<PAGE>
MUNICIPAL INCOME TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -----------------------------------------------------------------------------
Interest rates moved higher throughout most of 1994 as the fixed-income
markets focused on the strong pace of economic growth and the risk of higher
inflation. Convinced that growth would be sustained, the Federal Reserve
Board progressively tightened its monetary policy. This led to one of the
most severe bear markets for bonds in recent history. Subsequently, the bond
market began to rally in November based on signs of slower economic growth
and investor anticipation that the Fed's tighter monetary policy was taking
effect.
MUNICIPAL MARKET CONDITIONS
Municipal bond yields, as tracked by The Bond Buyer Revenue Bond Index,*
moved 187 basis points higher over a ten month period, from a low of 5.50
percent prior to the central bank's first rate increase in February 1994 to a
high of 7.37 percent in November. The municipal market rallied over the next
three months and the Revenue Bond Index yield declined 106 basis points to 6.31
percent at the end of February 1995. These yield changes were equivalent to a
22 point drop in price through November 1994 and a subsequent 9 point recovery
by February 1995.
The period ended February 28, 1995 was marked by shifts in the balance of
supply and demand in the municipal market. Between February and May 1994,
dealer inventories reached near-record levels as long-term bonds were sold to
pay taxes and increase cash. A semblance of stability returned to the market
between June and August. However, after Labor Day the market was subjected to
another round of bond sales caused by tax-loss selling. Conditions improved
in December as the market anticipated the reinvestment of coupons, bond calls
and maturities in January at a time of scarce supply. This seasonal pattern
more than offset the uncertainty caused by the Orange County, California
bankruptcy filing. On December 6, 1994 Orange County, one of the nation's
most affluent areas, was forced to seek court protection when its
pooled-investment fund faced unprecedented losses.
Long-term municipal bonds have out-performed U.S. Treasury bonds since
November. The ratio of Revenue Bond Index yields to 30-year Treasury yields
over the past twelve months began at 87 percent, ranged as high as 92 percent
in November and ended the period at 84 percent. A declining ratio means that
municipal prices have been relatively stronger than U.S. Treasury prices.
The rise in interest rates in 1994 also took its toll on the level of
state and local government debt issuance. For the year, new-issue volume
declined 44 percent to $163 billion. The driving force behind this sharp
decline was the virtual halt in refunding issues, which plummeted 74 percent.
Last year, municipal maturities and bond calls reached $191 billion and
exceeded the supply of new issues coming to market. This marked the first
decline in the outstanding supply of municipal securities. A continuation of
this pattern is expected in 1995 and should strengthen municipal market
conditions. In the first two months of 1995 municipal volume was down
approximately 60 percent compared to the same period last year.
FUND PERFORMANCE
Municipal Income Trust's net asset value (NAV) declined from $10.16 to
$9.80 per share during the six-month period ended February 28, 1995. The
Fund's total NAV return for the period was 3.40 percent. This was based on
the NAV price change of $0.36 and the reinvestment of tax-free dividends and
capital gains distributions which totaled $0.30 and $0.34 per share,
respectively. Concurrently, the Fund's market price on the New York Stock
Exchange declined from $9.25 to $9.125 per share. Based on this
- ------------
* The Bond Buyer Revenue Bond Index is an arithmetic average of the yields
of 25 selected municipal revenue bonds with 30-year maturities. Credit
ratings of these bonds range from Aa1 to Baa1 by Moody's and AA+ to A-by
Standard & Poor's.
<PAGE>
<PAGE>
price change and reinvestment of dividends and capital gains, the Fund's
total market return for the fiscal period was 5.75 percent. The Fund began
the period trading at a 9.0 percent discount to NAV and closed at a 6.9
percent discount to NAV.
On February 28, 1995 undistributed net investment income totaled $0.10 per
share, an increase from $0.07 at the beginning of the fiscal year, and is an
indication that the Fund had earned more than it paid in dividends during the
period.
INVESTMENT STRATEGY
Under volatile interest rate conditions, the Fund benefited from its
established mix of older, high coupon bonds. The portfolio held more than 20
percent of its net assets in refunded issues backed by U.S. government
securities held in escrow or by another refinancing method to redeem the
municipal issues on their first call dates.
