[EATON VANCE LOGO] [EDUCATION PLAQUE]
Annual Report November 30, 2001
EATON VANCE
[FREEWAY AT NIGHT] MUNICIPAL
INCOME
TRUST
[BRIDGE]
EATON VANCE MUNICIPAL INCOME TRUST as of November 30, 2001
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L E T T E R T O S H A R E H O L D E R S
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[PHOTO OF THOMAS J. As a major financing mechanism for local and state public
FETTER] initiatives, the municipal bond market is among the most
complex areas of the fixed-income investment universe. More
than 50,000 state and local entities issue municipal
Thomas J. Fetter securities, with 1.5 million separate bond issues
President outstanding. Not surprisingly, given the complexity and
diversity of this market, professional trading expertise
provides a distinct advantage to mutual fund investors. As part of our
continuing series, we thought it might be helpful to discuss some of the trading
fundamentals within this dynamic market.
THE MUNICIPAL BOND MARKET:
A $1.5 TRILLION OVER-THE-COUNTER
FINANCIAL MARKETPLACE...
Unlike the stock market, which features exchanges that oversee trading in
specific stocks, the $1.5 trillion municipal bond market is traded entirely
over-the-counter. The primary market presents opportunities in new issues
brought to market by underwriters. Typically, the underwriters will indicate a
date on which the bonds will be priced in line with prevailing interest rates.
This notice gives institutional investors time to study the issue as to its
suitability for their needs, while giving the underwriters a fairly accurate
indication of interest from the investment community.
The secondary market features trading in already-outstanding issues. While many
bonds are actively traded, others trade infrequently. This naturally places a
premium on strong research capabilities, with a clear line of communication
between the research and trading areas. Under SEC disclosure rules adopted in
1994, bond issuers must list financial information and data in the Official
Statement of the primary offering and update that information annually, as well
as provide ongoing notice of material events. These regulations were designed to
improve the availability of information, increasing market transparency and
benefiting all municipal investors. A strong research effort keeps the trading
desk up-to-date for any changes in a bond issuer's fundamentals.
BOND PRICES AND YIELDS ARE INFLUENCED
BY MANY FUNDAMENTAL AND TECHNICAL
FACTORS...
Bond prices and yields are based on a variety of important criteria,
incorporating interest rate levels. Key considerations used to evaluate bond
prices include:
- Coupon;
- Maturity of the bond;
- Call provisions;
- Trading characteristics of similar, bellwether bonds;
- Supply and demand for the bond;
- Creditworthiness of the issuer;
- Frequency of bond issuance by issuer; and
- Trading volume of the issue.
By examining these characteristics and comparing a prospective bond with
bellwether issues, a trader can fairly ascertain at what level an issue is
reasonably priced.
EXPERIENCE, SUPPORT AND MARKET
PRESENCE CAN PROVIDE AN ADVANTAGE...
At Eaton Vance, we have been prominent participants in the municipal market and
have developed a broad trading expertise, as well as a wealth of market
contacts. For example, Eaton Vance has three traders dedicated solely to the
municipal market and backed by a full support staff and a complete range of
research capabilities necessary to meet any market challenge.
The tax-exempt market has historically been a primary engine of public works and
economic development. We remain confident that the future will present
additional opportunities and believe that our trading and research commitments
demonstrate our faith in this exciting market.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter
President
January 10, 2002
2
EATON VANCE MUNICIPAL INCOME TRUST as of November 30, 2001
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M A R K E T R E C A P
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The U.S. economy weakened significantly in 2001, marking the end of the longest
economic expansion in the nation's history. The pace of job layoffs quickened in
the first half of the year, especially in the technology, telecom and
manufacturing sectors. Then, the tragic events of September 11 exacerbated an
already-difficult situation, and by November, the nation's unemployment rate
rose to 5.7%, its highest level in six years.
WITH JOB LOSSES MOUNTING, GROSS DOMESTIC PRODUCT
CONTRACTED IN THE THIRD QUARTER OF 2001...
In the wake of September 11, consumer sentiment took a decided turn for the
worse, resulting in a much wider economic slump. The heretofore-resilient
retailing, lodging, leisure and airline sectors felt the impact of consumers'
lingering uncertainties and a widespread move to curtail travel plans. As job
cuts mounted and the corporate earnings outlook deteriorated, the nation's Gross
Domestic Product contracted 1.3% in the third quarter of 2001, the first such
quarterly decline since 1991. Echoing the discouraging anecdotal evidence, in
early December the National Bureau of Economic Research -- the agency
responsible for dating economic cycles -- officially pronounced the U.S. economy
to be in a recession. At this writing, it is anticipated that the Commerce
Department will report that GDP declined again in the fourth quarter.
TO BOOST THE ECONOMY, THE FEDERAL RESERVE
LOWERED SHORT-TERM INTEREST RATES ON ELEVEN
OCCASIONS IN 2001...
