Delaware County, PA, IDA, (Glen Riddle), (AMT),
8.125%, 9/1/05 193,243
2,000 Delaware County, PA, IDA, (Glen Riddle), (AMT),
8.625%, 9/1/25 2,096,520
3,240 Logan County, CO, Industrial Development Revenue,
(TLC Care Choices, Inc.), 6.875%, 12/1/23 2,914,769
1,400 Mesquite, TX, Health Facilities Authority, (Christian
Retirement Facility), 7.625%, 2/15/28 1,457,596
----------------------------------------------------------------------------------------
$ 8,338,516
----------------------------------------------------------------------------------------
SPECIAL TAX REVENUE -- 3.9%
$ 3,280 Bell Mountain Ranch, CO, Metropolitan District,
6.625%, 11/15/25 $ 3,360,885
3,600 Black Hawk, CO, Business Improvement District,
6.50%, 12/1/11 3,546,072
895 Longleaf, FL, Community Development District,
6.20%, 5/1/09 823,848
1,790 Longleaf, FL, Community Development District,
6.65%, 5/1/20 1,565,910
----------------------------------------------------------------------------------------
$ 9,296,715
----------------------------------------------------------------------------------------
TRANSPORTATION -- 4.6%
$ 3,750 Kent County, MI, Airport Facility, (AMT),
Variable Rate, 1/1/25(1)(3) $ 3,794,663
7,000 Port Authority of New York and New Jersey,
5.00%, 9/1/33 7,121,030
----------------------------------------------------------------------------------------
$ 10,915,693
----------------------------------------------------------------------------------------
See notes to financial statements.
6
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
----------------------------------------------------------------------------------------
WATER AND SEWER -- 0.7%
$ 1,500 Metropolitan Water District, CA, (Southern California
Waterworks), Variable Rate, 1/1/18(1)(3) $ 1,558,350
----------------------------------------------------------------------------------------
$ 1,558,350
----------------------------------------------------------------------------------------
TOTAL TAX-EXEMPT INVESTMENTS -- 150.1%
(IDENTIFIED COST $339,801,613) $ 355,203,451
----------------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES -- 5.3% $ 12,424,081
AUCTION PREFERRED SHARES PLUS CUMULATIVE
UNPAID DIVIDENDS -- (55.4)% $ (131,067,058)
----------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO
COMMON SHARES -- 100.0% $ 236,560,474
----------------------------------------------------------------------------------------
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
FSA - Financial Security Assurance, Inc.
FGIC - Financial Guaranty Insurance Company
AMBAC - AMBAC Financial Group, Inc.
MBIA - Municipal Bond Insurance Association
At November 30, 2003, the concentration of the Trust's investments in the
various states, determined as a percentage of net assets, is as follows:
California 15.7%
Colorado 10.2%
Florida 10.1%
Illinois 13.7%
Texas 20.0%
Others, representing less than 10% individually 80.5%
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 November
30, 2003, 33.8% of the securities in the portfolio of investments are backed by
bond insurance of various financial institutions and financial guaranty
assurance agencies. The aggregate percentage insured by financial institutions
ranged from 3.6% to 15.3% of total investments.
(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(2) Security has been issued as a leveraged inverse floater bond.
(3) Security has been issued as an inverse floater bond.
(4) Non-income producing security.
(5) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements.