The portfolio's long-term investments were diversified among 14 specific
municipal sectors and 69 credits. The Fund held one issuer, insured by MBIA,
which participated in the Orange County investment pool. The three largest
sectors represented in the portfolio were refunded, industrial
development/pollution control and hospital revenue bonds. These sectors
accounted for 42 percent of net assets. The average maturity and call
protection of the Fund's long-term holdings were 18 and 5 years,
respectively. Bonds subject to the alternative minimum tax (AMT) comprised
approximately 17 percent of net assets. The credit-quality ratings of
long-term portfolio are summarized below:
<TABLE>
<CAPTION>
MOODY'S OR STANDARD & POOR'S RATING PERCENT
<S> <C>
Aaa or AAA ......................... 17
Aa or AA ........................... 31
A or A ............................. 36
Baa or BBB ......................... 8
Not rated .......................... 8
</TABLE>
LOOKING AHEAD
While economic growth is expected to continue in 1995, the effect of last
year's rise in interest rates is likely to take its toll. By mid-year, we
anticipate that the economy will slow vis-a-vis the rapid pace experienced in
1994 and that inflation will stabilize. Investor demand for municipal
securities should be sustained by significant bond maturities, calls for
redemption and diminished new-issue supply. The Fund plans to reduce
defensive positions, including refunded bonds to improve call protection. New
investments will continue to stress credit quality and essential service
sectors. Even with the move to higher yields that occurred last year, the
Fund still cannot replace the yield attributable to many older investments
that may be called or sold in the next few years.
The Fund's procedure for reinvestment of all dividends and distributions
on common shares is through purchase in the open market. This method helps to
support the market value of the Fund's shares. In addition, 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. During the six-month period ended
February 28, 1995, the Fund purchased 728,300 shares of common stock at a
weighted average discount of 9.3 percent.
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 February 28, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- --------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (95.5%)
GENERAL OBLIGATION (8.8%)
$ 6,000 Moulton-Niguel Water District, California, Refg 1993 (MBIA
Insured) .......................................................5.00 % 09/01/19 $ 5,118,780
10,000 Massachusetts, 1994 Ser A .......................................5.00 01/01/11 8,938,700
6,270 Washington Suburban Sanitary District, Maryland, Gen Constr Refg
1994 ...........................................................5.00 06/01/10 5,706,829
New York City, New York,
2,500 1988 Ser A .....................................................8.25 11/01/02 2,731,650
4,000 1995 Ser D .....................................................6.20 02/01/07 4,167,600
850 1988 Ser D .....................................................8.50 08/01/08 908,769
- ----------- --------------
29,620 27,572,328
- ----------- --------------
EDUCATIONAL FACILITIES REVENUE (6.4%)
5,000 California Public Works Board, University of California 1993 Ser
A ..............................................................5.50 06/01/21 4,390,650
3,500 Georgetown University, District of Columbia, Ser 1989 A ........8.25 04/01/18 3,840,655
4,000 FSU Financial Assistance Inc, Florida, Impr & Refg Ser 1994 ....5.25 10/01/15 3,586,840
8,000 Berks County Municipal Authority, Pennsylvania, University of
Pennsylvania Ser 1985 ..........................................7.00 09/01/15 8,249,200
- ----------- --------------
20,500 20,067,345
- ----------- --------------
ELECTRIC REVENUE (8.7%)
1,500 North Carolina Municipal Power Agency #1, Catawba Refg Ser 1988
