<PAGE> 1
DEAR SHAREHOLDER:
We at Kemper are pleased to provide you with an overview of the performance of
your fund and the municipal market for the six-month period ended May 31, 1995.
In that time, Kemper Municipal Income Trust earned a total return of 14.30
percent based on net asset value. The fund's share price was $11.75 as of May
31, 1995, representing a 4.08 percent discount to the fund's net asset value of
$12.25.
DIVIDEND REVIEW
The fund distributed a total of $.4350 per common share during the six-month
period. Based on the fund's closing share price of $11.75 and the May dividend
of $.0725, the current annualized distribution rate was 7.40 percent. This
distribution rate is equivalent to a taxable distribution rate of 11.76 percent
based on an assumed federal marginal income tax rate of 37.1 percent.
MARKET REVIEW
The six-month period was generally a favorable one for the municipal market. In
November 1994, just prior to the beginning of the period, yields reached their
recent highs. The higher yield ratios of municipals to Treasuries made
municipals attractive relative to Treasury securities. A strong market rally
ensued and extended throughout the six-month period which saw falling bond
yields and rising prices.
The municipal market rally was particularly powerful in the first quarter. An
unexpectedly low level of new issue volume helped municipal bonds outperform
Treasuries. The fixed-income markets continued to perform well into the second
quarter. Municipal bonds did not keep pace, however, with the Treasury market.
Market reaction to the first quarter's strong performance, a slightly larger
level of dealer inventories and growing concern about possible tax reforms all
contributed to the market's underperformance.
FUND ACTIVITY
The portfolio manager, encouraged by the prospect of increasing municipal bond
prices, reduced the fund's defensive hedge positions in December to enable the
fund to benefit when the market rallied. The portfolio remained nearly fully
invested throughout the remaining months; durations were extended somewhat to
take advantage of the municipal market's strength.
PORTFOLIO COMPOSITION
As of May 31, 1995, the composition of the fund was as follows:
<TABLE>
<CAPTION>
RATING PERCENT OF THE PORTFOLIO
------------------- ------------------------
<S> <C>
AAA 35%
AA 21
A 21
BBB 19
Non-rated 4
</TABLE>
The portfolio remained well diversified by state and industry. As of May 31,
1995, the fund's largest holdings were: 24 percent electricity bonds; 22 percent
state single family housing bonds; 20 percent airport bonds; 13 percent hospital
bonds; and 12 percent U.S. government securities.
OUTLOOK
We are generally positive about the prospects for the municipal market. First,
the efforts of the Federal Reserve appear to have been successful in both
slowing the economy and subduing inflation. It seems likely that rates will
remain in a range near today's levels and may possibly drop further, perhaps to
the lows in yields achieved in October 1993. In addition, we anticipate that new
issue volume will remain low, which will help to support municipal bond prices
further.
Tax reform proposals have already caused an adjustment in the ratio of municipal
bonds to Treasuries. This adjustment process may continue
1
<PAGE> 2
until the market believes that the risks of tax reform are fully discounted in
the market. Given the controversial nature of the tax reform proposals, the
situation is uncertain.
In any case, tax reform is sure to be a key campaign issue in 1996. We will be
vigilant about any signs of decreased demand for municipal bonds due to tax
reform concerns and may maintain a slightly higher cash position as we watch the
situation develop.
We appreciate your continued support of the Kemper Municipal Income Trust and
look forward to continuing to meet your investment needs in the future.
Sincerely,
[SIG]
Christopher J. Mier
Vice President and Portfolio Manager
July 7, 1995
Mr. Mier has been Portfolio Manager of the fund since its inception in October,
1988. He is a Senior Vice President of Kemper Financial Services, Inc.
Statistical Note: Current annualized distribution rate is the latest monthly
dividend shown as an annualized percentage of market price on the date shown.
Distribution rate simply measures the level of dividends and is not a complete
measure of performance. Total return measures aggregate change in net asset
value/market value assuming reinvestment of dividends. The tax equivalent
distribution rate is based on the distribution rate and the 37.1% federal tax
rate. Total return measures aggregate change in net asset value or market value
assuming reinvestment of dividends. Returns are historical and do not represent
future performance. Market price, net asset value and returns fluctuate.
Additional information concerning performance is contained in the Financial
Highlights appearing at the end of this report. The ratings of Standard and
Poor's Corporation (S&P) and Moody's Investors Service, Inc. (Moody's) represent
their opinions as to the quality of securities that they undertake to rate. The
percentage shown reflects the higher of Moody's or S&P's ratings. Portfolio
composition will change over time. Ratings are relative and subjective and not
absolute standards of quality. Income may be subject to state and local taxes. A
portion of the income may be subject to the alternative minimum tax for certain
investors.
