Dear Shareholders:
Moderate economic growth, low inflation, a stronger dollar and prospects for
major federal deficit reduction provided a favorable environment for the bond
markets during the past year. In this environment, the net asset value of the
Trust rose from $8.73 on October 31, 1994 to $8.84 on October 31, 1995. Over
that same period, the Trust's market price on the New York Stock Exchange
increased from $9.125 to $9.50. During this period, the Trust was able to
maintain a monthly dividend of $0.058 per share, and thus the distribution
rate on October 31, 1995, based on the most recent dividend annualized and
the stock market price of $9.50 in effect at the close of business on that
date, was 7.326%.
Economic Outlook
Moderate, but sustainable, growth appears to be the hallmark of the economic
expansion's fifth year. While initial estimates showed the U.S. economy
growing at an annual rate of 4.2% in the third quarter, this surprisingly
strong growth was mainly driven by a pickup in consumer spending and an
increase in business and government outlays. Although impressive, this growth
rate is not expected to continue in coming months. Recent retail sales have
been disappointing, in part because of rising levels of consumer debt. An
extended period of lower mortgage rates seems to have relieved much of the
pent-up demand for housing. Growth is not expected to get much help from the
manufacturing sector, either, as order flows from manufacturers have
moderated. Export activity, meanwhile, is also expected to remain modest as
continued weakness abroad has limited demand for many U.S. goods. However,
the Federal Reserve Board's consistent and, so far, successful efforts to
fight inflation seem to be giving consumers and businesses enough longer term
confidence to help maintain modest growth in real (adjusted for inflation)
gross domestic product into 1996.
Municipal Bond Market
The municipal bond market has become driven by the tax-reform debate. The
current yield ratio of 88% is the highest level since October 1989,
indicating that the market is already compensating for some moderate version
of reform. This debate has overshadowed the more significant trend of the
decline in new-issue volume, combined with a record level of early
redemptions, or bond calls. These redemptions have come at a time when
investors are also experiencing rate shock from new investments; yields on
high-grade municipals have dropped below the 6% level, and high-yield bonds
are trading at levels typically associated with a lack of supply.
Some of the more noteworthy events that dominated the high-yield market
earlier in the year have faded to the back pages or have been accepted by the
markets. Denver International Airport, for example, now carries an
investment-grade rating; Washington, D.C. has avoided bankruptcy; and Orange
County, California continues to work out its bankruptcy plan. The Trust has
remained broadly diversified geographically and by sector to avoid any
significant reliance on any one issue.
Portfolio Performance and Strategy
As high-yield municipal bonds maintain their popularity and as investors
reach for yield in a declining rate environment, some of the bonds held by
the Trust have become overvalued. Whenever possible, we take advantage of
these opportunities to upgrade the credit quality of the Trust without
impacting tax-exempt income. When considering new issues for purchase, our
emphasis will remain on careful research, diversification of credit risk,
liquidity and high current tax-exempt income. Should rates continue to fall,
call risk and supply of higher yielding bonds will remain challenges going
into the early part of 1996. The last of the big
1
<PAGE>
call dates is January 1996; thereafter, call volume will decline for a number
of years. The Trust has minimal call risk in the near term; however, as
interest rates continue to decline, the dividend may come under some
pressure.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
/s/ Cynthia M. Brown
Cynthia M. Brown
Portfolio Manager
November 10, 1995
In accordance with Section 23(c) of the Investment Company Act of 1940, the
Trust hereby gives notice that it may from time to time repurchase shares of
the Trust in the open market at the option of the Board of Trustees and on
such terms as the Trustees shall determine.
Investment Objective and Policy
The investment objective of MFS(R) Municipal Income Trust is to provide high
current income exempt from federal income taxes.
The Trust seeks to achieve its objective by investing primarily in medium and
lower quality municipal bonds and notes. The Trust may also enter into
futures contracts and purchase securities on a "when-issued" basis.
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.
New York Stock Exchange Symbol
The New York Stock Exchange symbol is MFM.
Performance Summary
(For the year ended October 31, 1995)
Net Asset Value Per Share
October 31, 1994 $8.73
October 31, 1995 $8.84
New York Stock Exchange
Price
October 31, 1994 $9.13
August 7, 1995 (high)* $9.75
November 22, 1994 (low)* $8.38
October 31, 1995 $9.50
*For the period November 1, 1994 through October 31, 1995.
Federal Income Tax Information
on Distributions
(For the year ended October 31, 1995)
Distribution Sources
Ordinary income $0.70
Exempt-Interest Dividends
For federal income tax purposes, 99.65% of the total dividends paid by the
Trust from net investment income during the year ended October 31, 1995, was
designated as an exempt-interest dividend.
Tax Form Summary
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995.
Number of Shareholders
As of October 31, 1995, our records indicate that there are 9,991 registered
shareholders and approximately 17,250 shareholders owning Trust shares in
"street" name, such as through brokers, banks and other financial
intermediaries.
2
<PAGE>
Dividend Reinvestment and
Cash Purchase Plan
The Trust offers a Dividend Reinvestment and Cash Purchase Plan which allows
you to reinvest either all of the distributions or only the long-term capital
gains paid by the Trust. Unless the shares are trading at a premium
(exceeding net asset value), purchases are made at the market price.
Otherwise, purchases will be made at a discounted price of either the net
asset value or 95% of the market price, whichever is greater. You can also
buy shares of the Trust. Investments from $100 to $500 can be made in January
and July on the 15th of the month or shortly thereafter.
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 may wish to request that your shares
be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the Trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. A service fee of $0.75
is charged for each cash purchase as well as a pro rata share of the
brokerage commissions, if any. The automatic reinvestment of distributions
does not relieve you of any income tax that may be payable (or required to be
withheld) on the distributions.
To enroll in or withdraw from the Plan or to receive a brochure providing a
complete description of the Plan, please contact the Plan agent at the
address and telephone number located on the back cover of this report. Please
have available the name of the Trust and your account and Social Security
numbers. For certain types of registrations, such as corporate accounts,
instructions must be submitted in writing. When you withdraw from the Plan,
you can receive the value of the reinvested shares in one of two ways: a
check for the value of the full and fractional shares, or a certificate for
the full shares and a check for the fractional shares.