A ..............................................................7.50 01/01/17 1,585,185
20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C ..............4.70 02/01/06 18,089,400
Intermountain Power Agency, Utah,
1,000 First Crossover Ser ............................................7.875 07/01/14 1,049,450
3,000 Refg Ser 1987 D ................................................8.625 07/01/21 3,263,430
2,750 Chelan County Public Utility District #1, Washington, Ser 1987 B
(AMT) ..........................................................9.30 07/01/62 3,110,195
- ----------- --------------
28,250 27,097,660
- ----------- --------------
HOSPITAL REVENUE (8.9%)
Illinois Health Facilities Authority,
1,375 Glen Oaks Medical Center Inc Refg 1990 Ser D ...................9.50 11/15/15 1,585,966
1,000 Mercy Center for Health Care Services Ser 1992 .................6.65 10/01/22 982,550
950 Kentucky Development Finance Authority, Ashland Hospital/ King's
Daughters Refg & Impr Ser 1987 .................................9.75 08/01/11 1,083,000
1,500 Winchester, Kentucky, Clark County Hospital Refg Ser 1987 ......7.75 04/01/13 1,557,750
7,500 North Carolina Medical Care Commission, Presbyterian Health
Services Corp Refg Ser 1993 ....................................5.50 10/01/20 6,897,600
4,735 Cass County, North Dakota, Franciscan Sisters Health Care Ser
1987 C .........................................................9.375 09/01/17 5,279,856
3,500 Lehigh County General Purpose Authority, Pennsylvania,
HealthEast Inc Ser 1987 A & B ..................................9.00 07/01/15 3,837,050
1,000 Montgomery County Higher Education & Health Authority,
Pennsylvania, Frankford Hospital Ser 1986 ......................7.875 01/01/19 1,018,130
3,275 Washington Health Care Facilities Authority, Sisters of
Providence Ser 1988 ............................................8.625 10/01/07 3,573,156
1,850 Fayette County, West Virginia, MPC Inc Refg Ser 1990 ...........9.750 02/01/11 2,047,525
- ----------- --------------
26,685 27,862,583
- ----------- --------------
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS February 28, 1995 (unaudited) (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- --------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (10.5%)
$ 5,000 California Pollution Control Finance Authority, Pacific Gas &
Electric Co 1987 Ser B (AMT) ................................... 8.875% 01/01/10 $ 5,494,200
5,000 Oxnard Industrial Development Finance Authority, California,
Green Foods Corp Ser 1987 (AMT) ................................ 9.50 10/01/97 5,119,450
2,860 Lapeer Economic Development Corporation, Michigan, Dott
Manufacturing Co Ser 1989 A (AMT) ..............................10.65 11/15/17 3,149,032
5,390 Missouri Environment Improvement & Energy Resource Authority,
Associated Electric Coop Inc/NRU-CFC Gtd Ser 84G-5 & 6 ........ 7.90 11/15/14 5,690,546
6,000 Ohio Air Quality Development Authority, Dayton Power & Light Co
Ser 1985 ....................................................... 9.50 12/01/15 6,379,440
5,000 Tulsa Municipal Airport Trust, Oklahoma, American Airlines Inc
Ser 1988 (AMT) ................................................. 7.375 12/01/20 5,006,400
1,965 Matagorda County Navigation District #1, Texas, Houston Lighting
& Power Co Collateralized Ser 1989 A (AMT) ..................... 7.875 02/01/19 2,058,731
- ----------- --------------
31,215 32,897,799
- ----------- --------------
MORTGAGE REVENUE -MULTI-FAMILY (4.7%)
57,797 Eden Prairie, Minnesota, Fountain Place Apts -Phase II Refg Ser
1989 B ......................................................... 0.00 07/15/19 1,155,935
5,000 New York City Housing Development Corporation, New York, Ser
1987 A ......................................................... 9.625 01/01/19 5,410,500