2
<PAGE> 3
ANNUAL SHAREHOLDERS MEETING
We are pleased to report that all six trustees have been re-elected to the Board
of Trustees of Kemper Municipal Income Trust at the annual meeting held on May
16, 1995. The Trustees are: Arthur R. Gottschalk, Frederick T. Kelsey, David B.
Mathis, Stephen B. Timbers, John B. Tingleff and John G. Weithers.
Along with the re-election of the Trustees, shareholders were asked to ratify
the selection of Ernst & Young LLP as the independent auditors for the fund. The
results of the shareholders' vote at the May 16, 1995 meeting were as follows:
- Election of Trustees by all Shareholders
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
Arthur R. Gottschalk 30,974,667 512,217
David B. Mathis 30,968,970 517,914
John B. Tingleff 31,003,737 483,147
John G. Weithers 31,003,696 483,188
</TABLE>
- Election of Trustees by Shareholders of Preferred Shares
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
Frederick T. Kelsey 36,280 0
Stephen B. Timbers 36,280 0
</TABLE>
- Ratification of the selection of Ernst & Young LLP as independent auditors for
the fund
For 30,855,820
Against 257,221
3
<PAGE> 4
PORTFOLIO OF INVESTMENTS May 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
ISSUER Amount Value
------ --------- --------
<S> <C> <C>
ADVANCED REFUNDED OBLIGATIONS SECURED AS TO PRINCIPAL AND INTEREST BY UNITED STATES GOVERNMENT
SECURITIES.
FLORIDA
---------------------------------------------------------------------------------------------------------------------------
Greater Orlando Aviation Authority, Airport Facilities, Revenue, 8.00%, to be called 10-1-98
@ 102 $ 120 $ 135
---------------------------------------------------------------------------------------------------------------------------
Volusia County Health Facilities Authority, Memorial Health Systems, Hospital Facilities
Revenue, 8.25% to be called 6-1-00 @ 102 7,000 8,245
---------------------------------------------------------------------------------------------------------------------------
8,380
INDIANA
Indianapolis Local Public Improvement Bond Bank, Revenue, 8.50%, to be called 2-1-98 @ 102 12,470 13,977
---------------------------------------------------------------------------------------------------------------------------
KENTUCKY
---------------------------------------------------------------------------------------------------------------------------
Kenton County Airport Board, Greater Cincinnati International Airport, Revenue, 8.25%,
to be called 3-1-98 @ 102 1,950 2,177
---------------------------------------------------------------------------------------------------------------------------
NEW YORK
---------------------------------------------------------------------------------------------------------------------------
Dormitory Authority, State University Educational Facilities, Revenue, 7.25%, to be called
5-15-02 @ 102 5,000 5,847
---------------------------------------------------------------------------------------------------------------------------
Dormitory Authority, State University Educational Facilities, Revenue, 7.375%, to be called
5-15-00 @ 102 1,355 1,551
---------------------------------------------------------------------------------------------------------------------------
New York State Housing Finance Agency, Service Contract, Revenue, 7.375%, to be called
3-15-02 @ 102 3,000 3,523
---------------------------------------------------------------------------------------------------------------------------
New York State Medical Care Facilities Finance Agency, Mental Health Services Facilities
Improvement, Revenue, 7.70%, to be called 2-15-98 @ 102 2,000 2,211
---------------------------------------------------------------------------------------------------------------------------
13,132
NORTH CAROLINA
---------------------------------------------------------------------------------------------------------------------------
North Carolina Eastern Municipal Power Agency, Power System Revenue, 8.00%, to be called
1-1-98 @ 102 262 290
---------------------------------------------------------------------------------------------------------------------------
OKLAHOMA
---------------------------------------------------------------------------------------------------------------------------
Tulsa, Tulsa Airport Improvement Trust, Revenue, 7.70%, to be called 6-1-02 @ 100 3,315 3,872
---------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA
---------------------------------------------------------------------------------------------------------------------------
Greene County, General Obligation, 8.75%, to be called 12-1-00 @ 100 3,275 3,934
---------------------------------------------------------------------------------------------------------------------------
PUERTO RICO
---------------------------------------------------------------------------------------------------------------------------
Puerto Rico, General Obligation, 7.75%, to be called 7-1-99 @ 101 1/2 5,020 5,710
---------------------------------------------------------------------------------------------------------------------------
TOTAL ADVANCED REFUNDED OBLIGATIONS--7.7%
(Cost: $44,759) 51,472
---------------------------------------------------------------------------------------------------------------------------
OTHER MUNICIPAL OBLIGATIONS
ARIZONA
---------------------------------------------------------------------------------------------------------------------------
Maricopa County, Rural Road Improvement District, General Obligation, 8.625%, 2007 1,940 2,234
---------------------------------------------------------------------------------------------------------------------------
CALIFORNIA
---------------------------------------------------------------------------------------------------------------------------
California Housing Finance Agency, Home Mortgage, Revenue, 8.30% and 8.35%, 2019 3,355 3,598
---------------------------------------------------------------------------------------------------------------------------
California State General Obligation, 5.90%, 2025 8,500 8,542
---------------------------------------------------------------------------------------------------------------------------
12,140
</TABLE>
4
<PAGE> 5
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
COLORADO
---------------------------------------------------------------------------------------------------------------------------