7
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2003
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AS OF NOVEMBER 30, 2003
ASSETS
Investments, at value (identified cost, $339,801,613) $ 355,203,451
Receivable for investments sold 5,384,089
Interest receivable 6,901,783
Receivable for daily variation margin on open financial futures contracts 400,390
Prepaid expenses 264,704
--------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 368,154,417
--------------------------------------------------------------------------------------------------
LIABILITIES
Due to bank $ 408,113
Payable to affiliate for Trustees' fees 2,317
Accrued expenses 116,455
--------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 526,885
--------------------------------------------------------------------------------------------------
AUCTION PREFERRED SHARES (5,240 SHARES OUTSTANDING) AT LIQUIDATION VALUE PLUS
CUMULATIVE UNPAID DIVIDENDS $ 131,067,058
--------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES $ 236,560,474
--------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS
Common Shares, $0.01 par value, unlimited number of shares authorized,
16,794,879 shares issued and outstanding $ 167,949
Additional paid-in capital 248,515,907
Accumulated net realized loss (computed on the basis of identified cost) (32,230,133)
Accumulated undistributed net investment income 4,092,361
Net unrealized appreciation (computed on the basis of identified cost) 16,014,390
--------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES $ 236,560,474
--------------------------------------------------------------------------------------------------
NET ASSET VALUE PER COMMON SHARE
($236,560,474 DIVIDED BY 16,794,879 COMMON SHARES ISSUED AND OUTSTANDING) $ 14.09
--------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 2003
INVESTMENT INCOME
Interest $ 25,285,950
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 25,285,950
--------------------------------------------------------------------------------------------------
EXPENSES
Investment adviser fee $ 2,500,095
Administration fee 714,313
Trustees' fees and expenses 14,988
Preferred shares remarketing agent fee 327,501
Transfer and dividend disbursing agent fees 231,108
Custodian fee 146,875
Legal and accounting services 73,059
Printing and postage 3,147
Miscellaneous 72,243
--------------------------------------------------------------------------------------------------
TOTAL EXPENSES $ 4,083,329
--------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 21,202,621
--------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) --
Investment transactions (identified cost basis) $ (2,322,768)
Financial futures contracts 3,110,857
Interest rate swap contracts (4,034,700)
--------------------------------------------------------------------------------------------------
NET REALIZED LOSS $ (3,246,611)
--------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 19,649,892
Financial futures contracts 612,552
--------------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $ 20,262,444
--------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $ 17,015,833
--------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS $ (1,586,402)
--------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 36,632,052
--------------------------------------------------------------------------------------------------
See notes to financial statements.
8
STATEMENTS OF CHANGES IN NET ASSETS
INCREASE (DECREASE) YEAR ENDED YEAR ENDED
IN NET ASSETS NOVEMBER 30, 2003 NOVEMBER 30, 2002
--------------------------------------------------------------------------------------------------------------
From operations --
Net investment income $ 21,202,621 $ 20,723,542
Net realized gain (loss) (3,246,611) 1,491,014
Net change in unrealized
appreciation (depreciation) 20,262,444 (1,429,416)
Distributions to preferred shareholders (1,586,402) (2,445,875)
--------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 36,632,052 $ 18,339,265
--------------------------------------------------------------------------------------------------------------
Distributions to common shareholders --
From net investment income $ (18,871,152) $ (17,028,398)
--------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS $ (18,871,152) $ (17,028,398)
--------------------------------------------------------------------------------------------------------------
Capital share transactions --
Reinvestment of distributions to
common shareholders $ 2,524,723 $ 2,648,507
--------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS $ 2,524,723 $ 2,648,507
--------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 20,285,623 $ 3,959,374
--------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES
At beginning of year $ 216,274,851 $ 212,315,477
--------------------------------------------------------------------------------------------------------------
AT END OF YEAR $ 236,560,474 $ 216,274,851
--------------------------------------------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME
INCLUDED IN NET ASSETS APPLICABLE TO COMMON SHARES
AT END OF YEAR $ 4,092,361 $ 3,504,953
--------------------------------------------------------------------------------------------------------------
See notes to financial statements.
