MUNICIPAL INCOME TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - -----------------------------------------------------------------------------
Strong economic growth in the fourth quarter of 1993 and a shift in
Federal Reserve Board monetary policy during the first half of 1994 resulted
in the sharpest increase in interest rates in more than six years. At the
beginning of the year, market concerns about inflation developed as the
economy approached full employment and commodity prices moved upward. The
Federal Reserve Board responded by tightening monetary policy. Between
February and August, the central bank raised the federal-funds rate--the
interest rate banks charge each other for overnight loans--from 3.00 percent
to 4.75 percent in five separate moves. Between May and August, the discount
rate--the interest rate the Federal Reserve charges member banks for loans
- - --was increased 100 basis points to 4.00 percent.
Long-term municipal bond yields, as measured by The Bond Buyer Revenue
Bond Index,* reached a record low 5.41 percent in mid October. Between
November and January, tax-exempt bond yields rose as high as 5.75 percent,
but declined on heavy demand in December and January. The Index yield jumped
89 basis points from 5.50 percent to 6.39 percent in February and March.
Municipal bonds began to stabilize in the second quarter despite monthly
volatility of 15 to 20 basis points. The Revenue Bond Index reached a high
yield of 6.60 percent in early May, but by the end of August had fallen to
6.43 percent.
The municipal market continued to be influenced by supply and demand
conditions. New-issue underwriting totaled a record $290 billion in 1993. The
pace of new-issue activity over the first eight months of 1994, however,
slowed 40 percent to a projected annual rate of $175 billion. By way of
comparison, municipal bond maturities and calls for redemption are expected
to reach $190 billion, reducing the amount of debt outstanding. This scarcity
helped long-term municipal securities outperform their U.S. Treasury
counterparts through the summer.
PERFORMANCE
For the fiscal year ended August 31, 1994, Municipal Income Trust paid
shareholders tax-free income dividends totaling $0.65 per share and long-term
capital gains distributions totaling $0.094 per share. Over the 12-month
period, the Fund's net asset value declined from $10.83 to $10.16 per share.
Including the reinvestment of all dividends and distributions, the Fund
declined 11.73 percent based on a change in New York Stock Exchange (NYSE)
market price from $11.25 on August 31, 1993 to $9.25 per share on August 31,
1994. The defensive nature of the high-coupon bonds in the portfolio,
including prerefunded bonds (bonds to be redeemed on optional call dates from
proceeds held in escrow), moderated the decline in the Fund's net asset value
during a year of sharply rising interest rates. The $12.5 million Denver
Airport bond position was sold in March when it appeared that the airport
opening would experience additional delays. The sale of these bonds prior to
credit downgrades by the rating agencies and further price erosion helped
preserve asset value.
- - ---------------
*The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of
25 selected municipal revenue bonds with 30-year maturities. Ratings of these
bonds range from Aa1 to Baa1, as measured by Moody's and AA+ to A-, as
measured by Standard & Poor's.
<PAGE>
<PAGE>
PORTFOLIO STRUCTURE
At the close of the fiscal period, the portfolio held $323 million in
long-term municipal bonds, which were diversified among 13 specific municipal
sectors and 71 credits. Prerefunded bond holdings comprised 22 percent of net
assets. The three largest sectors were hospital, general obligation and
industrial development/pollution control bonds, representing 47 percent of
net assets. The average maturity and call protection of the Fund's long-term
holdings was 19 years and 6 years, respectively. Bonds subject to the
alternative minimum tax (AMT) comprised approximately 18 percent of net
assets. The credit quality ratings of the long-term portfolio are summarized
below:
<TABLE>
<CAPTION>
MOODY'S OR STANDARD & POOR'S CREDIT RATINGS MUNICIPAL BONDS
- - ---------------------------------------------- -------------------
<S> <C>
Aaa or AAA .................................... 13%
Aa or AA ...................................... 32
A or A ........................................ 38
Baa or BBB .................................... 8
Not rated ..................................... 9
</TABLE>
LOOKING AHEAD
The overall direction of interest rates will primarily be determined by
the strength of the economy, the trend of inflation and the Federal Reserve
Board's response. These conditions may continue to move interest rates
higher. Investor demand for municipal securities should be sustained by
significant bond maturities and calls. Although the Fund may sell and/or
experience redemptions of older, high-coupon bonds, we will seek to sustain a
high level of tax-free income.