940 Rhode Island Housing & Mortgage Finance Corporation, Rental 1989
Ser B (AMT) .................................................... 7.95 10/01/20 990,450
30,935 Oak Ridge Industrial Development Board, Tennessee, Gardens
Southern Hill Woodlands Apts GNMA-Backed Refg Ser 1988 ........ 0.00 10/20/19 3,818,616
3,000 Virginia Housing Development Authority, Ser 1987 B .............. 9.45 11/01/12 3,280,740
- ----------- --------------
97,672 14,656,241
- ----------- --------------
MORTGAGE REVENUE -SINGLE FAMILY (5.5%)
5,000 Alaska Housing Finance Corporation, 1993 1st Ser ................ 5.90 12/01/33 4,531,050
Maine Housing Authority, Purchase
4,265 1988 Ser D-2 (AMT) ............................................. 8.10 11/15/19 4,523,971
1,000 1988 Ser D-2 (AMT) ............................................. 8.10 11/15/22 1,062,610
3,920 North Dakota Housing Finance Agency, 1990 Ser B (AMT) .......... 7.75 07/01/24 4,137,991
1,915 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser C (AMT) ...... 7.85 09/01/21 2,040,758
1,000 Pennsylvania Housing Finance Agency, 1987 Ser R (AMT) .......... 8.125 10/01/19 1,051,600
- ----------- --------------
17,100 17,347,980
- ----------- --------------
NURSING & HEALTH RELATED FACILITIES REVENUE (3.2%)
Vista, California, Long-Term Care Foundation of America
1,601 Ser 1994 A COPs (a) ............................................ 8.50 01/01/20 1,280,700
210 Ser 1994 B COPs (a) ............................................ 0.00 01/01/20 2,106
2,755 Newton County Industrial Development Authority, Missouri,
Skilled Health Care -Joplin Refg Ser 1987 ......................10.50 10/01/11 2,917,710
7,000 New York State Medical Care Facilities Finance Agency, Mental
Health Refg Ser F .............................................. 5.25 02/15/19 5,936,770
- ----------- --------------
11,566 10,137,286
- ----------- --------------
PUBLIC FACILITIES REVENUE (1.1%)
3,245 Illinois, Civic Center Dedicated Tax Ser 1991(AMBAC Insured) ... 6.25 12/15/20 3,333,134
- ----------- --------------
RESOURCE RECOVERY REVENUE (4.7%)
9,110 Greater Detroit Resource Recovery Authority, Michigan,
1984 Ser B & G ................................................. 9.25 12/13/08 9,596,929
4,500 Charleston County, South Carolina, Foster-Wheeler Charleston Inc
Ser 1987 A (AMT) ............................................... 9.25 01/01/10 5,030,640
- ----------- --------------
13,610 14,627,569
- ----------- --------------
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS February 28, 1995 (unaudited) (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- --------------
<C> <S> <C> <C> <C>
RETIREMENT & LIFECARE FACILITIES REVENUE (1.1%)
$ 3,000 Atlanta Urban Residential Finance Authority, Georgia,
Renaissance on Peachtree Apts Ser 1988 (b) .....................10.50 % 12/01/10 $ 2,100,000
2,065 Charleston County, South Carolina, Sandpiper Village Inc Refg
Ser 1988 ....................................................... 7.00 11/01/13 1,528,100
- ----------- --------------
5,065 3,628,100
- ----------- --------------
TRANSPORTATION FACILITIES REVENUE (4.8%)
885 Southwestern Development Authority, Illinois, Tri-City Regional
Port District Ser 1989 A (AMT) (a) ............................. 7.90 07/01/14 952,853
5,000 Albuquerque, New Mexico, Gross Receipts Airport Ser 1987 B (AMT) 8.75 07/01/19 5,473,200
4,500 Charlotte, North Carolina, Airport Ser 1987 (AMT) ............... 8.50 07/01/17 4,868,370
3,380 Dallas-Fort Worth Regional Airport Board, Texas, Dallas-Fort
Worth Intl Airport Ser 1985 .................................... 9.125 11/01/15 3,557,382
- ----------- --------------
13,765 14,851,805
- ----------- --------------
WATER & SEWER REVENUE (4.8%)
5,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994 ........ 5.50 01/01/20 4,642,350
5,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water