9
FINANCIAL HIGHLIGHTS
Selected data for a common share outstanding during the periods stated
YEAR ENDED NOVEMBER 30,
------------------------------------------------------------------
2003(1) 2002(1)(2) 2001(1) 2000(1) 1999(1)(3)
--------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning of year (Common shares) $ 13.020 $ 12.930 $ 11.950 $ 11.720 $ 15.000
--------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
Net investment income $ 1.269 $ 1.255 $ 1.124 $ 1.083 $ 0.837
Net realized and unrealized gain (loss) 1.026 0.013 0.873 0.260 (3.246)
Distribution to preferred shareholders (0.095) (0.148) (0.240) (0.328) (0.197)
--------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ 2.200 $ 1.120 $ 1.757 $ 1.015 $ (2.606)
--------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income $ (1.130) $ (1.030) $ (0.777) $ (0.785) $ (0.550)
--------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS $ (1.130) $ (1.030) $ (0.777) $ (0.785) $ (0.550)
--------------------------------------------------------------------------------------------------------------------------
PREFERRED AND COMMON SHARES OFFERING COSTS CHARGED TO
PAID-IN CAPITAL $ -- $ -- $ -- $ -- $ (0.042)
--------------------------------------------------------------------------------------------------------------------------
PREFERRED SHARES UNDERWRITING DISCOUNTS $ -- $ -- $ -- $ -- $ (0.082)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF YEAR (COMMON SHARES) $ 14.090 $ 13.020 $ 12.930 $ 11.950 $ 11.720
--------------------------------------------------------------------------------------------------------------------------
MARKET VALUE -- END OF YEAR (COMMON SHARES) $ 15.550 $ 14.050 $ 13.500 $ 11.125 $ 11.688
--------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(4) 20.02% 12.32% 28.95% 2.05% (18.74)%
--------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
10
YEAR ENDED NOVEMBER 30,
------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA+ ++ 2003(1) 2002(1)(2) 2001(1) 2000(1) 1999(1)(3)
--------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to common shares, end of year
(000's omitted) $ 236,560 $ 216,275 $ 212,315 $ 194,676 $ 190,209
Ratios (As a percentage of average net assets
applicable to common shares):
Net expenses(5) 1.80% 1.89% 1.88% 1.95% 1.76%(6)
Net expenses after custodian fee reduction(5) 1.80% 1.88% 1.88% 1.91% 1.70%(6)
Net investment income(5) 9.37% 9.69% 8.79% 9.47% 7.38%(6)
Portfolio Turnover 30% 14% 60% 66% 151%
--------------------------------------------------------------------------------------------------------------------------------
+ The expenses of the Trust may reflect a
reduction of the investment adviser fee. Had
such action not been taken, the ratios and the
net investment income would have been as
follows:
Ratios (As a percentage of average net assets
applicable to common shares):
Expenses(5) 1.76%(6)
Expenses after custodian fee reduction(5) 1.70%(6)
Net investment income(5) 7.38%(6)
Net investment income per share $ 0.837
--------------------------------------------------------------------------------------------------------------------------------
++ The ratios reported above are based on net
assets applicable solely to common shares. The
ratios based on net assets, including amounts
related to preferred shares, are as follows:
Ratios (As a percentage of average total net
assets):
Net expenses 1.14% 1.17% 1.15% 1.15% 1.14%(6)
Net expenses after custodian fee reduction 1.14% 1.17% 1.15% 1.12% 1.10%(6)
Net investment income 5.93% 6.01% 5.40% 5.56% 4.77%(6)
--------------------------------------------------------------------------------------------------------------------------------
+ The expenses of the Trust may reflect a
reduction of the investment adviser fee. Had
such action not been taken, the ratios would
have been as follows:
Ratios (As a percentage of average total net
assets):
Expenses 1.14%(6)
Expenses after custodian fee reduction 1.10%(6)
Net investment income 4.77%(6)
--------------------------------------------------------------------------------------------------------------------------------
Senior Securities:
Total preferred shares outstanding 5,240 5,240 5,240 5,240 5,240
Asset coverage per preferred share(7) $ 70,154 $ 66,291 $ 65,548 $ 62,155 $ 61,308
Involuntary liquidation preference per preferred
share(8) $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
Approximate market value per preferred
share(8) $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
(1) Computed using average common shares outstanding.
(2) The Trust has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies and began using the interest
method to amortize premiums on fixed-income securities. The effect of this
change for the year ended November 30, 2002 was to increase net investment
income per share by $0.011, decrease net realized and unrealized gains per
share by $0.011, increase the ratio of net investment income to average net
assets applicable to common shares from 9.61% to 9.69% and increase the
ratio of net investment income to average total net assets from 5.96% to
6.01%. Per share data and ratios for the periods prior to December 1, 2001
have not been restated to reflect this change in presentation.
(3) For the period from the start of business, January 29, 1999, to November
30, 1999.
