<PAGE>
[LOGO] EDUCATION
Semiannual Report May 31, 1999
Highway EATON VANCE
at Night MUNICIPAL
INCOME
TRUST
Brooklyn
Bridge
<PAGE>
Eaton Vance Municipal Income Trust as of May 31,1999
Letter to Shareholders
[Photo]
Thomas J. Fetter
President
We welcome the shareholders of Eaton Vance Municipal Income Trust with this
initial shareholder report. The Trust began operations in late January, with
the investment objective of producing current income exempt from regular
federal income tax.
A series of global economic crises late in 1998 precipitated a flight to
quality, increasing demand for U.S. Treasury securities. Amid the rush to
Treasuries, the ratio of Treasury yields to municipal yields reached a new
high. At one point municipal yields actually equalled Treasury yields. As
investors realized the extraordinary value in municipals, those ratios
narrowed significantly. But at May 31, municipals continued to represent an
excellent bargain, especially considering their tax-exempt status.
While the Federal Reserve remains
vigilant over inflation, the long-term
outlook for bonds remains positive...
In the wake of strong economic figures, the bond market encountered some
turbulence in the first half of 1999. Meanwhile, the Federal Reserve
continued to monitor inflation closely. At its Open Market Committee meeting
in late June, the Federal Reserve raised the target for its Federal Funds
rate - a key barometer of short-term interest rates - by 25 basis points
(.25%). The move indicates that the Fed remains intent on keeping inflation
from gathering steam.
Despite recent robust economic activity, there is no sign of a pick-up in
inflation on the horizon. Global competition remains fierce, while
technology continues to fuel increases in productivity. And budget surpluses
have now replaced the deficits that weighed on the nation's economy for a
generation. These trends suggest that the longer-term outlook for bonds
remains quite positive.
After years of strong stock market
performance, it may be time to allocate
more assets to municipal bonds...
Following another strong year in the stock market, it may make good sense to
review one's asset allocations. 1998 marked the fourth consecutive year of
20%-plus returns - an unprecedented run in the equity markets and well above
the market's 10% historical returns. As a result, many investors may find
themselves over-weighted in equities. We believe that it is worthwhile for
investors to regularly review their asset allocations, making adjustments
consistent with their investment goals. That may be especially true now, in
the wake of recent stock market performance.
Eaton Vance Municipal
Income Trust offers tax-exempt
income, flexibility, and liquidity...
Eaton Vance Municipal Income Trust is designed to deliver tax-exempt income
together with the flexibility of a closed-end fund and the liquidity afforded
by trading on the New York Stock Exchange. We believe that municipal bonds
remain an excellent fixed-income alternative and a good way to diversify
one+s investment portfolio and lower one+s tax burden. Eaton Vance Municipal
Income Trust will continue to seek promising opportunities for its
tax-conscious shareholders.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter
President
July 12, 1999
2
<PAGE>
Eaton Vance Municipal Income Trust as of May 31, 1999
Management Discussion
[Photo]
Thomas M. Metzold
Portfolio Manager
Investment Environment
- -------------------------------
The Economy
- - The nation's gross domestic product increased by a stronger-than-expected
4.6% in the first quarter of 1999. Weaker demand from Asia following last
year's economic meltdown was offset by continuing gains in productivity
and strong consumer activity at home.
- - Interest rates edged higher in the first several months of the year amid
strong economic growth. The Federal Reserve has indicated that its next
move may be to raise short-term rates slightly. Fed Chairman Greenspan
suggested that any such move would be preemptive rather than a sign of
serious inflation.
- - Unlike 1998, when supply pressures weighed heavily on the municipal
market, supply and demand have been more in balance in 1999. Not
surprisingly, with their unusually high yields relative to taxable yields,
municipal bonds outperformed Treasuries in the first half of the year.
The Trust
- -------------------------------
Performance for the Year To Date
- - Based on share price (traded on the New York Stock Exchange), the
Trust had a total return of -6.62% for the period from its inception on
January 29, 1999 through May 31, 1999. That return was the result of a
decrease in share price from $15.00 on January 29, 1999 to $13.875 on May
31, 1999, and the reinvestment of $0.1376 in regular monthly dividends.