We would like to remind you that the Trustees have approved a procedure
whereby the Fund, when appropriate, may repurchase shares in the open market
or in privately negotiated transactions at a price not above market value or
net asset value, whichever is lower at the time of purchase.
We appreciate your ongoing support of Municipal Income Trust and look
forward to continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
Chairman of the Board
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS August 31, 1994
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (97.3%)
GENERAL OBLIGATION (14.1%)
$ 6,000 Moulton-Niguel Water District, California, Refg 1993 (MBIA
Insured) ..................................................... 5.00 % 9/ 1/19 $4,998,120
5,000 Chicago, Illinois, Refg 1987 Ser B (Prerefunded) .............. 9.25 1/ 1/13 5,691,200
6,270 Washington Suburban Sanitary District, Maryland, Gen Constr
Refg 1994 .................................................... 5.00 6/ 1/10 5,606,822
10,000 Massachusetts, 1994 Ser A ..................................... 5.00 1/ 1/11 8,786,900
New York City, New York,
2,500 1988 Ser A ................................................... 8.25 11/ 1/02 2,786,500
850 1988 Ser D ................................................... 8.50 8/ 1/08 960,339
4,150 1988 Ser D (Prerefunded) ..................................... 8.50 8/ 1/08 4,650,988
7,650 1988 Ser A (Prerefunded) ..................................... 8.50 11/ 1/10 8,649,855
4,000 Washington, 1991 Ser B (Prerefunded) .......................... 6.70 6/ 1/16 4,365,960
- - ----------- -------------
46,420 46,496,684
- - ----------- -------------
EDUCATIONAL FACILITIES REVENUE (9.8%)
5,000 California Public Works Board, University of California 1993
Ser A ........................................................ 5.50 6/ 1/21 4,357,800
3,500 Georgetown University, District of Columbia, Ser 1989 A ...... 8.25 4/ 1/18 3,896,795
4,000 FSU Financial Assistance Inc, Florida, Impr & Refg Ser 1994 .. 5.25 10/ 1/15 3,417,960
6,750 Hamilton, Indiana, Southeastern Building Corp Cons Ser 1988
(Prerefunded) ................................................ 8.40 1/ 1/15 7,708,568
New York State Dormitory Authority,
2,700 St Rose College Ser 1987 (Prerefunded) ....................... 8.00 7/ 1/07 2,987,712
2,000 State University Ser 1993 A .................................. 5.25 5/15/15 1,742,040
8,000 Berks County Municipal Authority, Pennsylvania, University of
Pennsylvania Ser 1985 ........................................ 7.00 9/ 1/15 8,440,560
- - ----------- -------------
31,950 32,551,435
- - ----------- -------------
ELECTRIC REVENUE (9.0%)
1,500 North Carolina Municipal Power Agency #1, Catawba
Refg Ser 1988 A .............................................. 7.50 1/ 1/17 1,633,785
20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C ........... 4.56 2/ 1/06 17,798,200
Intermountain Power Agency, Utah,
1,000 First Crossover Ser .......................................... 7.875 7/ 1/14 1,072,680
3,000 Refg Ser 1987 D .............................................. 8.625 7/ 1/21 3,345,930
2,750 Chelan County Public Utility District #1, Washington,
Ser 1987 B (AMT) ............................................. 9.30 7/ 1/62 3,105,438
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS August 31, 1994 (continued)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
$ 2,500 Washington Public Power Supply System, Nuclear Proj #2 Refg
Ser 1990 C (Prerefunded) ..................................... 7.625% 7/ 1/10 $ 2,869,675
- - ----------- -------------
30,750 29,825,708
- - ----------- -------------
HOSPITAL REVENUE (18.8%)
3,800 Maricopa County Industrial Development Authority, Arizona,
Samaritan Health Ser 1985 A (Crossover Refunded) ............. 9.25 12/ 1/15 4,068,546
245 St Petersburg, Florida, Allegheny Health/St Anthony
Ser 1988 C ................................................... 7.75 1/ 1/14 266,423
Illinois Health Facility Authority,
1,410 Glen Oaks Medical Center Inc Refg 1990 Ser D ................. 9.50 11/15/15 1,632,089
1,000 Mercy Center for Health Care Services Ser 1992 ............... 6.65 10/ 1/22 1,007,220