In an effort to stimulate economic activity, the Federal Reserve continued the
accommodative monetary policy it began in January. By year-end, the Fed had
lowered its benchmark Federal Funds rate -- a key short-term interest rate
barometer -- on eleven occasions by a total of 475 basis points (4.75%). Through
much of the year, the bond market -- which typically moves in the opposite
direction of interest rates -- benefited by the rate cuts, as well as by a
flight to quality by worried investors. In the fourth quarter, however, the
market gave up some of those gains, as investors anticipated an end to the Fed's
interest rate cuts. The Lehman Brothers Municipal Bond Index -- a broad-based,
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Municipal bond yields exceeded Treasury yields
[EDGAR REPRESENTATION OF BAR CHART]
5.31% 8.72%
30-Year AAA-rated Taxable equivalent yield
General Obligation (GO) Bonds* In 39.1% tax bracket
5.28%
30-Year Treasury bond
Principal and interest payments of Treasury securities are guaranteed by the
U.S. government.
*GO yields are a compilation of a representative variety of general
obligations and are not necessarily representative of the Trust's yield.
Statistics as of November 30, 2001.
Past performance is no guarantee of future results.
Source: Bloomberg, L.P.
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unmanaged index of municipal bonds -- posted a total return of 8.75% for the
year ended November 30, 2001.* Interestingly, Eaton Vance Municipal Income Trust
benefited additionally from lower rates, as the lower interest rates paid on
their adjustable rate preferred debt allowed the Trust to raise its dividends
several times during the year.
AMID CONTINUING UNCERTAINTY, MUNICIPAL BONDS
OFFER QUALITY AND A REFUGE FROM VOLATILITY...
In the wake of the tumult of 2001, there is, understandably, a good deal of
uncertainty about the economic and geopolitical future, concerns that are likely
to be reflected in the fixed-income markets in the coming year. However, it is
noteworthy that, amid the frenzy of the past year, the municipal market has
demonstrated considerably less volatility than the Treasury market or the
corporate bond market.
The extent and length of the current recession remain major questions for
investors, as does the impact of the slowdown on state and municipal finances. A
weaker economy could result in lower revenues for states and municipalities, and
possibly increased funding needs, especially for areas such as New York City.
Interestingly, some indicators have suggested that the worst of the recession
may already be behind us. Whatever direction the economy takes in the coming
year, we believe that municipal bonds will continue to pose a quality
alternative for fixed-income investors, while making a major contribution to our
recovery.
*It is not possible to invest directly in an Index.
3
EATON VANCE MUNICIPAL INCOME TRUST as of November 30, 2001
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M A N A G E M E N T U P D A T E
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[PHOTO OF THOMAS M. MANAGEMENT DISCUSSION
METZGOLD] ---------------------
- With the Federal Reserve easing interest rates
dramatically this year, the Trust was able to increase
Thomas J. Metzgold its dividend three times in the last six months to
Portfolio Manager 6.30% at November 30, 2001. We believe that amid this
low interest rate environment, the dividend yield
should be stable and sustainable going forward. The
U.S. economy remains uncertain, which helps make
municipal bonds an attractive investment option.
- Hospital bonds were the Trust's largest sector weighting at November 30,
2001. Such holdings were well diversified by region; bonds from 15
different states were held at November 30, 2001, including Rhode Island's
St. Joseph Health Services and the Loyola University Health System in
Illinois.
- As a result of market volatility, the Trust was able to establish capital
loss carry-forwards, which can then be used to offset potential capital
gains over the next eight years. This strategy reduces the potential for
capital gain distributions, thereby minimizing future tax liabilities. In
addition, the Trust has the opportunity to potentially increase income by
using the proceeds to purchase higher-yielding bonds. The Trust did not pay
out any capital gains this year, and while it is impossible to predict for
certain, we currently do not anticipate any in the coming year.
- The Trust's commitment to the improvement of call protection continued
strong in 2001, especially given the lower interest rate environment. We
believe the Trust's significant and extended call protection strategies
truly help differentiate it from its peers.
TRUST OVERVIEW(4)
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- Number of Issues: 104
- Average Maturity: 26.2 years
- Average Rating: A
- Average Call: 10.1 years
- Average Dollar Price: $89.82
THE TRUST
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PERFORMANCE FOR THE PAST YEAR
- Based on share price (traded on the New York Stock Exchange), the Trust had
a total return of 28.95% for the year ended November 30, 2001. That return
was the result of an increase in share price from $11.125 on November 30,
2000 to $13.50 on November 30, 2001, and the reinvestment of $0.777 in
regular monthly dividends.(1)
- Based on net asset value, the Trust had a total return of 14.98% for the
year period ended November 30, 2001. That return was the result of an
increase in net asset value from $11.95 on November 30, 2000 to $12.93 on
November 30, 2001, and the reinvestment of all distributions.
- Based on the most recent dividend and a share price of $13.50, the Trust
had a market yield of 6.30% at November 30, 2001.(2) The Trust's market
yield is equivalent to a taxable yield of 10.34%.(3)
5 LARGEST CATEGORIES(4)
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By total net assets
[EDGAR REPRESENTATION OF BAR CHART]
Hospital 15.9%
Insured Transportation 11.3%
Insured General Obligations* 9.4%
Housing 8.2%
Industrial Development Revenue 7.5%
* Private insurance does not reduce the interest rate risks that are
associated with these investments. 5 Largest Categories are subject to
change due to active management.
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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.
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TRUST INFORMATION
as of November 30, 2001
PERFORMANCE(5)
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Average Annual Total Returns (by market value, New York Stock Exchange)
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One Year 28.95%
Life of Trust (1/29/99) 2.39
Average Annual Total Returns (at net asset value)
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One Year 14.98%
Life of Trust (1/29/99) 0.84
For federal income tax purposes, 100% of the total dividends paid by the Trust
from net investment income during the year ended November 30, 2001 was
designated as an exempt interest dividend.
