[MFS Investment Management Logo]
[Graphic of a man and woman conversing in front of a window]
MFS[RegTM] Municipal Income Trust
Semiannual Report
April 30, 1997
[End Graphic]
<PAGE>
Dear Shareholders:
For the six months ended April 30, 1997, shares of the Trust provided a total
return of 3.78% based on its New York Stock Exchange price. Over the same period
the Lehman Brothers Municipal Bond Index, an unmanaged index of investment-
grade, fixed-rate municipal bonds, provided a total return of 2.01%, and the
Lehman Brothers High Yield Municipal Bond Index, an unmanaged index of
fixed-rate, below-investment-grade municipal bonds, provided a total return of
1.86%. The net asset value of the Trust declined from $8.58 to $8.31 over the
period, providing a total return of 0.51%. The Trust's return assumes the
reinvestment of distributions. Additionally, the Trust primarily invests in
lower-quality municipal issues rated "Baa" or below or those that are unrated.
These lower-rated securities have high coupon rates relative to the market and
generally are less price sensitive in a volatile interest-rate environment;
hence, they provide less price fluctuation during these periods (although
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).
Economic Environment
After more than six years of expansion, the U.S. economy is experiencing another
year of growth in 1997, although a few signs point to the possibility of a
modest rise in inflation during the year. On the positive side, the pattern of
moderate growth and inflation set over the past few years now seems fairly well
entrenched in the economy and, short of a major international or domestic
crisis, appears to have enough momentum to remain on track for some time. Also,
gains in such important sectors as housing, automobiles, industrial production,
and exports indicate a fair amount of underlying strength in the economy. Some
of that strength was seen in the first quarter, when the U.S. economy grew at an
annualized rate of 5.6% (based on preliminary estimates), a pace that would be
inflationary in the unlikely event that it were to continue. The ongoing
tightness in the labor market could also add some inflationary pressures to the
economy. At the same time, there is some reason for caution as a result of the
continuing high level of consumer debt and rising personal bankruptcies. Given
these somewhat conflicting indicators, we expect real (inflation-adjusted)
growth to revolve around 2% in 1997, with the strength of the first quarter
moderating as we move through the balance of the year.
Bond Markets
In the bond markets, conflicting signals over the strength of the economy have
also created near-term volatility, and the Federal Reserve Board has begun
taking measured steps to control inflation by raising short-term interest rates.
Although we do not expect a repeat of the rapid growth in the first quarter, we
would expect the Fed to raise interest rates at least one more time in reaction
to the economic momentum that was built up during the period. While inflationary
forces largely remained in check in 1996, the continued strength in the labor
market suggests that a pickup in inflation is still possible. At the same time,
the U.S. budget deficit continues to decline and, as a percentage of gross
domestic product, is now approaching 1%, which we consider a positive
development for the bond markets. Although interest rates may remain volatile
over the coming months, we believe that, at current levels, fixed-income markets
remain equitably valued.
Portfolio Performance and Strategy
After the 1996 election, investors rebuffed any further rumors of a flat tax and
once again began to support the municipal market through investments in mutual
funds as well as individual municipal bonds. The credit problems that plagued
the market in the past in places such as Orange County, California and Miami,
Florida were resolved and faded from the front pages of the newspapers. Revenue
growth on both the state and local levels, combined with strong fiscal
management, also renewed investor confidence in the municipal market.
Because of investor worries about inflation, higher-yielding, higher-coupon
bonds have been in great demand, thereby causing spread, or yield differentials,
to narrow relative to investment-grade bonds.
1
<PAGE>
We will continue to watch this spread relationship and avoid situations in which
we do not believe we are being adequately compensated for any added risk
resulting from the narrowing spreads. Our corporate-backed bonds in the airline
industry have done very well due to strong earnings and increased passenger
load, while many other corporate-backed issues have provided strong debt-service
coverage and increased value due to the economic expansion. However, we feel we
are late in the expansion cycle and that profits for many corporations have
peaked. We will closely monitor these holdings for signs of weakness in the
months ahead. Single-family mortgage-revenue bonds have held up very well
against the bond markets' volatility. Because of the zigzagging of interest
rates, mortgage prepayments have been low, keeping the risk of calls, or early
redemptions, down as well.
The Trust's portfolio structure is consistent with its investment objective of
providing a high level of current tax-exempt income through generally
lower-rated or unrated securities. The Trust's monthly distribution of $0.055
per share has remained stable for the past six months. Increased bond call
activity, lack of investment opportunities consistent with the Trust's
objective, and a falling interest-rate environment could put pressure on the
distribution in the months ahead.
Our efforts remain focused on research and preservation of high current
tax-exempt income. We continue to monitor our holdings closely and to seek out
new investment opportunities. Diversification of credit risk and of factors that
might affect liquidity remain important components of the Trust's overall
strategy.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
[Signature of A. Keith Brodkin]
A. Keith Brodkin
Chairman and President
[Signature of Cynthia M. Brown]
Cynthia M. Brown
Portfolio Manager
May 14, 1997
----------------------
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.
2
<PAGE>
Performance Summary
(For the six months ended April 30, 1997)
Net Asset Value Per Share
October 31, 1996 $8.58
April 30, 1997 $8.31
New York Stock Exchange Price
October 31, 1996 $9.38
April 29, 1997 (high)* $9.50
April 18, 1997 (low)* $9.25
April 30, 1997 $9.38
*For the period November 1, 1996, through April 30, 1997.