- - Based on net asset value, the Trust had a total return of -3.29% for
the period ended May 31, 1999. That return was the result of a decrease in
net asset value from $15.00 on January 29, 1999 to $14.37 on May 31, 1999,
and the reinvestment of all distributions.
- - Based on the most recent dividend and a share price of $13.875 the
Trust had a market yield of 5.95% at May 31, 1999.(1)
- - On May 31, 1999, the Trust's share price on the New York Stock Exchange
traded at a 3.4% discount to its underlying net asset value.
Management Discussion
- - Education bonds have played a leading role in the Trust's initial months
of operation, including bonds issued by colleges and universities. Among
the Trust's education investments was a rare 60-year maturity bond issued
by Boston University. The bond carries a 5.45% coupon and offers an
extraordinary thirty years of call protection.
- - The Trust's industrial development bonds provided attractive yield
opportunities as well as good diversification across industry sectors. The
Trust's holdings were represented by industries such as airlines, energy
and consumer goods and brand-name issuers that included United Airlines
and Proctor & Gamble.
- - Quality is an important focus of the Trust. The Trust maintained an
average A rating at May 31, 1999, with insured* bonds representing 16.6%
of the total investments. In addition to quality, the Trust emphasized
good call protection. With bond calls accelerating in the past year, call
protection is an important investment criterion used to protect dividend
levels.
Rating Distribution(2)
- -------------------------------
By total investments
[CHART]
- -----------------------------------------------------------------------------
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.
Yield will change.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Trust Information
as of May 31, 1999
Performance(3)
- ------------------------------------------------------------------
Cumulative Total Return (at market value, New York Stock Exchange)
Life of Trust (1/29/99) -6.62%
- ------------------------------------------------------------------
Cumulative Total Return (at net asset value)
Life of Trust (1/29/99) -3.29%
Trust Overview(2)
- -------------------------------------------------
Number of Issues 68
Average Maturity 28.0 Yrs.
Effective Maturity 25.9 Yrs.
Average Rating A
Average Call 10.9 Yrs.
Average Dollar Price $94.14
(1) The Trust's market yield is calculated by dividing the most recent
dividend per share by the share market price at the end of the period
and annualizing the result.
(2) Rating Distribution is determined by dividing the total market value
of the holdings by the total investments of the Trust. Rating
Distribution and Trust Overview are subject to change.
(3) Returns are historical and are calculated by determining the
percentage change in net asset value or share price with all
distributions reinvested.
* Private insurance does not remove the risk of loss of principal
associated with this investment due to changes in market conditions.
Past performance is no guarantee of future results. Investment
return and market price will fluctuate so that shares, when sold, may be
worth more or less than their original cost.
3
<PAGE>
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED)
TAX-EXEMPT INVESTMENTS -- 100.0%
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- ----------------------------------------------------------------------------
Certificates of Participation -- 1.9%
- ----------------------------------------------------------------------------
$ 5,000 California Statewide Communities
Development Authority, (Children's
Hospital of Los Angeles), 5.25%, 8/15/29 $ 4,863,050
2,000 Cliff House Trust, PA, (AMT), 6.625%,
6/1/27 2,000,000
- ----------------------------------------------------------------------------
$ 6,863,050
- ----------------------------------------------------------------------------
Cogeneration -- 1.9%
- ----------------------------------------------------------------------------