Results of Shareholder Meeting
At the annual meeting of shareholders of MFS Municipal Income Trust, which
was held on October 30, 1995, the following actions were taken:
Item 1. The election of A. Keith Brodkin, Richard B. Bailey, Peter G. Harwood
and Charles W. Schmidt as Trustees of the Trust.
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares
Nominee For Withhold Authority
--------------------- ------------------ -------------------
A. Keith Brodkin 31,793,148.0468 513,210.8693
Richard B. Bailey 31,772,562.4325 533,796.4836
Peter G. Harwood 31,631,382.3792 674,976.5369
Charles W. Schmidt 31,772,495.6626 533,863.2535
</TABLE>
Trustees continuing in office who were not subject to re-election at this
meeting are J. Atwood Ives, Lawrence T. Perera, William J. Poorvu, Arnold D.
Scott, Jeffrey L. Shames, Elaine R. Smith and David B. Stone.
Item 2. The ratification of the selection of Deloitte & Touche as the
independent public accountants to be employed by the Trust for the
fiscal year ending October 31, 1996.
<TABLE>
<CAPTION>
<S> <C>
Number of Shares
------------------
For 31,694,941.8692
Against 1,435,968.0063
Abstain 1,553,921.4973
</TABLE>
3
<PAGE>
Portfolio of Investments -- October 31, 1995
Municipal Bonds -- 96.5%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Student Loan Revenue -- 0.6%
Arizona Student Loan Acquisition Authority, 7.625s, 2010 $ 750 $ 825,758
Pennsylvania Higher Education Assistance Agency, AMBAC, RIBS, 8.099s,
2022((section))((section)) 1,300 1,289,353
----------
$ 2,115,111
----------
General Obligation -- 1.6%
Arapahoe County, CO, Water & Sanitation District, 9.25s, 2013 $ 300 $ 318,921
Arapahoe County, CO, Water & Sanitation District, 9.25s, 2013 1,700 1,956,037
City of Markham, Cook County, IL, 9s, 2012 1,300 1,398,930
Jefferson County, OH, 7.125s, 2019 1,000 1,055,180
Triview, CO, Metropolitan District, 13s, 2004+*# 2,100 525,000
----------
$ 5,254,068
----------
State and Local Appropriation
Troy, NY, Certificates of Participation, Recreational Facilities Rev., 9.75s,
2010*((section)) $ 1,100 $ 110,000
----------
Refunded and Special Obligation -- 14.4%
Dayton, OH, Special Facilities Rev. (Emery Air Freight), "A", 12.5s, 2009 $ 1,000 $ 1,168,450
Grand Junction, CO (Lincoln Park Osteopathic Hospital), 10.5s, 2017 1,250 1,448,175
Maine Health & Higher Education Facilities Authority (d'Youville Pavilli), 10s, 2017 7,690 8,779,673
Maine Health & Higher Education Facilities Authority (St. Mary's Hospital), 8.625s,
2022 1,000 1,157,280
Mississippi Hospital Equipment & Facilities Authority Rev. (Rush Medical Center),
8.75s, 2016 1,000 1,098,870
New Lenox, IL, Community Park Development Authority, 8.25s, 2014 2,000 2,484,840
Russellville, AR, Industrial Development Rev. (Charles Meyers Project), 10s, 2009 5,565 6,681,840
Telluride Gondola, CO, Real Estate Transfer, 11.5s, 2012 1,155 1,829,543
Telluride Gondola, CO, Real Estate Transfer, 11.5s, 2012 1,745 2,099,549
Texas Turnpike Authority (Houston Ship Channel Bridge), 0s, 2002 10,565 14,843,085
Washington Public Power Supply System Project #1, 15s, 2017 3,740 4,116,057
Washington Public Power Supply System Project #1, 14.375s, 2001 1,825 2,459,753
----------
$48,167,115
----------
Single Family Housing Revenue -- 7.7%
Austin, TX, Housing Finance Corp., 0s, 2016 $26,435 $ 2,565,517
Berkeley, Brookes, & Fayette Counties, WV, MBIA, 0s, 2016 14,000 1,498,980
Cook County, IL, Single Family Housing, 0s, 2015 1,800 211,212
Corpus Christi, TX, Housing Finance Corp., 0s, 2011 3,000 664,500
Dallas, TX, Housing Finance Corp., Single Family Mortgage Rev., MBIA, 0s, 2016 15,820 1,753,647
Denver, CO, City & County Airport Rev., 0s, 2015 7,730 766,739
Duval County, FL, Housing Finance Authority, 0s, 2015 23,815 2,643,227
Florida Housing Finance Agency, 0s, 2012 4,345 807,692
Harris County, TX, Housing Finance Corp., 9.625s, 2003 1,230 1,234,256
Harris County, TX, Housing Finance Corp., 9.875s, 2014 775 777,666
Jackson County, MO, 0s, 2016 7,170 717,574
Louisiana Housing Finance Agency, Single Family Mortgage Rev., FGIC, 9.375s, 2015 385 397,898
Nebraska Investment Finance Authority, 0s, 2015 48,500 7,115,435
Nebraska Investment Finance Authority, 0s, 2016 3,385 308,137
Nevada Housing Division, 0s, 2015 1,689 239,544
Ohio Housing Finance Agency, GNMA, RIBS, 9.627s, 2031((section))((section)) 1,000 1,075,520
Reno County, KS, Mortgage Rev., 0s, 2014 5,050 600,344
Saline County, KS, 0s, 2014 2,075 261,367
4
<PAGE>
Single Family Housing Revenue -- continued
Utah Housing Finance Agency, Residential Mortgage Rev., 9s, 2019 $ 50 $ 52,019
West Virginia Housing Development Fund, 0s, 2015 9,845 1,265,083
Wisconsin Housing & Economic Development Authority, Home Ownership Rev., RIBS, 9.915s,
2022((section))((section)) 900 969,624
----------
$25,925,981
----------
Multi-Family Housing Revenue -- 7.0%
Bexar County, Housing Finance Corp., 0s, 2015 $26,300 $ 3,200,447
Broward County, FL, Housing Finance Authority (Deerfield Beach Apartments), 13s,
2000*((section))# 85 51,598
Colorado Housing Finance Authority, 9s, 2025 865 806,240
Dade County, FL, Housing Finance Agency, Multi-Family Housing, 8.25s, 2002 5,466 5,625,848
Dade County, FL, Housing Finance Agency, Multi-Family Housing, 8.25s, 2002 4,237 4,361,023