RATING DISTRIBUTION(4)
--------------------------------------------------------------------------------
By total investments
[EDGAR REPRESENTATION OF PIE CHART]
AAA 38.5%
AA 8.9%
A 6.2%
BBB 18.5%
CCC 0.5%
Non-Rated 27.4%
1 A portion of the Trust's income may be subject to federal and state income
tax and/or federal alternative minimum tax.
2 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.
3 Taxable-equivalent yield assumes maximum 39.1% federal income tax rate. A
lower rate would result in a lower tax-equivalent figure.
4 Trust Overview and Rating Distribution are determined by dividing the total
market value of the holdings by the total investments of the Trust. Trust
Overview and Rating Distribution are subject to change.
5 Returns are historical and are calculated by determining the percentage
change in share price or net asset value with all distributions reinvested.
Past performance is no guarantee of future results. Investment return and
market price will fluctuate so that shares, when sold, may be worth more or
less than their original cost. Yields will vary.
4
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
PORTFOLIO OF INVESTMENTS
TAX-EXEMPT INVESTMENTS -- 98.0%
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
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Cogeneration -- 0.9%
-------------------------------------------------------------------------
$ 2,950 Maryland Energy Cogeneration, (AES
Warrior Run), (AMT), 7.40%, 9/1/19 $ 3,096,910
-------------------------------------------------------------------------
$ 3,096,910
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Education -- 2.7%
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$ 2,250 California Educational Facilities
Authority, Residual Certificates,
Variable Rate, 12/1/32(1)(2) $ 2,503,260
6,875 Massachusetts Development Finance
Agency, (Boston University),
5.45%, 5/15/59 6,658,369
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$ 9,161,629
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Electric Utilities -- 5.8%
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$ 8,000 Brazos River Authority, TX, (Reliant
Energy, Inc.), (AMT), 5.375%, 4/1/19 $ 7,588,800
3,550 Mississippi Business Finance Corp.,
(System Energy Resources, Inc.),
5.90%, 5/1/22 3,491,922
7,250 North Carolina Municipal Power Agency,
(Catawba), 6.50%, 1/1/20 7,666,947
1,200 Santa Cruz County, AZ, IDA, (Citizens
Utilities Co.), (AMT), 7.15%, 2/1/23 1,200,192
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$ 19,947,861
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Escrowed / Prerefunded -- 3.3%
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$35,000 Dawson Ridge, CO, Metropolitan District
#1, Escrowed to Maturity, 0.00%, 10/1/22 $ 9,277,450
1,725 Maricopa County, AZ, IDA, (Place Five
and The Greenery), Escrowed to Maturity,
8.625%, 1/1/27 2,163,012
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$ 11,440,462
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General Obligations -- 3.7%
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$ 500 California General Obligation, Variable
Rate, 12/1/29(1)(3) $ 1,211,250
4,000 Kershaw County, SC, School District,
5.00%, 2/1/18 4,025,040
8,500 North East Independent School District,
TX, 4.50%, 10/1/28 7,518,335
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$ 12,754,625
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Hospital -- 15.9%
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$ 2,500 California Health Facilities Authority,
(Cedars Sinai Medical Center), Variable
Rate, 12/1/34(1)(3) $ 2,897,125
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
-------------------------------------------------------------------------
Hospital (continued)
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$ 1,000 Chautauqua County, NY, IDA, (Women's
Christian Association), 6.35%, 11/15/17 $ 927,220
1,000 Chautauqua County, NY, IDA, (Women's
Christian Association), 6.40%, 11/15/29 896,540
1,410 Colorado Health Facilities Authority,
(Rocky Mountain Adventist),
6.625%, 2/1/22 1,454,866
1,000 Halifax, FL, Medical Center,
7.25%, 10/1/24 1,014,840
2,840 Highland County, OH, (Joint Township
Hospital District), 6.75%, 12/1/29 2,626,262
5,000 Illinois Health Facility Authority,
(Loyola University Health System),
6.00%, 7/1/21 4,901,050
3,500 John Tolfree Health System Corp., MI,
6.00%, 9/15/23 3,176,355
1,215 Loris, SC, Community Hospital District,
5.625%, 1/1/20 1,153,509
3,500 Loris, SC, Community Hospital District,
5.625%, 1/1/29 3,241,595
5,250 Louisiana Public Facilities Authority,
(Tuoro Infirmary), 5.625%, 8/15/29 5,169,832
2,000 Martin County, MN, (Fairmont Community
Hospital Association), 6.625%, 9/1/22 1,891,160
1,700 Mecosta County, MI, General Hospital,
5.75%, 5/15/09 1,682,830
2,500 Mecosta County, MI, General Hospital,
6.00%, 5/15/18 2,320,200
4,260 New Jersey Health Care Facilities
Financing Authority, (Capital Health
System), 5.25%, 7/1/27 3,407,702
1,500 New Jersey Health Care Facilities
Financing Authority, (Trinitas
Hospital), 7.50%, 7/1/30 1,611,180
5,000 North Central, TX, Health Facility
Development Corp., (Baylor Healthcare
System), 5.125%, 5/15/29 4,786,950
1,585 Oneonta, AL, Eastern Health Care
Facility Financing Authority, (Eastern
Health Systems, Inc.), 7.75%, 7/1/21 1,733,768
7,000 Rhode Island HEFA, (St. Joseph Health
Services), 5.50%, 10/1/29 5,683,930
2,425 Southwestern Illinois, Development
Authority, (Anderson Hospital),
5.625%, 8/15/29 2,226,320
2,000 Weber County, UT, (IHC Health Services,
Inc.), 5.00%, 8/15/30 1,887,960
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$ 54,691,194
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Housing -- 8.2%
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$ 990 California Statewide Communities
Development Authority, Variable Rate,