$ 2,950 Maryland Energy Cogeneration, (AES
Warrior Run), (AMT), 7.40%, 9/1/19 $ 3,182,342
3,500 Pennsylvania, EDA, (Northampton
Generating), (AMT), 6.40%, 1/1/09 3,682,840
- ----------------------------------------------------------------------------
$ 6,865,182
- ----------------------------------------------------------------------------
Education -- 3.8%
- ----------------------------------------------------------------------------
$ 4,125 Massachusetts Development Finance
Agency, (Boston University), 5.45%,
5/15/59 $ 4,049,843
4,750 New York State Dormitory Authority,
(State University Educational
Facilities), 4.75%, 5/15/28 4,309,960
5,000 Ohio State Higher Educational
Facilities, (Oberlin College), Variable
Rate, 10/1/29(1)(2) 4,570,900
1,000 Philadelphia, PA, HEFA, (Chestnut Hill
College), 6.00%, 10/1/29 985,480
- ----------------------------------------------------------------------------
$ 13,916,183
- ----------------------------------------------------------------------------
Electric Utilities -- 14.2%
- ----------------------------------------------------------------------------
$ 8,000 Brazos River Authority, TX, (Reliant
Energy, Inc.), 5.375%, 4/1/19 $ 7,946,400
6,250 Brazos River Authority, TX, (Texas
Utilities Electric Co.), (AMT), 5.55%,
6/1/30 6,135,688
5,500 Burke County, GA, Development Authority,
(Georgia Power Co.), (AMT), 5.45%,
5/1/34 5,345,120
17,500 Long Island Power Authority, NY,
Electric System Revenue, 5.25%, 12/1/26 17,212,299
7,500 North Carolina Eastern Municipal Power
Agency, (Power System Revenue), 5.75%,
1/1/26 7,464,150
7,800 Pleasants County, WV, (Potomac Edison
Co.), (AMT), 5.50%, 4/1/29 7,700,238
- ----------------------------------------------------------------------------
$ 51,803,895
- ----------------------------------------------------------------------------
Escrowed / Prerefunded -- 2.5%
- ----------------------------------------------------------------------------
$35,000 Dawson Ridge, CO, Metropolitan District
#1, Escrowed to Maturity, 0.00%, 10/1/22 $ 8,977,500
- ----------------------------------------------------------------------------
$ 8,977,500
- ----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- ----------------------------------------------------------------------------
General Obligations -- 7.0%
- ----------------------------------------------------------------------------
$ 3,600 Bell Mountain Ranch, CO, Metropolitan,
6.625%, 11/15/25 $ 3,567,060
10,000 Florida Board of Education, 4.75%,
6/1/28 9,182,800
9,000 Michigan State Building Authority
Revenue, 4.75%, 10/15/21 8,371,890
4,500 Wisconsin State, (AMT), 5.30%, 5/1/20 4,435,470
- ----------------------------------------------------------------------------
$ 25,557,220
- ----------------------------------------------------------------------------
Health Care-Miscellaneous -- 0.8%
- ----------------------------------------------------------------------------
$ 2,845 Illinois Development Finance Authority,
(Community Rehabilitation Providers),
5.60%, 7/1/19 $ 2,831,259
- ----------------------------------------------------------------------------
$ 2,831,259
- ----------------------------------------------------------------------------
Hospital -- 21.6%
- ----------------------------------------------------------------------------
$ 4,000 Baxter County, AK, Community Hospital
District, 5.625%, 9/1/28 $ 3,949,840
3,300 Bell County, TX, Health Facilities
Healthcare, (Heritage Oaks), 6.70%,
6/1/29 3,305,346
1,215 Loris, SC, Community Hospital District,
5.625%, 1/1/20 1,190,992
3,500 Loris, SC, Community Hospital District,
5.625%, 1/1/29 3,394,405
7,500 Louisiana Public Facilities Authority,
(Tuoro Infirmary), 5.625%, 8/15/29 7,386,750
3,750 Maricopa County, AZ, IDA, Residual
Certificates, Variable Rate,
11/15/37(1)(2) 3,562,425
17,000 Massachusetts HEFA, (Partners Healthcare
System), 5.25%, 7/1/29 16,317,109
7,600 Missouri HEFA, (BJC Health System),
5.00%, 5/15/38 7,043,756
4,260 New Jersey Health Care Facilities,
(Capital Health System), 5.25%, 7/1/27 3,909,317
4,085 New Jersey Health Care Facilities, (St.
