<PAGE> 1
KEMPER
MUNICIPAL INCOME TRUST
SEMIANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED MAY 31, 1997
" . . . the fund delivered positive
performance despite the modest upward pressure on
interest rates and the Fed's rate hike."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
7
Largest Sectors
Portfolio Statistics
8
Portfolio of Investments
14
Financial Statements
16
Notes to
Financial Statements
18
Financial Highlights
19
Shareholders' Meeting
AT A GLANCE
- -------------------------------------------------------------------------------
TOTAL RETURNS
- -------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1997
<TABLE>
<CAPTION>
BASED ON BASED ON
NET ASSET MARKET
VALUE PRICE
- -------------------------------------------------------------------------------
<S> <C> <C>
KEMPER MUNICIPAL
INCOME TRUST 1.97% 6.48%
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NET ASSET VALUE AND MARKET PRICE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
5/31/97 11/30/96
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE $12.11 $ 12.31
- -------------------------------------------------------------------------------
MARKET PRICE $13.50 $13.125
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
DIVIDEND REVIEW
- -------------------------------------------------------------------------------
The following table shows per share dividend and yield information for the fund
as of May 31, 1997.
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
SIX-MONTH INCOME: $0.4350
- -------------------------------------------------------------------------------
MAY DIVIDEND: $0.0725
- -------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE:
(BASED ON NET ASSET VALUE) 7.18%
- -------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE:
(BASED ON MARKET PRICE) 6.44%
- -------------------------------------------------------------------------------
TAX EQUIVALENT DISTRIBUTION RATE:
(BASED ON NET ASSET VALUE AND A 37.1%
FEDERAL INCOME TAX RATE AND AN ASSUMED
$150,000 OF TAXABLE INCOME FOR A JOINT
RETURN) 11.41%
- -------------------------------------------------------------------------------
TAX EQUIVALENT DISTRIBUTION RATE:
(BASED ON MARKET PRICE AND A 37.1%
FEDERAL INCOME TAX RATE AND AN ASSUMED
$150,000 OF TAXABLE INCOME FOR A JOINT
RETURN) 10.24%
- -------------------------------------------------------------------------------
</TABLE>
Statistical Note: Current annualized distribution rate is the latest monthly
dividend shown as an annualized percentage of net asset value/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 price 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.
Income may be subject to state and local taxes and a portion of the income may
be subject to the alternative minimum tax for certain investors.
TERMS TO KNOW
DURATION Duration is a measure of the interest rate sensitivity of a fixed-
income investment or portfolio. The longer the duration, the greater the
interest rate risk.
TOTAL RETURN A fund's total return figure measures both the net investment
income and any realized and unrealized appreciation or depreciation of the
underlying investments in its portfolio for the period. Total return assumes the
reinvestment of all dividends and it represents the aggregate percentage or
change in the value of an investment in the fund over the period.
<PAGE> 3
ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER OF
ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $80 BILLION IN ASSETS, INCLUDING $45 BILLION IN RETAIL MUTUAL
FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM HARVARD
UNIVERSITY.
DEAR SHAREHOLDER,
The consistently good news on the domestic economy and the recent agreement
between the White House and Republican leaders in Congress to balance the
federal budget has provided the basis for strong stock and bond markets. This
progress on balancing the budget, an initiative that the bond market was
anticipating resolution of more than one year ago, has very positive long term
implications for financial markets.
The next several weeks will find Congress and the Clinton administration
negotiating toward a final agreement. Unlike previous failed proposals that
sought to balance the budget principally by increasing income taxes, the current
plan -- which starts from the base of a relatively small deficit -- proposes to
slow the growth of federal spending. As such, its prospects are promising.
Natural skeptics are waiting to see specific legislation to see if the
agreement has teeth. While we are optimistic, we need to temper our enthusiasm.
Much of the good news associated with a balanced budget has been discounted in
the higher prices in the stock and bond markets.
Of particular interest to equity investors is the agreement to reduce the
maximum tax rate on capital gains. Although details of the reduction are yet to
be known, the prospect of more favorable tax treatment on gains will have the
short-term effect of supporting stocks -- investors can be expected to postpone
selling until they can qualify for the lower tax rate. With equity sales
essentially "frozen" until the effective date is known, the stock market should
have a considerable underpinning. Once an effective date is determined, we would
expect the pent-up selling to occur. However, then we shall enjoy the long-term
positive effect of the lower tax rate on gains.
Talk of a balanced budget has shifted the spotlight away from the Federal
Reserve Board's upward pressure on interest rates. Having declined to raise
rates in May, the Fed may still act again at a later date. However, this action
may be the last for a while because the economy seems to be slowing down in the
second quarter, after the rapid 5.6 percent annualized growth in the first
quarter of the year. A slower economy would reduce the threat of inflation and
reduce the need for further rate hikes by the Fed.