10,600 Indiana Health Facilities Financing Authority, St Anthony
Medical Center & Home Inc Ser 1987 (Prerefunded) ............. 9.25 10/ 1/17 12,142,300
Kentucky Development Finance Authority, Ashland Hospital/
King's Daughters Refg & Impr
950 Ser 1987 ..................................................... 9.75 8/ 1/11 1,089,270
1,550 Ser 1987 (Prerefunded) ....................................... 9.75 8/ 1/11 1,810,013
1,500 Winchester, Kentucky, Clark County Hospital Refg Ser 1987 .... 7.75 4/ 1/13 1,609,215
7,700 Breckenridge, Minnesota, Franciscan Sisters Health Care Inc
Ser 1987 B-1 (Prerefunded) ................................... 9.375 9/ 1/17 8,841,987
4,000 Minneapolis, Minnesota, Lifespan Inc Refg Ser 1987 B
(Prerefunded) ................................................ 9.125 12/ 1/14 4,602,560
7,500 North Carolina Medical Care Commission, Presbyterian Health
Services Corp Refg Ser 1993 .................................. 5.50 10/ 1/20 6,709,650
4,670 Cass County, North Dakota, Franciscan Sisters Health Care
Ser 1987 C ................................................... 9.375 9/ 1/17 5,276,820
6,000 Lehigh County General Purpose Authority, Pennsylvania,
HealthEast Inc Ser 1987 A & B ................................ 9.00 7/ 1/15 6,633,555
1,000 Montgomery County Higher Education & Health Authority,
Pennsylvania, Frankford Hospital Ser 1986 .................... 7.875 1/ 1/19 1,049,730
3,275 Washington Health Care Facility Authority,
Sisters of Providence Ser 1988 ............................... 8.625 10/ 1/07 3,681,362
1,850 Fayette County, West Virginia, MPC Inc Refg Ser 1990 ......... 9.75 2/ 1/11 2,047,525
- - ----------- -------------
57,050 62,468,265
- - ----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (13.7%)
5,000 California Pollution Control Finance Authority, Pacific Gas &
Electric Co 1987 Ser B (AMT) ................................. 8.875 1/ 1/10 5,555,300
5,000 Oxnard Industrial Development Finance Authority, California,
Green Foods Corp Ser 1987 (AMT) .............................. 9.50 10/ 1/97 5,124,400
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS August 31, 1994 (continued)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
Illinois Development Finance Authority, America Tire Corp
$ 840 Ser 1987 (AMT) ............................................... 10.00 % 10/ 1/97 $814,800
3,000 Ser 1987 (AMT) ............................................... 10.50 10/ 1/07 2,880,000
2,890 Lapeer Economic Development Corporation, Michigan,
Dott Manufacturing Co Ser 1989 A (AMT) ....................... 10.65 11/15/17 3,236,453
5,465 Missouri Environmental Improvement & Energy Resource
Authority, Associated Electric Coop Inc/NRU-CFC Gtd
Ser 84G-5 & 84G-6 ............................................ 7.90 11/15/14 5,828,149
10,000 New York State Energy Research & Development Authority,
Consolidated Edison Co of New York Inc Refg Ser 1993 B ...... 5.25 8/15/20 8,541,700
6,000 Ohio Air Quality Development Authority, Dayton Power & Light
Co Ser 1985 .................................................. 9.50 12/ 1/15 6,490,140
5,000 Tulsa Municipal Airport Trust, Oklahoma, American Airlines Inc
Ser 1988 (AMT) . ............................................. 7.375 12/ 1/20 4,961,800
1,965 Matagorda County Navigation District #1, Texas, Houston
Lighting & Power Co Collateralized Ser 1989 A (AMT) ......... 7.875 2/ 1/19 2,141,693
- - ----------- -------------
45,160 45,574,435
- - ----------- -------------
MORTGAGE REVENUE--MULTI-FAMILY (4.6%)
57,797 Eden Prairie, Minnesota, Fountain Place Apts-Phase II
Refg Ser 1989 B .............................................. 0.00 7/15/19 1,733,902
5,000 New York City Housing Development Corporation, New York,
Ser 1987 A ................................................... 9.625 1/ 1/19 5,668,800
940 Rhode Island Housing & Mortgage Finance Corporation, Rental
1989 Ser B (AMT) ............................................. 7.95 10/ 1/20 967,477
30,935 Oak Ridge Industrial Development Board, Tennessee, Gardens
Southern Hill Woodlands Apts GNMA-Backed Refg Ser 1988 ...... 0.00 10/20/19 3,654,971
3,000 Virginia Housing Development Authority, Ser 1987 B ........... 9.45 11/ 1/12 3,204,210