Barnabas Health), Variable Rate,
7/1/28(1)(2)' 3,507,626
10,750 Oklahoma Development Finance Authority,
(Hillcrest Health System), 5.625%,
8/15/29 10,589,180
7,000 Rhode Island HEFA, (Saint Joseph Health
Services), 5.50%, 10/1/29 6,559,350
2,425 Southwestern Illinois, IDR, (Anderson
Hospital), 5.625%, 8/15/29 2,381,544
6,000 Weber County, UT, (IHC Health Services,
Inc.), 5.00%, 8/15/30 5,600,820
- ----------------------------------------------------------------------------
$ 78,698,460
- ----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------------------
<C> <S> <C>
Housing -- 3.0%
- ----------------------------------------------------------------------------
$ 3,700 Bexar County, TX, Housing Finance Corp.,
5.90%, 4/1/37 $ 3,688,530
3,700 Louisiana Public Facilities Authority,
(Eden Point), 6.25%, 3/1/34 3,637,729
3,700 Oregon State Health Authority, (Trillium
Affordable Housing), 6.75%, 2/15/29 3,681,056
- ----------------------------------------------------------------------------
$ 11,007,315
- ----------------------------------------------------------------------------
Industrial Development Revenue -- 7.6%
- ----------------------------------------------------------------------------
$ 3,700 Charleston County, SC, IDA, (Zeigler
Coal Holding), 6.95%, 8/10/28 $ 3,746,805
1,000 Chautauqua County, NY, IDA, (Womans
Christian Association), 6.35%, 11/15/17 996,850
1,000 Chautauqua County, NY, IDA, (Womans
Christian Association), 6.40%, 11/15/29 985,600
8,800 Chicago, IL, O'Hare International
Airport, (United Airlines, Inc.), 5.35%,
9/1/16 8,672,576
3,550 Mississippi Business Finance Corp.,
(System Energy Resources, Inc.), 5.90%,
5/1/22 3,549,823
4,000 Missouri State Development Finance
Board, (Proctor and Gamble), (AMT),
5.20%, 3/15/29 3,925,400
5,750 Ohio State Solid Waste Disposal, (USG
Corp.), 5.65%, 3/1/33 5,736,545
- ----------------------------------------------------------------------------
$ 27,613,599
- ----------------------------------------------------------------------------
Insured-Education -- 0.8%
- ----------------------------------------------------------------------------
$ 3,000 Massachusetts HEFA, Residual
Certificates, (Berklee College of
Music), (MBIA), Variable Rate,
10/1/27(1)(2) $ 2,828,880
- ----------------------------------------------------------------------------
$ 2,828,880
- ----------------------------------------------------------------------------
Insured-Electric Utilities -- 2.7%
- ----------------------------------------------------------------------------
$10,000 Alaska Industry Development, Snettisham
Hydroelectric, (AMBAC), (AMT), 5.375%,
1/1/34 $ 9,829,800
- ----------------------------------------------------------------------------
$ 9,829,800
- ----------------------------------------------------------------------------
Insured-Hospital -- 4.4%
- ----------------------------------------------------------------------------
$17,500 New York State Dormitory Authority, (New
York Presbyterian Hospital), (AMBAC),
4.75%, 8/1/27 $ 16,207,100
- ----------------------------------------------------------------------------
$ 16,207,100
- ----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- ----------------------------------------------------------------------------
Insured-Transportation -- 7.4%
- ----------------------------------------------------------------------------
$10,000 Metropolitan Transportation Authority,
NY, Commuter Revenue (FGIC), 4.75%,
7/1/26 $ 9,220,100
5,000 Southeastern Pennsylvania Transit
Authority, (FGIC), Variable Rate,
2/1/29(1)(2) 4,201,400
14,400 Triborough Bridge & Tunnel Authority,
NY, (MBIA), 4.75%, 1/1/24 13,364,496
- ----------------------------------------------------------------------------
$ 26,785,996
- ----------------------------------------------------------------------------
Insured-Utilities -- 1.3%
- ----------------------------------------------------------------------------
$ 5,000 Indiana Municipal Power Agency Power
Supply, (MBIA), 5.30%, 1/1/23 $ 4,910,600
- ----------------------------------------------------------------------------
$ 4,910,600
- ----------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 1.3%
- ----------------------------------------------------------------------------
$ 5,000 San Mateo County, CA, Joint Powers
Financing Authority, Variable Rate,
7/15/29(1)(2) $ 4,645,100
- ----------------------------------------------------------------------------
$ 4,645,100