In fact, a review of the standard measures of the economy shows little to
be concerned about and much to be encouraged by. As has been the pattern for
more than five years, a few strong quarters followed by a few weak quarters have
produced an overall 2 to 3 percent rate of growth in gross domestic product
(GDP). Job creation and the unemployment rate are consistent with a moderately
expanding economy. Corporate profits continue to grow at an expected 4 to 5
percent rate in 1997. The Consumer Price Index continues to track at a 2.5 to
3.0 percent rate.
Leadership in the stock market has been quite narrow and concentrated in
the first half of 1997 in large, multinational companies with familiar consumer
brand names. The recent rally after the announcement of a balanced budget
agreement suggests that valuations of smaller capitalization stocks are
compelling and the market is broadening.
A natural response to increased volatility in the U.S. equity market is to
look abroad. In fact, the valuations of many international markets are more
attractive than the U.S. However, the weak German and Japanese economies make it
difficult to identify many exciting near-term opportunities without careful
research.
3
<PAGE> 4
ECONOMIC OVERVIEW
- -------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- -------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The
10-year Treasury rate and the prime rate are prevailing interest rates. The
other data report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (6/30/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 6.49 6.58 6.87 6.28
PRIME RATE(2) 8.5 8.25 8.25 8.8
INFLATION RATE(3) 2.3 3.04 2.95 2.76
THE U.S. DOLLAR(4) 5.52 4.59 8.35 -7.04
CAPITAL GOODS ORDERS(5)* 8.17 2.23 2.44 8.24
INDUSTRIAL PRODUCTION(5) 3.84 4.84 3.38 2.36
EMPLOYMENT GROWTH(6) 2.12 2.41 2.18 2.46
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6%. The low, moderate inflation of the last
few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of May 31, 1997.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
Our recommendation to shareholders is to stay the course and to fight the
temptation to try to time when and where you should be invested without help.
Financial assets react much quicker today to events. Volatility has returned to
the market and with it heightened uncertainty. Now is the time to rely on your
financial representative for the expertise and the long-term investing
discipline that he or she can provide.
With this commentary as an economic backdrop, we encourage you to read the
following detailed report of your fund, including an interview with your fund's
portfolio management. Thank you for your continued support. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
Zurich Kemper Investments, Inc.
July 11, 1997
4
<PAGE> 5
PERFORMANCE UPDATE
[MIER PHOTO]
CHRIS MIER JOINED ZURICH KEMPER INVESTMENTS, INC. (ZKI) IN 1986 AND IS NOW
SENIOR VICE PRESIDENT OF ZKI AND A VICE PRESIDENT AND PORTFOLIO MANAGER OF
KEMPER MUNICIPAL INCOME TRUST. MIER RECEIVED A B.A. DEGREE IN ECONOMICS FROM THE
UNIVERSITY OF MICHIGAN AND RECEIVED AN M.M. IN FINANCE FROM THE KELLOGG GRADUATE
SCHOOL OF MANAGEMENT AT NORTHWESTERN UNIVERSITY. HE IS A CHARTERED FINANCIAL
ANALYST.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED
ON MARKET AND OTHER CONDITIONS.
KEMPER MUNICIPAL INCOME TRUST PORTFOLIO MANAGER CHRIS MIER DISCUSSES THE
PERFORMANCE OF THE MUNICIPAL BOND MARKET DURING THE LAST SIX MONTHS. HE
EXPLAINS THE IMPACT THE FEDERAL RESERVE BOARD'S INTEREST RATE INCREASE HAD ON
THE OVERALL MUNICIPAL BOND MARKET AS COMPARED WITH THE FUND.
Q MUNICIPAL BOND YIELDS HAVE FLUCTUATED QUITE A BIT DURING THE LAST SIX
MONTHS. WHAT IMPACT DID THIS HAVE ON THE MUNICIPAL MARKET?
A During the first three months of the period, yields in the municipal market
fluctuated, but tended to be range-bound. The rise and fall of interest rates
was based partly on the market's changing expectations about whether or not the
Federal Reserve Board (the Fed) would move to raise short-term interest rates.
The market was looking for signs that the Fed would raise short-term rates if
the economy was growing too quickly and faced a possible emergence of inflation.
In March, with accumulating evidence of strong first quarter growth, the Fed
raised short-term interest rates by 0.25 percent. In reaction to this
tightening, market yields in all sectors of the municipal market rose and
overall bond performance suffered. Yields continued to rise into April and then
reversed direction in May as it appeared the economy might be losing some of its
earlier steam and a second Fed tightening was not imminent. Additionally, an
agreement in Washington was reached to balance the budget, which also had a
positive impact on the market. At the end of May, market yields were just 0.11
percent higher than at the start of the fiscal year in December.
Q WHAT IMPACT DID THE FEDERAL RESERVE BOARD'S INTERVENTION HAVE ON THE FUND?
A The Fed's rate hike did not have a profound impact on the performance of
the fund. In anticipation of a potential rate increase, however, we closely
monitored economic data releases. We varied duration as appropriate and made
minor adjustments to the fund to mitigate some market risk.
Because of the income-oriented structure of the fund, we did not
aggressively buy and sell issues within the portfolio. We generally ride out
short periods of interest rate turbulance. The fund continues to benefit from a
high level of income from its investments, which enables it to address its
primary investment objective of generating a high level of current income. As a
result, the fund delivered positive performance despite the modest upward
pressure on interest rates and the Fed's rate hike.