6/1/09(1)(3) $ 1,064,577
SEE NOTES TO FINANCIAL STATEMENTS
5
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
PORTFOLIO OF INVESTMENTS CONT'D
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
-------------------------------------------------------------------------
Housing (continued)
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$ 4,000 Charter Mac Equity Trust, TN, (AMT),
6.625%, 6/30/09 $ 4,060,840
3,185 Florida Capital Projects Finance
Authority, Student Housing Revenue,
(Florida University), 7.75%, 8/15/20 3,210,002
960 Lake Creek, CO, Affordable Housing
Corp., Multifamily, 7.00%, 12/1/23 915,600
4,600 Louisiana Public Facilities Authority,
(Eden Point), 6.25%, 3/1/34 4,122,612
4,000 Muni Mae Tax-Exempt Bond, LLC, (AMT),
6.875%, 6/30/09 4,096,360
3,350 North Little Rock, AR, Residential
Housing Facilities, (Parkstone Place),
6.50%, 8/1/21 3,206,519
3,660 Oregon Health Authority, (Trillium
Affordable Housing), (AMT),
6.75%, 2/15/29 3,463,348
970 Raleigh, NC, Housing Authority,
Multifamily, (Cedar Point),
7.00%, 11/1/30(4) 582,000
3,300 Texas Student Housing Corp., (University
of Northern Texas), 6.75%, 7/1/16 3,283,104
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$ 28,004,962
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Industrial Development Revenue -- 7.5%
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$ 1,970 Abia Development Corp., TX, (Austin
Cargoport Development), (AMT),
6.50%, 10/1/24 $ 1,721,907
1,935 Broward County, FL, IDR, (Lynxs
Cargoport), (AMT), 6.75%, 6/1/19 1,756,438
4,000 Courtland, AL, Solid Waste Disposal,
(Champion International Corp.), (AMT),
6.70%, 11/1/29 4,230,320
2,500 Denver, CO, City and County, (United
Airlines), Variable Rate, 10/1/32(1)(3) 814,650
1,000 Gloucester County, NJ, Improvements
Authority, (Waste Management, Inc.),
(AMT), 7.00%, 12/1/29 1,124,270
2,500 Gulf Coast, TX, Waste Disposal
Authority, (Valero Energy Corp.) (AMT),
5.70%, 4/1/32 2,352,475
3,000 Houston, TX, Airport System,
(Continental Airlines), 6.75%, 7/1/29 2,310,900
3,000 Minneapolis and St. Paul, MN,
Metropolitan Airport Commission,
(Northwest Airlines), (AMT),
7.00%, 4/1/25 2,341,800
3,000 Missouri Development Finance Authority,
Solid Waste Disposal, (Proctor and
Gamble Paper Products), (AMT),
5.20%, 3/15/29 2,963,130
6,000 New Jersey EDA, (Continental Airlines),
(AMT), 6.25%, 9/15/29 4,635,000
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
-------------------------------------------------------------------------
Industrial Development Revenue (continued)
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$ 3,550 Phoenix, AZ, IDA, (America West
Airlines, Inc.), (AMT), 6.25%, 6/1/19 $ 1,565,301
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$ 25,816,191
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Insured-Education -- 0.9%
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$ 3,000 Massachusetts HEFA, (Berklee College of
Music), (MBIA), Variable Rate,
10/1/27(1)(3) $ 3,000,990
-------------------------------------------------------------------------
$ 3,000,990
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Insured-Electric Utilities -- 0.9%
-------------------------------------------------------------------------
$ 3,000 Burke County, GA, Development Authority,
(Georgia Power Co.), (MBIA), (AMT),
5.45%, 5/1/34 $ 3,016,560
-------------------------------------------------------------------------
$ 3,016,560
-------------------------------------------------------------------------
Insured-General Obligations -- 9.4%
-------------------------------------------------------------------------
$ 3,500 California General Obligation, (FGIC),
Variable Rate, 9/1/30(1)(2) $ 3,687,145
11,250 Chicago, IL, (MBIA), 5.00%, 1/1/41 10,757,475
30,160 Chicago, IL, Board Education, (FGIC),
0.00%, 12/1/22 9,669,899
4,000 Puerto Rico General Obligation, (FSA),
Variable Rate, 7/1/27(1)(2) 4,251,400
10,000 Washington, (FGIC), 0.00%, 1/1/19 4,042,400
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$ 32,408,319
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Insured-Hospital -- 5.2%
-------------------------------------------------------------------------
$21,305 Kentucky EDA, (Norton Healthcare, Inc.),
(MBIA), 0.00%, 10/1/25 $ 5,818,395
23,470 Kentucky EDA, (Norton Healthcare, Inc.),
(MBIA), 0.00%, 10/1/26 6,055,260
10,000 Kentucky EDA, (Norton Healthcare, Inc.),
(MBIA), 0.00%, 10/1/27 2,440,600
4,000 New Jersey Health Care Facilities
Financing Authority, (St. Barnabas
Medical Center), (MBIA), Variable Rate,
7/1/28(1)(2) 3,570,080
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$ 17,884,335
-------------------------------------------------------------------------
Insured-Special Tax -- 1.6%
-------------------------------------------------------------------------
$15,905 Metropoltan Pier and Exposition
Authority III, (MBIA), 0.00%, 6/15/23 $ 4,952,658
SEE NOTES TO FINANCIAL STATEMENTS
6
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
PORTFOLIO OF INVESTMENTS CONT'D
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
-------------------------------------------------------------------------
Insured-Special Tax (continued)
-------------------------------------------------------------------------
$ 60 South Orange County, CA, Public
Financing Authority, (FGIC), DRIVERS,
Variable Rate, 8/15/15(1)(3) $ 396,240
-------------------------------------------------------------------------
$ 5,348,898
-------------------------------------------------------------------------
Insured-Transportation -- 11.3%
-------------------------------------------------------------------------
$ 3,500 Chicago, IL, O'Hare International
Airport, (AMBAC), (AMT), 5.375%, 1/1/32 $ 3,489,465
2,850 Clark County, NV, Airport, (MBIA),
6.00%, 7/1/29 3,259,716
4,930 Dallas-Fort Worth, TX, International