- ----------------------------------------------------------------------------
Nursing Home -- 0.6%
- ----------------------------------------------------------------------------
$ 2,000 Tarrant County, TX, Health Facilities,
(3927 Foundation), 10.25%, 9/1/19 $ 2,072,820
- ----------------------------------------------------------------------------
$ 2,072,820
- ----------------------------------------------------------------------------
Pooled Loans -- 1.1%
- ----------------------------------------------------------------------------
$ 4,000 Muni Mae Tax Revenue Exempt Bond, (AMT),
Variable Rate, 6/30/49(2) $ 3,999,880
- ----------------------------------------------------------------------------
$ 3,999,880
- ----------------------------------------------------------------------------
Senior Living / Life Care -- 1.9%
- ----------------------------------------------------------------------------
$ 3,245 Logan County, CO, Industrial Development
Revenue, (TLC Care Choices, Inc.),
6.875%, 12/1/23 $ 3,241,138
3,700 Ohio HFA, Retirement Rental Housing,
(Encore Retirement Partners), 6.75%,
3/1/19 3,683,498
- ----------------------------------------------------------------------------
$ 6,924,636
- ----------------------------------------------------------------------------
Solid Waste -- 0.7%
- ----------------------------------------------------------------------------
$ 2,500 Gulf Coast, TX, Waste Disposal
Authority, (AMT), 5.70%, 4/1/32 $ 2,478,875
- ----------------------------------------------------------------------------
$ 2,478,875
- ----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------------------
<C> <S> <C>
Special Tax Revenue -- 4.4%
- ----------------------------------------------------------------------------
$ 3,600 Black Hawk, CO, Business Improvement
District, 6.50%, 12/1/11 $ 3,600,216
2,100 Brentwood, CA, Infrastructure Financing
Authority, 5.625%, 9/2/29 2,040,381
2,330 Frederick County, MD, Urbana Community
Development Authority, 6.625%, 7/1/25 2,358,007
1,750 Longleaf, FL, Community Development
District, 6.20%, 5/1/09 1,731,415
1,955 Longleaf, FL, Community Development
District, 6.65%, 5/1/20 1,940,689
5,000 Pennsylvania State Turnpike Commission,
Oil Franchise Tax, Variable Rate,
12/1/27(1)(2) 4,216,500
- ----------------------------------------------------------------------------
$ 15,887,208
- ----------------------------------------------------------------------------
Transportation -- 7.0%
- ----------------------------------------------------------------------------
$ 4,000 Kent County, MI, Airport Facility,
Variable Rate, 1/1/25(1)(2) $ 3,713,280
5,000 Los Angeles County, CA, Metropolitan
Transportation Authority, Variable Rate,
7/1/28(1)(2) 4,279,200
2,400 Massachusetts Turnpike Authority,
Metropolitan Highway System, Variable
Rate, 1/1/39 1,970,088
11,000 New York State Thruway Authority,
General Revenue, 5.00%, 1/1/25 10,532,610
5,575 Wayne, MI, Charter County Airport,
Variable Rate, 12/1/28(1)(2) 4,897,080
- ----------------------------------------------------------------------------
$ 25,392,258
- ----------------------------------------------------------------------------
Utilities-Electrical and Gas -- 2.1%
- ----------------------------------------------------------------------------
$ 8,500 San Antonio, TX, Electric and Natural
Gas Revenue, 4.50%, 2/1/21 $ 7,659,690
- ----------------------------------------------------------------------------
$ 7,659,690
- ----------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $369,773,612) $363,756,506
- ----------------------------------------------------------------------------
</TABLE>
At May 31, 1999, the concentration of the Trust's investments in the various
states, determined as a percentage of total investments, was as follows:
<TABLE>
<S> <C>
New York 20.0%
Others, representing less than 10% individually 80.0%
</TABLE>
The Trust invests primarily in debt securities issued by municipalities. The
ability of the issuers of the debt securities to meet their obligations may be
affected by economic developments in a specific industry or municipality. In
order to reduce the risk associated with such economic developments, at May 31,
1999, 16.6% of the securities in the portfolio of investments are backed by bond
insurance of various financial institutions and financial guaranty insurance
agencies. The aggregate percentage by financial institution range from 3.7% to
7.2% of total investments.
