<PAGE>
Municipal Income Trust
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- ------------------------------------------------------------------------------
Long-term revenue bond yields, as measured by The Bond Buyer, reached a
record low of 5.41 percent in mid October. However, strong economic growth and
fears of renewed inflationary pressures subsequently caused yields to rise.
This reversed the trend toward lower yields that had been in place for more
than three years. Municipal bond yields lagged the rise in U.S. Treasury bond
yields through January. During February, municipal bond prices deteriorated
substantially after the Federal Reserve Board increased the fed funds rate
which banks charge each other for overnight borrowing. By the end of the
period under review, The Bond Buyer Revenue Bond Index had climbed to 5.88
percent, its highest level in almost a year.
New-issue underwriting totaled a record $290 billion in 1993, a 23
percent increase over the previous high of $235 billion set in 1992. Refunding
issues, which are used by state and local governments to refinance higher-
coupon debt, represented 66 percent of total volume last year. New issues
backed by insurance had a 37 percent market share. This year's new-issue
volume is expected to decline by approximately 30 percent to the $200 billion
range. An estimated $260 billion in bonds will either mature or be called in
1994, resulting in a decrease in outstanding municipal debt. For the first two
months of 1994, new-issue volume declined by 20 percent and totaled $30
billion. Refunding activity, the catalyst of last year's record underwriting
dropped even more sharply.
Performance
Municipal Income Trust's (NYSE symbol: TFA) total return for the six
months ended February 28, 1994 was--8.70 percent. This return was based on the
change in New York Stock Exchange (NYSE) market price from $11.25 to $9.875
per share and reinvestment of dividends and distributions. The net asset value
of TFA declined 2.86 percent from $10.83 to $10.52 per share.
For the six-month period, the Fund paid shareholders income dividends
totaling $0.35 per share and a capital gains distribution of $0.09 per share.
Beginning with the February 25, 1994 distribution, the Fund's monthly dividend
level was reduced from $0.06 per share to $0.05 per share. This decrease was
prompted by the prospect of continued redemptions and sales of older, high-
coupon bonds with reduced call protection.
Portfolio Structure
The Fund was fully invested throughout most of the six-month period in
long-term tax-exempt bonds. Short-term municipals were temporarily held for
cash flow purposes. Prerefunded bond holdings represented 23 percent of net
assets. The average credit rating was "A1" by Moody's Investors Service, Inc.
or "A+" by Standard & Poor's Corp. The Fund's average maturity and call
protection were 20 years and 6 years, respectively.
Hospital revenue, industrial development/pollution control revenue and
general obligation bonds, the three largest portfolio sectors, comprised 45
percent of net assets. Bonds subject to the alternative minimum tax (AMT)
accounted for 21 percent of net assets.
<PAGE>
We would like to remind you that the Trustees have approved a procedure
whereby the Fund, when appropriate, may attempt to reduce or eliminate a
market value discount from net asset value by repurchasing shares in the open
market or in privately negotiated transactions at a price not above market
value, if any, or net asset value, whichever is lower at the time of purchase.
We appreciate your support of Municipal Income Trust and look forward to
continuing to serve your investment needs and objectives.