Dallas, TX, Housing Finance Corp., 8.5s, 2011 1,360 1,409,164
Escondido, CA, Community Development Authority (Las Villas del Norte), 8.875s, 2005 830 825,634
Florida Housing Finance Agency (South Lake Apartments), 8.7s, 2021 1,500 1,525,485
Kenton County, KY, Industrial Development Rev. (Highland Terrace), 8.7s, 2026 5,330 5,686,790
Memphis, TN, Health, Education & Housing Facilities Board (Wesley Highland Terrace),
12.75s, 2015+ 100 85,000
----------
$23,577,229
----------
Insured Health Care Revenue -- 1.3%
Clermont County, OH, Hospital Facilities Revenue (Mercy Health Systems), AMBAC, MVRIC,
9.221s, 2021((section))((section)) $ 500 $ 567,695
Desert Hospital District, CA, Hospital Rev. (Desert Hospital), CG, COP, MVRIC, 8.684s,
2020((section))((section)) 1,500 1,575,900
North Central Texas, Health Facilities Development Corp. (Presbyterian Hospital),
9.375s, 2021((section))((section)) 1,500 1,620,735
Salt Lake City, UT, Hospital Rev. (Intermountain Health Care), AMBAC, INFLO, 9.287s,
2020((section))((section)) 650 729,566
----------
$ 4,493,896
----------
Health Care Revenue -- 24.4%
Arkansas Development Finance Authority, Economic Development Rev. (Southwest Homes),
10.8s, 2018 $ 1,435 $ 1,520,067
Bell County, TX, Health Facilities Authority (Kings Daughters Hospital), 9.25s, 2008 810 896,160
Bell County, TX, Health Facilities Development Corp. (Advanced Living Technology),
10.5s, 2018 4,055 3,527,850
Boonville, MO, Health Facilities Rev. (Gericare, Inc.), 11s, 2017 1,900 1,988,027
Boston, MA, Industrial Development Finance Authority Rev. (Stonehedge Convalescent
Center), 10.75s, 2011 845 920,323
Brevard County, FL, Health Facilities Authority Rev. (Friendly Village), 9.25s, 2012 2,320 2,402,012
Broward County, FL, Industrial Development Rev. (Beverly Enterprises, Inc.), 9.8s,
2010 2,600 2,907,840
Cambria County, PA, Industrial Development Authority (Beverly Enterprises), 10s, 2012 800 995,848
Chester County, PA, Industrial Development Authority (RHA/PA Nursing Home, Inc.),
10.125s, 2019 990 1,025,462
Connecticut Health & Educational Facilities (Johnson Evergreen Corp.), 8.5s, 2014 650 692,406
Daphne, AL, Special Care Facilities Financing Authority (Westminster Village), 8.25s,
2026*# 500 300,000
District of Columbia, Hospital Rev. (Hospital for Sick Children), 8.875s, 2021 490 528,813
Fairfax, Fauquier & Loudoun Counties, VA, Health Center Commission, Nursing Home Rev.,
9s, 2020 1,920 2,018,285
Fulton County, GA, Residential Care Facilities, Elderly Authority Rev. (Lenbrook
Square Foundation), 9.75s, 2017 2,820 2,876,174
Gadsden County, FL, Industrial Development Authority (RHA/FLA Properties), 10.45s,
2018 2,585 2,682,015
Greenville County, SC, Hospital Facility Rev. (Chestnut Hill), 10.375s, 2016 2,930 2,930,000
Hannibal, MO, Industrial Development Authority (Hannibal Regional Health Care System,
Inc.), 9.5s, 2022# 1,500 1,744,605
Hobbs, NM, Health Facilities Rev. (Nemecal Associates), 9.625s, 2014 935 996,551
Hopewell County, VA, Hospital Authority (John Randolph Hospital), 8.85s, 2013 1,100 1,181,103
</TABLE>
5
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Health Care Revenue -- continued
Lee County, FL, Industrial Development Authority (Beverly Enterprises), 10s, 2010 $2,055 $ 2,333,802
Lexington-Fayette Counties, KY, Health Care Facilities Rev. (Sayre Christian Village),
10s, 2012 1,540 1,587,417
Louisiana Public Facilities Authority (Chateau Riviere Home for the Aged), 10.25s,
2016 3,390 3,525,668
Louisiana Public Facilities Authority (Southwest Medical Center), 11s, 2006 4,455 2,220,403
Mass. Health & Education Facilities Authority (Fairview Extended Care Facility),
10.25s, 2021 1,500 1,699,200
Mass. Industrial Finance Agency (Martha's Vineyard Long-Term Care), 9.25s, 2022 1,700 1,615,000
Mass. Industrial Finance Agency (Needham/Hamilton House), 11s, 2010 900 926,001
Monongalia County, WV, Health Facilities Rev. (Beverly Enterprises, Inc.), 10s, 2007 1,090 1,213,475
Montgomery County, OH, Hospital Rev. (Kettering Convalescent Center), 10s, 2020 1,000 1,031,530
Montgomery County, PA, Higher Education & Health Authority Rev. (AHF/Montgomery Inc.),
10.5s, 2020 2,500 2,631,775
New Jersey Economic Development Authority (Courthouse Convalescent Center), 8.7s, 2014 650 676,591
New Jersey Economic Development Authority (Geriatric & Medical Services Inc.), 9.625s,
2004 205 223,487
New Jersey Economic Development Authority (Geriatric & Medical Services Inc.), 9.625s,
2022 675 728,730
New Jersey Economic Development Authority (Greenwood Health Care), 9.75s, 2011 1,510 1,545,168
New Jersey Economic Development Authority (Wanaque Convalescent Center), 8.6s, 2011 1,000 1,015,650
North Carolina Medical Care Commission, Hospital Rev. (Valdese General Hospital),
8.75s, 2016 1,450 1,566,855
Okaloosa County, FL, Retirement Rental Housing Rev. (Beverly Enterprises Inc.),
10.75s, 2003 1,410 1,538,634
Orange County, FL, Industrial Development Authority (Friendly Village), 9.25s, 1997 150 152,445
Orange County, FL, Industrial Development Authority Rev., 9.25s, 2012 1,805 1,881,460
Osceola County, FL, Industrial Development Rev. (Community Provider Pooled Loan
Project), 7.75s, 2017 1,300 1,352,143
Philadelphia, PA, Industrial Development Authority, 10.25s, 2018 2,370 2,446,030