Investment Objective and Policy
The investment objective of MFS[RegTM] 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, nondiversified,
management investment company and has no employees.
New York Stock Exchange Symbol
The New York Stock Exchange symbol is MFM.
Number of Shareholders
As of April 30, 1997, our records indicate that there are 7,157 registered
shareholders and approximately 16,600 shareholders owning Trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our reports,
which contain important information about the Trust, please write or call:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-637-2304
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.
3
<PAGE>
Portfolio of Investments (Unaudited) -- April 30, 1997
Municipal Bonds -- 96.8%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
General Obligation -- 2.7%
Arapahoe County, CO, Water & Sanitation District, 9.25s, 2013 ........................... $ 300 $ 310,830
Cook County, IL (Markham), 9s, 2012 ...................................................... 1,295 1,372,830
Jefferson County, OH, 7.125s, 2019 ...................................................... 1,000 1,047,020
New York, NY, 5.75s, 2017 ............................................................... 4,000 3,804,320
New York, NY, 6.125s, 2025 ............................................................... 2,000 1,959,340
------------
$ 8,494,340
------------
State and Local Appropriation
Troy, NY, Certificates of Participation, Recreational Facilities Rev., 9.75s, $ 1,060 $ 106,000
2010**[dbldag]+ ------------
Airlines -- 4.5%
Atlanta, GA, Special Purpose Facilities Rev. (Delta Airlines), 7.9s, 2018 ............... $ 2,100 $ 2,251,557
Cleveland, OH, Airport Special Facilities Rev. (Continental Airlines), 9s, 2019 ......... 3,150 3,404,835
Hillsborough County, FL, Aviation Authority Rev. (USAir), 8.6s, 2022 ..................... 650 718,490
Kenton County, KY, Airport Board Special Facilities (Delta Airlines), 7.5s, 2020 ......... 1,000 1,069,700
Tulsa, OK, Municipal Airport Trust Rev. (American Airlines), 7.375s, 2020 ............... 3,400 3,614,438
Tulsa, OK, Municipal Airport Trust Rev. (American Airlines), 7.6s, 2030 .................. 3,000 3,213,990
------------
$14,273,010
------------
Airport and Port Revenue -- 0.5%
Denver, CO, City & County Airport Rev., 8.75s, 2023 .................................... $ 1,500 $ 1,751,475
------------
Electric and Gas Utility Revenue -- 4.4%
Midland, MI, Environmental Development Authority, Pollution Control Rev. (Midland
Cogeneration), 9.5s,
2009 ................................................................................. $ 1,500 $ 1,628,700
Montana Board of Investment Resources Recovery Rev. (Yellowstone Energy), 7s, 2019 ...... 3,000 2,826,690
Ohio Water Development, Pollution Control Rev. (Cleveland Electric), 8s, 2023 ............ 2,500 2,703,875
Pittsylvania County, VA, Industrial Development Authority Rev., 7.5s, 2014 ............... 2,000 2,091,220
Port of Corpus Christi, TX, (Valero Energy), 10.25s, 2017 .............................. 4,000 4,137,280
Southern California Public Power Authority, Transmission Project Rev., RIBS, 7.812s, 650 669,441
2012[dbldag][dbldag] ------------
$14,057,206
------------
Health Care Revenue -- 24.1%
Arkansas Development Finance Authority, Economic Development Rev. (Southwest Homes), 11s, $ 1,400 $ 1,456,588
2018
Bell County, TX, Health Facilities Development (Advanced Living Tech), 7.25s, 2001 ...... 205 197,538
Bell County, TX, Health Facilities Development (Advanced Living Tech), 7.75s, 2006 ...... 300 281,451
Bell County, TX, Health Facilities Development (Advanced Living Tech), 8.125s, 2016 ...... 1,085 990,204
Bell County, TX, Health Facilities Development (Advanced Living Tech), 8.5s, 2026 ...... 2,405 2,176,212
Bell County, TX, Health Facilities Development (Kings Daughters Hospital), 9.25s, 2008 ... 775 839,650
Booneville, MO, Health Facilities Rev. (Gericare), 11s, 2017 ........................... 1,900 1,969,274
Boston, MA, Industrial Development Finance Authority Rev. (Stonehedge Convalescent
Center), 10.75s,
2019 ................................................................................. 790 842,717
Brevard County, FL, Health Facilities Authority Rev. (Wuesthoff Memorial/Friendly 2,320 2,394,611
Village), 9.25s, 2012
Broward County, FL, Industrial Development Authority (Beverly Enterprises), 9.8s, 2010 ... 2,480 2,729,066
Cambria County, PA, Industrial Development Authority (Beverly Enterprises), 10s, 2012 ... 760 943,996
Cheneyville, LA, Westside Habilitation Center, 8.375s, 2013 .............................. 2,500 2,534,875
Chester County, PA, Industrial Development Authority (RHA/PA Nursing Home), 10.125s, 2019 967 937,990
Colorado Health Retirement Facilities (Liberty Heights), 0s, 2024 ........................ 10,000 1,572,300
Connecticut Health & Educational Facilities (Johnson Evergreen), 8.5s, 2014 ............ 650 700,986
Daphne, AL, Special Care Facilities Financing Authority (Westminster Village), 8.25s, 500 433,740
2026*+
District of Columbia, Hospital Rev. (Hospital for Sick Children), 8.875s, 2021 ......... 480 509,434