(1) Security has been issued as an inverse floater bond.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1993. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 1999,
the value of these securities amounted to $44,422,271 or 12.2% of the
Trust's net assets.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 1999
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF MAY 31, 1999
<S> <C>
Assets
- -------------------------------------------------------
Investments, at value
(identified cost, $369,773,612) $ 363,756,506
Interest receivable 5,501,188
Receivable from the Investment Adviser 685
Receivable for daily variation margin on
financial futures contracts 16,551
Prepaid expenses 25,469
- -------------------------------------------------------
TOTAL ASSETS $ 369,300,399
- -------------------------------------------------------
Liabilities
- -------------------------------------------------------
Payable for investments purchased $ 4,343,320
Due to Bank 2,008,409
Payable to affiliate for Trustees' fees 1,130
Other accrued expenses 77,763
- -------------------------------------------------------
TOTAL LIABILITIES $ 6,430,622
- -------------------------------------------------------
NET ASSETS $ 362,869,777
- -------------------------------------------------------
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, 16,134,422 shares issued
and outstanding 161,344
Additional paid-in capital 239,872,401
Accumulated net realized loss from
investment transactions (3,476,506)
Undistributed net investment income 1,329,644
Unrealized depreciation of investments (6,017,106)
- -------------------------------------------------------
NET ASSETS $ 362,869,777
- -------------------------------------------------------
Net assets applicable to preferred
shareholders --
Auction Preferred Shares at
liquidation value $ 131,000,000
Cumulative undeclared dividends 58,616
- -------------------------------------------------------
TOTAL $ 131,058,616
- -------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS $ 231,811,161
- -------------------------------------------------------
TOTAL $ 362,869,777
- -------------------------------------------------------
Net Asset Value Per Common Share
- -------------------------------------------------------
($231,811,161 DIVIDED BY 16,134,422
COMMON SHARES ISSUED AND OUTSTANDING) $ 14.37
- -------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
MAY 31, 1999(1)
<S> <C>
Investment Income
- ------------------------------------------------------
Interest $ 5,693,679
- ------------------------------------------------------
TOTAL INVESTMENT INCOME $ 5,693,679
- ------------------------------------------------------
Expenses
- ------------------------------------------------------
Investment adviser fee $ 745,803
Administration fee 213,087
Trustees fees and expenses 1,130
Custodian fee 37,278
Preferred shares remarketing agent fee 77,164
Transfer and dividend disbursing agent
fees 69,284
Organization expenses 60,466
Printing and postage 21,390
Legal and accounting services 16,395
Miscellaneous 15,290
- ------------------------------------------------------
TOTAL EXPENSES $ 1,257,287
- ------------------------------------------------------
Deduct --
Preliminary reduction of investment
adviser fee $ 685
Reduction of custodian fee 37,278
- ------------------------------------------------------
TOTAL EXPENSE REDUCTIONS $ 37,963
- ------------------------------------------------------
NET EXPENSES $ 1,219,324
- ------------------------------------------------------
NET INVESTMENT INCOME $ 4,474,355
- ------------------------------------------------------
Realized and Unrealized Gain (Loss)
- ------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ (3,662,057)
Financial futures contracts 185,551
- ------------------------------------------------------
NET REALIZED LOSS $ (3,476,506)
- ------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ (6,017,106)
- ------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ (6,017,106)
- ------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (9,493,612)
- ------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (5,019,257)
- ------------------------------------------------------
</TABLE>
(1) For the period from the start of business, January 29, 1999, to May 31,
1999.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 1999
FINANCIAL STATEMENTS (UNAUDITED) CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase (Decrease) PERIOD ENDED
in Net Assets MAY 31, 1999(1)
<S> <C>
- --------------------------------------------------------------------
From operations --
Net investment income $ 4,474,355
Net realized loss (3,476,506)
Net change in unrealized
appreciation (depreciation) (6,017,106)
- --------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (5,019,257)
- --------------------------------------------------------------------
Distributions to Shareholders --
Preferred Shareholders --
From net investment income $ (929,052)
Common Shareholders --
From net investment income (2,215,659)
- --------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (3,144,711)
- --------------------------------------------------------------------
Capital Share Transactions:
Proceeds from sale of preferred shares $ 131,000,000
Proceeds from sale of common shares 241,500,000
Reinvestment of distributions to shareholders 406,098
Offering costs and preferred shares