City and County of Denver, Airport System Revenue, 6.75% to 8.50%, 2013 through 2023 $13,080 $ 14,000
---------------------------------------------------------------------------------------------------------------------------
Colorado Housing and Finance Authority, Single Family Program, Revenue, 7.70%, 2021 4,970 5,209
---------------------------------------------------------------------------------------------------------------------------
19,209
FLORIDA
---------------------------------------------------------------------------------------------------------------------------
Broward County, Broward Waste Energy Company, Revenue, 7.95%, 2008 4,440 4,920
---------------------------------------------------------------------------------------------------------------------------
Dade County, Housing Finance Authority, Single Family Mortgage Revenue, 6.55%, 2027 3,500 3,592
---------------------------------------------------------------------------------------------------------------------------
Escambia County, Housing Finance Authority, Single Family Mortgage Revenue, 6.90%, 2021 3,780 3,989
---------------------------------------------------------------------------------------------------------------------------
Florida Housing Finance Agency, Home Ownership, Revenue, 8.30%, 2020 4,680 5,098
---------------------------------------------------------------------------------------------------------------------------
Greater Orlando Aviation Authority, Airport Facilities, Revenue, 8.00%, 2018 1,130 1,259
---------------------------------------------------------------------------------------------------------------------------
Lake County, Resource Recovery, Industrial Development Revenue, 5.95%, 2013 4,000 3,758
---------------------------------------------------------------------------------------------------------------------------
22,616
HAWAII
---------------------------------------------------------------------------------------------------------------------------
Hawaii Housing Finance and Development Corporation, Single Family Mortgage Revenue, 8.125%,
2019 580 617
---------------------------------------------------------------------------------------------------------------------------
IDAHO
---------------------------------------------------------------------------------------------------------------------------
Idaho Housing Agency, Single Family Mortgage Revenue, 7.875% and 6.90%, 2021 and 2025 7,105 7,465
---------------------------------------------------------------------------------------------------------------------------
ILLINOIS
---------------------------------------------------------------------------------------------------------------------------
Chicago Gas Supply, Peoples Gas, Light and Coke Company, Revenue, 8.10%, 2020 1,250 1,415
---------------------------------------------------------------------------------------------------------------------------
Chicago, O'Hare International Airport, General Airport Revenue, 8.20%, 2018 3,900 4,183
---------------------------------------------------------------------------------------------------------------------------
Chicago, O'Hare International Airport, International Terminal, Special Revenue, 7.625% and
8.20% 2010 and 2024 14,775 16,413
---------------------------------------------------------------------------------------------------------------------------
Harvard, Multifamily Housing, Northfield Court Project, Revenue, 9.50%, 2006 2,675 2,936
---------------------------------------------------------------------------------------------------------------------------
Illinois Development Finance Authority, Commonwealth Edison Finance Company Project,
Pollution Control Revenue, 6.75%, 2015 4,220 4,592
---------------------------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority, Bethany Home and Hospital, Revenue, 8.625%, 2009 7,430 8,072
---------------------------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority, Lutheran General Health Care System, Revenue, 6.00%,
2018 1,030 982
---------------------------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority, Methodist Health Services Corporation, Revenue, 8.00%,
2015 1,945 2,180
---------------------------------------------------------------------------------------------------------------------------
Illinois Housing Development Authority, Residential Mortgage, Revenue, 8.10%, 2022 4,105 4,392
---------------------------------------------------------------------------------------------------------------------------
Illinois Sports Facilities Authority, Revenue, 7.875%, 2010 6,000 6,680
---------------------------------------------------------------------------------------------------------------------------
Illinois State Scholarship Commission, Student Loan Revenue, 7.85% to 8.00%, 1999 through
2002 13,900 14,539
---------------------------------------------------------------------------------------------------------------------------
Regional Transportation Authority, Cook, DuPage, Kane, Lake, McHenry, and Will Counties,
General Obligation, 6.125%, 2022 4,000 4,049
---------------------------------------------------------------------------------------------------------------------------
70,433
INDIANA
---------------------------------------------------------------------------------------------------------------------------
Indiana Employment Development Commission, Indianapolis Power and Light Company, Revenue,
7.45%, 2019 14,215 15,421
---------------------------------------------------------------------------------------------------------------------------
Indianapolis, Airport Authority, Federal Express Corporation Project, Special Facilities
Revenue, 7.10%, 2017 7,000 7,334
---------------------------------------------------------------------------------------------------------------------------
Indianapolis, Gas Utility System Revenue, 5.875%, 2024 14,000 14,039
---------------------------------------------------------------------------------------------------------------------------
Town of Fishers, Economic Development Water Facilities, Indianapolis Water Company, Revenue,
7.875%, 2019 10,000 10,937
---------------------------------------------------------------------------------------------------------------------------
47,731
</TABLE>
5
<PAGE> 6
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
IOWA