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Health Care Revenue -- continued
Fairfax, Fauquier & Loudoun Counties, VA, Health Center Commission, Nursing Home Rev., $ 1,895 $ 1,982,303
9s, 2020
Gadsden County, FL, Industrial Development Authority (RHA/FLA Properties), 10.45s, 2018 2,555 2,632,698
Greenville County, SC, Hospital Facility Rev. (Chestnut Hill), 10.375s, 2016 ............ 2,845 2,884,119
Hobbs County, NM, Health Facilities Rev. (Nemecal Associates), 9.625s, 2014 ............ 915 963,037
Lee County, FL, Industrial Development Authority (Beverly Enterprises), 10s, 2010 ...... 1,995 2,217,163
Louisiana Public Facilities Authority (Chateau Riviere), 10.25s, 2016 .................. 3,295 3,396,091
Louisiana Public Facilities Authority, (Southwest Medical Center), 11s, 2006 ............ 4,114 1,366,024
Massachusetts Health & Education Facilities Authority (Fairview Extended Care Facility), 1,500 1,702,095
10.25s, 2021
Massachusetts Industrial Finance Agency (Martha's Vineyard Long-Term Care Facility), 1,700 1,154,300
9.25s, 2022[dbldag]
Massachusetts Industrial Finance Agency (Needham/Hamilton House), 11s, 2010 ............ 800 819,416
Monongalia County, WV, Health Facilities Rev. (Beverly Enterprises), 10s, 2007 ......... 1,035 1,121,122
Montgomery County, PA, Higher Education & Health Authority Rev. (AHF / Montgomery), 2,480 2,622,823
10.5s, 2020
New Jersey Economic Development Authority (Courthouse Convalescent Center), 8.7s, 2014 ... 650 683,384
New Jersey Economic Development Authority (Geriatric & Medical Services), 9.625s, 2004 ... 175 194,875
New Jersey Economic Development Authority (Geriatric & Medical Services), 9.625s, 2022 ... 675 744,552
New Jersey Economic Development Authority (Greenwood Health Care), 9.75s, 2011 ......... 1,440 1,491,912
New Jersey Economic Development Authority (Wanaque Convalescent Center), 8.6s, 2011 ...... 1,000 1,029,980
New Jersey Health Care Facilities Financing (Cherry Hill), 8s, 2027 ..................... 1,000 991,690
North Carolina Medical Care Commission, Hospital Rev. (Valdese General Hospital), 8.75s, 1,425 1,591,839
2016
Okaloosa County, FL, Retirement Rental Housing Rev. (Beverly Enterprises), 10.75s, 2003 1,325 1,383,088
Orange County, FL, Industrial Development Rev. (Friendly Village), 9.25s, 2012 ......... 1,805 1,862,634
Osceola County, FL, Industrial Development Rev., Community Pooled Loan, 7.75s, 2017 ...... 1,300 1,333,631
Philadelphia, PA, Industrial Development Authority, 10.25s, 2018 ........................ 2,340 2,390,661
Philadelphia, PA, Industrial Development Authority, 10.25s, 2018 ........................ 1,950 2,002,045
Reedley, CA, Certificates of Participation (Mennonite Home), 7.5s, 2026 .................. 3,000 2,974,800
Rochester, MN, Health Care Facilities Rev. (Mayo Medical Foundation), FIRS, 7.81s, 1,000 1,008,170
2021[sec]
San Francisco, CA, City & County (Coventry Park), 8.5s, 2026 ........................... 2,000 2,002,620
Santa Fe, NM, Industrial Development Rev. (Casa Real Nursing Home), 9.75s, 2013 ......... 1,145 1,221,658
Seminole County, FL, Industrial Development Authority (Friendly Village), 10s, 2011 ...... 1,755 1,800,683
St. Charles County, MO, Industrial Development Authority (Garden View Care Center), 10s, 2,255 2,288,216
2016
St. Petersburg, FL, Health Facilities Rev. (Swanholm Nursing), 10s, 2022 ............... 790 892,724
Suffolk County, NY, Industrial Development Agency (APPLE), 9.75s, 2015 .................. 1,350 1,147,500
Washington County, FL, Industrial Development Authority (Washington County), 10s, 2016 ... 1,110 1,110,055
Waterford Township, MI, Economic Development Rev. (Canterbury Health Care), 8.375s, 2023 1,500 1,554,645
Wilkinsburg, PA, Municipal Authority Health, Monroeville Christian, 8.25s, 2027 ......... 1,000 991,810
-------------
$77,064,995
-------------
Industrial Revenue (Corporate Guarantee) -- 16.1%
Courtland, AL, Industrial Development Board, Solid Waste Disposal Rev. (Champion
International), 6.375s,
2029 .................................................................................... $ 2,000 $1,985,300
Dayton, OH, Special Facilities Rev. (Emery Air Freight), 12.5s, 2009 ..................... 1,000 1,112,250
Eastern Band of Cherokee Indian Community, NC (Carolina Mirror), 10.25s, 2009+** ......... 6,540 6,533,068
Eastern Band of Cherokee Indian Community, NC (Carolina Mirror), 11s, 2012+** ............ 650 649,304
Hardeman County, TN (Correctional Facilities Corp.), 7.75s, 2017 ........................ 2,220 2,214,028
Hernando County, FL, Water & Sewer Rev. (Florida Crushed Stone), 8.5s, 2014 ............ 3,600 3,985,452
Hodge Village , LA, Utilities Rev. (Stone Container), 9s, 2010 ........................... 7,585 8,068,999
Lawrenceburg, TN, Industrial Development Board (Tridon, Inc.), 9.625s, 2006 ............ 1,500 1,606,080
Massachusetts Industrial Finance Agency, Solid Waste Disposal Rev. (Molten Metal
Technology), 8.25s,
2014 .................................................................................... 3,000 3,215,520