Q WHAT TYPES OF ADJUSTMENTS DID YOU MAKE TO THE FUND DURING THE PERIOD?
A The fund's portfolio is designed to generate a high level of income from a
portfolio of investment-grade bonds. Although we consistently monitor
5
<PAGE> 6
PERFORMANCE UPDATE
the performance of the issues, we haven't made significant changes to the
portfolio composition. During the reporting period, we focused on efficiently
reinvesting proceeds from maturing bonds or issues that were called away early.
We also reinvested the fund's interest earnings. We invested in issues with
maturities of 20 to 30 years offering good call protection features and
attractive yields, with acceptable credit risk.
Q CAN YOU TELL US ABOUT THE FUND'S CREDIT SELECTION PROCESS?
A We are fortunate to have a staff of four research analysts dedicated to
following the municipal market. This group of seasoned professionals has more
than 40 years of combined industry experience, which makes them critical to the
portfolio selection process.
Each analyst covers a specific geographic area as well as an industry
specialization. They have access, via computer subscription services, to an
abundant array of regional and national news and financial publications. In
addition, the research analysts regularly meet with issuers and often travel to
conduct on-site visits.
This multi-faceted approach to research enables us to make informed
decisions quickly as issues are offered. This is especially crucial in keeping
the fund fully invested.
Q ARE MUNICIPAL BOND FUNDS A GOOD INVESTMENT IN THE CURRENT ECONOMIC
ENVIRONMENT?
A Municipal bonds may play an important role in rounding out a
well-diversified portfolio of investments. The tax-exempt income that municipal
bond funds provide may be especially helpful now as many investors may be
under-invested in tax-exempt assets. Municipal bonds and equities are both
important components of a balanced portfolio. If your exposure to municipal
bonds has declined on a relative basis, now may be the right time to review your
long-term goals and rebalance your portfolio of investments.
Q WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A We are optimistic about the municipal market. We believe that municipal
bonds may continue to outperform Treasuries. New supply in the market is low and
there continues to be strong demand for municipal bonds from individuals and
property and casualty insurance companies, creating a favorable supply and
demand situation. Additionally, interest rates appear to have stabilized
somewhat and we don't anticipate any significant surges in rates. Inflation
remains relatively benign. All of these factors create a positive environment
for municipal bonds.
6
<PAGE> 7
LARGEST SECTORS
THE FUND'S LARGEST SECTORS*
REPRESENTING 64% OF THE FUND'S TOTAL NET ASSETS ON MAY 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------
HOLDINGS PERCENT
- ------------------------------------------------------------
<S> <C> <C>
1. AIRPORT BONDS 15%
- ------------------------------------------------------------
2. U.S. GOVERNMENT SECURED BONDS 15%
- ------------------------------------------------------------
3. ELECTRICITY BONDS 14%
- ------------------------------------------------------------
4. SINGLE FAMILY STATE HOUSING BONDS 11%
- ------------------------------------------------------------
5. WASTE DISPOSAL BONDS 9%
- ------------------------------------------------------------
</TABLE>
PORTFOLIO STATISTICS
SECURITIES RATINGS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
ON 5/31/97 ON 11/30/96
- -----------------------------------------------------------------------------------
<S> <C> <C>
AAA 51% 48%
- -----------------------------------------------------------------------------------
AA 16 18
- -----------------------------------------------------------------------------------
A 13 13
- -----------------------------------------------------------------------------------
BBB 14 14
- -----------------------------------------------------------------------------------
NOT RATED 6 7
- -----------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 5/31/97 ON 11/30/96
The ratings of Standard & Poor's Corporation (S&P) and Moody's Investors
Services, 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 ratings. Portfolio composition will change over time. Ratings
are relative and subjective and not absolute standards of quality.
AVERAGE MATURITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
ON 5/31/97 ON 11/30/96
- -----------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 21.0 YEARS 20.9 YEARS
- -----------------------------------------------------------------------------------
</TABLE>
* Portfolio holdings and composition are subject to change.