Ser 1994 ....................................................... 5.45 07/01/19 4,596,050
2,000 Chicago, Illinois, Wastewater Ser 1994 (MBIA Insured) .......... 6.375 01/01/24 2,032,200
3,000 Massachusetts Water Resources Authority, 1993 Ser C ............ 5.25 12/01/20 2,645,850
1,000 New York City Municipal Water Finance Authority, New York, 1991
Ser A (Secondary FGIC Insured) ................................. 6.75 06/15/16 1,053,930
- ----------- --------------
16,000 14,970,380
- ----------- --------------
REFUNDED (22.3%)
3,800 Maricopa County Industrial Development Authority, Arizona,
Samaritan Health Ser 1985 A (Crossover Refunded) ............... 9.25 12/01/15 3,997,220
5,000 Chicago, Illinois, Refg 1987 Ser B (Prerefunded) ................ 9.25 01/01/13 5,580,850
6,750 Hamilton, Indiana, Southeastern Building Corp Cons Ser 1988
(Prerefunded) .................................................. 8.40 01/01/15 7,581,870
10,600 Indiana Health Facilities Financing Authority, St Anthony
Medical Center & Home Inc Ser 1987 (Prerefunded) ............... 9.25 10/01/17 11,909,418
1,550 Kentucky Development Finance Authority, Ashland Hospital/King's
Daughters Refg & Impr Ser 1987 (Prerefunded) ................... 9.75 08/01/11 1,776,130
7,700 Breckenridge, Minnesota, Franciscan Sisters Health Care Inc Ser
1987 B-1 (Prerefunded) ......................................... 9.375 09/01/17 8,667,659
4,000 Minneapolis, Minnesota, Lifespan Inc Refg Ser 1987 B
(Prerefunded) .................................................. 9.125 12/01/14 4,511,640
New York City, New York,
4,150 1988 Ser D (Prerefunded) ....................................... 8.50 08/01/08 4,571,267
5,000 1988 Ser A (Prerefunded) ....................................... 8.50 11/01/10 5,534,050
5,000 New York City Municipal Water Finance Authority, New York, 1987
Ser A (Prerefunded) ............................................ 9.00 06/15/17 5,552,250
2,500 Lehigh County General Purpose Authority, Pennsylvania,
HealthEast Inc Ser 1987 A & B (Prerefunded) .................... 9.00 07/01/15 2,773,225
4,000 Washington, 1991 Ser B (Prerefunded) ............................ 6.70 06/01/16 4,316,600
2,500 Washington Public Power Supply System, Nuclear Proj #2 Refg Ser
1990 C (Prerefunded) ........................................... 7.625 07/01/10 2,836,125
- ----------- --------------
62,550 69,608,304
- ----------- --------------
376,843 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $288,858,813) ................................. 298,658,514
- ----------- --------------
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS February 28, 1995 (unaudited) (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS (2.7%)
$ 7,000 Harris County Health Facilities Development Corporation, Texas,
Methodist Hospital Ser 1994 (Tender 03/01/95) ..................3.75*% 12/01/25 $ 7,000,000
1,500 Washington Health Care Facilities Authority, Sisters of
Providence Ser 1985 B (Tender 03/01/95) ........................3.95* 10/01/05 1,500,000
- ----------- --------------
8,500 TOTAL SHORT-TERM OBLIGATIONS (IDENTIFIED COST $8,500,000) ................. 8,500,000
- ----------- --------------
$385,343 TOTAL INVESTMENTS (IDENTIFIED COST $297,358,813) (C) ...................... 98.2% 307,158,514
===========
OTHER ASSETS IN EXCESS OF LIABILITIES ..................................... 1.8 5,479,785
--------------
NET ASSETS ................................................................ 100.0% $312,638,299
===== ==============
<FN>
- ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Variable or floating rate securities. 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 $297,358,813; the aggregate gross unrealized appreciation is
$21,299,155 and the aggregate gross unrealized depreciation is $11,499,454, resulting in net unrealized appreciation
of $9,799,701.