Sincerely yours,
/S/ C. FIUMEFREDDO
Charles A. Fiumefreddo
Chairman of the Board
<PAGE>
<TABLE>
Municipal Income Trust
Portfolio of Investments February 28, 1994 (unaudited)
- -------------------------------------------------------------------------------
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
---------- ------- -------- -------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (97.6%)
GENERAL OBLIGATION (12.4%)
$ 5,000 Chicago, Illinois, Refg 1987 Ser B
(Prerefunded) ...................... 9.25% 1/ 1/13 $ 5,885,050
6,270 Washington Suburban Sanitary District,
Maryland, Constr Refg 1994 ......... 5.00 6/ 1/10 5,961,202
10,000 Massachusetts, 1994 Ser A ............. 5.00 1/ 1/11 9,381,600
New York City, New York,
2,500 1988 Ser A ......................... 8.25 11/ 1/02 2,846,775
855 1988 Ser D ......................... 8.50 8/ 1/08 987,123
4,145 1988 Ser D (Prerefunded)............ 8.50 8/ 1/08 4,789,838
7,650 1988 Ser A (Prerefunded)............ 8.50 11/ 1/10 8,917,376
4,000 Washington, 1991 Ser B (Prerefunded)... 6.70 6/ 1/16 4,474,360
------- ----------
40,420 43,243,324
------- ----------
EDUCATIONAL FACILITIES REVENUE (9.8%)
5,000 California Public Works Board,
University of California 1993
Ser A .............................. 5.50 6/ 1/21 4,710,600
3,500 Georgetown University, District of
Columbia, Ser 1989 A ............... 8.25 4/ 1/18 3,992,730
4,000 FSU Financial Assistance Inc,
Florida, Impr & Refg Ser 1994 ...... 5.25 10/ 1/15 3,702,960
6,750 Hamilton, Indiana, Southeastern
Building Corp Cons Ser 1988
(Prerefunded) ...................... 8.40 1/ 1/15 7,941,173
New York State Dormitory Authority,
2,700 St Rose College Ser 1987
(Prerefunded)....................... 8.00 7/ 1/07 3,082,779
2,000 State University Ser 1993 A ........ 5.25 5/15/15 1,864,240
8,000 Berks County Municipal Authority,
Pennsylvania, University of
Pennsylvania Ser 1985 .............. 7.00 9/ 1/15 8,671,920
------- ----------
31,950 33,966,402
- -------- ----------
ELECTRIC REVENUE (8.1%)
North Carolina Eastern Municipal
Power Agency,
5,000 Refg Ser 1986 A (Prerefunded) ...... 7.75 1/ 1/15 5,489,550
1,500 Refg Ser 1988 A .................... 7.00 1/ 1/24 1,621,500
1,500 North Carolina Municipal Power
Agency #1, Catawba Refg
Ser 1988 A ......................... 7.50 1/ 1/17 1,660,380
10,000 San Antonio, Texas, Electric &
Gas Refg Ser 1994 INFLOS ........... 6.37 + 2/ 1/06 8,937,500
Intermountain Power Agency, Utah,
1,000 First Crossover Ser ................ 7.875 7/ 1/14 1,100,980
3,000 Refg Ser 1987 D .................... 8.625 7/ 1/21 3,426,300
2,750 Chelan County Public Utility
District #1, Washington,
Ser 1987 B (AMT) ................... 9.30 7/ 1/62 3,126,778
2,500 Washington Public Power Supply
System, Nuclear Proj #2
Refg Ser 1990 C (Prerefunded)....... 7.625 7/ 1/10 2,948,475
------- ----------
27,250 28,311,463
------- ----------
HOSPITAL REVENUE (18.6%)
3,800 Maricopa County Industrial
Development Authority, Arizona,
Samaritan Health Ser 1985 A
(Crossover Refunded)................ 9.25 12/ 1/15 4,192,882
St Petersburg, Florida, Allegheny
Health/St Anthony
245 Ser 1988 C ......................... 7.75 1/ 1/14 272,219
5 Ser 1988 C (Prerefunded)............ 7.75 1/ 1/14 5,649
</TABLE>
<PAGE>
<TABLE>
Municipal Income Trust
Portfolio of Investments February 28, 1994 (unaudited) (continued)
- --------------------------------------------------------------------------------
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
---------- ------- -------- -------
<C> <S> <C> <C> <C>
Illinois Health Facilities Authority,
$ 1,410 Glen Oaks Medical Center Inc
Refg 1990 Ser D ................. 9.50% 11/15/15 $ 1,711,303
1,000 Mercy Center for Health Care
Services Ser 1992 ............... 6.65 10/ 1/22 1,056,750
10,600 Indiana Health Facilities Financing
Authority, St Anthony Medical
Center & Home Inc Ser 1987
(Prerefunded) ..................... 9.25 10/ 1/17 12,452,668