7
<PAGE> 8
PORTFOLIO OF INVESTMENTS
KEMPER MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS AT MAY 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
ISSUER PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
ADVANCE REFUNDED OBLIGATIONS SECURED AS TO PRINCIPAL
AND INTEREST BY UNITED STATES GOVERNMENT SECURITIES
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NY, Urban Dev. Corp., State Facilities, Rev., 7.50%, to be
called 4-01-01 @ 102 $ 6,695 $ 7,517
NY, Dormitory Auth., State University Educational
Facilities, Rev.:
7.25%, to be called 5-15-02 @ 102 5,000 5,670
7.375%, to be called 5-15-00 @ 102 1,355 1,490
NY, New York City, Gen. Oblg., 7.50%, to be called 8-01-99 @
101.50 4,525 4,890
NY, Medical Care Facilities Finance Agcy., Mental Health
Services Facilities Improvement, Rev., 7.70%, to be called
2-15-98 @ 102 3,730 3,905
NY, Housing Finance Agcy., Service Contract, Rev., 7.375%,
to be called 3-15-02 @ 102 3,000 3,399
WA, Public Power Supply System, Nuclear Proj. #2, Rev.,
7.00%, to be called 7-01-00 @ 102 15,500 16,900
WA, Health Care Facilities Auth., Rev., 7.75%, to be called
5-01-00 @ 102 4,200 4,646
IN, Indianapolis, Local Public Improvement Bond Bank, Rev.,
8.50%, to be called 2-01-98 @ 102 12,470 13,097
OK, Tulsa, Airport Improvement Trust, Rev.:
7.70%, to be called 6-01-97 @ 102.50 7,545 7,734
7.70%, to be called 6-01-02 @ 100 3,315 3,751
FL, Volusia County, Health Facilities Auth., Memorial Health
Systems Proj., Rev., 8.25% to be called 6-01-00 @ 102 7,000 7,833
FL, Greater Orlando, Aviation Auth., Airport Facilities
Rev., 8.00%, to be called 10-01-98 @ 102 120 128
MO, St. Louis, Regional Convention and Sports Complex Auth.,
Rev., 7.90%, to be called 8-15-03 @ 100 3,445 4,007
PA, Greene County, Gen. Oblg., 8.75%, to be called 12-01-00
@ 100 3,065 3,448
IL, Chicago, Skyway Toll Bridge, Rev., 6.75%, to be called
1-01-04 @ 102 2,775 3,105
KY, Kenton County, Airport Board, Greater Cincinnati
International Airport, Rev., 8.25% to be called 3-01-98 @
102 1,950 2,052
NC, Eastern Municipal Power Agcy., Power System, Rev.,
8.00%, to be called 1-01-98 @ 102 262 274
Puerto Rico, Gen. Oblg., 7.75%, to be called 7-01-99 @
101.50 5,020 5,447
------------------------------------------------------------------------------------
TOTAL ADVANCE REFUNDED OBLIGATIONS--14.7%
(Cost: $90,907) 99,293
------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
ISSUER PRINCIPAL AMOUNT VALUE
OTHER MUNICIPAL OBLIGATIONS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ILLINOIS--9.1% Chicago:
Gas Supply, Peoples Gas, Light and Coke Co., Rev., 8.10%,
2020 $ 1,250 $ 1,374
Midway Airport, Rev., 5.625%, 2029 4,000 3,829
O'Hare International Airport, International Terminal,
Special Rev., 7.625% and 8.20%, 2010 and 2024 14,775 16,439
Dev. Finance Auth.:
Catholic Health Partners Services, Rev., 5.30%, 2018 3,500 3,253
Pollution Control, Commonwealth Edison Co. Proj., Rev.,
6.75%, 2015 4,220 4,639
Harvard, Multifamily Housing, Northfield Court Proj., Rev.,
9.50%, 2006 2,625 2,838
Health Facilities Auth.:
Bethany Home and Hospital of the Methodist Church, Rev.,
8.625%, 2009 6,815 7,489
Lutheran General Health Care System, Rev., 6.00%, 2018 1,030 1,034
Methodist Health Services Corp., Rev., 8.00%, 2015 1,905 2,056
Housing Dev. Auth., Residential Mortgage, Rev., 8.10%, 2022 3,060 3,161
Regional Transportation Auth., Cook, DuPage, Kane, Lake,
McHenry and Will Counties, Rev., 6.125%, 2022 4,000 4,065
Sports Facilities Auth., Rev., 7.875%, 2010 6,000 6,484
Will County Exempt Facilities, Mobil Oil Refining Corp.