Philadelphia, PA, Industrial Development Authority, 10.25s, 2018 1,970 2,047,992
Prince William County, VA, Industrial Development Authority, Residential Care,
(Westminister at Lake Ridge), 10s, 2022 1,500 1,625,415
Rochester, MN, Health Care Facilities Rev. (Mayo Medical Foundation), FIRS, 8.06s,
2021+++ 1,000 1,036,620
Santa Fe, NM, Industrial Development Rev. (Casa Real Nursing Home), 9.75s, 2013 1,185 1,259,347
Seminole County, FL, Industrial Development Authority (Friendly Village), 10s, 2011 1,810 1,888,898
St. Charles County, MO, Industrial Development Authority (Garden View Care Center),
10s, 2016 2,325 2,394,424
St. Petersburg, FL, Health Facilities Rev. (Swanholm Nursing), 10s, 2022 790 857,095
Suffolk County, NY, Industrial Development Agency (A Planned Program), 9.75s, 2015 1,360 1,156,000
Washington County, FL, Industrial Development Authority (Washington County), 10s, 2016 1,140 1,128,953
Waterford Township, MI, Economic Development Rev. (Canterbury Health), 8.375s, 2023 1,500 1,562,025
Westside Habilitation Center, Cheneyville, LA, 8.375s, 2013 2,600 2,582,424
-----------
$81,584,198
-----------
Electric and Gas Utility Revenue -- 0.7%
Midland Michigan Environmental Development Authority, Pollution Control Rev. (Midland
Cogeneration), 9.5s, 2009 $1,500 $ 1,621,995
Southern California Public Power Authority, Transportation Project, RIBS, 7.506s,
2012((section))((section)) 650 663,754
-----------
$ 2,285,749
-----------
Turnpike Revenue -- 2.5%
Arapahoe County, CO, 0s, 2015 $1,000 $ 250,740
Massachusetts Industrial Finance Agency, Tunnel Rev. (Mass Turnpike), 9s, 2020 3,855 4,217,409
San Joaquin Hills California, 0s, 2006 2,300 1,086,635
San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Rev., 0s, 2011 6,600 2,156,352
West Virginia State Parkways, Economic Development & Tourism Authority, 7.408s,
2019((section))((section)) 600 596,208
-----------
$ 8,307,344
-----------
6
<PAGE>
Airport and Port Revenue -- 4.9%
Cleveland, OH, Airport Special Facilities Rev. (Continental Airlines), 9s, 2019 $ 3,150 $ 3,295,656
Denver, CO, City & County Airport Rev., 8.75s, 2023 1,500 1,746,900
Hillsborough County, FL, Aviation Authority Rev. (US Air), 8.6s, 2022 650 708,338
Kenton County, KY, Airport Board Special Facilities (Delta Airlines), 7.5s, 2020 1,000 1,062,370
St. Augustine, FL, Airport Authority, Airport Rev. (Grumman Repair Facility), 11s,
2004 2,575 2,756,640
Tulsa, OK, Municipal Airport Trust Rev., 7.375s, 2020 3,400 3,567,688
Tulsa, OK, Municipal Airport Trust Rev., 7.6s, 2030 3,000 3,178,050
-----------
$16,315,642
-----------
Sales and Excise Tax Revenue -- 0.7%
Chicago, IL (Ryan Garfield Tax Increment Rev.), 10.125s, 2007 $ 1,745 $ 1,821,082
Denver, CO, Urban Renewal Tax, 8.5s, 2013 490 465,907
-----------
$ 2,286,989
-----------
Industrial Revenue (Corporate Guarantee) -- 16.7%
Atlanta, GA, Special Purpose Facilities Rev. (Delta Airlines Project), 7.9s, 2018 $ 2,100 $ 2,240,889
Charleston County, SC, Resource Recovery Rev. (Foster Wheeler), 9.25s, 2010 1,750 1,924,825
East Chicago, IN, Pollution Control Rev. (Inland Steel Co.), 10s, 2011 11,000 11,704,330
Eastern Band of Cherokee Indian Community, NC (Carolina Mirror Co.), 10.25s, 2009 6,945 7,290,097
Eastern Band of Cherokee Indian Community, NC (Carolina Mirror Co.), 11s, 2012# 650 686,134
Hernando County, FL, Water & Sewer Rev. (Florida Crushed Stone, Co.), 8.5s, 2014 3,000 3,254,130
Hodge Village, LA, Utilities Rev. (Stone Container Corp.), 9s, 2010 7,585 8,229,497
Hunt County, TX, Industrial Development Rev. (Household Manufacturing), 10.236s, 2003 2,700 2,683,881
Lawrenceburg, TN, Industrial Development Board (Tridon, Inc.), 9.625s, 2006 1,500 1,548,570
Mass. Industrial Financing Agency (Solid Waste Disposal Rev.), 8.25s, 2014 3,000 3,155,910
Mesa County, CO (Joy Technologies), 8.5s, 2006 650 694,987
Philadelphia, PA, Authority for Industrial Development Rev., 7.75s, 2017 3,255 3,248,913
Port of Corpus Christi, TX (Valero Energy), 10.25s, 2017 4,000 4,419,640
Port of New Orleans, LA, 8.25s, 2004 1,000 1,102,110
Port of New Orleans, LA, 8.5s, 2014 1,650 1,844,452
Walton, GA, Industrial Development Rev. (Ultima Rubber Products, Inc.), 10s, 2010 1,820 1,959,758
-----------
$55,988,123
-----------
Universities -- 0.7%
Mass. Industrial Finance Agency (Emerson College), 8.9s, 2018 $ 2,000 $ 2,233,880
-----------
Other -- 13.3%
Cleveland County, OK, Development Authority (Trails Inn), 12.5s, 2012*+# $ 9,625 $ 4,299,486
Connecticut Development Authority (Southington Associates), 10s, 2016*+# 4,425 2,199,668
Crystal City, TX, Lease Obligations, 10.5s, 2008# 4,243 4,163,296
Danville, VA, Industrial Development Rev. (Piedmont Mall), 8s, 2017 5,795 5,816,094
District of Columbia (National Public Radio), 7.7s, 2023 2,500 2,618,875
Downtown Marietta Development Authority, GA (Marietta Station), 10.25s, 1996*+# 2,166 898,949
Maryland Energy Financing Administration (Solid Waste), 9s, 2016 6,000 6,097,200
Michigan Strategic Funding, Obligation Rev. (Blue Water Fiber Project), 8s, 2012 1,000 5,243,750
Michigan Strategic Funding, Obligation Rev. (Great Lakes Fibre Project), 10.25s, 2016 5,000 957,190
Pennsylvania Economic Development Finance Authority, Recycling Rev., 9.25s, 2022 5,000 5,209,350