Mesa County, CO, (Joy Technologies), 8.5s, 2006 .......................................... 650 720,746
</TABLE>
5
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Municipal Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) -- continued
New Hampshire Business Authority, Sewer & Solid Waste Disposal, (Crown Paper), 7.875s, $ 1,550 $ 1,641,078
2026
New Jersey Economic Development Authority, (Holt Hauling & Warehousing), 8.4s, 2015 ...... 1,000 1,045,110
New Jersey Economic Development Authority, (Holt Hauling & Warehousing), 8.6s, 2017 ...... 1,000 1,047,590
Ohio Solid Waste Rev. (Republic Engineered Steels), 8.25s, 2014 ........................ 3,000 2,916,630
Ohio Solid Waste Rev. (Republic Engineered Steels), 9s, 2021 ........................... 3,000 3,004,620
Philadelphia, PA, Industrial Development Authority Rev., 7.75s, 2017 ..................... 3,255 3,445,125
Port of New Orleans, LA, 8.25s, 2004 ................................................... 900 1,018,539
Port of New Orleans, LA, (Avondale Industries), 8.5s, 2014 .............................. 1,650 1,895,619
Riverdale, IL, Enviromental Improvement Rev. (Acme Metals), 7.9s, 2024 .................. 1,000 1,043,500
St. Augustine, FL, Airport Authority (Grumman Repair Facility), 11s, 2004 ............... 2,575 2,656,318
Walton, GA, Industrial Development Rev. (Ultima Rubber Products), 10s, 2010 ............ 1,765 1,869,735
-------------
$51,674,611
-------------
Insured Health Care Revenue -- 1.4%
Clermont County, OH, Hospital Facilities Rev (Mercy Health Systems), AMBAC, 9.443s, $ 500 559,255
2021[dbldag][dbldag]
Desert Hospital District, CA, Insured Hospital Rev., Certificates of Participation
(Desert Hospital), 8.754s,
2020[dbldag][dbldag] .................................................................. 1,500 1,573,170
North Central, TX, Health Facilities Development Corp. (Presbytarian Hospital), MBIA, 1,500 1,741,695
9.345s, 2021[dbldag][dbldag]
Salt Lake City, UT, Hospital Rev (Intermountain Health Care Hospitals), AMBAC, 9.261s, 650 725,257
2020[dbldag][dbldag] -------------
$4,599,377
-------------
Multi-Family Housing Revenue -- 4.4%
Austin, TX, Housing Finance Authority (Woodland Heights Apartments), 10s, 2027 ......... $ 1,000 1,001,000
Colorado Housing Finance Authority, 9s, 2025 ............................................. 865 872,379
Dade County, FL, Housing Finance Agency, Multi-Family Housing (Blackstone), 8.375s, 2002+ 5,467 5,601,850
Dade County, FL, Housing Finance Agency, Multi-Family Housing (Silverblue), 8.375s, 2002+ 3,983 4,081,107
Dallas, TX, Housing Finance Corp., 8.5s, 2011 .......................................... 1,315 1,351,149
Florida Multi-Family Housing Finance Agency Rev (Center Court Apartments), 8.5s, 2018 ... 1,150 1,165,100
Memphis, TN, Health, Education & Housing Facilities Board (Wesley Highland Terrace), 100 85,000
12.75s, 2015 -------------
$14,157,585
-------------
Refunded -- 16.8%
Arapahoe County, CO, Water & Sanitation District, 9.25s, 1998 ........................... $ 1,700 $ 1,843,769
Grand Junction, CO (Lincoln Park Osteopathic Hospital), 10.5s, 1998 ..................... 1,250 1,344,400
Hannibal, MO, Industrial Development Authority (Hannibal Regional Healthcare), 9.5s, 1,500 1,833,150
2001+
Illinois Development Finance Authority, Retirement Housing (Regency Park), ETM, 0s, 2025 26,000 3,819,140
Maine Health & Higher Education Facilities Authority, (d'Youville Pavillion), 10s, 1997 7,490 7,963,143
Maine Health & Higher Education Facilities Authority (St. Mary's General Hospital), 1,000 1,099,730
8.625s, 2099
Massachusetts Industrial Finance Agency, Tunnel Rev. (Massachusetts Turnpike), 9s, 2000 3,810 4,371,784
Mississippi Hospital Equipment & Facilities Authority Rev. (Rush Medical Foundation), 1,000 1,125,420
8.75s, 2001
New Lenox, IL, Community Park Development Authority, 8.25s, 2004 ........................ 2,000 2,391,400
Prince William County, VA, Industrial Development Authority, Residential Care,
(Westminster at Lake Ridge),
10s, 2002 .............................................................................. 1,500 1,828,230
Russellville, AR, Industrial Development Rev. (Charles Meyers), 10s, 2009 ............... 5,195 5,840,998
Telluride, CO, Real Estate Transfer Assessment Rev., 11.5s, 2012 ........................ 2,475 3,818,727
Texas Turnpike Authority, (Houston Ship Channel Bridge), 12.625s, 2020 .................. 10,565 14,319,590
Washington Public Power Supply System, (Nuclear #1), 14.375s, 2001 ..................... 1,825 2,222,376
-------------
$53,821,857
-------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Sales and Excise Tax Revenue -- 0.7%
Chicago, IL, Tax Increment Rev., (Ryan Garfield), 10.125s, 2007 ........................ $ 1,600 $ 1,653,696
Denver, CO, Urban Renewal Tax Increment (Downtown Denver), 8.5s, 2013 .................. 475 473,300
-------------
$ 2,126,996
-------------
Single Family Housing Revenue -- 9.4%
Austin, TX, Housing Finance Authority, 0s, 2016 ....................................... $25,480 $ 2,889,687
Berkeley, Brookes & Fayette Counties, WV, Single Family Mortgage Rev., MBIA, 0s, 2016 14,000 1,729,840