----------------------------------------------------------------------------------------------------------------------------
Iowa Housing Finance Authority, Single Family Mortgage Revenue, 7.90%, 2022 $ 8,555 $ 9,106
----------------------------------------------------------------------------------------------------------------------------
KENTUCKY
----------------------------------------------------------------------------------------------------------------------------
Kenton County Airport Board, Greater Cincinnati International Airport, Revenue, 8.25%, 2015 8,950 9,927
----------------------------------------------------------------------------------------------------------------------------
Trimble County, Louisville Gas and Electric Company, Pollution Control Revenue, 7.75%, 2019 7,000 7,571
----------------------------------------------------------------------------------------------------------------------------
17,498
LOUISIANA
----------------------------------------------------------------------------------------------------------------------------
Louisiana Housing Finance Agency, Single Family Mortgage Revenue, 8.30%, 2020 4,430 4,780
----------------------------------------------------------------------------------------------------------------------------
Louisiana Public Facilities Authority, Lafayette General Medical Center, Revenue, 6.50%, 2022 7,350 7,732
----------------------------------------------------------------------------------------------------------------------------
12,512
MAINE
----------------------------------------------------------------------------------------------------------------------------
Maine Health and Higher Educational Facilities Authority, Revenue, 5.70% and 7.00%, 2013 and
2024 9,320 9,717
----------------------------------------------------------------------------------------------------------------------------
Maine State Housing Authority, Mortgage Purchase Revenue, 8.30%, 2028 2,775 2,994
----------------------------------------------------------------------------------------------------------------------------
Regional Waste Systems, Inc., Solid Waste Resource Recovery System, Revenue, 7.85% and 8.15%,
2011 13,280 14,614
----------------------------------------------------------------------------------------------------------------------------
27,325
MARYLAND
----------------------------------------------------------------------------------------------------------------------------
Howard County, Braeland Eden Commons, Multifamily Housing Revenue, 6.20%, 2023 6,750 6,440
----------------------------------------------------------------------------------------------------------------------------
MICHIGAN
----------------------------------------------------------------------------------------------------------------------------
Greater Detroit Resource Recovery Authority, Resource Recovery Facility, Revenue, 9.25%, 2008 3,000 3,138
----------------------------------------------------------------------------------------------------------------------------
Monroe County, Detroit Edison, Pollution Control Revenue, 7.75%, 2019 6,500 7,052
----------------------------------------------------------------------------------------------------------------------------
10,190
MINNESOTA
----------------------------------------------------------------------------------------------------------------------------
Minnesota Housing Finance Agency, Single Family Mortgage Revenue, 7.95% and 8.00%, 2022 and
2029 5,260 5,551
----------------------------------------------------------------------------------------------------------------------------
MISSOURI
----------------------------------------------------------------------------------------------------------------------------
Missouri Housing Development Commission, Single Family Mortgage Revenue, 7.90%, 2021 4,960 5,318
----------------------------------------------------------------------------------------------------------------------------
St. Louis, Regional Convention and Sports Complex Authority, Revenue, 7.90%, 2021 3,600 3,955
----------------------------------------------------------------------------------------------------------------------------
West Plains, Industrial Development Authority, Ozarks Medical Center, Hospital Revenue,
8.625%, 2020 3,650 4,018
----------------------------------------------------------------------------------------------------------------------------
13,291
NEVADA
----------------------------------------------------------------------------------------------------------------------------
Clark County, Nevada Power Company Project, Industrial Development Revenue, 6.70%, 2022 1,750 1,856
----------------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE
----------------------------------------------------------------------------------------------------------------------------
New Hampshire, Higher Education and Health Facilities, Nashua Memorial Hospital, Revenue,
6.00%, 2013 and 2023 6,000 5,635
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
NEW JERSEY
-------------------------------------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, New Jersey-American Water Company, Inc. Project,
Water Facilities Revenue, 6.875%, 2034 $10,775 $ 11,789
-------------------------------------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Financing Authority, General Hospital Center at Passaic,
Revenue, 6.75%, 2019 5,000 5,495
-------------------------------------------------------------------------------------------------------------------------
New Jersey Housing and Mortgage Finance Agency, Home Buyer Revenue, 7.70%, 2029 3,530 3,758
-------------------------------------------------------------------------------------------------------------------------
21,042
NEW MEXICO
-------------------------------------------------------------------------------------------------------------------------
New Mexico Mortgage Finance Authority, Single Family Mortgage Revenue, 8.30% and 7.80%,
2020 and 2021 8,835 9,738
-------------------------------------------------------------------------------------------------------------------------
NEW YORK
-------------------------------------------------------------------------------------------------------------------------
New York City, General Obligation, 7.50%, 2003 and 2004 10,430 11,328
-------------------------------------------------------------------------------------------------------------------------