underwriting discounts (1,972,353)
- --------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS $ 370,933,745
- --------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 362,769,777
- --------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------
At beginning of period $ 100,000
- --------------------------------------------------------------------
AT END OF PERIOD $ 362,869,777
- --------------------------------------------------------------------
Accumulated undistributed
net investment income
included in net assets
- --------------------------------------------------------------------
AT END OF PERIOD $ 1,329,644
- --------------------------------------------------------------------
</TABLE>
(1) For the period from the start of business, January 29, 1999, to May 31,
1999.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING DURING THE PERIOD
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31,
1999(1)(2)
(UNAUDITED)
<S> <C>
- ---------------------------------------------------------
Net asset value -- Beginning of period
(Common Shares) $ 15.000
- ---------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------
Net investment income $ 0.287
Net realized and unrealized loss (0.592)
- ---------------------------------------------------------
TOTAL LOSS FROM OPERATIONS $ (0.305)
- ---------------------------------------------------------
Less distributions
- ---------------------------------------------------------
Preferred Shareholders --
From net investment income $ (0.060)
Common Shareholders --
From net investment income (0.138)
- ---------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.198)
- ---------------------------------------------------------
PREFERRED AND COMMON SHARES OFFERING
COSTS CHARGED TO PAID-IN CAPITAL $ (0.043)
- ---------------------------------------------------------
PREFERRED SHARES UNDERWRITING DISCOUNTS $ (0.084)
- ---------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD (COMMON
SHARES) $ 14.370
- ---------------------------------------------------------
MARKET VALUE -- END OF PERIOD (COMMON
SHARES) $ 13.875
- ---------------------------------------------------------
TOTAL RETURN(3) (6.62)%
- ---------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING DURING THE PERIOD
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31,
1999(1)(2)
(UNAUDITED)
- ---------------------------------------------------------
<S> <C>
Ratios/Supplemental Data+
- ---------------------------------------------------------
Net assets, end of period (000's
omitted) $362,870
Ratios (As a percentage of average total
net assets):
Net expenses 1.14%(4)
Net expenses after custodian fee
reduction 1.10%(4)
Net investment income 4.05%(4)
Ratios (As a percentage of average
common net assets):
Net expenses(5) 1.62%(4)
Net expenses after custodian fee
reduction(5) 1.57%(4)
Net investment income(5) 5.77%(4)
Portfolio Turnover 104%
- ---------------------------------------------------------
+ The expenses of the Trust reflect a reduction of the
investment adviser fee. Had such action not been
taken, the ratios and net investment income per share
would have been as follows:
- ---------------------------------------------------------
Ratios (As a percentage of average total
net assets):
Expenses 1.14%(4)
Expenses after custodian fee
reduction 1.10%(4)
Net investment income 4.05%(4)
Net investment income per share $ 0.287
- ---------------------------------------------------------
Ratios (As a percentage of average
common net assets):
Expenses(5) 1.62%(4)
Expenses after custodian fee
reduction(5) 1.57%(4)
Net investment income(5) 5.77%(4)
Net investment income per share $ 0.287
- ---------------------------------------------------------
</TABLE>
(1) For the period from the start of business, January 29, 1999, to May 31,
1999.
(2) Computed using average common shares outstanding.
(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) Annualized.
(5) Ratios do not reflect the effect of dividend payments to preferred
shareholders. Ratios to average common net assets reflect the Trust's
leveraged capital structure.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1 Significant Accounting Policies
- -------------------------------------------
Eaton Vance Municipal Income Trust (the "Trust") is an entity commonly known
as a Massachusetts business trust and is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end management investment
company. The Trust was organized under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated December 10,
1998. The Trust's investment objective is to provide current income exempt
from regular federal income tax. The Trust seeks to achieve its objective 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 generally accepted accounting principles.
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.
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, if any, and
tax-exempt income, including any net realized gain on investments. Therefore,
no provision for federal income or excise tax is necessary. 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 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 Use of Estimates -- The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
11
<PAGE>
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue 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 reflected as a reduction of operating expenses on
the Statement of Operations.