Proj., Rev., 6.00%, 2027 5,000 5,021
------------------------------------------------------------------------------------
61,682
- ---------------------------------------------------------------------------------------------------------------------
NEW YORK--6.3% Dormitory Auth.:
City University System, Rev., 5.625%, 2016 1,500 1,488
State University Educational Facilities, Rev., 7.375% and
7.00%, 2014 and 2016 7,140 7,654
Energy Research and Dev. Auth., Electric Facilities,
Consolidated Edison Co. Proj., Rev., 7.75%, 2024 13,300 13,714
Medical Care Facilities Finance Agcy., Mental Health
Services, Rev., 7.70%, 2018 1,525 1,590
New York City, Gen. Oblg., 6.125% to 7.50%, 2003 through
2025 7,405 7,807
Niagara Frontier Transportation Auth., Greater Buffalo
International Airport, Rev., 6.25%, 2024 5,750 5,961
Port Auth. of New York & New Jersey, JFK International Air
Terminal--6, Rev., 5.75%, 2025 4,000 3,975
------------------------------------------------------------------------------------
42,189
- ---------------------------------------------------------------------------------------------------------------------
TEXAS--6.1% Angelina & Neches River Auth., Solid Waste Disposal,
Champion International Corp. Proj., Rev., 6.30%, 2018 2,350 2,392
Brazos River Auth., Collateralized Pollution Control,
Utilities Electric Co. Proj., Rev., 8.25%, 2019 11,000 11,726
College Student Loans, Gen. Oblg., 5.00%, 2021 4,015 3,636
Dallas-Fort Worth International Airport Facility Improvement
Corp., American Airlines Inc., Rev., 7.50%, 2025 1,500 1,606
Harris County, Criminal Justice Center, Gen. Oblg., 5.625%,
2023 1,800 1,793
Lower Neches Valley Auth., Industrial Dev. Corp., Mobil Oil
Refining Corp. Proj., Rev., 6.35% and 6.40%, 2026 and 2030 19,150 19,996
------------------------------------------------------------------------------------
41,149
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
ISSUER PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FLORIDA--6.1% Broward County, Resource Recovery, Waste Energy Co., Rev.,
7.95%, 2008 $ 4,140 $ 4,515
Dade County:
Aviation Rev., 5.75%, 2026 20,400 20,384
Special Oblg., Capital Appreciation, Rev., zero coupon,
2022 and 2024 24,690 5,010
Escambia County, Pollution Control, Champion International
Corp. Proj., Rev., 6.40%, 2030 6,000 6,233
Greater Orlando Aviation Auth., Airport Facilities, Rev.,
8.00%, 2018 1,130 1,199
Housing Finance Agcy., Home Ownership, Rev., 8.30%, 2020 3,655 3,807
------------------------------------------------------------------------------------
41,148
- ---------------------------------------------------------------------------------------------------------------------
INDIANA--5.9% Employment Dev. Commission, Indianapolis Power and Light
Co., Rev., 7.45%, 2019 14,215 15,154
Fishers, Economic Dev. Auth., Indianapolis Water Co. Proj.,
Rev., 7.875%, 2019 10,000 10,403
Indianapolis, Gas Utility System Rev., 5.875%, 2024 14,000 14,107
------------------------------------------------------------------------------------
39,664
- ---------------------------------------------------------------------------------------------------------------------
NEW JERSEY--4.4% Economic Dev. Auth., Water Facilities, New Jersey American
Water Co., Inc. Proj., Rev., 6.875% and 6.00%, 2034 and
2036 20,775 22,009
Health Care Facilities Financing Auth., General Hospital
Center at Passaic, Rev., 6.75%, 2019 5,000 5,466
Housing and Mortgage Finance Agcy., Home Buyer Rev.,
7.70%, 2029 2,410 2,523
------------------------------------------------------------------------------------
29,998
- ---------------------------------------------------------------------------------------------------------------------
CALIFORNIA--4.4% Housing Finance Agcy., Home Mortgage, Rev., 8.30% and 8.35%,
2019 2,265 2,346
Los Angeles County, Metropolitan Transportation Auth., Sales
Tax Rev., 6.00%, 2026 2,750 2,841
Orange County, Recovery Certificates of Participation,
6.00%, 2026 11,500 11,900
Sacramento County, Airport System, Rev., 5.90%, 2024 5,000 5,038
State, Gen. Oblg., 5.90%, 2025 7,690 7,800
------------------------------------------------------------------------------------
29,925
- ---------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA--3.6% Allegheny County, Greater Pittsburgh International Airport,
Rev., 8.25%, 2016 8,450 8,805
Lehigh County:
General Purpose Auth., Wiley House, Rev., 8.65% and 8.75%,
2004 and 2014 5,520 5,742
Industrial Dev. Auth., Pollution Control, Rev., 6.15%,
2029 1,500 1,564
Philadelphia, Gas Works, Rev., 6.375%, 2026 7,950 8,141
------------------------------------------------------------------------------------
24,252
- ---------------------------------------------------------------------------------------------------------------------
MAINE--3.6% Health and Higher Educational Facilities Auth., Rev., 5.70%
and 7.00%, 2013 and 2024 9,320 9,882
Housing Auth., Mortgage Purchase Rev., 8.30%, 2028 30 30
Regional Waste Systems, Inc., Solid Waste Resource Recovery,
Rev., 7.85% and 8.15%, 2011 13,280 14,209
------------------------------------------------------------------------------------
24,121
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
ISSUER PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COLORADO--3.2% Adams County, Multifamily Housing, Oasis Park Apartments
Proj., Rev., 6.15%, 2026 $ 6,580 $ 6,677
City and County of Denver, Airport System Rev., 6.75% to
8.50%, 2013 through 2023 10,580 11,480
Housing and Finance Auth., Single Family Program, Rev.,
7.70%, 2021 3,255 3,387
------------------------------------------------------------------------------------
21,544
- ---------------------------------------------------------------------------------------------------------------------
OHIO--2.7% Cuyahoga County, Meridia Health System, Hospital Rev.,
6.25%, 2024 2,350 2,420
Green Springs, Health Care Facilities Rev., 7.125%, 2025 6,000 6,169
Higher Education Facility Commission, University of Findlay
Proj., Rev., 6.15% and 6.125%, 2011 and 2016 3,635 3,596
Housing Finance Agcy., Single Family Mortgage Rev., 7.65% to
8.25%, 2010 through 2029 5,891 6,202
------------------------------------------------------------------------------------
18,387
- ---------------------------------------------------------------------------------------------------------------------
KENTUCKY--2.5% Kenton County Airport Board, Greater Cincinnati
International Airport, Rev., 8.25%, 2015 8,950 9,363