(4) Returns are historical and are calculated by determining the percentage
change in market value with all distributions reinvested. Total return is
not computed on an annualized basis.
(5) Ratios do not reflect the effect of dividend payments to preferred
shareholders. Ratios to average net assets applicable to common shares
reflect the Trust's leveraged capital structure.
(6) Annualized.
(7) Calculated by subtracting the Trust's total liabilities (not including the
preferred shares) from the Trust's total assets, and dividing this by the
number of preferred shares outstanding.
(8) Plus accumulated and unpaid dividends.
See notes to financial statements.
11
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2003
NOTES TO FINANCIAL STATEMENTS
1 SIGNIFICANT ACCOUNTING POLICIES
Eaton Vance Municipal Income Trust (the Trust) is an entity commonly known as
a Massachusetts business trust and is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company.
The Trust was organized under the laws of the Commonwealth of Massachusetts
by an Agreement and Declaration of Trust dated December 10, 1998. The Trust's
investment objective is to achieve current income exempt from regular federal
income tax by investing primarily in investment grade municipal obligations.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with accounting principles generally accepted in
the United States of America.
A INVESTMENT VALUATION -- Municipal bonds are normally valued on the basis of
valuations furnished by a pricing service. Taxable obligations, if any, for
which price quotations are readily available are normally valued at the mean
between the latest bid and asked prices. Futures contracts listed on the
commodity exchanges are valued at closing settlement prices. Short-term
obligations, maturing in sixty days or less, are valued at amortized cost,
which approximates value. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B INVESTMENT TRANSACTIONS -- Investment transactions are recorded on a trade
date basis. Realized gains and losses from such transactions are determined
using the specific identification method. Securities purchased or sold on a
when-issued or delayed delivery basis may be settled a month or more after
the transaction date. The securities so purchased are subject to market
fluctuations during this period. To the extent that when-issued or delayed
delivery purchases are outstanding, the Trust instructs the custodian to
segregate assets in a separate account, with a current value at least equal
to the amount of its purchase commitments.
C INCOME -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount.
D FEDERAL INCOME TAXES -- The Trust's policy is to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and
to distribute to shareholders each year all of its taxable income, if any,
and tax-exempt income, including any net realized gain on investments.
Therefore, no provision for federal income or excise tax is necessary. At
November 30, 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 of the option.
When the Trust exercises a put option, settlement is made in cash. The risk
associated with purchasing put options is limited to the premium originally
paid.
12
G INTEREST RATE SWAPS -- The Trust has entered into interest rate swap
agreements to enhance return, to hedge against fluctuations in securities
prices or interest rates or as substitution for the purchase or sale of
securities. Pursuant to these agreements, the Trust makes semi-annual
payments at a fixed interest rate. In exchange, the Trust receives payments
based on the interest rate of a benchmark industry index. During the term of
the outstanding swap agreement, changes in the underlying value of the swap
are recorded as unrealized gains and losses. Payments received or made at the
end of a measurement period are recorded as realized gains and losses. The
value of the swap is determined by changes in the relationship between two
rates of interest. The Trust is exposed to credit loss in the event of
non-performance by the swap counterparty. However, the Trust does not
anticipate non-performance by the counterparty. Risk may also arise from the
unanticipated movements in value of interest rates.
H USE OF ESTIMATES -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expense during the
reporting period. Actual results could differ from those estimates.
I EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT) serves as
custodian of the Trust. Pursuant to the custodian agreement, IBT receives a
fee reduced by credits which are determined based on the average daily cash
balance the Trust maintains with IBT. All significant credit balances used to
reduce the Trust's custodian fees are reported as a reduction of total
expenses in the Statement of Operations.
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 0.69% to 1.50% for Series B Shares, during the
year ended November 30, 2003. Series A and Series B are identical in all
respects except for the dates of reset for the dividend rates.