- - ----------- -------------
97,672 15,229,360
- - ----------- -------------
MORTGAGE REVENUE--SINGLE FAMILY (5.3%)
5,000 Alaska Housing Finance Corporation, 1993 1st Ser .............. 5.90 12/ 1/33 4,494,550
2,795 San Francisco Redevelopment Agency, California, Residential
Ser 1984 Issue A ............................................. 0.00 4/ 1/17 254,261
Maine Housing Authority, Purchase
4,265 1988 Ser D-2 (AMT) ........................................... 8.10 11/15/19 4,456,413
1,000 1988 Ser D-2 (AMT) ........................................... 8.10 11/15/22 1,043,260
4,190 North Dakota Housing Finance Agency, 1990 Ser B (AMT) ........ 7.75 7/ 1/24 4,358,438
1,975 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser C (AMT) .... 7.85 9/ 1/21 2,064,231
1,000 Pennsylvania Housing Finance Agency, 1987 Ser R (AMT) ........ 8.125 10/ 1/19 1,059,640
- - ----------- -------------
20,225 17,730,793
- - ----------- -------------
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS August 31, 1994 (continued)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
NURSING & HEALTH RELATED FACILITIES REVENUE (3.1%)
Vista, California, Long-Term Care Foundation of America
$ 1,612 Ser 1994 A COPs (a) .......................................... 8.50 % 1/ 1/20 $1,289,214
225 Ser 1994 B COPs (a) .......................................... 0.00 1/ 1/20 2,251
2,790 Newton County Industrial Development Authority, Missouri,
Skilled Health Care -Joplin Refg Ser 1987 .................... 10.50 10/ 1/11 2,993,670
7,000 New York State Medical Care Facilities Finance Agency,
Mental Health Ser F .......................................... 5.25 2/15/19 5,920,180
- - ----------- -------------
11,627 10,205,315
- - ----------- -------------
PUBLIC FACILITIES REVENUE (1.0%)
3,245 Illinois, Civic Center Dedicated Tax Ser 1991
(AMBAC Insured) .............................................. 6.25 12/15/20 3,269,695
- - ----------- -------------
RESOURCE RECOVERY REVENUE (4.4%)
9,110 Greater Detroit Resource Recovery Authority, Michigan,
1984 Ser B & G ............................................... 9.25 12/13/08 9,684,750
4,500 Charleston County, South Carolina, Foster-Wheeler
Charleston Inc Ser 1987 A (AMT) .............................. 9.25 1/ 1/10 5,051,970
- - ----------- -------------
13,610 14,736,720
- - ----------- -------------
RETIREMENT & LIFE CARE FACILITIES REVENUE (1.1%)
3,000 Atlanta Urban Residential Financial Authority, Georgia,
Renaissance on Peachtree Apts Ser 1988 (b) ................... 10.50 12/ 1/10 2,100,000
2,065 Charleston County, South Carolina, Sandpiper Village Inc
Refg Ser 1988 ................................................ 7.00 11/ 1/13 1,528,100
- - ----------- -------------
5,065 3,628,100
- - ----------- -------------
TRANSPORTATION REVENUE (5.1%)
885 Southwestern Development Authority, Illinois, Tri-City
Regional Port District Ser 1989 A (AMT) (a) .................. 7.90 7/ 1/14 980,810
5,000 Albuquerque, New Mexico, Gross Receipts Airport
Ser 1987 B (AMT) ............................................. 8.75 7/ 1/19 5,549,250
4,500 Charlotte, North Carolina, Airport Ser 1987 (AMT) ............ 8.50 7/ 1/17 4,941,900
2,000 Puerto Rico Highway & Transportation Authority, Refg Ser X ... 5.25 7/ 1/21 1,720,360
3,380 Dallas-Fort Worth Regional Airport Board, Texas,
Dallas-Fort Worth Intl Airport Ser 1985 ...................... 9.125 11/ 1/15 3,666,895
- - ----------- -------------
15,765 16,859,215
- - ----------- -------------
WATER & SEWER REVENUE (7.3%)
5,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994 ...... 5.50 1/ 1/20 4,502,300
5,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water
Ser 1994 ..................................................... 5.45 7/ 1/19 4,492,500
2,000 Chicago, Illinois, Wastewater Ser 1994 (MBIA Insured) ........ 6.375 1/ 1/24 2,007,380
3,000 Massachusetts Water Resources Authority, 1993 Ser C .......... 5.25 12/ 1/20 2,550,330
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS August 31, 1994 (continued)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
New York City Municipal Water Finance Authority, New York,