J Interim Financial Statements -- The interim financial statements relating to
May 31, 1999 and for the period then ended have not been audited by
independent certified public accountants, but in the opinion of the Trust's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Auction Preferred Shares (APS)
- -------------------------------------------
The Trust issued 2,620 shares of Auction Preferred Shares Series A and 2,620
shares of Auction Preferred Shares Series B on March 1, 1999 in a public
offering. The underwriting discount and other offering costs were recorded as
a reduction of the capital of the Common Shares. Dividends on the APS, which
accrue daily, are cumulative at a rate which was established at the offering
of the APS and have been reset every 7 days thereafter by an auction.
Dividend rates ranged from 2.90% to 3.50% and from 2.80% to 3.30% for Series
A and Series B Shares respectively, during the period ended May 31, 1999.
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.
3 Distributions to Shareholders
- -------------------------------------------
The Trust intends to make monthly distributions of net investment income,
after payment of any dividends on any outstanding preferred shares.
Distributions are recorded on the ex-dividend date. Distributions to
Preferred Shareholders are recorded daily and are payable at the end of each
dividend period. Each dividend payment period for the Auction Preferred
Shares is generally seven days. The applicable dividend rate for the Auction
Preferred Shares on May 31, 1999 was 3.25% and 3.27%, for Series A and Series
B Shares respectively. For the period ended May 31, 1999, the Trust paid
dividends to Auction Preferred shareholders amounting to $459,495 and
$469,557 for Series A and Series B Shares respectively, representing an
average APS dividend rate for such period of 3.11% and 3.07%.
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 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 period ended May 31, 1999, the
fee was equivalent to 0.70% of the Trust's average weekly gross assets and
amounted to $745,803. In order to enhance the net income of the Trust, EVM
waived a portion of its investment advisory fee in the amount of $685. 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 administering the business affairs of the Trust.
For the period ended May 31, 1999, the administrative fee amounted to
$213,087.
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
period ended May 31, 1999, no significant amounts have been deferred.
12
<PAGE>
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
Eaton Vance has agreed to bear all ordinary and organizational expenses of
the Trust that exceed 5% (annualized) of average weekly net assets for the
Trust's first fiscal year.
Certain of the officers and one Trustee 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 $672,148,171 and $298,894,484
respectively, for the period ended May 31, 1999.
6 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned by the Trust at May 31, 1999, as computed for Federal
income tax purposes are as follows:
<TABLE>
<S> <C>
AGGREGATE COST $ 369,773,612
- -------------------------------------------------------
Gross unrealized appreciation $ 516,906
Gross unrealized depreciation (6,534,012)
- -------------------------------------------------------
NET UNREALIZED APPRECIATION $ (6,017,106)
- -------------------------------------------------------
</TABLE>
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 shares of beneficial interest.
Transactions in Common Shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1999(1)
<S> <C>
- -------------------------------------------------------------
Sales 16,100,000
Shares issued pursuant to the Trust's
dividend reinvestment plan 27,755
- -------------------------------------------------------------
ENDING SHARES 16,127,755
- -------------------------------------------------------------
</TABLE>
(1) For the period from the start of business, January 29, 1999, to May 31,
1999.
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.
At May 31, 1999 there were no outstanding obligations under these financial
instruments.
13
<PAGE>
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, First Data Investor
Services Group 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, First Data
Investor Services Group, at 1-800-331-1710.
14
<PAGE>
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 you 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 First Data Investor Services Group
P.O. Box 8030
Boston, MA 02266-8030
800-331-1710
-------------------------------------------------------------------------------
NUMBER OF EMPLOYEES
The Trust is organized as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as a closed-end,
non-diversified, management investment company and has no employees.
NUMBER OF SHAREHOLDERS
As of May 31, 1999, our records indicate that there are 166 registered
shareholders and approximately 7500 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.
15
<PAGE>
EATON VANCE MUNICIPAL INCOME TRUST AS OF MAY 31, 1999
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 Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
16
<PAGE>
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
First Data Investor Services Group
Attention: Eaton Vance Funds P.O. Box 5123
Westborough, MA 01581-5123
Eaton Vance Municipal Income Trust
The Eaton Vance Building
255 State Street
Boston, MA 02109
- -------------------------------------------------------------------------------
2-2220-7/99 CE-NASRC-7/99