Bexar County, TX, Housing Finance Authority, 0s, 2015 ................................. 26,300 3,707,774
Cook County, IL, Single Family Housing Rev., 0s, 2015 ................................. 1,060 144,065
Corpus Christi, TX, Housing Finance Corp., MBIA, 0s, 2011 .............................. 3,000 747,660
Dallas, TX, Housing Finance Corp., Single Family Mortgage Rev., MBIA, 0s, 2016 ......... 13,890 1,770,975
Denver, CO, Single Family Mortgage Rev., 0s, 2015 .................................... 4,215 489,741
Duval County, FL, Housing Finance Authority, 0s, 2015 ................................. 23,815 3,069,753
Florida Housing Finance Agency Rev. (South Lake Apartments), 0s, 2012 .................. 630 131,985
Georgia Housing & Finance Authority Rev., Capital Appreciation Homeownership Mortgage, 20,000 1,649,000
0s, 2031
Harris County, TX, Housing Finance Corp., 9.625s, 2003 ................................. 945 948,052
Harris County, TX, Housing Finance Corp., 9.875s, 2014 ................................. 590 591,894
Jackson County, MO, 0s, 2016 ......................................................... 3,505 405,003
Nebraska Investment Finance Authority, Single Family Mortgage Rev., 6.25s, 2021 ...... 2,000 2,001,660
Nebraska Investment Finance Authority, Single Family Mortgage Rev., 0s, 2015 ......... 41,425 7,064,619
Nevada Housing Division, Single Family Mortgage Rev., 0s, 2015 ........................ 780 126,471
Ohio Housing Finance Agency, Single Family Mortgage Rev., GNMA, RIBS, 9.567s, 850 919,164
2031[dbldag][dbldag]
Reno County, KS, Single Family Mortgage Rev., 0s, 2014 ................................. 2,825 395,980
Saline County, KS, 0s, 2014 ............................................................ 1,250 182,500
Utah Housing Finance Agency, Residential Mortgage Rev., 9s, 2019 ..................... 30 31,029
Wisconsin Housing & Economic Development Authority, Home Ownership Rev., RIBS, 10.006s, 885 955,048
-------------
2022[dbldag][dbldag]
$29,951,900
-------------
Solid Waste Revenue -- 3.2%
Charleston County, SC, Resource Recovery Rev. (Foster Wheeler), 9.25s, 2010 ............ $ 1,750 1,846,933
Michigan Strategic Fund Ltd., Obligation Rev. (Blue Water Fiber), 8s, 2012** ......... 1,000 670,000
Pennsylvania Economic Development Finance Authority, Recycling Rev., 9.25s, 2022 ...... 5,000 4,265,950
Port Walla Walla, WA, Solid Waste Recycling Rev. (Ponderosa Fibres), 9.125s, 2026 ...... 4,000 3,509,200
-------------
$10,292,083
-------------
Student Loan Revenue -- 0.7%
Arizona Student Loan Acquisition Authority, "C", 7.625s, 2010 ........................ $ 750 823,170
Pennsylvania Higher Education Assistance Agency, AMBAC, 8.27s, 2022[dbldag][dbldag] ... 1,300 1,279,564
-------------
$ 2,102,734
-------------
Toll Road and Transit -- 2.7%
Arapahoe County, CO, Capital Improvement (Highway Rev.), 0s, 2015 ..................... $ 1,000 283,780
San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Rev., 0s, 2006 ...... 2,300 1,306,009
San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Rev., 0s, 2011 ...... 6,600 2,571,030
San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Rev., 0s, 2019 ...... 10,000 2,537,800
Telluride, CO, Real Estate Transfer Assessment Rev., 11.5s, 2012 ..................... 425 501,249
Telluride, CO, Real Estate Transfer Assessment Rev., 9s, 2016 ........................ 995 966,941
West Virginia Parkways, Economic Development & Tourism Authority, FGIC, RIBS, 7.555s, 600 576,504
2019[dbldag][dbldag] -------------
$ 8,743,313
-------------
</TABLE>
7
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Municipal Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Universities -- 1.5%
Islip, NY, Community Development Agency Rev. (New York Institute of Technology), 7.5s, $ 2,500 $ 2,560,425
2026
Massachusetts Industrial Finance Agency (Emerson College), 8.9s, 2018 .................. 2,000 2,186,680
-------------
$ 4,747,105
-------------
Other -- 3.7%
Colorado Postsecondary Educational Facility (Colorado Ocean Journey), 8.3s, 2017 ......... $ 1,500 $ 1,529,655
Dade County, FL, Special Obligation Rev., AMBAC, 0s, 2032 .............................. 15,080 1,613,409
Danville, VA, Industrial Development Rev. (Piedmont Mall), 8s, 2017 ..................... 5,795 5,786,018
District of Columbia, Hospital Rev. (National Public Radio), 7.7s, 2023 .................. 2,500 2,592,750
St. Louis County, MO, Industrial Development Authority (Keil Center Arena), 7.875s, 2024 300 320,997
-------------
$ 11,842,829
-------------
Total Municipal Bonds (Identified Cost, $297,555,281) ................................. $309,807,416
-------------
Floating Rate Demand Notes -- 2.0%
Uinta County, WY, Pollution Control Rev. (Chevron), due 8/15/20, at Identified Cost ... $ 6,400 $ 6,400,000
-------------
Total Investments (Identified Cost, $303,955,281) .................................... $316,207,416
Other Assets, Less Liabilities -- 1.2% 3,807,973
-------------
Net assets -- 100.0% .................................................................. $320,015,389
=============
</TABLE>
[sec]Indexed security.