New York State Dormitory Authority, State University Educational Facilities, Revenue, 7.375%
and 7.00%, 2014 and 2016 7,140 7,632
-------------------------------------------------------------------------------------------------------------------------
New York State Energy Research and Development Authority, Consolidated Edison Company,
Revenue, 7.75%, 2024 13,300 14,221
-------------------------------------------------------------------------------------------------------------------------
New York State Medical Care Facilities Finance Agency, Mental Health Services, Revenue,
7.70%, 2018 3,255 3,510
-------------------------------------------------------------------------------------------------------------------------
New York State Urban Development Corporation, State Facilities, Revenue, 7.50%, 2011 6,695 7,343
-------------------------------------------------------------------------------------------------------------------------
Niagara Frontier Transportation Authority, Greater Buffalo International Airport, Revenue,
6.25%, 2024 5,750 5,920
-------------------------------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Revenue, 8.00%, 2023 6,000 6,273
-------------------------------------------------------------------------------------------------------------------------
56,227
NORTH CAROLINA
-------------------------------------------------------------------------------------------------------------------------
North Carolina Housing Finance Agency, Single Family Mortgage Revenue, 7.85%, 2028 4,510 4,797
-------------------------------------------------------------------------------------------------------------------------
NORTH DAKOTA
-------------------------------------------------------------------------------------------------------------------------
North Dakota Housing Finance Agency, Single Family Mortgage Revenue, 8.375%, 2021 950 998
-------------------------------------------------------------------------------------------------------------------------
OHIO
-------------------------------------------------------------------------------------------------------------------------
Cuyahoga County, Meridia Health System, Hospital Revenue, 6.25%, 2024 2,350 2,388
-------------------------------------------------------------------------------------------------------------------------
Green Springs, Health Care Facilities Revenue, 7.125%, 2025 6,000 5,916
-------------------------------------------------------------------------------------------------------------------------
Ohio Housing Finance Agency, Single Family Mortgage Revenue, 7.65% to 8.25%, 2010 through
2029 7,761 8,167
-------------------------------------------------------------------------------------------------------------------------
16,471
OKLAHOMA
-------------------------------------------------------------------------------------------------------------------------
Oklahoma Turnpike Authority, Turnpike System Revenue, 7.875%, 2021 355 399
-------------------------------------------------------------------------------------------------------------------------
Tulsa, Tulsa Airport Improvement Trust, General Revenue, 7.70%, 2013 7,545 8,149
-------------------------------------------------------------------------------------------------------------------------
8,548
PENNSYLVANIA
-------------------------------------------------------------------------------------------------------------------------
Allegheny County, Greater Pittsburgh International Airport, Revenue, 8.25%, 2016 8,450 9,349
-------------------------------------------------------------------------------------------------------------------------
Lehigh County, General Purpose Authority, Wiley House, Revenue, 8.65% and 8.75%, 2004 and
2014 6,090 6,198
-------------------------------------------------------------------------------------------------------------------------
Philadelphia, Gas Works, Revenue, 6.375%, 2026 7,950 8,035
-------------------------------------------------------------------------------------------------------------------------
23,582
</TABLE>
7
<PAGE> 8
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
RHODE ISLAND
----------------------------------------------------------------------------------------------------------------------------
Rhode Island Housing and Mortgage Finance Corporation, Revenue, 8.25%, 2022 $ 2,715 $ 2,902
----------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA
----------------------------------------------------------------------------------------------------------------------------
Oconee County, Duke Power Company, Pollution Control Revenue, 7.75%, 2017 3,500 3,906
----------------------------------------------------------------------------------------------------------------------------
TEXAS
----------------------------------------------------------------------------------------------------------------------------
Brazos River Authority, Texas Utilities Electric Company, Pollution Control Revenue, 7.875%
and 8.25%, 2017 and 2019 13,890 15,189
----------------------------------------------------------------------------------------------------------------------------
Dallas-Fort Worth International Airport Facility Improvement Corporation, American Airlines,
Inc., Revenue, 7.50%, 2025 1,500 1,567
----------------------------------------------------------------------------------------------------------------------------
Lower Neches Valley, Industrial Development Authority, Mobil Oil Refining Corporation Project
Revenue, 6.40%, 2030 17,000 17,407
----------------------------------------------------------------------------------------------------------------------------
Matagorda County, Navigation District Number 1, Central Power and Light Company, Pollution
Control Revenue, 7.875% and 6.00%, 2016 and 2028 20,000 20,115
----------------------------------------------------------------------------------------------------------------------------
Red River Authority, West Texas Utilities Company, Public Service Company of Oklahoma and
Central Power and Light Company, Pollution Control Revenue, 7.875%, 2014 5,200 5,507
----------------------------------------------------------------------------------------------------------------------------
59,785
UTAH
----------------------------------------------------------------------------------------------------------------------------