$ 1,000 1991 Ser A (Secondary FGIC Insured) .......................... 6.75% 6/15/16 $1,037,180
8,500 1987 Ser A (Prerefunded) ..................................... 9.00 6/15/17 9,645,885
- - ----------- -------------
24,500 24,235,575
- - ----------- -------------
403,039 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $311,488,743) .............................. 322,811,300
- - ----------- -------------
SHORT-TERM MUNICIPAL OBLIGATION (0.9%)
3,000 District of Columbia, General Fund Recovery Ser B-2
(Tender 9/1/94)
(IDENTIFIED COST $3,000,000) ................................. 3.35* 6/ 1/03 3,000,000
- - ----------- -------------
$406,039 TOTAL INVESTMENTS (IDENTIFIED COST $314,488,743) (C) ................... 98.2% 325,811,300
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ......................... 1.8 5,933,941
----- -------------
NET ASSETS ............................................................. 100.0% $331,745,241
===== =============
</TABLE>
- - ---------------
AMT Alternative Minimum Tax
COPs Certificates of Participation
* Variable or floating rate security. Coupon rate shown reflects current
rate.
(a) Resale is restricted to qualified institutional investors.
(b) Non-income producing, bond in default.
(c) The aggregate cost for federal income tax purposes is $314,488,743;
the aggregate gross unrealized appreciation is $25,296,959 and the
aggregate gross unrealized depreciation is $13,974,402, resulting in
net unrealized appreciation of $11,322,557.
See Notes to Financial Statements
<TABLE>
<CAPTION>
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
August 31, 1994
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alabama .............. 1.4% Indiana ....... 6.0% New Mexico ..... 1.7% Rhode Island .. 0.3%
Alaska ............... 1.3 Kentucky ...... 1.4 New York ....... 15.8 South Carolina . 2.0
Arizona .............. 2.6 Maine ......... 1.7 North Carolina . 4.0 Tennessee ...... 1.1
California ........... 6.5 Maryland ...... 1.7 North Dakota .. 2.9 Texas .......... 7.1
District of Columbia 2.1 Massachusetts . 3.4 Ohio ........... 2.6 Utah ........... 1.3
Florida .............. 1.1 Michigan ...... 3.9 Oklahoma ....... 1.5 Virginia ....... 1.0
Georgia .............. 0.6 Minnesota ..... 4.6 Pennsylvania .. 5.2 Washington ..... 4.2
Illinois ............. 5.5 Missouri ...... 2.6 Puerto Rico ... 0.5 West Virginia . 0.6
------
Total .......... 98.2%
======
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
- - -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1994
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $314,488,743) (Note 1) . $325,811,300
Cash ...................................... 42,249
Receivable for:
Interest ................................. 6,100,221
Investments sold ......................... 70,538
Prepaid expenses and other assets ........ 17,895
--------------
TOTAL ASSETS ............................ 332,042,203
--------------
LIABILITIES:
Payable for:
Investment advisory fee (Note 2) ........ 97,612
Administration fee (Note 3) .............. 56,301
Shares of beneficial interest repurchased 37,120
Accrued expenses (Note 4) ................. 105,929
--------------
TOTAL LIABILITIES ....................... 296,962
--------------
NET ASSETS:
Paid-in-capital ........................... 307,106,243
Accumulated undistributed net realized
gain on investments ...................... 11,045,147
Net unrealized appreciation on investments 11,322,557
Accumulated undistributed net investment
income ................................... 2,271,294
--------------
NET ASSETS .............................. $331,745,241
==============
NET ASSET VALUE PER SHARE, 32,640,950
shares outstanding (unlimited shares
authorized of $.01 par value) ............ $10.16
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended August 31, 1994
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME ......................... $ 24,940,237
--------------
EXPENSES
Investment advisory fee (Note 2) ...... 1,116,216
Administration fee (Note 3) ............ 644,661
Transfer agent fees and expenses
(Note 4) .............................. 187,310
Professional fees ...................... 71,967