Port Walla Walla, WA, Solid Waste Recycling Rev. (Ponderosa Fibres Project), 9.122s,
2026 5,000 5,113,750
Retema, TX, Special Facilities Rev. (Retama Park Racetrack Project), 8.75s, 2018 3,290 1,645,000
</TABLE>
7
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
<TABLE>
Principal Amount
Issuer (000 Omitted) Value
Other -- continued
<S> <C> <C>
St. Louis County, MO, Industrial Development Authority (Kiel Center Arena),
7.875s, 2024 $ 300 $ 316,641
------------
$ 44,579,249
------------
Total Municipal Bonds (Identified Cost, $311,779,227) $323,224,574
------------
Floating Rate Demand Notes -- 2.1%
Hammond, IN, Pollution Control Rev., due 2022 $2,120 $ 2,120,000
Jackson County, MS, Pollution Control Rev. (Chevron), due 2023 1,000 1,000,000
Lincoln County, WY, Pollution Control Rev. (Exxon), due 2014 200 200,000
St. Charles Parish, LA, Pollution Control Rev., due 2022 3,000 3,000,000
Uinta County, WY, Pollution Control Rev. (Chevron), due 2020 700 700,000
Uinta County, WY, Pollution Control Rev. (Chevron), due 2022 100 100,000
------------
Total Floating Rate Demand Notes, at Amortized Cost $ 7,120,000
------------
Total Investments (Identified Cost, $318,899,227) $330,344,574
Other Assets, Less Liabilities -- 1.4% 4,640,090
------------
Net Assets -- 100.0% $334,984,664
============
</TABLE>
+ Non-income producing security -- in default.
+++ Indexed security.
* Security valued by or at the direction of the Trustees.
((section)) Non-income producing security.
((section))((section)) Inverse floating rate security.
# Restricted security.
See notes to financial statements
8
<PAGE>
Statement of Assets and Liabilities -- October 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments, at value (identified cost, $318,899,227) $330,344,574
Cash 82,025
Receivable for investments sold 410,168
Interest receivable 8,217,254
Other assets 6,078
------------
Total assets $339,060,099
------------
Liabilities:
Distributions payable $ 309,130
Payable for investments purchased 3,303,806
Payable to affiliates --
Management fee 31,360
Transfer and dividend disbursing agent fee 10,500
Accrued expenses and other liabilities 420,639
------------
Total liabilities $ 4,075,435
------------
Net assets $334,984,664
============
Net assets consist of:
Paid-in capital $352,631,337
Unrealized appreciation on investments 11,445,347
Accumulated net realized loss on investments (29,533,590)
Accumulated undistributed net investment income 441,570
------------
Total $334,984,664
============
Shares of beneficial interest outstanding 37,891,252
============
Net asset value per share (net assets / shares of beneficial interest
outstanding) $8.84
============
</TABLE>
Statement of Operations -- Year Ended October 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Net investment income:
Interest income $ 29,788,260
-----------
Expenses --
Management fee $ 3,214,430
Trustees' compensation 145,288
Transfer and dividend disbursing agent fee 133,915
Workout expenditures 214,587
Custodian fee 160,748
Postage 71,279
Auditing fees 65,780
Legal fees 44,113
Printing 21,424
Miscellaneous 322,903
-----------
Total expenses $ 4,394,467
Fees paid indirectly (17,994)
-----------
Net expenses $ 4,376,473
-----------
Net investment income $ 25,411,787
-----------
Realized and unrealized gain (loss) on investments:
Realized loss on investment transactions (identified cost
basis) $ (3,512,925)
Change in unrealized appreciation on investments 8,494,997
-----------
Net realized and unrealized gain on investments $ 4,982,072
-----------
Increase in net assets from operations $30,393,859
===========
</TABLE>
See notes to financial statements
9
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C>
Increase (decrease) in net assets: Year Ended October 31,
-----------------------------
From operations -- 1995 1994
------------ ------------
Net investment income $ 25,411,787 $ 25,188,088
Net realized loss on investments (3,512,925) (7,845,685)
Net unrealized gain (loss) on investments 8,494,997 (2,969,705)
------------ ------------
Increase in net assets from operations $ 30,393,859 $ 14,372,698
------------ ------------
Distributions declared to shareholders from net investment income $(26,240,482) $(25,961,909)
------------ ------------
Trust share (principal) transactions --
Net asset value of shares issued to shareholders in reinvestment of
distributions $ 3,638,621 $ 3,525,668
------------ ------------
Total increase (decrease) in net assets $ 7,791,998 $ (8,063,543)
Net assets:
At beginning of period 327,192,666 335,256,209
------------ ------------
At end of period (including accumulated undistributed net investment income of
$441,570 and $1,270,265, respectively) $334,984,664 $327,192,666
============ ============
</TABLE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987*
------- ------- ------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a
share outstanding
throughout each
period):
Net asset value --
beginning of period $ 8.73 $ 9.04 $ 8.78 $ 8.94 $ 9.02 $ 9.44 $ 9.22 $ 8.67 $ 9.40
----- ----- ----- ----- ----- ----- ----- ----- --------
Income from investment
operations --
Net investment income# $ 0.68 $ 0.68 $ 0.75 $ 0.73 $ 0.70 $ 0.75 $ 0.76 $ 0.75 $ 0.65