2,500 Kentucky Development Finance
Authority, Ashland Hospital/King's
Daughters Refg & Impr Ser 1987 .... 9.75 8/ 1/11 3,010,425
1,500 Winchester, Kentucky, Clark County
Hospital Refg Ser 1987 ............ 7.75 4/ 1/13 1,653,345
7,700 Breckenridge, Minnesota,
Franciscan Sisters Health Care Inc
Ser 1987 B--1 (Prerefunded) ....... 9.375 9/ 1/17 9,150,988
4,000 Minneapolis, Minnesota, Lifespan
Inc Refg Ser 1987 B (Prerefunded).. 9.125 12/ 1/14 4,763,280
7,500 North Carolina Medical Care
Commission, Presbyterian Health
Services Corp Refg Ser 1993 ....... 5.50 10/ 1/20 7,275,375
4,735 Cass County, North Dakota,
Franciscan Sisters Health Care
Ser 1987 C ........................ 9.375 9/ 1/17 5,525,366
6,000 Lehigh County General Purpose
Authority, Pennsylvania,
HealthEast Inc Ser 1987 A&B ....... 9.00 7/ 1/15 6,901,750
1,000 Montgomery County Higher Education
& Health Authority, Pennsylvania,
Frankford Hospital Ser 1986 ....... 7.875 1/ 1/19 1,077,610
3,275 Washington Health Care Facility
Authority, Sisters of
Providence Ser 1988 ............... 8.625 10/ 1/07 3,722,430
1,850 Fayette County, West Virginia,
MPC Inc Refg Ser 1990 ............. 9.75 2/ 1/11 2,052,076
------- ----------
57,120 64,824,116
------- ----------
INDUSTRIAL DEVELOPMENT/POLLUTION
CONTROL REVENUE (13.6%)
5,000 California Pollution Control Finance
Authority, Pacific Gas &
Electric Co 1987 Ser B (AMT) ....... 8.875 1/ 1/10 5,785,400
5,000 Oxnard Industrial Development
Finance Authority, California,
Green Foods Corp Ser 1987 (AMT)..... 9.50 10/ 1/97 5,291,000
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 3,229,170
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 6,032,267
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 9,285,600
6,000 Ohio Air Quality Development
Authority, Dayton Power &
Light Co Ser 1985 ................. 9.50 12/ 1/15 6,685,380
5,000 Tulsa Municipal Airport Trust,
Oklahoma, American Airlines
Inc Ser 1988 (AMT) ................ 7.375 12/ 1/20 5,301,650
1,965 Matagorda County Navigation
District #1, Texas, Houston
Lighting & Power Co
Collateralized Ser 1989 A (AMT) ... 7.875 2/ 1/19 2,191,112
------- ----------
45,160 47,496,379
------- ----------
</TABLE>
<PAGE>
<TABLE>
Municipal Income Trust
Portfolio of Investments February 28, 1994 (unaudited) (continued)
- --------------------------------------------------------------------------------
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
---------- ------- -------- -------
<C> <S> <C> <C> <C>
MORTGAGE REVENUE--MULTI-FAMILY (4.5%)
$57,797 Eden Prairie, Minnesota, Fountain
Place Apts--Phase II
Refg Ser 1989 B ................... 0.00% 7/15/19 $ 2,167,378
5,000 New York City Housing Development
Corporation, New York,
Ser 1987 A ........................ 9.625 1/ 1/19 5,771,350
940 Rhode Island Housing & Mortgage
Finance Corporation, Rental
1989 Ser B (AMT)................... 7.95 10/ 1/20 979,489
30,935 Oak Ridge Industrial Development
Board, Tennessee, Gardens
Southern Hill Woodlands Apts
GNMA--Backed Refg Ser 1988 ........ 0.00 10/20/19 3,437,497
3,000 Virginia Housing Development
Authority Ser 1987 B .............. 9.45 11/ 1/12 3,240,420
- ---------- ----------
97,672 15,596,134
- ---------- ----------
MORTGAGE REVENUE--SINGLE FAMILY (5.4%)
5,000 Alaska Housing Finance Corporation,
1993 1st Ser ...................... 5.90 12/ 1/33 4,901,750
6,970 San Francisco Redevelopment Agency,
California, Residential Ser 1984
Issue A ........................... 0.00 4/ 1/17 588,129
Maine Housing Authority, Purchase
4,265 1988 Ser D-2 (AMT) ................ 8.10 11/15/19 4,484,903
1,000 1988 Ser D-2 (AMT) ................ 8.10 11/15/22 1,067,570
4,410 North Dakota Housing Finance Agency,
1990 Ser B (AMT) .................. 7.75 7/ 1/24 4,746,968
1,975 Ohio Housing Finance Agency, GNMA-
Backed 1990 Ser C (AMT) ........... 7.85 9/ 1/21 2,054,356
1,000 Pennsylvania Housing Finance Agency,
1987 Ser R (AMT) .................. 8.125 10/ 1/19 1,078,260