The APS are redeemable at the option of the Trust, at a redemption price
equal to $25,000 per share, plus accumulated and unpaid dividends on any
dividend payment date. The APS are also subject to mandatory redemption at a
redemption price equal to $25,000 per share, plus accumulated and unpaid
dividends, if the Trust is in default for an extended period on its asset
maintenance requirements with respect to the APS. If the dividends on the APS
shall remain unpaid in an amount equal to two full years' dividends, the
holders of the APS as a class have the right to elect a majority of the Board
of Trustees. In general, the holders of the APS and the common shares have
equal voting rights of one vote per share, except that the holders of the
APS, as a separate class, have the right to elect at least two members of the
Board of Trustees. The APS have a liquidation preference of $25,000 per
share, plus accumulated and unpaid dividends. The Trust is required to
maintain certain asset coverage with respect to the APS as defined in the
Trust's By-Laws and the Investment Company Act of 1940. The Trust pays an
annual fee equivalent to 0.25% of the preferred shares' liquidation value for
the remarketing efforts associated with the preferred auctions.
3 DISTRIBUTIONS TO SHAREHOLDERS
The Trust intends to make monthly distributions of net investment income,
after payment of any dividends on any outstanding Auction Preferred Shares.
Distributions are recorded on the ex-dividend date. Distributions to
preferred shareholders are recorded daily and are payable at the end of each
dividend period. Each dividend payment period for the Auction Preferred
Shares is generally seven days. Effective July 8, 2003, the Series A shares
set a special dividend period of 733 days. The applicable dividend rate for
the Auction Preferred Shares on November 30, 2003 was 1.25% and 1.05%, for
Series A and Series B Shares, respectively. For the year ended November 30,
2003, the Trust paid dividends to Auction Preferred shareholders amounting to
$978,964 and $607,438 for Series A and Series B Shares, respectively,
representing an average APS dividend rate for such period of 1.47% and 0.94%,
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
13
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 year ended
November 30, 2003, the fee was equivalent to 0.70% of the Trust's average
weekly gross assets and amounted to $2,500,095. 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 year
ended November 30, 2003, the administrative fee amounted to $714,313.
Trustees of the Trust that are not affiliated with EVM may elect to defer
receipt of all or a percentage of their annual fees in accordance with the
terms of the Trustees Deferred Compensation Plan. For the year ended
November 30, 2003, no significant amounts have been deferred.
Certain officers and Trustees of the Trust are officers of EVM.
5 INVESTMENTS
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $104,377,933 and $110,528,839,
respectively, for the year ended November 30, 2003.
6 FEDERAL INCOME TAX BASIS OF UNREALIZED APPRECIATION (DEPRECIATION)
The cost and unrealized appreciation (depreciation) in value of the
investments owned by the Trust at November 30, 2003, as computed for Federal
income tax purposes, are as follows:
AGGREGATE COST $ 339,490,736
----------------------------------------------------
Gross unrealized appreciation $ 25,005,249
Gross unrealized depreciation (9,292,534)
----------------------------------------------------
NET UNREALIZED APPRECIATION $ 15,712,715
----------------------------------------------------
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:
YEAR ENDED NOVEMBER 30,
-----------------------
2003 2002
---------------------------------------------------------------------------
Shares issued pursuant to the Trust's dividend
reinvestment plan 181,895 197,404
---------------------------------------------------------------------------
NET INCREASE 181,895 197,404
---------------------------------------------------------------------------
8 FINANCIAL INSTRUMENTS
The Trust regularly trades in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include futures
contracts and interest rate swaps and may involve, to a varying degree,
elements of risk in excess of the amounts recognized for financial statement
purposes. The notional or contractual amounts of these instruments represent
the investment the Trust has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered.
14
A summary of obligations under these financial instruments at November 30,
2003 is as follows:
FUTURES CONTRACTS
EXPIRATION NET UNREALIZED
DATE(S) CONTRACTS POSITION APPRECIATION
----------------------------------------------------------------
3/04 275 U.S. Treasury Bond Short $ 402,523
3/04 175 U.S. Treasury Note Short 210,029
----------------------------------------------------------------
$ 612,552
----------------------------------------------------------------
At November 30, 2003, the Trust had sufficient cash and/or securities to
cover margin requirements on open futures contracts.