</TABLE>
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
February 28, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Alabama ............ 1.5%
Alaska ............. 1.5
Arizona ............ 2.7
California ......... 6.8
District of Columbia 1.2
Florida ............ 1.1
Georgia ............ 0.7
Illinois ........... 4.6
Indiana ............ 6.2%
Kentucky ........... 1.4
Maine .............. 1.8
Maryland ........... 1.8
Massachusetts ...... 3.7
Michigan ........... 4.1
Minnesota .......... 4.6
Missouri ........... 2.8
New Mexico ......... 1.8%
New York ........... 11.5
North Carolina ..... 4.3
North Dakota ....... 3.0
Ohio ............... 2.7
Oklahoma ........... 1.6
Pennsylvania ....... 5.4
Rhode Island ....... 0.3
South Carolina ..... 2.1%
Tennessee .......... 1.2
Texas .............. 9.8
Utah ............... 1.4
Virginia ........... 1.0
Washington ......... 4.9
West Virginia ...... 0.7
------
Total .............. 98.2%
======
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $297,358,813) ........ $307,158,514
Receivable for:
Interest ............................... 5,641,158
Investments sold ....................... 60,000
Prepaid expenses and other assets ...... 36,137
--------------
TOTAL ASSETS .......................... 312,895,809
--------------
LIABILITIES:
Payable for:
Investment advisory fee ................ 90,054
Administration fee ..................... 51,835
Payable to bank ......................... 13,019
Accrued expenses and other payables .... 102,602
--------------
TOTAL LIABILITIES ..................... 257,510
--------------
NET ASSETS:
Paid-in-capital ......................... 300,666,125
Net unrealized appreciation ............. 9,799,701
Accumulated undistributed net investment
income ................................. 3,239,267
Accumulated net realized loss ........... (1,066,794)
--------------
NET ASSETS ............................ $312,638,299
==============
NET ASSET VALUE PER SHARE, 31,912,650
shares outstanding (unlimited shares
authorized of $.01 par value) .......... $9.80
==============
</TABLE>
STATEMENT OF OPERATIONS For the six months
ended February 28, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ....................... $11,666,929
-------------
EXPENSES
Investment advisory fee .............. 515,625
Administration fee ................... 296,944
Transfer agent fees and expenses .... 87,279
Professional fees .................... 47,323
Shareholder reports and notices ..... 31,966
Registration fees .................... 15,971
Trustees' fees and expenses .......... 14,153
Other ................................ 9,152
-------------
TOTAL EXPENSES ...................... 1,018,413
-------------
NET INVESTMENT INCOME ............... 10,648,516
-------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss .................... (1,066,804)
Net change in unrealized appreciation (1,522,856)
-------------
TOTAL LOSS .......................... (2,589,660)
-------------
NET INCREASE ........................ $ 8,058,856
=============
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
FEBRUARY 28, 1995 ENDED AUGUST
(UNAUDITED) 31, 1994
----------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ........................................ $ 10,648,516 $ 22,771,576
Net realized gain (loss) ..................................... (1,066,804) 13,818,414
Net change in unrealized appreciation ........................ (1,522,856) (34,589,071)
----------------- ---------------
Net increase ................................................ 8,058,856 2,000,919
----------------- ---------------
Dividends and distributions to shareholders from:
Net investment income ........................................ (9,680,543) (21,458,878)
Net realized gain ............................................ (11,045,137) (3,123,625)
----------------- ---------------
Total ....................................................... (20,725,680) (24,582,503)
Net decrease from transactions in shares of beneficial
interest ...................................................... (6,440,118) (4,839,155)
----------------- ---------------
Net decrease ................................................ (19,106,942) (27,420,739)
NET ASSETS:
Beginning of period ........................................... 331,745,241 359,165,980
----------------- ---------------
END OF PERIOD (including undistributed net investment income
of $3,232,030 and $2,271,294, respectively) .................. $312,638,299 $331,745,241
================= ===============
</TABLE>
See Notes to Financial Statements
<PAGE>
<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,
as a diversified, closed-end management investment 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 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.
Short-term debt securities having a maturity date of more than sixty
days at time of purchase are valued on a mark-to-market basis until
sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a
maturity date of sixty days or less at the time of purchase are valued
at amortized cost.
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 by the
identified cost method. The Fund amortizes premiums and discounts on
securities purchased 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 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 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.
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- -----------------------------------------------------------------------------
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% to the portion of the Fund's
average weekly net assets exceeding $250 million.
Under the terms of the Advisory 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 --Pursuant to an Administration Agreement with
Dean Witter Services Company Inc. (the "Administrator"), the Fund pays an
administration fee, calculated weekly and payable monthly, by applying the
following annual rates to the Fund's average weekly net assets: 0.20% to the
portion of the Fund's average weekly net assets not exceeding $250 million;
0.15% to the portion of the Fund's average weekly net assets exceeding $250
million but not exceeding $500 million; 0.12% to the portion of the Fund's
average weekly net assets exceeding $500 million but not exceeding $750
million; and 0.10% to the portion of the Fund's average weekly net assets
exceeding $750 million.
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 six months ended February 28, 1995 aggregated
$3,983,280 and $25,914,754, respectively.
Dean Witter Trust Company, an affiliate of the Investment Adviser and
Administrator, is the Fund's transfer agent. At February 28, 1995, the Fund
had transfer agent fees and expenses payable of approximately $12,300.