- ---------- ----------
24,620 18,921,936
- ---------- ----------
NURSING & HEALTH RELATED FACILITIES REVENUE (3.1%)
2,000 Vista, California, Long-Term Care
Foundation of America
Ser 1989 COPs (a) (b) .............. 9.875 1/ 1/20 1,200,000
2,820 Newton County Industrial Development
Authority, Missouri, Skilled
Health Care--Joplin Refg Ser 1987... 10.50 10/ 1/11 3,036,802
7,000 New York State Medical Care
Facilities Finance Agency,
Mental Health Ser F ................. 5.25 2/15/19 6,392,190
- ---------- ----------
11,820 10,628,992
- ---------- ----------
PUBLIC FACILITIES REVENUE (1.0%)
3,245 Illinois, Civic Center Dedicated
Tax Ser 1991 (AMBAC Insured) ........ 6.25 12/15/20 3,511,804
- -------- ----------
RESOURCE RECOVERY REVENUE (4.3%)
9,110 Greater Detroit Resource Recovery
Authority, Michigan, 1984
Ser B & G ........................... 9.25 12/13/08 9,868,134
4,500 Charleston County, South Carolina,
Foster-Wheeler Charleston Inc Ser
1987 A (AMT) ........................ 9.25 1/ 1/10 5,228,955
- ---------- ----------
13,610 15,097,089
- ---------- ----------
RETIREMENT & LIFE CARE FACILITIES REVENUE (1.0%)
3,000 Atlanta Urban Residential Financial
Authority, Georgia, Renaissance on
Peachtree Apts Ser 1988 (a) ........ 10.50 12/ 1/10 1,920,000
2,065 Charleston County, South Carolina,
Sandpiper Village Inc Refg
Ser 1988 ........................... 7.00 11/ 1/13 1,528,100
- ---------- ----------
5,065 3,448,100
- ---------- ----------
</TABLE>
<PAGE>
<TABLE>
Municipal Income Trust
Portfolio of Investments February 28, 1994 (unaudited) (continued)
- --------------------------------------------------------------------------------
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
---------- ------- -------- -------
<C> <S> <C> <C> <C>
TRANSPORTATION REVENUE (9.1%)
Denver, Colorado, Airport
$ 408,722 Ser 1991 D (AMT) ................... 7.75% 11/15/21 $11,121,000
2,500 Ser 1991 A (AMT) ................... 8.75 11/15/23 2,950,875
910 Southwestern Development Authority,
Illinois, Tri-City Regional
Port District Ser 1989 A
(AMT) (b) .......................... 7.90 7/ 1/14 1,034,761
5,000 Albuquerque, New Mexico, Airport
Ser 1987 B (AMT) ................... 8.75 7/ 1/19 5,698,400
4,500 Charlotte, North Carolina, Airport
Ser 1987 (AMT) ..................... 8.50 7/ 1/17 5,087,745
2,000 Puerto Rico Highway & Transportation
Authority, Refg Ser X .............. 5.25 7/ 1/21 1,855,060
3,380 Dallas-Fort Worth Regional Airport
Board, Texas, Dallas-Fort Worth
Intl Airport Ser 1985 .............. 9.125 11/ 1/15 3,736,658
- ---------- ----------
28,290 31,484,499
- ---------- ----------
WATER & SEWER REVENUE (6.7%)
5,000 Birmingham Water Works & Sewer Board,
Alabama, Ser 1994 (c) .............. 5.50 1/ 1/20 4,793,450
5,000 Phoenix Civic Improvement Corporation,
Arizona, Jr Lien Water Ser 1994 (c).. 5.45 7/ 1/19 4,813,600
3,000 Massachusetts Water Resources
Authority, 1993 Ser C ............... 5.25 12/ 1/20 2,776,830
New York City Municipal Water
Finance Authority, New York,
1,000 1991 Ser A (Secondary FGIC Insured).. 6.75 6/15/16 1,097,980
8,500 1987 Ser A (Prerefunded)............. 9.00 6/15/17 9,952,990
- -------- ----------
22,500 23,434,850
- -------- ----------
$408,722 TOTAL INVESTMENTS (Identified Cost
======== $313,240,349) (d) .......................... 97.6% 339,965,088
OTHER ASSETS IN EXCESS OF LIABILITIES ........ 2.4 8,511,075
------ -----------
NET ASSETS ................................... 100.0% $348,476,163
====== ============
<FN>
- ------------------
+ Current coupon rate for residual interest bonds. This rate resets
periodically as the auction rate on the related short-term securities
fluctuates.
(a)Non-income producing, bond in default.
(b)Resale is restricted to qualified investors.
(c)Security purchased on a "when issued" basis.
(d)The aggregate cost for federal income tax purposes is $313,240,349; the