[dbldag][dbldag]Inverse floating rate security.
+Restricted security.
[dbldag]Security valued by or at the direction of the Trustees.
**Non-income producing security -- in default.
See notes to financial statements
8
<PAGE>
Statement of Assets and Liabilities (Unaudited) -- April 30, 1997
<TABLE>
<S> <C>
Assets:
Investments, at value (identified cost, $303,955,281) ........................ $316,207,416
Cash ........................................................................ 78,968
Receivable for investments sold ............................................. 3,273,104
Interest receivable ......................................................... 7,182,750
Other assets ............................................................... 3,637
--------------
Total assets ............................................................. $326,745,875
--------------
Liabilities:
Distributions payable ...................................................... $ 295,612
Payable for investments purchased .......................................... 5,912,137
Payable to affiliates --
Management fee ............................................................ 8,253
Administrative fee ......................................................... 131
Transfer and dividend disbursing agent fee ................................. 10,024
Accrued expenses and other liabilities ....................................... 504,329
--------------
Total liabilities .......................................................... $ 6,730,486
--------------
Net assets ..................................................................... $320,015,389
==============
Net assets consist of:
Paid-in capital ............................................................ $350,716,986
Unrealized appreciation on investments ....................................... 12,252,135
Accumulated net realized loss on investments ................................. (43,543,563)
Accumulated undistributed net investment income .............................. 589,831
--------------
Total ...................................................................... $320,015,389
==============
Shares of beneficial interest outstanding .................................... 38,489,125
==============
Net asset value per share (net assets [divided by] shares of beneficial interest $8.31
outstanding) ==============
</TABLE>
See notes to financial statements
9
<PAGE>
Statement of Operations (Unaudited) -- Six Months Ended April 30, 1997
<TABLE>
<S> <C>
Net investment income:
Interest income ...................................................... $ 13,742,652
-------------
Expenses --
Management fee .................................................... $ 1,508,573
Trustees' compensation ........................................... 65,371
Transfer and dividend disbursing agent fee ......................... 59,431
Administrative fee ................................................. 8,157
Workout expenditures .............................................. 184,573
Custodian fee .................................................... 78,768
Auditing fees .................................................... 30,789
Postage .......................................................... 21,554
Printing .......................................................... 15,212
Legal fees ....................................................... 13,959
Miscellaneous .................................................... 65,249
-------------
Total expenses .................................................. $ 2,051,636
Fees paid indirectly .............................................. (20,206)
-------------
Net expenses ..................................................... $ 2,031,430
-------------
Net investment income ........................................... $ 11,711,222
-------------
Realized and unrealized gain (loss) on investments:
Realized loss on investment transactions (identified cost basis) ... $ (11,778,363)
Change in unrealized appreciation on investments ..................... 2,353,552
-------------
Net realized and unrealized loss on investments ................... $ (9,424,811)
-------------
Increase in net assets from operations .......................... $ 2,286,411
=============
</TABLE>
See notes to financial statements
10
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
April 30, 1997 Year Ended
(Unaudited) October 31, 1996
----------------- ------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income ............................................................ $ 11,711,222 $ 24,777,694
Net realized loss on investments ................................................ (11,778,363) (7,965,614)
Net unrealized gain (loss) on investments ....................................... 2,353,552 (1,546,763)
------------- ------------
Increase in net assets from operations .......................................... $ 2,286,411 $ 15,265,317
------------- ------------
Distributions declared to shareholders from net investment income .................. $ (12,674,309) $(25,186,035)
------------- ------------
Trust share (principal) transactions --
Net asset value of shares issued to shareholders in reinvestment of distributions $ 1,773,345 $ 3,565,996
------------- ------------
Total decrease in net assets ................................................... $ (8,614,553) $ (6,354,722)
Net assets:
At beginning of period ............................................................ 328,629,942 334,984,664
------------- ------------
At end of period (including accumulated undistributed net investment income of
$589,831 and $1,552,918, respectively) .......................................... $ 320,015,389 $328,629,942
============= ============
</TABLE>
See notes to financial statements
11
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Six Months
Ended Year Ended October 31,
April 30, ---------------------------------------------
1997
(Unaudited) 1996 1995 1994 1993
------------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period ..................... $ 8.58 $ 8.84 $ 8.73 $ 9.04 $ 8.78
--------- -------- -------- ---------- --------
Income from investment operations# --
Net investment income .................................... $ 0.31 $ 0.66 $ 0.68 $ 0.68 $ 0.75
Net realized and unrealized gain (loss) on investments . (0.25) (0.26) 0.13 (0.29) 0.21