Net realized and
unrealized gain (loss)
on investments 0.13 (0.29) 0.21 (0.17) (0.05) (0.41) 0.22 0.54 (0.79)
----- ----- ----- ----- ----- ----- ----- ----- --------
Total from investment
operations $ 0.81 $ 0.39 $ 0.96 $ 0.56 $ 0.65 $ 0.34 $ 0.98 $ 1.29 $ (0.14)
----- ----- ----- ----- ----- ----- ----- ----- --------
Less distributions
declared to
shareholders from net
investment income $ (0.70) $ (0.70) $ (0.70) $ (0.72) $ (0.73) $ (0.76) $ (0.76) $ (0.74) $ (0.59
----- ----- ----- ----- ----- ----- ----- ----- --------
Net asset value -- end of
period $ 8.84 $ 8.73 $ 9.04 $ 8.78 $ 8.94 $ 9.02 $ 9.44 $ 9.22 $ 8.67
===== ===== ===== ===== ===== ===== ===== ===== =======
Per share market value --
end of period $ 9.50 $ 9.13 $ 10.00 $ 9.00 $ 9.25 $ 8.38 $ 9.88 $ 9.88 $ 8.50
===== ===== ===== ===== ===== ===== ===== ===== ========
Total return 12.57% (1.47)% 10.95% 5.34% 19.88% (7.87)% 8.32% 26.11% (10.10)%+
Ratios (to average net
assets)/
Supplemental data:
Expenses## 1.33% 1.31% 1.33% 1.34% 1.27% 1.21% 1.28% 1.25% 1.04%+
Net investment income 7.66% 7.58% 7.55% 8.17% 7.79% 8.07% 8.15% 8.35% 7.62%+
Portfolio turnover 14% 22% 14% 17% 21% 19% 16% 37% 58%
Net assets at end of
period (000 omitted) $334,985 $327,193 $335,256 $323,060 $325,077 $325,767 $338,461 $327,193 $305,118
</TABLE>
*For the period from the commencement of investment operations, November 25,
1986 to October 31, 1987.
#Per share data for periods subsequent to October 31, 1992 is based on
average shares outstanding.
##For fiscal years ending after September 1, 1995, the Trust's expenses are
calculated without reduction for fees paid indirectly.
+Annualized.
10
<PAGE>
Notes to Financial Statements
(1) Business and Organization
The Trust is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as a non-diversified,
closed-end management investment company. The following is a summary of
significant accounting policies consistently followed by the Trust in
preparation of its financial statements.
(2) Significant Accounting Policies
Investment Valuations -- Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in
60 days or less, are valued at amortized cost, which approximates market
value. Futures contracts, options and options on futures contracts listed on
commodities exchanges are valued at closing settlement prices.
Over-the-counter options are valued by brokers through the use of a pricing
model which takes into account closing bond valuations, implied volatility
and short-term repurchase rates. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith
by or at the direction of the Trustees.
Futures Contracts -- The Trust may enter into futures contracts for the
delayed delivery of securities, or contracts based on financial indices at a
fixed price on a future date. In entering such such contracts, the Trust is
required to deposit either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Trust each day, depending on the daily fluctuations in the value of
the underlying security, and are recorded for financial statement purposes as
unrealized gains or losses by the Trust. The Trust's investment in futures
contracts is designed to hedge against anticipated future changes in interest
or securities prices. The Trust may also invest in futures contracts for
non-hedging purposes. Should interest securities prices move unexpectedly,
the Trust may not achieve the anticipated benefits of the financial futures
contracts and may realize a loss.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discounts are amortized or accreted for financial
statement and tax reporting purposes as required by federal income tax
regulations.
The Trust can invest up to 75% of its portfolio in high-yield securities
rated below investment grade. Investments in high-yield securities involve
greater degrees of credit and market risk than investments in higher-rated
securities, and tend to be more sensitive to economic conditions.
The Trust uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds, whereby interest income on PIK bonds is recorded
ratably by the Trust at a constant yield to maturity. Legal fees and other
related expenses incurred to preserve and protect the value of a security
owned are added to the cost of the security, other legal fees are expensed.
Capital infusions, which are generally non-recurring, incurred to protect or
enhance the value of high-yield debt securities, are reported as an addition
to the cost basis of the security. Costs that are incurred to negotiate the
terms or conditions of capital infusions or that are expected to result in a
plan of reorganization are reported as realized losses. Ongoing costs
incurred to protect or enhance an investment, or costs incurred to pursue
other claims or legal actions, are reported as operating expenses.
Fees Paid Indirectly -- The Trust's custodian bank calculates its fee based
on the Trust's average daily net assets. The fee is reduced according to a
fee arrangement, which provides for custody fees to be reduced
11
<PAGE>
Notes to Financial Statements -- continued
based on a formula developed to measure the value of cash deposited with the
custodian by the Trust. This amount is shown as a reduction of expenses on
the Statement of Operations.