15
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2003
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS OF EATON VANCE MUNICIPAL INCOME TRUST:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance Municipal Income Trust (the Trust), including the portfolio of
investments, as of November 30, 2003, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
years in the four year period ended November 30, 2003 and for the period from
the start of business, January 29, 1999, to November 30, 1999. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. Our
procedures included confirmation of securities held as of November 30, 2003 by
correspondence with the custodian. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights, referred to
above, present fairly, in all material respects, the financial position of Eaton
Vance Municipal Income Trust as of November 30, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for the
respective stated periods, in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 13, 2004
16
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.
17
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 November 30, 2003, our records indicate that there are 179 registered
shareholders and approximately 7,985 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.
18
EATON VANCE MUNICIPAL INCOME TRUST
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of Eaton Vance Municipal Income Trust (the Trust)
are responsible for the overall management and supervision of the Trust's
affairs. The Trustees and officers of the Trust are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. The "noninterested Trustees" consist of
those Trustees who are not "interested persons" of the Trust, as that term is
defined under the 1940 Act. The business address of each Trustee and officer is
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109. As used
below, "EVC" refers to Eaton Vance Corp., "EV" refers to Eaton Vance, Inc.,
"EVM" refers to Eaton Vance Management, "BMR" refers to Boston Management and
Research and "EVD" refers to Eaton Vance Distributors, Inc. EVC and EV are the
corporate parent and trustee, respectively, of EVM and BMR. EVD is the Trust's
principal underwriter and a wholly-owned subsidiary of EVM.
TERM OF NUMBER OF PORTFOLIOS
OFFICE AND IN FUND COMPLEX
NAME AND POSITION(S) LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY
DATE OF BIRTH WITH THE TRUST SERVICE DURING PAST FIVE YEARS TRUSTEE(1) OTHER DIRECTORSHIPS HELD
-----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE(S)
Jessica M. Bibliowicz Trustee Until 2006. Chairman, President and 193 Director of National
11/28/59 3 years. Chief Executive Officer Financial Partners
Trustee of National Financial
since 1998 Partners (financial
services company) (since
April 1999). President
and Chief Operating
Officer of John A. Levin &
Co. (registered
investment adviser) (July
1997 to April 1999) and a
Director of Baker,
Fentress & Company which
owns John A. Levin & Co.
(July 1997 to April
1999). Ms. Bibliowicz is
an interested person
because of her
affiliation with a
brokerage firm.
James B. Hawkes Vice President Until 2004. Chairman, President and 195 Director of EVC
11/9/41 and Trustee 3 years. Chief Executive Officer
Trustee of BMR, EVC, EVM and EV;
since 1998. Director of EV; Vice
President and Director of
EVD. Trustee and/or officer
of 195 registered
investment companies in the
Eaton Vance Fund Complex.
Mr. Hawkes is an interested
person because of his
positions with BMR, EVM,
EVC and EV, which are
affiliates of the Trust.
NONINTERESTED TRUSTEE(S)
Samuel L. Hayes, III Trustee Until 2004. Jacob H. Schiff Professor 195 Director of Tiffany & Co.
2/23/35 3 years. of Investment Banking (specialty retailer) and
Trustee Emeritus, Harvard Telect, Inc.
since 1998. University Graduate (telecommunication
School of Business services company)
Administration.
William H. Park Trustee Until 2005. President and Chief 192 None
9/19/47 3 years. Executive Officer, Prizm
Trustee Capital Management, LLC
since 2003. (investment management
firm) (since 2002).
Executive Vice President
and Chief Financial
Officer, United Asset
Management Corporation (a
holding company owning
institutional investment
management firms)
(1982-2001).
Ronald A. Pearlman Trustee Until 2006. Professor of Law, 192 None
7/10/40 3 years. Georgetown University Law
Trustee Center (since 1999). Tax
since 2003. Partner Covington &
Burling, Washington, DC
(1991-2000).