Airport, (FGIC), (AMT), 5.75%, 11/1/30 5,076,520
4,500 Dallas-Fort Worth, TX, International
Airport, (FGIC), (AMT), 6.125%, 11/1/35 4,768,650
3,500 Florida Turnpike Authority, (Department
of Transportation), (FGIC),
4.50%, 7/1/27 3,141,705
2,400 Massachusetts Turnpike Authority,
Metropolitan Highway System, (MBIA),
Variable Rate, 1/1/37(1)(2) 2,095,800
4,250 Metropolitan Transportation Authority,
NY, Commuter Revenue (FGIC),
4.75%, 7/1/26 3,977,745
7,500 Minneapolis and St. Paul, MN,
Metropolitan Airport Commission, (FGIC),
5.25%, 1/1/32 7,529,250
5,500 Nevada Department of Business and
Industry, (Las Vegas Monorail -1st
Tier), (AMBAC), 5.375%, 1/1/40 5,542,735
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$ 38,881,586
-------------------------------------------------------------------------
Insured-Water and Sewer -- 1.6%
-------------------------------------------------------------------------
$ 5,000 Charleston, SC, Waterworks and Sewer,
(FGIC), 4.50%, 1/1/24 $ 4,523,200
100 Los Angeles, CA, Department of Water and
Power, (MBIA), Variable Rate,
12/15/24(1)(3) 1,090,150
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$ 5,613,350
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Miscellaneous -- 1.0%
-------------------------------------------------------------------------
$ 3,300 Santa Fe, NM, (Crow Hobbs),
8.50%, 9/1/16 $ 3,458,598
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$ 3,458,598
-------------------------------------------------------------------------
Nursing Home -- 2.7%
-------------------------------------------------------------------------
$ 3,700 Ohio HFA, Retirement Rental Housing,
(Encore Retirement Partners),
6.75%, 3/1/19 $ 3,187,328
750 Okaloosa County, FL, Retirement Rental
Housing, (Encore Retirement Partners),
6.125%, 2/1/14 661,980
2,000 Orange County, FL, Health Facilities
Authority, (Westminster Community Care),
6.75%, 4/1/34 1,757,380
779 Tarrant County, TX, Health Facilities
Authority, 8.00%, 9/2/25 775,121
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
-------------------------------------------------------------------------
Nursing Home (continued)
-------------------------------------------------------------------------
$ 1,221 Tarrant County, TX, Health Facilities
Authority, (3927 Foundation),
10.25%, 9/1/19(4) $ 57,980
3,000 Wisconsin HEFA, (Wisconsin Illinois
Senior Housing), 7.00%, 8/1/29 2,845,650
-------------------------------------------------------------------------
$ 9,285,439
-------------------------------------------------------------------------
Other Revenue -- 1.9%
-------------------------------------------------------------------------
$ 1,500 Mohegan Tribe Indians, CT, Gaming
Authority, (Public Improvements),
6.25%, 1/1/21 $ 1,500,450
5,000 Tobacco Settlement Financing Corp.,
5.875%, 5/15/39 4,918,050
-------------------------------------------------------------------------
$ 6,418,500
-------------------------------------------------------------------------
Pooled Loans -- 0.9%
-------------------------------------------------------------------------
$ 655 Tax Exempt Securities Trust, Community
Health Provider, Pooled Loan Program,
6.00%, 12/1/36 $ 658,626
1,728 Tax Exempt Securities Trust, Community
Health Provider, Pooled Loan Program,
6.25%, 12/1/36 1,791,971
656 Tax Exempt Securities Trust, Community
Health Provider, Pooled Loan Program,
7.75%, 12/1/36 657,617
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$ 3,108,214
-------------------------------------------------------------------------
Resource Recovery -- 2.1%
-------------------------------------------------------------------------
$ 6,500 Sacramento County, CA, Sanitation
District Financing Authority Revenue,
5.875%, 12/1/27 $ 7,207,720
-------------------------------------------------------------------------
$ 7,207,720
-------------------------------------------------------------------------
Senior Living / Life Care -- 2.5%
-------------------------------------------------------------------------
$ 1,960 Cliff House Trust, PA, (AMT),
6.625%, 6/1/27 $ 1,803,651
360 Delaware County, PA, IDA, (Glen Riddle),
(AMT), 8.125%, 9/1/05 373,522
2,000 Delaware County, PA, IDA, (Glen Riddle),
(AMT), 8.625%, 9/1/25 2,139,960
3,245 Logan County, CO, Industrial Development
Revenue, (TLC Care Choices, Inc.),
6.875%, 12/1/23 2,934,778
1,400 Mesquite, TX, Health Facilities
Authority, (Christian Retirement
Facility), 7.625%, 2/15/28 1,452,668
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$ 8,704,579
-------------------------------------------------------------------------
Special Tax Revenue -- 4.3%
-------------------------------------------------------------------------
$ 3,280 Bell Mountain Ranch, CO, Metropolitan
District, 6.625%, 11/15/25 $ 3,256,515
SEE NOTES TO FINANCIAL STATEMENTS
7
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
PORTFOLIO OF INVESTMENTS CONT'D
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
-------------------------------------------------------------------------
Special Tax Revenue (continued)
-------------------------------------------------------------------------
$ 3,600 Black Hawk, CO, Business Improvement
District, 6.50%, 12/1/11 $ 3,554,532
1,340 Longleaf, FL, Community Development
District, 6.20%, 5/1/09 1,259,144
1,910 Longleaf, FL, Community Development
District, 6.65%, 5/1/20 1,755,386
3,900 Puerto Rico Infrastructure Financing
Authority, Variable Rate, 10/1/32(1)(2) 4,869,930
-------------------------------------------------------------------------
$ 14,695,507
-------------------------------------------------------------------------
Transportation -- 1.0%
-------------------------------------------------------------------------
$ 3,750 Kent County, MI, Airport Facility,
(AMT), Variable Rate, 1/1/25(1)(3) $ 3,462,638
-------------------------------------------------------------------------