Shareholder reports and notices ....... 62,895
Registration fees ...................... 32,695
Trustees' fees and expenses (Note 4) .. 30,947
Other .................................. 21,970
--------------
TOTAL EXPENSES ........................ 2,168,661
--------------
NET INVESTMENT INCOME ................ 22,771,576
--------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (Note 1):
Net realized gain on investments ....... 13,818,414
Net change in unrealized appreciation on
investments ............................ (34,589,071)
--------------
NET LOSS ON INVESTMENTS ............... (20,770,657)
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........... $ 2,000,919
==============
</TABLE>
<PAGE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED AUGUST 31, ENDED AUGUST 31,
1994 1993
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ................................................... $ 22,771,576 $ 23,825,661
Net realized gain on investments ........................................ 13,818,414 554,522
Net change in unrealized appreciation on investments .................... (34,589,071) 4,188,802
--------------- ---------------
Net increase in net assets resulting from operations ................... 2,000,919 28,568,985
--------------- ---------------
Dividends and distributions to shareholders from:
Net investment income ................................................... (21,458,878) (23,869,997)
Net realized gain on investments ........................................ (3,123,625) -0-
--------------- ---------------
Total dividends and distributions ...................................... (24,582,503) (23,869,997)
--------------- ---------------
Net decrease from transactions in shares of beneficial interest (Note 5) (4,839,155) -0-
--------------- ---------------
Total increase (decrease) ............................................... (27,420,739) 4,698,988
NET ASSETS:
Beginning of period ...................................................... 359,165,980 354,466,992
--------------- ---------------
END OF PERIOD (including undistributed net investment income of
$2,271,294 and $958,596, respectively) ................................. $331,745,241 $359,165,980
=============== ===============
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
- - -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES--Municipal Income Trust (the "Fund")
is registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end management invest-ment company. The Fund was
organized as a Massachusetts business trust on June 16, 1987 and commenced
operations on September 29, 1987.
The following is a summary of significant accounting policies:
A. Valuation of Investments--Portfolio securities are valued for the
Fund by an outside independent pricing service approved by the Trustees.
The pricing service has informed the Fund that in valuing the Fund's
portfolio securities, it uses both a computerized grid matrix of
tax-exempt securities and evaluations by its staff, in each case based
on information concerning market transactions and quotations from
dealers which reflect the bid side of the market each day. The Fund's
portfolio securities are thus valued by reference to a combination of
transactions and quotations for the same or other securities believed to
be comparable in quality, coupon, maturity, type of issue, call
provisions, trading characteristics and other features deemed to be
relevant.
B. Accounting for Investments--Security transactions are accounted for
on the trade date (date the order to buy or sell is executed). Realized
gains and losses on security transactions are determined on the
identified cost method. Premiums and discounts on securities purchased
are amortized over the life of the respective securities. Interest
income is accrued daily except where collection is not expected.
C. Federal Income Tax Status--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable and
non-taxable income to its shareholders. Accordingly, no federal income
tax provision is required.
D. Dividends and Distributions to Shareholders--The Fund records
dividends and distributions to its shareholders on the ex-dividend date.