Davis County, Solid Waste Management and Energy Recovery, Revenue, 6.125%, 2009 5,000 4,771
----------------------------------------------------------------------------------------------------------------------------
Intermountain Power Agency, Power Supply System Revenue, 7.75%, 2020 5,000 5,436
----------------------------------------------------------------------------------------------------------------------------
10,207
VERMONT
----------------------------------------------------------------------------------------------------------------------------
Vermont Housing Finance Agency, Mortgage Purchase Revenue, 8.10%, 2022 13,660 14,271
----------------------------------------------------------------------------------------------------------------------------
VIRGINIA
----------------------------------------------------------------------------------------------------------------------------
Fairfax County Economic Development Authority, Ogden Martin System, Resource Recovery
Revenue, 7.75%, 2011 13,890 15,163
----------------------------------------------------------------------------------------------------------------------------
Metropolitan Washington Airports Authority, Airport System Revenue, 5.75%, 2020 13,100 13,012
----------------------------------------------------------------------------------------------------------------------------
28,175
WASHINGTON
----------------------------------------------------------------------------------------------------------------------------
Washington Health Care Facilities Authority, Sisters of St. Joseph of Peace, Health and
Hospital Services, Revenue, 7.75%, 2015 4,200 4,750
----------------------------------------------------------------------------------------------------------------------------
Washington Public Power Supply System, Nuclear Project 2, Refunding Revenue, 7.00% and 5.60%,
2012 and 2015 18,500 19,730
----------------------------------------------------------------------------------------------------------------------------
Washington State Housing Finance Commission, Revenue, 7.05%, 2022 8,800 9,324
----------------------------------------------------------------------------------------------------------------------------
33,804
WISCONSIN
----------------------------------------------------------------------------------------------------------------------------
Wisconsin Health Facilities Authority, Franciscan Health Advisory Services, Inc., Revenue,
7.80%, 2014 8,460 9,003
----------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER MUNICIPAL OBLIGATIONS--88.5%
(Cost: $555,336) 595,305
----------------------------------------------------------------------------------------------------------------------------
TOTAL OBLIGATIONS--96.2%
(Cost: $600,095) 646,777
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
(Dollars in thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
MONEY MARKET INSTRUMENTS--1.7%
Yield-4.10% to 4.50%, Due-June 1995
(Cost: $11,500) $11,500 $ 11,500
---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--97.9%
(Cost: $611,595) 658,277
---------------------------------------------------------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--2.1% 13,961
---------------------------------------------------------------------------------------------------------------------------
NET ASSETS--100% $672,238
===========================================================================================================================
</TABLE>
NOTE TO PORTFOLIO OF INVESTMENTS
Based on the cost of investments of $611,595,000 for federal income tax purposes
at May 31,1995, the aggregate gross unrealized appreciation of investments was
$47,680,000, the aggregate gross unrealized depreciation was $998,000 and the
net unrealized appreciation on investments was $46,682,000.
See accompanying Notes to Financial Statements.
9
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995
(in thousands)
<TABLE>
<S> <C>
ASSETS
----------------------------------------------------------
Investments, at value
(Cost: $611,595) $ 658,277
----------------------------------------------------------
Cash 154
----------------------------------------------------------
Interest receivable 14,671
----------------------------------------------------------
Total assets 673,102
----------------------------------------------------------
LIABILITIES AND NET ASSETS
----------------------------------------------------------
Payable for:
Dividends 306
----------------------------------------------------------
Management fee 305
----------------------------------------------------------
Custodian and transfer agent
fees and related expenses 42
----------------------------------------------------------
Other 211
----------------------------------------------------------
Total liabilities 864
----------------------------------------------------------
Net assets $ 672,238
==========================================================
ANALYSIS OF NET ASSETS
----------------------------------------------------------
Remarketed preferred shares, par value $.01 per
share, unlimited number of shares authorized,
43 shares outstanding at $5,000 liquidation
value per share $ 215,000
----------------------------------------------------------
Common shares, par value $.01 per share,
unlimited number of shares authorized, 37,317
shares outstanding 373
----------------------------------------------------------
Paid in surplus 411,927
----------------------------------------------------------
Accumulated net realized loss on sales of
investments (15,172)
----------------------------------------------------------
Unrealized appreciation of investments 46,682
----------------------------------------------------------
Undistributed net investment income 13,428
----------------------------------------------------------
Net assets $ 672,238
==========================================================
Net asset value per common share
($672,238 less remarketed preferred shares at
liquidation value of $215,000 divided by 37,317
common shares outstanding) $12.25
==========================================================
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six months ended May 31, 1995
(in thousands)
<TABLE>
<S> <C>
INTEREST INCOME $ 22,914
----------------------------------------------------------
EXPENSES
----------------------------------------------------------
Management fee 1,784
----------------------------------------------------------