aggregate gross unrealized appreciation is $35,013,354 and the aggregate
gross unrealized depreciation is $8,288,615, resulting in net unrealized
appreciation of $26,724,739.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1994 (unaudited)
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $313,240,349)
(Note 1) ........................................ $ 339,965,088
Receivable for:
Investments sold ................................ 8,227,251
Interest ........................................ 6,027,685
Prepaid expenses and other assets .................. 43,236
-----------
Total Assets .................................. 354,263,260
-----------
LIABILITIES:
Payable for:
Investments purchased ............................ 4,963,750
Shares of beneficial interest repurchased
(Note 5) ......................................... 206,787
Payable to bank ..................................... 339,074
Investment advisory fee payable (Note 2) ............ 96,674
Administration fee payable (Note 3) ................. 55,875
Accrued expenses (Note 4)............................ 124,937
-----------
Total Liabilities ............................. 5,787,097
-----------
NET ASSETS:
Paid-in-capital ..................................... 311,738,611
Accumulated undistributed net realized gain
on investments ................................... 9,096,300
Net unrealized appreciation on investments .......... 26,724,739
Accumulated undistributed net investment
income ........................................... 916,513
------------
Net Assets .......................................... $348,476,163
============
Net Asset Value Per Share, 33,132,650
shares outstanding (unlimited shares
authorized of $.01 par value) ................... $10.52
======
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF OPERATIONS For the six months
ended February 28, 1994 (unaudited)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest Income ................................. $12,672,591
-----------
Expenses
Investment advisory fee (Note 2) .............. 567,844
Administration fee (Note 3) ................... 328,275
Transfer agent fees and expenses
(Note 4) ................................... 110,410
Professional fees ............................. 33,503
Shareholder reports and notices ............... 22,263
Registration fees ............................. 15,816
Trustees' fees and expenses (Note 4) .......... 15,803
Custodian fees ................................ 6,335
Other ......................................... 10,857
----------
Total Expenses ............................. 1,111,106
----------
Net Investment Income .................... 11,561,485
----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 1):
Net realized gain on investments .............. 11,862,328
Net change in unrealized appreciation
on investments ............................. (19,186,889)
------------
Net Loss on Investments .................... (7,324,561)
------------
Net Increase in Net Assets
Resulting from Operations ............. $ 4,236,924
============
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<CAPTION>
For the six
months ended For the year
February 28, 1994 ended
(unaudited) August 31, 1993
----------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ...................... $ 11,561,485 $ 23,825,661
Net realized gain on investments ........... 11,862,328 554,522
Net change in unrealized appreciation
on investments ........................... (19,186,889) 4,188,802
------------- ------------
Net increase in net assets resulting
from operations ......................... 4,236,924 28,568,985
---------- ----------
Dividends and distributions to
shareholders from:
Net investment income ...................... (11,603,568) (23,869,997)
Net realized gain on investments ........... (3,116,386) -0-
------------ ------------
Total dividends and distributions ........ (14,719,954) (23,869,997)
------------ ------------