The amount of dividends and distributions from net investment income and
net realized capital gains are determined in accordance with federal
income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes
are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent
they exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT ADVISORY AGREEMENT--Pursuant to an Investment Advisory
Agreement with Dean Witter InterCapital Inc. (the "Investment Adviser"), the
Fund pays its Investment Adviser an advisory fee, calculated weekly and
payable monthly, by applying the following annual rates to the Fund's average
weekly net assets: 0.35% to the portion of the Fund's average weekly net
assets not exceeding $250 million and 0.25% of the portion of the Fund's
average weekly net assets exceeding $250 million.
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- - -----------------------------------------------------------------------------
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Adviser pays the salaries of all personnel,
including officers of the Fund, who are employees of the Investment Adviser.
3. ADMINISTRATION AGREEMENT--Through December 31, 1993, pursuant to an
Administration Agreement with Dean Witter InterCapital Inc. (the "Former
Administrator"), the Fund paid an administration fee, calculated weekly and
payable monthly, by applying the following annual rates to the Fund's average
weekly net assets: 0.20% of the portion of the Fund's average weekly net
assets not exceeding $250 million; 0.15% of the portion of the Fund's average
weekly net assets exceeding $250 million but not exceeding $500 million;
0.12% of the portion of the Fund's average weekly net assets exceeding $500
million but not exceeding $750 million; and 0.10% of the portion of the
Fund's average weekly net assets exceeding $750 million. On January 1, 1994,
the Administration Agreement between the Former Administrator and the Fund
was terminated and a new Administration Agreement has been entered into
between Dean Witter Services Company Inc. (the "Administrator"), a
wholly-owned subsidiary of the Former Administrator, and the Fund. The nature
and scope of the services being provided to the Fund or any fees being paid
by the Fund under the new Agreement are identical to those of the previous
Agreement.
Under the terms of the Administration Agreement, the Administrator
maintains certain of the Fund's books and records and furnishes, at its own
expense, office space, facilities, equipment, clerical, bookkeeping and
certain legal services and pays the salaries of all personnel, including
officers of the Fund who are employees of the Administrator. The
Administrator also bears the cost of telephone services, heat, light, power
and other utilities provided to the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES--The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended August 31, 1994 aggregated
$88,018,196 and $97,115,838, respectively.
Dean Witter Trust Company, an affiliate of the Investment Adviser, is the
Fund's transfer agent. At August 31, 1994, the Fund had transfer agent fees
and expenses payable of approximately $20,000.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will
have served as an independent Trustee for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs
for the year ended August 31, 1994, included in Trustees' fees and expenses
in the Statement of Operations amounted to $9,519. At August 31, 1994, the
Fund had an accrued pension liability of $44,455 which is included in accrued
expenses in the Statement of Assets and Liabilities.
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- - -----------------------------------------------------------------------------
5. SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
CAPITAL PAID
PAR VALUE IN EXCESS OF
SHARES OF SHARES PAR VALUE
------------ ----------- --------------
<S> <C> <C> <C>
Balance, August 31, 1992 and August 31, 1993 33,153,050 $331,531 $311,613,867
Treasury shares purchased and retired
(weighted average discount 7.22%)* ......... (512,100) (5,121) (4,834,034)
------------ ----------- --------------
Balance, August 31, 1994 .................... 32,640,950 $326,410 $306,779,833
============ =========== ==============
</TABLE>
- - ---------------
* The Trustees have voted to retire the shares repurchased.