19
TERM OF NUMBER OF PORTFOLIOS
OFFICE AND IN FUND COMPLEX
NAME AND POSITION(S) LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY
DATE OF BIRTH WITH THE TRUST SERVICE DURING PAST FIVE YEARS TRUSTEE(1) OTHER DIRECTORSHIPS HELD
-----------------------------------------------------------------------------------------------------------------------------------
NONINTERESTED TRUSTEE(S) (CONTINUED)
Norton H. Reamer Trustee Until 2005. President and Chief 195 None
9/21/35 3 years. Executive Officer of
Trustee Asset Management Finance
since 1998. Corp. (a specialty
finance company serving
the investment management
industry) (since October
2003). President, Unicorn
Corporation (an
investment and financial
advisory services
company) (since September
2000). Formerly,
Chairman, Hellman, Jordan
Management Co., Inc. (an
investment management
company) (2000-2003).
Formerly, Advisory
Director of Berkshire
Capital Corporation
(investment banking firm)
(2002-2003). Formerly,
Chairman of the Board,
United Asset Management
Corporation (a holding
company owning
institutional investment
management firms) and
Chairman, President and
Director, UAM Funds
(mutual funds)
(1980-2000).
Lynn A. Stout Trustee Until 2005. Professor of Law, 195 None
9/14/57 3 years. University of California
Trustee at Los Angeles School of
since 1998. Law (since July 2001).
Formerly, Professor of
Law, Georgetown
University Law Center.
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
TERM OF
OFFICE AND
NAME AND POSITION(S) LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH WITH THE TRUST SERVICE DURING PAST FIVE YEARS
-----------------------------------------------------------------------------------------------------------------------------
Thomas J. Fetter President Since 1998 Vice President of EVM and BMR. Trustee and President of
8/20/43 The Massachusetts Health& Education Tax-Exempt Trust.
Officer of 127 registered investment companies managed
by EVM or BMR.
Robert B. MacIntosh Vice President Since 1998 Vice President of EVM and BMR. Officer of 127 registered
1/22/57 investment companies managed by EVM or BMR.
Thomas M. Metzold Vice President Since 1998 Vice President of EVM and BMR. Officer of 7 registered
8/3/58 investment companies managed by EVM or BMR.
Alan R. Dynner Secretary Since 1998 Vice President, Secretary and Chief Legal Officer of
10/10/40 BMR, EVM, EVD, EV and EVC. Officer of 195 registered
investment companies managed by EVM or BMR.
James L. O'Connor Treasurer Since 1998 Vice President of BMR, EVM and EVD. Officer of 116
4/1/45 registered investment companies managed by EVM or BMR.
(1) Includes both master and feeder funds in a master-feeder structure.
20
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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
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
200 Berkeley Street
Boston, MA 02116-5022
EATON VANCE MUNICIPAL INCOME TRUST
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
151-1/04 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 (a fixed income
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 of
Unicorn Capital (an investment and financial advisory services company),
Chairman of Hellman, Jordan Management Co., Inc. (an investment management
company) and Advisory Director of Berkshire Capital Corporation (an investment
banking firm). Previously, Mr. Reamer was 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. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not required in this filing since the registrant invests exclusively in
non-voting securities.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) It is the conclusion of the registrant's principal executive officer and
principal financial officer that the effectiveness of the registrant's current
disclosure controls and procedures (such disclosure controls and procedures
having been evaluated within 90 days of the date of this filing) provide
reasonable assurance that the information required to be disclosed by the
registrant has been recorded, processed, summarized and reported within the time
period specified in the Commission's rules and forms and that the information
required to be disclosed by the registrant has been accumulated and communicated
to the registrant's principal executive officer and principal financial officer
in order to allow timely decisions regarding required disclosure.
(b) There have been no significant changes in the registrant's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS
(a)(1) Registrant's Code of Ethics - Not applicable (please see Item 2).
(a)(2)(i) Treasurer's Section 302 certification.
(a)(2)(ii) President's Section 302 certification.
(b) Combined Section 906 certification.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
EATON VANCE MUNICIPAL INCOME TRUST
By: /s/ Thomas J. Fetter
-----------------------------------
Thomas J. Fetter
President
Date: January 13, 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: January 13, 2004
----------------
By: /s/ Thomas J. Fetter
-----------------------------------
Thomas J. Fetter
President
Date: January 13, 2004
----------------