$ 3,462,638
-------------------------------------------------------------------------
Utilities-Electrical and Gas -- 2.3%
-------------------------------------------------------------------------
$ 8,500 San Antonio, TX, Electric and Natural
Gas, 4.50%, 2/1/21 $ 7,739,590
-------------------------------------------------------------------------
$ 7,739,590
-------------------------------------------------------------------------
Water and Sewer -- 0.4%
-------------------------------------------------------------------------
$ 1,500 Metropolitan Water District, CA,
(Southern California Waterworks),
Variable Rate, 1/1/18(1)(3) $ 1,472,850
-------------------------------------------------------------------------
$ 1,472,850
-------------------------------------------------------------------------
Total Tax-Exempt Investments -- 98.0%
(identified cost $339,167,140) $336,621,507
-------------------------------------------------------------------------
Other Assets, Less Liabilities -- 2.0% $ 6,849,987
-------------------------------------------------------------------------
Net Assets -- 100.0% $343,471,494
-------------------------------------------------------------------------
AMT - Interest earned from these securities may be considered a tax
preference item for purposes of the Federal Alternative Minimum Tax.
At November 30, 2001, the concentration of the Trust's investments
in the various states, determined as a percentage of net assets, is
as follows:
Illinois 10.5%
Texas 14.4%
Others, representing less than 10% individually 73.1%
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, 2001, 31.6% of the securities in the portfolio of investments
are backed by bond insurance of various financial institutions and financial
guaranty assurance agencies. The aggregate percentage insured by financial
institutions ranged from 1.3% to 13.9% 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
8
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AS OF NOVEMBER 30, 2001
Assets
----------------------------------------------------------------
Investments, at value (identified cost,
$339,167,140) $336,621,507
Cash 711,634
Receivable for investments sold 50,000
Interest receivable 6,146,648
Prepaid expenses 108,243
----------------------------------------------------------------
TOTAL ASSETS $343,638,032
----------------------------------------------------------------
Liabilities
----------------------------------------------------------------
Payable for open swap contracts $ 90,770
Payable to affiliate for Trustees' fees 1,037
Accrued expenses 74,731
----------------------------------------------------------------
TOTAL LIABILITIES $ 166,538
----------------------------------------------------------------
NET ASSETS $343,471,494
----------------------------------------------------------------
Sources of Net Assets
----------------------------------------------------------------
Auction Preferred Shares, $0.01 par value;
unlimited number of shares authorized, 5,240
shares issued and outstanding at $25,000 per
share liquidation preference $131,000,000
Common Shares, $0.01 par value; unlimited number
of shares authorized, 16,415,580 shares issued
and outstanding 164,156
Additional paid-in capital 243,346,472
Accumulated net realized loss (computed on the
basis of
identified cost) (30,993,317)
Accumulated undistributed net investment income 2,590,586
Net unrealized depreciation (computed on the basis
of identified cost) (2,636,403)
----------------------------------------------------------------
NET ASSETS $343,471,494
----------------------------------------------------------------
NET ASSETS APPLICABLE TO PREFERRED SHARES --
AUCTION PREFERRED SHARES AT LIQUIDATION VALUE $131,000,000
CUMULATIVE UNDECLARED DIVIDENDS 156,017
----------------------------------------------------------------
NET ASSETS APPLICABLE TO PREFERRED SHARES $131,156,017
----------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES $212,315,477
----------------------------------------------------------------
TOTAL NET ASSETS $343,471,494
----------------------------------------------------------------
Net Asset Value Per Common Share
----------------------------------------------------------------
($212,315,477 DIVIDED BY 16,415,580 COMMON SHARES
ISSUED AND OUTSTANDING) $ 12.93
----------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
NOVEMBER 30, 2001
Investment Income
---------------------------------------------------------------
Interest $22,295,481
---------------------------------------------------------------
TOTAL INVESTMENT INCOME $22,295,481
---------------------------------------------------------------
Expenses
---------------------------------------------------------------
Investment adviser fee $ 2,387,597
Administration fee 682,171
Trustees' fees and expenses 14,707
Preferred shares remarketing agent fee 266,887
Transfer and dividend disbursing agent fees 198,043
Custodian fee 150,231
Legal and accounting services 59,353
Printing and postage 39,602
Miscellaneous 128,207
---------------------------------------------------------------
TOTAL EXPENSES $ 3,926,798
---------------------------------------------------------------
NET INVESTMENT INCOME $18,368,683
---------------------------------------------------------------
Realized and Unrealized Gain (Loss)
---------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $(4,876,422)
Financial futures contracts (97,466)
Interest rate swap contracts (525,600)
---------------------------------------------------------------
NET REALIZED LOSS $(5,499,488)
---------------------------------------------------------------
Change in unrealized appreciation (depreciation)
--
Investments (identified cost basis) $19,812,553
Financial futures contracts 78,675
Interest rate swap contracts (46,970)
---------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $19,844,258