Tax Matters and Distributions -- The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided. The Trust files a tax return
annually using tax accounting methods required under provisions of the Code
which may differ from generally accepted accounting principles, the basis on
which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial
statements may differ from that reported on the Trust's tax return, and
consequently, the character of distributions to shareholders reported in the
financial highlights may differ from that reported to shareholders on Form
1099-DIV.
Distributions paid by the Trust from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for
federal income tax purposes because the Trust intends to meet certain
requirements of the Code applicable to regulated investment companies which
will enable the Trust to pay 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 to shareholders. Distributions
to shareholders are recorded on the ex-dividend date.
The Trust distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or accumulated net
realized gains. During the year ended October 31, 1995, $2,739,150 was
reclassified from paid in capital to accumulated net realized loss on
investments, due to the expiration of capital losses for tax purposes. This
change had no effect on the net assets or net asset value per share.
At October 31, 1995, the Trust, for federal income tax purposes, had a
capital loss carryforward of $30,396,585, which may be applied against any
net taxable realized gains of each succeeding year until
the earlier of its utilization or expiration on October 31, 1996,
($7,594,152), October 31, 1999, ($1,898,227), October 31, 2000 ($4,765,334),
October 31, 2001 ($3,636,033), October 31, 2002 ($7,977,644) and October 31,
2003 ($4,525,195).
(3) Transactions with Affiliates
Investment Adviser -- The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an effective annual rate
of 0.40% of average daily net assets and 6.32% of investment income.
The Trust pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain of the
officers and Trustees of the Trust are officers or directors of MFS. The
Trust has an unfunded defined benefit plan for all of its independent
Trustees and Mr. Bailey. Included in Trustees' compensation is a net periodic
pension expense of $36,888 for the year ended October 31, 1995.
12
<PAGE>
Notes to Financial Statements -- continued
Transfer Agent -- MFS Service Center, Inc. (MFSC) acts as a registrar and
dividend disbursing agent for the Trust under an agreement which provides
that the Trust will pay MFSC an account maintenance fee and a dividend
service fee and will reimburse MFSC for reasonable out-of-pocket expenses.
The account maintenance fee is computed as follows:
<TABLE>
<CAPTION>
Total Number of Accounts Annual Account Fee
----------------------------- ---------------------
<S> <C>
Less than 75,000 $9.00
75,000 and over $8.00
</TABLE>
The dividend service fee is $0.75 per dividend reinvestment and $0.75 per
cash infusion.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, aggregated
$45,358,982 and $54,475,884, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Trust, as computed on a federal income tax basis,
are as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate cost $318,899,227
===========
Gross unrealized appreciation $ 23,754,837
Gross unrealized depreciation (12,309,490)
-----------
Net unrealized appreciation $ 11,445,347
===========
</TABLE>
(5) Shares of Beneficial Interest
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------
<S> <C> <C>
1995 1994
- ------------------------------------------------------------------------ -------- ----------
Shares issued to shareholders in reinvestment of distributions 410,850 387,477
</TABLE>
(6) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Net Increase
(Decrease)
Net Realized and in Net Assets
Net Investment Unrealized Gain (Loss) Resulting
Quarterly Period Investment Income Income on Investments from Operations
------------------ ------------------ ------------------ ---------------------- ------------------
Per Per Per Per
Fiscal 1995 Amount Share Amount Share Amount Share Amount Share
------------------ ---------- ---- ---------- ---- ------------ ------ ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31, 1995 $ 7,475,901 $0.20 $ 6,403,027 $0.17 $ (201,711) $(0.01) $ 6,201,316 $0.16
April 30, 1995 7,483,534 0.20 6,386,559 0.17 5,392,067 0.15 11,778,626 0.32
July 31, 1995 7,503,734 0.20 6,395,755 0.17 519,974 0.01 6,915,729 0.18
October 31, 1995 7,325,091 0.19 6,226,446 0.17 (728,258) (0.02) 5,498,188 0.15
-------- ----- -------- ----- ---------- ---- -------- -----
$29,788,260 $0.79 $25,411,787 $0.68 $ 4,982,072 $ 0.13 $30,393,859 $0.81
======== ===== ======== ===== ========== ==== ======== =====
Fiscal 1994
------------------
January 31, 1994 $ 6,827,945 $0.19 $ 5,789,070 $0.16 $ (12,660) $ -- $ 5,776,410 $0.16
April 30, 1994 7,736,487 0.21 6,576,323 0.18 (5,346,907) (0.14) 1,229,416 0.03
July 31, 1994 7,552,625 0.20 6,495,294 0.17 (6,503,505) (0.17) (8,211) --
October 31, 1994 7,420,241 0.20 6,327,401 0.17 1,047,682 0.02 7,375,083 0.20
-------- ----- -------- ----- ---------- ---- -------- -----
$29,537,298 $0.80 $25,188,088 $0.68 $(10,815,390) $(0.29) $14,372,698 $0.39
======== ===== ======== ===== ========== ==== ======== =====
</TABLE>
13
<PAGE>
Notes to Financial Statements -- continued
(7) Line of Credit
The Trust entered into an agreement which enables it to participate with
other funds managed by MFS in an unsecured line of credit with a bank which
permits borrowings up to $350 million, collectively. Borrowings may be made
to temporarily finance the acquisition of Treasury shares. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The commitment fee allocated to the Trust for the
year ended October 31, 1995 was $4,673.
(8) Financial Instruments
The Trust also invests in indexed securities whose value may be linked to
interest rates, commodities, indices or other financial indicators. Indexed
securities are fixed-income securities whose proceeds at maturity
(principal-indexed securities) or interest rates (coupon-indexed securities)
rise and fall according to the change in one or more specified underlying
instruments. Indexed securities may be more volatile than the underlying
instrument itself. The following is a summary of such securities held at
October 31, 1995.