Trimble County Pollution Control, Louisville Gas & Electric
Co. Proj., Rev., 7.75%, 2019 7,000 7,277
------------------------------------------------------------------------------------
16,640
- ---------------------------------------------------------------------------------------------------------------------
VIRGINIA--2.2% Fairfax County Economic Dev. Auth., Resource Recovery, Ogden
Martin System Proj., Rev., 7.75%, 2011 13,890 14,863
- ---------------------------------------------------------------------------------------------------------------------
HAWAII--2.1% Department of Budget and Finance, Special Purpose, Hawaiian
Electric Co., Inc. Proj., Rev., 6.20%, 2026 13,200 13,598
Housing Finance and Dev. Corp., Single Family Mortgage Rev.,
8.125%, 2019 565 584
------------------------------------------------------------------------------------
14,182
- ---------------------------------------------------------------------------------------------------------------------
ALABAMA--2.0% Docks Dept., Facilities Rev., 6.30%, 2021 8,250 8,571
Jefferson County, Sewer Rev., 5.75%, 2022 5,000 5,014
------------------------------------------------------------------------------------
13,585
- ---------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA--1.9% Metropolitan Airports Auth., Airport System, Rev., 5.75%,
2020 13,100 13,090
- ---------------------------------------------------------------------------------------------------------------------
VERMONT--1.8% Housing Finance Agcy., Mortgage Purchase Rev., 8.10%, 2022 11,890 12,336
- ---------------------------------------------------------------------------------------------------------------------
UTAH--1.8% Housing Finance Agcy., Single Family Mortgage Rev.,
6.65%, 2026 905 937
Intermountain Power Agcy., Power Supply System Rev., 7.75%
and 5.00%, 2020 and 2021 11,700 11,352
------------------------------------------------------------------------------------
12,289
- ---------------------------------------------------------------------------------------------------------------------
LOUISIANA--1.7% Housing Finance Agcy., Single Family Mortgage Rev.,
8.30%, 2020 3,490 3,631
Public Facilities Auth., Lafayette General Medical Center
Proj., Rev., 6.50%, 2022 7,350 7,914
------------------------------------------------------------------------------------
11,545
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
ISSUER PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MISSOURI--1.4% Health and Educational Facilities Auth., Health Facilities,
Lake of the Ozarks General Hospital Inc. Proj., Rev.,
6.50%, 2021 $ 1,125 $ 1,159
Housing Dev. Commission, Single Family Mortgage Rev., 7.90%,
2021 3,830 3,978
St. Louis, Regional Convention and Sports Complex Auth.,
Rev., 7.90%, 2021 155 172
West Plains, Industrial Dev. Auth., Ozarks Medical Center
Proj., Rev., 8.625%, 2020 3,650 3,972
------------------------------------------------------------------------------------
9,281
- ---------------------------------------------------------------------------------------------------------------------
NEW MEXICO--1.2% Mortgage Finance Auth., Single Family Mortgage Rev., 8.30%
and 7.80%, 2020 and 2021 7,440 7,787
- ---------------------------------------------------------------------------------------------------------------------
NEBRASKA--1.2% Investment Finance Auth., Single Family Housing Rev., 6.70%,
2026 7,500 7,776
- ---------------------------------------------------------------------------------------------------------------------
MICHIGAN--1.0% Monroe County, Pollution Control, Detroit Edison Proj.,
Rev., 7.75%, 2019 6,500 7,009
- ---------------------------------------------------------------------------------------------------------------------
IOWA--1.0% Housing Finance Auth., Single Family Mortgage Rev., 7.90%,
2022 6,690 6,992
- ---------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS--1.0% Port Auth., Special Facilities, US Air Proj., Rev., 5.875%,
2023 6,755 6,799
- ---------------------------------------------------------------------------------------------------------------------
MARYLAND--1.0% Howard County, Multifamily Housing, Braeland and Eden Common
Projs., Rev., 6.20%, 2023 6,750 6,546
- ---------------------------------------------------------------------------------------------------------------------
STATES LESS THAN ID, Housing Agcy., Single Family Mortgage Rev., 7.875% and
ONE PERCENT--4.6% 6.90%, 2021 and 2025 5,355 5,574
MN, Housing Finance Agcy., Single Family Mortgage Rev.,
7.95% and 8.00%, 2022 and 2029 4,675 4,864
NC, Housing Finance Agcy., Single Family Mortgage Rev.,
7.85%, 2028 3,675 3,850
ND, Housing Finance Agcy., Single Family Mortgage Rev.,
8.375%, 2021 710 746
NH, Higher Educational and Health Facilities Auth., Nashua
Memorial Hospital, Rev., 6.00%, 2023 3,000 2,982
NV, Clark County, Industrial Dev., Power Co. Proj., Rev.,
6.70%, 2022 1,750 1,865
OK, Turnpike Auth., Turnpike System Rev., 7.875%, 2021 355 378
SC, Oconee County, Pollution Control, Duke Power Co. Proj.,
Rev., 7.75%, 2017 3,500 3,764
WA, Grant County, Public Utility District #2, Wanapum Hydro-
Electric, Rev., 5.875%, 2031 1,575 1,581
WA, Public Power Supply System, Nuclear Projs. #1 and #3,
Rev., 5.60%, 2015 3,000 2,985
WI, Housing & Economic Dev. Auth., Home Ownership, Rev.,
6.20%, 2027 2,500 2,526
------------------------------------------------------------------------------------
31,115
------------------------------------------------------------------------------------
TOTAL OTHER MUNICIPAL OBLIGATIONS--83.8%
(Cost: $534,745) 565,894
------------------------------------------------------------------------------------
TOTAL MUNICIPAL OBLIGATIONS--98.5%
(Cost: $625,652) 665,187
------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET Yield--4.00% to 4.35%
INSTRUMENTS--.7%
Due--June 1997
(Cost: $4,900) $ 4,900 $ 4,900
------------------------------------------------------------------------------------
TOTAL INVESTMENTS--99.2%
(Cost: $630,552) 670,087
------------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES--.8% 5,374
------------------------------------------------------------------------------------
NET ASSETS--100.0% $675,461
------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Based on the cost of investments of $630,552,000 for federal income tax purposes
at May 31, 1997, the gross unrealized appreciation was $39,830,000, the gross