---------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $14,344,770
---------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $32,713,453
---------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
9
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
INCREASE (DECREASE) YEAR ENDED YEAR ENDED
IN NET ASSETS NOVEMBER 30, 2001 NOVEMBER 30, 2000
----------------------------------------------------------------------------------------
From operations --
Net investment income $ 18,368,683 $ 17,621,668
Net realized loss (5,499,488) (14,544,619)
Net change in unrealized appreciation
(depreciation) 19,844,258 18,789,011
----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 32,713,453 $ 21,866,060
----------------------------------------------------------------------------------------
Distributions to shareholders --
Preferred Shareholders --
From net investment income $ (3,923,686) $ (5,330,835)
Common Shareholders --
From net investment income $ (12,687,380) $ (12,771,225)
----------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (16,611,066) $ (18,102,060)
----------------------------------------------------------------------------------------
Capital share transactions --
Reinvestment of distributions
to shareholders $ 1,678,324 $ 672,063
----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE
TRANSACTIONS $ 1,678,324 $ 672,063
----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 17,780,711 $ 4,436,063
----------------------------------------------------------------------------------------
Net Assets
----------------------------------------------------------------------------------------
At beginning of year $ 325,690,783 $ 321,254,720
----------------------------------------------------------------------------------------
AT END OF YEAR $ 343,471,494 $ 325,690,783
----------------------------------------------------------------------------------------
Accumulated undistributed
net investment income
included in net assets
----------------------------------------------------------------------------------------
AT END OF YEAR $ 2,590,586 $ 832,969
----------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
10
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
YEAR ENDED NOVEMBER 30,
------------------------------------------------
2001(1) 2000(1) 1999(1)(2)
----------------------------------------------------------------------------------
Net asset value -- Beginning
of year (Common shares) $11.950 $11.720 $15.000
----------------------------------------------------------------------------------
Income (loss) from operations
----------------------------------------------------------------------------------
Net investment income $ 1.124 $ 1.083 $ 0.837
Net realized and unrealized
gain (loss) 0.873 0.260 (3.246)
----------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ 1.997 $ 1.343 $(2.409)
----------------------------------------------------------------------------------
Less distributions
----------------------------------------------------------------------------------
Preferred Shareholders --
From net investment income $(0.240) $(0.328) $(0.197)
Common Shareholders --
From net investment income $(0.777) $(0.785) $(0.550)
----------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $(1.017) $(1.113) $(0.747)
----------------------------------------------------------------------------------
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) $12.930 $11.950 $11.720
----------------------------------------------------------------------------------
MARKET VALUE -- END OF YEAR
(COMMON SHARES) $13.500 $11.125 $11.688
----------------------------------------------------------------------------------
TOTAL RETURN(3) 28.95% 2.05% (18.74)%
----------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
11
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
YEAR ENDED NOVEMBER 30,
------------------------------------------------
2001(1) 2000(1) 1999(1)(2)
----------------------------------------------------------------------------------
Ratios/Supplemental Data+ ++
----------------------------------------------------------------------------------
Net assets, end of year (000's
omitted) $343,471 $325,691 $321,255
Ratios (As a percentage of average net assets attributable to common shares):
Net expenses(4) 1.88% 1.95% 1.76%(5)
Net expenses after
custodian fee
reduction(4) 1.88% 1.91% 1.70%(5)
Net investment income(4) 8.79% 9.47% 7.38%(5)
Portfolio Turnover 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
per share would have been as follows:
Ratios (As a percentage of average net assets attributable to common shares):
Expenses 1.76%(5)
Expenses after custodian
fee reduction 1.70%(5)
Net investment income 7.38%(5)
Net investment income per
share $ 0.837
++ The ratios reported above are based on net assets attributable solely to common
shares. The ratios based on average net assets, including amounts related to
preferred shares, are as follows:
Ratios (As a percentage of
average total net assets):
Net expenses(4) 1.15% 1.15% 1.14%(5)
Net expenses after
custodian fee
reduction(4) 1.15% 1.12% 1.10%(5)
Net investment income(4) 5.40% 5.56% 4.77%(5)
+ 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%(5)
Expenses after custodian
fee reduction 1.10%(5)
Net investment income 4.77%(5)
----------------------------------------------------------------------------------
Senior Securities:
Total preferred shares
outstanding 5,240 5,240 5,240
Asset coverage per
preferred share(6) $ 65,548 $ 62,155 $ 61,308
Involuntary liquidation
preference per preferred
share(7) $ 25,000 $ 25,000 $ 25,000
Approximate market value
per preferred share(7) $ 25,000 $ 25,000 $ 25,000
----------------------------------------------------------------------------------
(1) Computed using average common shares outstanding.