<TABLE>
<CAPTION>
Unrealized
Description Index Principal Value Appreciation
- --------------------------------------------------------------- ----------------- --------- --------- -------------
<S> <C> <C> <C> <C>
Principal-Indexed Securities:
Rochester, MN, HealthCare Facilities Rev. (Mayo Medical
Foundation), FIRS, 8.06s, 2021 PSA Index $1,000,000 $1,036,620 $36,620
</TABLE>
(9) Restricted Securities
The Trust may invest not more than 10% of its total assets in securities
which are subject to legal or contractual restrictions on resale. At October
31, 1995, the Trust owned the following restricted securities (constituting
4.44% of net assets) which may not be publicly sold without registration
under the Securities Act of 1933 (the 1933 Act). The Trust does not have the
right to demand that such securities be registered. The value of these
securities is determined by valuations supplied by a pricing service or
brokers or, if not available, in good faith by or at the direction of the
Trustees.
<TABLE>
<CAPTION>
Date of Par
Description Acquisition Amount Cost Value
- ------------------------------------------------------------------------ ---------- --------- -------- -----------
<S> <C> <C> <C> <C>
Broward County, FL, Housing Finance Authority (Deerfield Beach
Apartments), 13s, 2000 1/14/88 $ 85,385 $ 85,385 $ 51,598
Clevland County, OK, Development Authority (Trails Inn), 12.5s, 2012 7/31/87 9,625,000 5,098,968 4,299,486
Connecticut Development Authority (Southington Associates) 10s, 2016 12/22/86 4,425,000 4,425,000 2,199,668
Crystal City, TX, Lease Obligations, 10.5s, 2008 5/28/88 4,243,239 3,217,157 4,163,296
Daphne, AL, Special Care Facilities Financing Authority (Westminster
Village), 8.25s, 2026 10/28/88 500,000 500,186 300,000
Downtown Marietta Development Authority, GA (Marietta Station), 10.25s,
1996 6/09/87 2,166,143 2,184,076 898,949
Eastern Band of Cherokee Indian Community, NC (Carolina Mirror Co.),
11s, 2012 2/05/88 650,000 601,250 686,134
Hannibal, MO, Industrial Development Authority (Hannibal Regional Health
Care System, Inc.) 9.5s, 2022 8/28/92 1,500,000 1,485,000 1,744,605
Triview, CO, Metropolitan District, 13s, 2004 11/06/87 2,100,000 2,108,440 525,000
---------
$14,868,736
=========
</TABLE>
14
<PAGE>
Notes to Financial Statements -- continued
(10) Litigation
MFS has been named as a defendant in a lawsuit brought by the City of Troy,
NY (the City) alleging, among other things, that certain municipal securities
issued by Troy and purchased by the Trust were invalid at the time of
issuance. The Trust is actual owner of the securities. The lawsuit seeks to
void the issuance of the securities and seeks the return of all principal and
interest payments previously made by Troy together with interest on such
amounts. If the matter cannot be resolved through settlement with the City
and other parties, MFS and the Trust, if named as defendant, intend
vigorously to contest the case. This lawsuit is in a preliminary state and
involves significant complexities that prevent the Trust from being able to
predict whether any liability might result. Management does not believe that
any potential liability would be material to the financial position of the
Trust. Accordingly, no amount has been accrued in the financial statements
with respect to this matter. The Trust has filed a separate lawsuit against
the City, and certain other parties, in which the Trust is seeking a
determination that the securities are valid and that the Trust is entitled to
payment and/or damages.
Independent Auditors' Report
To the Trustees and Shareholders of MFS Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Municipal Income Trust as of
October 31, 1995, the related statement of operations for the year then
ended, the statement of changes in net assets for the years ended October 31,
1995 and 1994, and the financial highlights for each of the years in the
nine-year period ended October 31, 1995. 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 generally accepted auditing
standards. 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. An audit includes
examining on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned at October 31, 1995 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. 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 present
fairly, in all material respects, the financial position of MFS Municipal
Income Trust at October 31, 1995, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 4, 1995
15
<PAGE>
MFS(R) Municipal Income Trust
Trustees
A. Keith Brodkin*
Chairman and President
Richard B. Bailey*(2)
Private Investor; Former Chairman and
Director (until 1991), Massachusetts
Financial Services Company; Director,
Cambridge Bancorp; Director,
Cambridge Trust Company
Peter G. Harwood(1)
Private Investor
J. Atwood Ives(1)
Chairman and Chief Executive Officer,
Eastern Enterprises
Lawrence T. Perera(2)
Partner, Hemenway & Barnes
William J. Poorvu(1)
Adjunct Professor, Harvard University
Graduate School of Business
Administration
Charles W. Schmidt(2)
Private Investor;
Arnold D. Scott*
Senior Executive Vice President,
Director and Secretary,
Massachusetts Financial
Services Company
Jeffrey L. Shames*
President and Director,
Massachusetts Financial
Services Company
Elaine R. Smith(2)
Independent Consultant
David B. Stone(1)(2)
Chairman, North American
Management Corp.
(investment advisers)
Portfolio Manager
Cynthia M. Brown*
Treasurer
W. Thomas London*
Assistant Treasurer
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Transfer Agent,
Registrar and Dividend
Disbursing Agent
MFS Service Center, Inc.
P.O. Box 9024
Boston, MA 02205-9824
1-800-637-2304
Custodian
State Street Bank and
Trust Company
Auditors
Deloitte & Touche llp
Investment Adviser
Massachusetts Financial
Services Company
500 Boylston Street
Boston, MA 02116-3741
*Affiliated with the Investment Adviser
(1)Member of Audit Committee
(2)Member of Portfolio Trading Committee
C This report is printed on recycled paper MFMCE-2 12/95 34.4M
(Graphic - MFS Logo)
MFS(R) Municipal Income Trust
Annual Report
October 31, 1995
(Graphic - Silhouette of 2 Men Conversing)
16
<PAGE>
APPENDIX
MFS Municipal Income Trust
Front cover
[Silhouette of two people talking.]