Custodian and transfer agent
fees and related expenses 69
----------------------------------------------------------
Professional fees 22
----------------------------------------------------------
Reports to shareholders 7
----------------------------------------------------------
Registration and remarketing fees 255
----------------------------------------------------------
Trustees' fees and other 49
----------------------------------------------------------
Total expenses 2,186
----------------------------------------------------------
Net investment income 20,728
----------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
----------------------------------------------------------
Net realized loss on sales of investments (4,082)
----------------------------------------------------------
Net realized loss from futures transactions (295)
----------------------------------------------------------
Net realized loss (4,377)
----------------------------------------------------------
Net change in balance of unrealized
depreciation of investments 46,736
----------------------------------------------------------
Net gain on investments 42,359
----------------------------------------------------------
Net increase in net assets resulting
from operations $ 63,087
==========================================================
</TABLE>
10
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
Six months
ended Year ended
May 31, November 30,
1995 1994
---------- ------------
<S> <C> <C>
OPERATIONS
-----------------------------------------------------------
Net investment income $20,728 40,996
-----------------------------------------------------------
Net realized loss on
investments (4,377) (7,810)
-----------------------------------------------------------
Net change in unrealized
appreciation/depreciation 46,736 (60,931)
-----------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 63,087 (27,745)
-----------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS
-----------------------------------------------------------
Distribution from net
investment income:
Common shares (16,233) (32,429)
-----------------------------------------------------------
Remarketed preferred shares (4,406) (6,096)
-----------------------------------------------------------
Distribution from net
realized gain on investments -- (10,419)
-----------------------------------------------------------
Distribution in excess of
net realized gain on
investments -- (2,976)
-----------------------------------------------------------
Total dividends to
shareholders (20,639) (51,920)
-----------------------------------------------------------
Proceeds from common shares
issued in reinvestment of
dividends (109 shares in 1994) -- 1,347
-----------------------------------------------------------
Total increase (decrease) in
net assets 42,448 (78,318)
-----------------------------------------------------------
NET ASSETS
-----------------------------------------------------------
Beginning of period 629,790 708,108
-----------------------------------------------------------
End of period (including
undistributed net investment
income of $13,428 in 1995 and
$13,339 in 1994) $672,238 629,790
===========================================================
</TABLE>
See accompanying Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF FUND
The Fund is registered under the Investment Company Act of 1940 as a
diversified, closed-end management investment company.
INVESTMENT VALUATION
Investments are stated at value. Fixed income securities are valued by using
market quotations, or independent pricing services that use prices provided by
market makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Exchange traded options
are valued at the last sale price unless there is no sale price, in which event
prices provided by market makers are used. Over-the-counter traded options are
valued based upon prices provided by market makers. Financial futures and
options thereon are valued at the settlement price established each day by the
board of trade or exchange on which they are traded. Other securities and assets
are valued at fair value as determined in good faith by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual basis and
premiums and original issue discount on securities are amortized. Realized gains
and losses from investment transactions are reported on an identified cost
basis. Realized and unrealized gains and losses on financial futures and options
are included in net realized and unrealized gain (loss) on investments, as
appropriate.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS
The Fund has complied with the special provisions of the Internal Revenue Code
available to investment companies for the six months ended May 31, 1995. The
accumulated net realized loss on sales of investments for federal income tax
purposes at May 31, 1995, amounting to approximately $12,068,000, is available
to offset future taxable gains. If not applied, the loss carryover expires
during the period 2002 through 2003.
The Fund declares and pays common share dividends on a monthly basis. Dividends
payable to its shareholders are recorded by the Fund on the ex-dividend date.
Distributions are determined in accordance with income tax principles which may
treat certain transactions differently from generally accepted accounting
principles.
11
<PAGE> 12
REMARKETED PREFERRED SHARES
The Fund has issued and outstanding 10,800 Series A, 10,700 Series B, 10,800
Series C and 10,700 Series D remarketed preferred shares, each at a liquidation
value of $5,000 per share. The dividend rate on each series is set by the
remarketing agent, and preferred share dividends are generally paid every 28
days.
2. TRANSACTIONS WITH AFFILIATES
The Fund has a management agreement with Kemper Financial Services, Inc. (KFS).
For management services and facilities furnished, the Fund pays a fee at an
annual rate of .55% of average weekly net assets. The Fund incurred a management
fee of $1,784,000 for the six months ended May 31, 1995.
The Fund has a custodian agreement and a transfer agent agreement with Investors
Fiduciary Trust Company (IFTC), which was 50% owned by KFS until January 31,
1995, when KFS completed the sale of IFTC to a third party. For the six months
ended May 31, 1995, the Fund incurred
custodian and transfer agent fees of $34,000 (excluding related expenses).