--------- -------- -------- ---------- --------
Total from investment operations ........................ $ 0.06 $ 0.40 $ 0.81 $ 0.39 $ 0.96
--------- -------- -------- ---------- --------
Less distributions declared to shareholders from net
investment income .......................................... $ (0.33) $ (0.66) $ (0.70) $ (0.70) $ (0.70)
--------- -------- -------- ---------- --------
Net asset value -- end of period ........................... $ 8.31 $ 8.58 $ 8.84 $ 8.73 $ 9.04
========= ======== ======== ========== ========
Per share market value -- end of period .................. $ 9.38 $ 9.38 $ 9.50 $ 9.13 $ 10.00
========= ======== ======== ========== ========
Total return ................................................ 3.78%++ 4.50% 12.57% (1.47)% 10.95%
Ratios (to average net assets)/Supplemental data:
Expenses## ................................................ 1.26%+ 1.24% 1.33% 1.31% 1.33%
Net investment income .................................... 7.27%+ 7.47% 7.66% 7.58% 7.55%
Portfolio turnover ....................................... 12% 13% 14% 22% 14%
Net assets at end of period (000 omitted) .................. $320,015 $328,630 $334,985 $327,193 $335,256
</TABLE>
<TABLE>
<CAPTION>
Per share data (for a share outstanding
throughout each period): Year Ended October 31,
---------------------------------------
1992 1991 1990
----------- ------------- -------------
<S> <C> <C> <C>
Net asset value -- beginning of period ... $ 8.94 $ 9.02 $ 9.44
-------- ----------- -----------
Income from investment operations# --
Net investment income ..................... $ 0.73 $ 0.70 $ 0.75
Net realized and unrealized gain (loss)
on investments ........................... (0.17) (0.05) (0.41)
-------- ----------- -----------
Total from investment operations ......... $ 0.56 $ 0.65 $ 0.34
-------- ----------- -----------
Less distributions declared to
shareholders from net investment
income .................................... $ (0.72) $ (0.73) $ (0.76)
-------- ----------- -----------
Net asset value -- end of period ......... $ 8.78 $ 8.94 $ 9.02
======== =========== ===========
Per share market value -- end of period $ 9.00 $ 9.25 $ 8.38
======== =========== ===========
Total return .............................. 5.34% 19.88% (7.87)%
Ratios (to average net assets)/
Supplemental data:
Expenses ................................. 1.34% 1.27% 1.21%
Net investment income ..................... 8.17% 7.79% 8.07%
Portfolio turnover ........................ 17% 21% 19%
Net assets at end of period
(000 omitted) ........................... $323,060 $ 325,077 $ 325,767
Per share data (for a share outstanding
throughout each period): Year Ended October 31,
--------------------------------------------
1989 1988 1987*
------------- ------------- ----------------
<S> <C> <C> <C>
Net asset value -- beginning of period ... $ 9.22 $ 8.67 $ 9.40
--------- ----------- ---------------
Income from investment operations# --
Net investment income ..................... $ 0.76 $ 0.75 $ 0.65
Net realized and unrealized gain (loss)
on investments ........................... 0.22 0.54 (0.79)
--------- ----------- ---------------
Total from investment operations ......... $ 0.98 $ 1.29 $ (0.14)
--------- ----------- ---------------
Less distributions declared to
shareholders from net investment
income .................................... $ (0.76) $ (0.74) $ (0.59)
--------- ----------- ---------------
Net asset value -- end of period ......... $ 9.44 $ 9.22 $ 8.67
========= =========== ===============
Per share market value -- end of period $ 9.88 $ 9.88 $ 8.50
========= =========== ===============
Total return .............................. 8.32% 26.11% (10.10)%+
Ratios (to average net assets)/
Supplemental data:
Expenses ................................. 1.28% 1.25% 1.04%+
Net investment income ..................... 8.15% 8.35% 7.62%+
Portfolio turnover ........................ 16% 37% 58%
Net assets at end of period
(000 omitted) ........................... $ 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 the periods subsequent to October 31, 1992, is based on
average shares outstanding.
##For fiscal years ending after September 1, 1995. The Fund's expenses are
calculated without reduction for fees paid indirectly.
+Annualized.
++Not annualized.
See notes to financial statements
12
<PAGE>
Notes to Financial Statements (Unaudited)
(1) Business and Organization
MFS Municipal Income Trust (the Trust) is a non-diversified, closed-end
management company. The Trust is organized as a Massachusetts business trust and
is registered under the Investment Company Act of 1940, as amended.
(2) Significant Accounting Policies
General -- The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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.
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 discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Dividends received in cash are recorded on the ex-dividend date. Dividend and
interest payments received in additional securities are recorded on the
ex-dividend or ex-interest date in an amount equal to the value of the security
on such date.
The Fund can invest up to 100% 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 Fund uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds. 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 additions 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 expensed.
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 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.
13
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
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 tax 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.
At October 31, 1996, the Trust, for federal tax purposes, had a capital loss
carryforward of $31,565,822, which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration, October 31, 1999 ($1,898,227), October 31, 2000 ($4,765,334),
October 31, 2001 ($3,636,033), October 31, 2002 ($7,977,644), October 31, 2003
($4,513,979), and October 31, 2004 ($8,774,605).
(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 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 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
$18,971 for the six months ended April 30, 1997.