(2) For the period from the start of business, January 29, 1999, to November
30, 1999.
(3) 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.
(4) 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.
(5) Annualized.
(6) 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.
(7) Plus accumulated and unpaid dividends.
SEE NOTES TO FINANCIAL STATEMENTS
12
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
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 on long-term debt securities
when required for federal income tax purposes. The Trust will adopt the
provisions of the AICPA Audit and Accounting Guide for Investment Companies,
as revised, effective for fiscal years beginning after December 15, 2000. As
required, the Trust will begin accreting market discounts on debt securities
effective December 1, 2001. Prior to this date, the Trust did not accrete
market discounts on debt securities. The cumulative effect of this accounting
change will have no impact on the total net assets of the Trust. The impact
of this accounting change has not been determined but will result in an
increase to cost of securities and a corresponding increase in net unrealized
depreciation based on securities held as of November 30, 2001.
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 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
13
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
NOTES TO FINANCIAL STATEMENTS CONT'D
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.
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 2.69% to 5.19% and from 1.70% to 4.80% for
Series A and Series B Shares, respectively, during the year ended
November 30, 2001. 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 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.
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
14
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
NOTES TO FINANCIAL STATEMENTS CONT'D
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
November 30, 2001 was 2.80% and 1.75% for Series A and Series B Shares,
respectively. For the year ended November 30, 2001, the Trust paid dividends
to Auction Preferred shareholders amounting to $2,000,501 and $1,923,185 for
Series A and Series B Shares, respectively, representing an average
APS dividend rate for such period of 3.23% and 2.95%, 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 year ended
November 30, 2001, the fee was equivalent to 0.70% of the Trust's average
weekly gross assets and amounted to $2,387,597. 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, 2001, the administrative fee amounted to $682,171.
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
year ended November 30, 2001, 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 $198,834,185 and $199,821,589,
respectively, for the year ended November 30, 2001.
6 Federal Income Tax Basis of Investments
-------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investment owned by the Trust at November 30, 2001, as computed for Federal
income tax purposes, are as follows:
AGGREGATE COST $ 339,321,616
-------------------------------------------------------
Gross unrealized appreciation $ 12,220,318
Gross unrealized depreciation (14,920,427)
-------------------------------------------------------
NET UNREALIZED DEPRECIATION $ (2,700,109)
-------------------------------------------------------
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,
-----------------
2001 2000
-----------------------------------------------------------
Shares issued pursuant to the Trust's
dividend
reinvestment plan 130,619 61,394
-----------------------------------------------------------
NET INCREASE 130,619 61,394
-----------------------------------------------------------
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.
The Trust has entered into interest rate swap agreements with Morgan Guaranty
Trust Company of New York and Morgan Stanley Capital Services, Inc. whereby
the Trust makes bi-annual payments at a fixed rate equal to 4.6530% and
4.6920% on the notional amounts of $8,000,000 and $8,500,000, respectively.
In exchange, the Trust receives bi-annual payments at a rate equal to the
Bond Market Association Municipal Swap Index on the
15
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
NOTES TO FINANCIAL STATEMENTS CONT'D
same notional amounts. The value of the contracts, which terminate at
November 1, 2021 and February 1, 2022, are recorded as a payable for open
swap contracts of $32,689 and $58,081, respectively, at November 30, 2001.
16
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS
OF EATON VANCE MUNICIPAL INCOME TRUST:
---------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Eaton Vance Municipal Income Trust (the Trust)
as of November 30, 2001, 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
two-year period ended November 30, 2001 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, 2001 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, such financial statements and financial highlights, referred to
above, present fairly, in all material respects, the financial position of Eaton
Vance Municipal Income Trust at November 30, 2001, and the results of its
operations, the changes in its net assets and its 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 4, 2002
17
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 inquiries regarding the Plan can be directed to the Plan Agent, PFPC, Inc.
18
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
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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 31, 2001, our records indicate that there are 197 registered
shareholders and approximately 7,200 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.
19
EATON VANCE MUNICIPAL INCOME TRUST AS OF NOVEMBER 30, 2001
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
Chairman and Chief Operating Officer,
Hellman, Jordan Management Co., Inc.
President Unicorn Corporation
Lynn A. Stout
Professor of Law,
UCLA School of Law
Jack L. Treynor
Investment Adviser and Consultant
20
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
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
200 Berkeley Street
Boston, MA 02116-5022
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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
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EATON VANCE MUNICIPAL INCOME TRUST
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
151-1/02 CE-NASRC