Pursuant to a services agreement with IFTC, Kemper Service Company (KSvC), an
affiliate of KFS, is the shareholder service agent of the Fund. For the six
months ended May 31, 1995, IFTC remitted shareholder service fees of $44,000 to
KSvC.
Certain officers or trustees of the Fund are also officers or directors of KFS.
During the six months ended May 31, 1995, the Fund made no direct payments to
its officers and incurred trustees' fees of $5,000 to independent trustees.
3. INVESTMENT TRANSACTIONS
For the six months ended May 31, 1995, investment transactions (excluding money
market instruments) are as follows (in thousands):
Purchases $106,869
---------------------------------------------------------
Proceeds from sales 102,653
---------------------------------------------------------
12
<PAGE> 13
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended
May 31, Year ended November 30,
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE FOR A COMMON
SHARE:
Net asset value, beginning of period $11.12 13.25 12.45 11.85 11.25
----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .56 1.10 1.16 1.16 1.18
----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 1.13 (1.84) .66 .49 .56
----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.69 (.74) 1.82 1.65 1.74
----------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income to
common shareholders .44 .87 .87 .87 .87
----------------------------------------------------------------------------------------------------------------------------------
Distribution from net investment income to
preferred shareholders (common share
equivalent) .12 .16 .15 .18 .27
----------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain on
investments -- .28 -- -- --
----------------------------------------------------------------------------------------------------------------------------------
Distribution in excess of net realized gain on
investments -- .08 -- -- --
----------------------------------------------------------------------------------------------------------------------------------
Total dividends .56 1.39 1.02 1.05 1.14
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.25 11.12 13.25 12.45 11.85
----------------------------------------------------------------------------------------------------------------------------------
Market value, end of period $11.75 11.00 12.75 12.63 12.00
==================================================================================================================================
TOTAL RETURN PER COMMON SHARE (%):
Based on net asset value 14.30 (7.36) 13.80 12.80 13.55
----------------------------------------------------------------------------------------------------------------------------------
Based on market value 10.99 (4.52) 8.00 12.72 14.78
==================================================================================================================================
RATIOS TO AVERAGE NET ASSETS (%):
(ratios exclude the effect of dividends to
preferred shareholders)
Expenses .67 .70 .69 .71 .72
----------------------------------------------------------------------------------------------------------------------------------
Net investment income 6.35 6.13 6.20 6.48 6.76
==================================================================================================================================
SUPPLEMENTAL DATA:
Net assets at end of period, net of remarketed
preferred shares (in thousands) $457,238 414,790 493,108 461,119 434,924
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 32 12 17 5 4
----------------------------------------------------------------------------------------------------------------------------------
Remarketed preferred shares outstanding at end of
period
(in thousands) $215,000 215,000 215,000 215,000 215,000
----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per share of remarketed preferred
shares outstanding at end of period $ 15,600 14,600 16,500 15,700 15,100
----------------------------------------------------------------------------------------------------------------------------------
Liquidation and market value per share of
remarketed preferred shares $ 5,000 5,000 5,000 5,000 5,000
==================================================================================================================================
NOTE: Total return based on net asset value reflects changes in the Fund's net asset value during the period. Total return based
on market value reflects changes in market value. Each figure includes reinvestment of dividends. These figures will differ
depending upon the level of any discount from or premium to net asset value at which the Fund's shares trade during the period.
</TABLE>
13
<PAGE> 14
KEMPER MUNICIPAL INCOME TRUST SEMIANNUAL REPORT TO SHAREHOLDERS
May 31, 1995
-----------------------------------
KEMPER
-----------------------------------
MUNICIPAL
-----------------------------------
INCOME
-----------------------------------
TRUST
-----------------------------------
Trustees Officers
STEPHEN B. TIMBERS JOHN E. PETERS
President and Trustee Vice President
ARTHUR R. GOTTSCHALK J. PATRICK BEIMFORD, JR.
Trustee Vice President
FREDERICK T. KELSEY CHRISTOPHER J. MIER
Trustee Vice President
DAVID B. MATHIS PHILIP J. COLLORA
Trustee Vice President and
JOHN B. TINGLEFF Secretary
Trustee CHARLES F. CUSTER
JOHN G. WEITHERS Assistant Secretary
Trustee JEROME L. DUFFY
Treasurer
Legal Counsel Custodian and Transfer Agent
VEDDER, PRICE, KAUFMAN INVESTORS FIDUCIARY
& KAMMHOLZ TRUST COMPANY
222 North LaSalle Street 127 West 10th Street
Chicago, IL 60601 Kansas City, MO 64105
Shareholder Service Agent
KEMPER SERVICE COMPANY
P.O. Box 419430
Kansas City, MO 64141
Investment Manager
KEMPER FINANCIAL
SERVICES, INC.
120 South LaSalle Street
Chicago, IL 60603
240760 [KEMPER LOGO]
KMIT-3 (7/95) (LOGO)PRINTED ON RECYCLED PAPER Printed in U.S.A.