Administrator -- Effective March 31, 1997, the Trust has an administrative
services agreement with MFS to provide the Trust with certain financial, legal,
compliance, shareholder communications, and other administrative services. As a
partial reimbursement for the cost of providing these services, the Trust pays
MFS an administrative fee up to 0.015% per annum of the Trust's average daily
net assets, provided that the administrative fee is not assessed on Trust assets
that exceed $3 billion.
14
<PAGE>
Transfer Agent -- MFS Service Center, Inc. (MFSC) acts as registrar and dividend
disbursing agent for the Trust. The agreement 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:
Total Number of Accounts Annual Account Fee
- -------------------------- -------------------
Less than 75,000 $9.00
75,000 and over $8.00
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 $38,708,641
and $45,900,762, 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:
Aggregate cost ..................... $303,955,281
============
Gross unrealized appreciation ...... $ 19,133,234
Gross unrealized depreciation ...... (6,881,099)
------------
Net unrealized appreciation ...... $ 12,252,135
============
(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>
Six Months Year Ended
Ended April 30, October 31,
1997 1996
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares issued to shareholders in reinvestment of distributions ... 200,016 397,857
======= =======
</TABLE>
(6) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Net Realized and Net Increase
Unrealized Loss in Net Assets Resulting
Quarterly Period Investment Income Net Investment Income on Investments from Operations
- ------------------- -------------------------------------------------------------------------------------------------------
Per Per Per Per
Fiscal 1997 Amount Share Amount Share Amount Share Amount Share
- ------------------- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31 ...... $7,040,572 $0.18 $5,971,154 $0.16 $(4,767,479) $(0.13) $1,203,675 $0.03
April 30 ......... 6,702,080 0.18 5,740,068 0.15 (4,657,332) (0.12) 1,082,736 0.03
------------ ------ ------------ ------ ------------ ------- ------------ ------
$13,742,652 $0.36 $11,711,222 $0.31 $ (9,424,811) $ (0.25) $ 2,286,411 $0.06
============ ====== ============ ====== ============ ======= ============ ======
Fiscal 1996
- ------------------
January 31 ...... $ 7,161,282 $0.18 $ 6,101,655 $0.16 $ (4,112,032) $ (0.11) $ 1,989,623 $0.05
April 30 ......... 7,213,357 0.19 6,167,967 0.16 (1,580,129) (0.03) 4,587,838 0.13
July 31 ......... 7,265,805 0.20 6,305,036 0.17 (3,006,927) (0.08) 3,298,109 0.09
October 31 ...... 7,227,530 0.20 6,203,036 0.17 (813,289) (0.04) 5,389,747 0.13
------------ ------ ------------ ------ ------------ ------- ------------ ------
$28,867,974 $0.77 $24,777,694 $0.66 $ (9,512,377) $ (0.26) $15,265,317 $0.40
============ ====== ============ ====== ============ ======= ============ ======
</TABLE>
15
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
<TABLE>
<CAPTION>
Net Realized and Net Increase
Unrealized Gain/(Loss) in Net Assets Resulting
Quarterly Period Investment Income Net Investment 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 ..... $ 7,475,901 $0.20 $ 6,403,027 $0.17 $ (201,711) $ (0.01) $ 6,201,316 $0.16
April 30 ........ 7,483,534 0.20 6,386,559 0.17 5,392,067 0.15 11,778,626 0.32
July 31 ........ 7,503,734 0.20 6,395,755 0.17 519,974 0.01 6,915,729 0.18
October 31 ..... 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
============ ====== ============ ====== ========== ======== ============ ======
</TABLE>
(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 $400 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Trust 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 six months ended
April 30, 1997, was $1,434.
(8) Financial Instruments
The Trust also invests in indexed securities whose value may be linked to
foreign currencies, 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 April 30, 1997:
<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, 7.81s, 2021 PSA Index $1,000,000 $1,008,170 $8,170
=======
</TABLE>
16
<PAGE>
(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 April 30, 1997,
the Trust owned the following restricted securities (constituting 5.90% of total
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>
Par
Date of Amount
Description Acquisition (000 Omitted) Cost Value
- ------------------------------------------------------------------------ ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Dade County, FL, Housing Finance Agency, Multi-Family Housing
(Blackstone), 8.375s, 2002 4/22/94 $5,467 $5,466,500 $ 5,601,850
Dade County, FL, Housing Finance Agency, Multi-Family Housing
(Silverblue), 8.375s, 2002 4/22/94 3,983 3,982,500 4,081,107
Daphne, AL, Special Care Facilities Financing Authority (Westminster
Village), 8.25s, 2026 10/28/88 500 500,186 433,740
Eastern Band of Cherokee Indian Community, NC (Carolina Mirror Co.)
10.25s, 2009 12/10/86 6,540 6,409,197 6,533,068
Eastern Band of Cherokee Indian Community, NC (Carolina Mirror Co.),
11s, 2012 2/05/88 650 601,250 649,304
Hannibal, MO, Industrial Development Authority (Hannibal Regional
Healthcare), 9.5s, 2001 8/28/92 1,500 1,485,521 1,833,150
Troy, NY, Certificates of Participation, Recreational Facilities Rev.,
9.75s, 2010 12/10/86 1,060 1,060,000 106,000
------------
$19,238,219
============
</TABLE>
17
<PAGE>
MFS[RegTM] 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(2)
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
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
[Recycling symbol] This report is printed on recycled paper. MFMCE-3 6/97 34M