The Fund established an unfunded noncontributory defined benefit pension
plan covering all independent Trustees of the Fund who will have served as
independent Trustees 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, 1995, included in Trustees' fees and expenses in
the Statement of Operations amounted to $3,889. At February 28, 1995, the
Fund had an accrued pension liability of $47,803 which is included in accrued
expenses in the Statement of Assets and Liabilities.
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- -----------------------------------------------------------------------------
5. SHARES OF BENEFICIAL INTEREST --Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Capital Paid
Par value of in Excess of
Shares Shares Par Value
------------ -------------- --------------
<S> <C> <C> <C>
Balance, 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
Treasury shares purchased and retired (weighted
average discount 9.27%)* ...................... (728,300) (7,283) (6,432,835)
------------ -------------- --------------
Balance, February 28, 1995 ..................... 31,912,650 $319,127 $300,346,998
============ ============== ==============
<FN>
- ---------------
* The Trustees have voted to retire the shares purchased.
</TABLE>
6. DIVIDENDS --The Fund has declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
Amount Per
Declaration Date Share Record Date Payable Date
- -------------------- ----------- -------------- --------------
<S> <C> <C> <C>
February 28, 1995 $0.05 March 10, 1995 March 24, 1995
March 28, 1995 $0.05 April 7, 1995 April 21, 1995
</TABLE>
7. SELECTED QUARTERLY FINANCIAL DATA --(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
2/28/95 11/30/94
----------------------- -------------------
Per Per
Total* Share Total* Share
-------------- ------- ---------- -------
<S> <C> <C> <C> <C>
Total investment income ................ $ 5,738 $0.18 $ 5,929 $ 0.18
Net investment income .................. 5,222 0.16 5,427 0.17
Net realized and unrealized gain (loss) 11,705 0.37 (14,295) (0.42)
</TABLE>
<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 ...................... (1,001) (0.03) (12,445) (0.37) (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) ............... 4,204 0.12 (6,319) (0.19) 8,393 0.26 (1,535) (0.05)
<FN>
- ---------------
* Totals expressed in thousands.
</TABLE>
<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,
For the six months
ended February 28, --------------------------------------------------
1995* (unaudited) 1994* 1993* 1992* 1991* 1990*
----------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .. $ 10.16 $ 10.83 $ 10.69 $ 10.37 $ 10.01 $ 10.36
-------- -------- -------- -------- -------- --------
Net investment income .................. 0.33 0.69 0.72 0.73 0.74 0.76
Net realized and unrealized gain (loss) (0.05) (0.62) 0.14 0.31 0.30 (0.20)
-------- -------- -------- -------- -------- --------
Total from investment operations ...... 0.28 0.07 0.86 1.04 1.04 0.56
-------- -------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income ................. (0.30) (0.65) (0.72) (0.72) (0.68) (0.85)
Net realized gain ..................... (0.34) (0.09) -- --** --** (0.06)
-------- -------- -------- -------- -------- --------
Total dividends and distributions ..... (0.64) (0.74) (0.72) (0.72) (0.68) (0.91)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ......... $ 9.80 $ 10.16 $ 10.83 $ 10.69 $ 10.37 $ 10.01
======== ======== ======== ======== ======== ========
Market value, end of period ............ $ 9.125 $ 9.25 $ 11.25 $ 10.75 $ 10.25 $ 10.125
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN+ ............... 5.75 %(1) (11.73)% 11.82% 12.28% 8.23% 5.27 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) ............................ $312,638 $331,745 $359,166 $354,467 $343,724 $329,674
Ratios to average net assets:
Expenses .............................. 0.65 %(2) 0.63% 0.67% 0.73% 0.75% 0.79 %
Net investment income ................. 6.80 %(2) 6.59% 6.70% 6.87% 7.31% 7.38 %
Portfolio turnover rate ................ 1 %(1) 27 % 1 % 11 % 5 % 10 %
<FN>
- ---------------
* 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 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 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.
</TABLE>
See Notes to Financial Statements
- -----------------------------------------------------------------------------
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>
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chirman 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
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
SEMIANNUAL REPORT
FEBRUARY 28, 1995