unrealized depreciation was $295,000 and the net unrealized appreciation on
investments was $39,535,000.
See accompanying Notes to Financial Statements.
13
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $630,552) $670,087
- ------------------------------------------------------------------------
Receivable for:
Investments sold 3,388
- ------------------------------------------------------------------------
Interest 13,777
- ------------------------------------------------------------------------
TOTAL ASSETS 687,252
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Cash overdraft 2,771
- ------------------------------------------------------------------------
Payable for:
Investments purchased 8,440
- ------------------------------------------------------------------------
Management fee 309
- ------------------------------------------------------------------------
Trustees' fees and other 271
- ------------------------------------------------------------------------
Total liabilities 11,791
- ------------------------------------------------------------------------
NET ASSETS $675,461
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Remarketed preferred shares, par value $.01 per share,
unlimited number of shares authorized,
43 shares outstanding at $5 thousand liquidation value per
share $215,000
- ------------------------------------------------------------------------
Common shares, par value $.01 per share, unlimited number of
shares authorized,
38,038 shares outstanding 380
- ------------------------------------------------------------------------
Paid-in surplus 421,159
- ------------------------------------------------------------------------
Accumulated net realized loss on investments (13,653)
- ------------------------------------------------------------------------
Net unrealized appreciation on investments 39,535
- ------------------------------------------------------------------------
Undistributed net investment income 13,040
- ------------------------------------------------------------------------
NET ASSETS $675,461
- ------------------------------------------------------------------------
NET ASSET VALUE PER COMMON SHARE
(net assets less remarketed preferred shares at liquidation
value
divided by common shares outstanding) $12.11
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------
NET INVESTMENT INCOME
- ----------------------------------------------------------------------------
Interest income $22,455
- ----------------------------------------------------------------------------
Expenses:
Management fee 1,853
- ----------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 101
- ----------------------------------------------------------------------------
Registration and remarketing fees 271
- ----------------------------------------------------------------------------
Professional fees 49
- ----------------------------------------------------------------------------
Reports to shareholders 22
- ----------------------------------------------------------------------------
Trustees' fees and other 99
- ----------------------------------------------------------------------------
Total expenses 2,395
- ----------------------------------------------------------------------------
NET INVESTMENT INCOME 20,060
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ----------------------------------------------------------------------------
Net realized gain on sales of investments 748
- ----------------------------------------------------------------------------
Net realized loss from futures transactions (217)
- ----------------------------------------------------------------------------
Net realized gain 531
- ----------------------------------------------------------------------------
Change in net unrealized appreciation on investments (8,281)
- ----------------------------------------------------------------------------
Net loss on investments (7,750)
- ----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $12,310
- ----------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996
- --------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 20,060 40,573
- --------------------------------------------------------------------------------------------------
Net realized gain 531 577
- --------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (8,281) (4,207)
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 12,310 36,943
- --------------------------------------------------------------------------------------------------
Distribution from net investment income:
Common shares (16,600) (32,977)
- --------------------------------------------------------------------------------------------------
Remarketed preferred shares (3,782) (7,662)
- --------------------------------------------------------------------------------------------------
Total dividends to shareholders (20,382) (40,639)
- --------------------------------------------------------------------------------------------------
Proceeds from common shares issued in reinvestment of
dividends (175 and 409 shares, respectively) 2,290 5,255
- --------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (5,782) 1,559
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------
Beginning of period 681,243 679,684
- --------------------------------------------------------------------------------------------------
END OF PERIOD
(including undistributed net investment income
of $13,040 and $13,362, respectively) $675,461 681,243
- --------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES DESCRIPTION OF FUND. Kemper Municipal Income Trust
(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 financial futures
and options are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Over-the-counter
traded options are valued based upon prices
provided by market makers. 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 includes premium and original
issue discount amortization on fixed income
securities. Realized gains and losses from
investment transactions are reported on an
identified cost basis.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies during the six
months ended May 31, 1997. The accumulated net
realized loss on sales of investments for federal
income tax purposes at May 31, 1997, amounting to
approximately $9,664,000, is available to offset
future taxable gains. If not applied, the loss
carryover expires in the period ended 2003.