6. DIVIDENDS--The Fund has declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT PER RECORD PAYABLE
DATE SHARE DATE DATE
- - ------------------ ----------- ----------------- ------------------
<S> <C> <C> <C>
August 30, 1994 $0.05 September 9, 1994 September 23, 1994
September 27, 1994 $0.05 October 7, 1994 October 21, 1994
</TABLE>
7. SELECTED QUARTERLY FINANCIAL DATA--(unaudited)
<TABLE>
<CAPTION>
QUARTERS ENDED*
----------------------------------------------------------------------------------
8/31/94 5/31/94 2/28/94 11/30/93
------------------- -------------------- ------------------- ------------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
--------- -------- ---------- -------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ... $6,169 $0.19 $6,098 $0.18 $6,176 $0.19 $6,497 $0.20
Net investment income ..... 5,657 0.17 5,554 0.17 5,626 0.17 5,935 0.18
Net realized and unrealized
loss on investments ....... (1,001) (0.03) (12,445) (0.37) (5,024) (0.15) (2,301) (0.07)
<CAPTION>
QUARTERS ENDED*
-----------------------------------------------------------------------------
8/31/93 5/31/93 2/28/93 11/30/92
----------------- ------------------- ----------------- ------------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
-------- ------- --------- -------- -------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ... $6,832 $0.21 $6,391 $0.19 $6,476 $0.19 $6,517 $0.20
Net investment income ..... 6,267 0.19 5,844 0.18 5,840 0.17 5,875 0.18
Net realized and unrealized
gain (loss) on investments 4,204 0.12 (6,319) (0.19) 8,393 0.26 (1,535) (0.05)
</TABLE>
- - ---------------
* Totals expressed in thousands of dollars.
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS
- - -----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31,
--------------------------------------------------------------
1994* 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 10.83 $ 10.69 $ 10.37 $ 10.01 $10.36
----------- ----------- ----------- ----------- ----------
Net investment income ................... 0.69 0.72 0.73 0.74 0.76
Net realized and unrealized gain (loss)
on investments ......................... (0.62) 0.14 0.31 0.30 (0.20)
----------- ----------- ----------- ----------- ----------
Total from investment operations ....... 0.07 0.86 1.04 1.04 0.56
----------- ----------- ----------- ----------- ----------
Less dividends and distributions from:
Net investment income .................. (0.65) (0.72) (0.72) (0.68) (0.85)
Net realized gain on investments ...... (0.09) -0- -0- ** -0- ** (0.06)
----------- ----------- ----------- ----------- ----------
Total dividends and distributions ...... (0.74) (0.72) (0.72) (0.68) (0.91)
----------- ----------- ----------- ----------- ----------
Net asset value, end of period .......... $ 10.16 $ 10.83 $ 10.69 $ 10.37 $10.01
=========== =========== =========== =========== ==========
Market value, end of period ............. $ 9.25 $ 11.25 $ 10.75 $ 10.25 $10.125
=========== =========== =========== =========== ==========
TOTAL INVESTMENT RETURN+ ................ (11.73%) 11.82% 12.28% 8.23% 5.27 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ......................... $331,745 $359,166 $354,467 $343,724 $329,674
Ratio of expenses to average net assets 0.63% 0.67% 0.73% 0.75% 0.79 %
Ratio of net investment income to
average net assets ..................... 6.59% 6.70% 6.87% 7.31% 7.38 %
Portfolio turnover rate ................. 27% 1% 11% 5% 10 %
</TABLE>
- - ---------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
** Distribution of $.0041 and $.0012 for the years ended August 31, 1992
and August 31, 1991, respectively.
+ Total investment return is based upon the current market value on the
last day of each period reported. Dividends and distributions are assumed
to be reinvested at the prices obtained under the Fund's dividend
reinvestment plan. Total investment return does not reflect sales charges
or brokerage commissions.
See Notes to Financial Statements
1994 FEDERAL TAX NOTICE (unaudited)
During the year ended August 31, 1994, the Fund paid to shareholders $0.65
per share from net investment income. All of the Fund's dividends from net
investment income were exempt interest dividends, excludable from gross
income for Federal income tax purposes. For the year ended August 31, 1994,
the Fund paid to shareholders $0.094 per share from long-term capital gains.
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- - -----------------------------------------------------------------------------
To the Shareholders and Trustees of Municipal Income Trust
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Municipal Income
Trust (the "Fund") at August 31, 1994, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities owned at August 31, 1994 by
correspondence with the custodian provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
October 11, 1994
<PAGE>
<PAGE>
TRUSTEES
- - --------------------------------------
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
- - --------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- - --------------------------------------
Dean Witter Trust Company
Harborside Financial Center--Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
- - --------------------------------------
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
- - --------------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT ADVISER
- - --------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
MUNICIPAL
INCOME
TRUST
ANNUAL REPORT
AUGUST 31, 1994