Net decrease from transactions in shares of
beneficial interest (Note 5)............... (206,787) -0-
------------ ----------
Total increase (decrease) ................ (10,689,817) 4,698,988
NET ASSETS
Beginning of period .......................... 359,165,980 354,466,992
----------- -----------
End of period (including undistributed
net investment income of $916,513
and $958,596, respectively) ................ $348,476,163 $359,165,980
============ ============
See Notes to Financial Statements
</TABLE>
<PAGE>
MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
1. Organization and Accounting Policies--Municipal Income Trust (the "Fund")
is registered under the Investment Company Act of 1940, as amended (the "Act"),
as a diversified, closed-end management investment company. It was organized on
June 16, 1987 as a Massachusetts business trust 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
Fund's 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).
In computing net investment income, the Fund amortizes premiums and
original issue discounts on fixed income securities. Additionally,
with respect to market discount on bonds purchased after April 30,
1993, a portion of any capital gain realized upon disposition is
recharacterized as taxable investment income. Realized gains and
losses on security transactions are determined on the identified
cost method. 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 nontaxable 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
that 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
reclassifications. 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 that 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 (the "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% of the portion of the Fund's
average weekly net assets not exceeding $250 million and 0.25% of the portion
of average weekly net assets exceeding $250 million.
Under the terms of the Advisory Agreement, the Investment Adviser manages
the Fund's assets. Also, the Investment Adviser pays the salaries of all
personnel, including officers of the Fund, who are employees of the Investment
Adviser.
<PAGE>
MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
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 average weekly net
assets exceeding $250 million but not exceeding $500 million; 0.12% of the
portion of the average weekly net assets exceeding $500 million but not
exceeding $750 million; and 0.10% of the portion of the average weekly net
assets exceeding $750 million. On January 1, 1994, the Administration
Agreement between the Former Administrator and the Fund had been terminated
and a new Administration Agreement had 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 Funds books and records and furnishes, at its own
expense, such office space, facilities, equipment, clerical help, bookkeeping
and certain legal services as the Fund may reasonably require in the conduct
of its business. In addition, the Administrator pays the salaries of all
personnel, including officers of the Fund who are employees of the
Administrator.
4. Security Transactions and Transactions with Affiliates--The cost of
purchases and the proceeds from sales of portfolio securities for the six
months ended February 28, 1994, excluding short-term investments, aggregated
$70,923,636 and $75,938,102, respectively.
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 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 six months ended February 28, 1994, included in Trustees' fees and
expenses in the Statement of Operations, amounted to $4,720. At February 28,
1994, the Fund had an accrued pension liability of $39,943 which is included
in accrued expenses in the Statement of Assets and Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Adviser and
Administrator, is the Fund's transfer agent. At February 28, 1994, the Fund
had transfer agent fees and expenses payable of $52,390.
5. Shares of Beneficial Interest--Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Capital
Par Value Paid in
of Excess of
Shares 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 4.027%)*... (20,400) (204) (206,583)
--------- -------- ------------
Balance, February 28, 1994 ............. 33,132,650 $331,327 $311,407,284
========== ======== ============
<FN>
- --------
*The Trustees have voted to retire the shares repurchased.
</TABLE>
<PAGE>
MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
6. Dividends--The Fund has declared the following dividends from net
investment income--
<TABLE>
<CAPTION>
Declaration Amount Record Payable
Date Per Share Date Date
----------- ---------- ------- -------
<S> <C> <C> <C>
March 1, 1994 $0.05 March 11, 1994 March 25, 1994
March 29, 1994 $0.05 April 8, 1994 April 22, 1994
</TABLE>
7. Selected Quarterly Financial Data--
<TABLE>
<CAPTION>
Quarters Ended*
------------------------------
2/28/94 11/30/93
--------------- ------------
<S> <C> <C> <C> <C>
Per Per
Total Share Total Share
------ ------ ----- ------
Total investment income .................. $ 6,176 $0.19 $ 6,497 $0.20
Net investment income .................... 5,626 0.17 5,935 0.18
Net realized and unrealized loss
on investments ........................ (5,024) (0.15) (2,301) (0.07)
</TABLE>
<TABLE>
<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)
<FN>
- --------
*Totals expressed in thousands of dollars.
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS (unaudited)
- --------------------------------------------------------------------------------
Selected data and ratios for a share of beneficial interest outstanding
throughout each period:
<CAPTION>
For the six For the year ended August 31,
months ended -------------------------------
February 28,
1994 1993 1992 1991 1990 1989
---------- ---- ----- ----- ----- -----
<S> <C> <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 $10.20
------ ------ ------ ------ ------ ------
Net investment income... 0.35 0.72 0.73 0.74 0.76 0.76
Net realized and
unrealized gain (loss)
on investments.........(0.22) 0.14 0.31 0.30 (0.20) 0.41
------ ------ ------ ------ ------ ------
Total from investment
operations .............. 0.13 0.86 1.04 1.04 0.56 1.17
------ ------ ------ ------ ------ ------
Less dividends and
distributions:
Dividends from net
investment income.....(0.35) (0.72) (0.72) (0.68) (0.85) (0.78)
Distributions from
net realized
gain on investments....(0.09) -0- -0-* -0-* (0.06) (0.23)
------ ------ ------ ------ ------ ------
Total dividends and
distributions........... (0.44) (0.72) (0.72) (0.68) (0.91) (1.01)
------ ------ ------ ------ ------ ------
Net asset value,
end of period ......... $10.52 $10.83 $10.69 $10.37 $10.01 $10.36
====== ====== ====== ====== ====== ======
Market value,
end of period ......... $9.875 $11.25 $10.75 $10.25 $10.125 $10.50
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT
RETURN+................(8.70%)(1) 11.82% 12.28% 8.23% 5.27% 17.24%
RATIOS/SUPPLEMENTAL
DATA:
NET ASSETS,
END OF PERIOD
(IN THOUSANDS).. $348,476 $359,166 $354,467 $343,724 $329,674 $328,429
Ratio of expenses
to average
net assets ......... 0.63%(2) 0.67% 0.73% 0.75% 0.79% 0.76%
Ratio of net
investment income
to average
net assets ......... 6.52%(2) 6.70% 6.87% 7.31% 7.38% 7.29%
Portfolio turnover
rate .............. 21% 1% 11% 5% 10% 18%
<FN>
- -------
* 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 first
and 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.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
</TABLE>
- --------------------------------------------------------------------------------
The financial statements included herein have been taken from the records
of the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
<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
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- -----------------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
MUNICIPAL
INCOME
TRUST
Semiannual Report
February 28, 1994