DIVIDENDS TO SHAREHOLDERS. 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. Dividends are
determined in accordance with income tax principles
which may treat certain transactions differently
from generally accepted accounting principles.
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 the dividends
are paid every 28 days. Preferred shareholders will
vote together with common shareholders as a single
class and have the same voting rights, subject to
certain class specific preferences.
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Zurich Kemper Investments, Inc.
(ZKI) and pays a management fee at an annual rate
of .55% of average weekly net assets. The Fund
incurred a management fee of $1,853,000 for the six
months ended May 31, 1997.
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Zurich Kemper Service Company (ZKSvC) (formerly
known as Kemper Service Company) is the shareholder
service agent of the Fund. Under the agreement,
ZKSvC received shareholder services fees of $32,000
for the six months ended May 31, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the six months ended May 31, 1997, the Fund
made no payments to its officers and incurred
trustees' fees of $25,000 to independent trustees.
- --------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS For the six months ended May 31, 1997, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $46,500
Proceeds from sales 38,314
17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, ------------------------------------------
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE FOR A COMMON SHARE
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.31 12.41 11.12 13.25 12.45
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .52 1.07 1.10 1.10 1.16
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.18) (.10) 1.29 (1.84) .66
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .34 .97 2.39 (.74) 1.82
- -----------------------------------------------------------------------------------------------------------
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) .10 .20 .23 .16 .15
- -----------------------------------------------------------------------------------------------------------
Distribution from net realized gain to common
shareholders -- -- -- .36 --
- -----------------------------------------------------------------------------------------------------------
Total dividends .54 1.07 1.10 1.39 1.02
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.11 12.31 12.41 11.12 13.25
- -----------------------------------------------------------------------------------------------------------
Market value, end of period $13.50 13.13 12.63 11.00 12.75
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN PER COMMON SHARE (NOT ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
Based on net asset value 1.97% 6.56 20.00 (7.36) 13.80
- -----------------------------------------------------------------------------------------------------------
Based on market value 6.48% 11.57 23.55 (4.66) 8.04
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
(Ratios exclude the effect of dividends to preferred shareholders)
Expenses .71% .72 .69 .70 .69
- -----------------------------------------------------------------------------------------------------------
Net investment income 5.95% 6.03 6.23 6.13 6.20
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets at end of period, net of remarketed
preferred shares (in thousands) $460,461 466,243 464,684 414,790 493,108
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 12% 26 19 12 17
- -----------------------------------------------------------------------------------------------------------
Remarketed preferred shares information at end of period:
Aggregate amount outstanding (in thousands) $215,000 215,000 215,000 215,000 215,000
Asset coverage per share $ 15,700 15,800 15,800 14,600 16,500
Liquidation and market value per share $ 5,000 5,000 5,000 5,000 5,000
- -----------------------------------------------------------------------------------------------------------
</TABLE>
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.
18
<PAGE> 19
SHAREHOLDERS' MEETING
ANNUAL SHAREHOLDERS' MEETING
On May 29, 1997, an annual shareholders' meeting was held. Kemper Municipal
Income Trust shareholders were asked to vote on two separate issues: re election
of the eight members to the Board of Trustees and ratification of Ernst & Young
LLP as independent auditors. We are pleased to report that all nominees were
elected and the selection of Ernst & Young LLP as the fund's auditors was
ratified. Following are the results for each issue:
1) Re-election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
James E. Akins 31,228,854 666,749
Arthur R. Gottschalk 31,256,832 638,771
Frederick T. Kelsey 39,840 1,060
(preferred shares only)
Dominique P. Morax 31,247,828 647,775
Fred B. Renwick 31,195,631 652,366
Stephen B. Timbers 39,840 1,060
(preferred shares only)
John B. Tingleff 31,282,598 613,005
John G. Weithers 31,284,142 611,461
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
31,432,291 150,584 312,727
</TABLE>
19
<PAGE> 20
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS CHARLES R. MANZONI, JR.
President and Trustee Vice President
JAMES E. AKINS CHRISTOPHER J. MIER
Trustee Vice President
ARTHUR R. GOTTSCHALK JOHN E. NEAL
Trustee Vice President
FREDERICK T. KELSEY ROBERT C. PECK
Trustee Vice President
DOMINIQUE P. MORAX PHILIP J. COLLORA
Trustee Vice President and
Secretary
FRED B. RENWICK
Trustee JEROME L. DUFFY
Treasurer
JOHN B. TINGLEFF
Trustee
JOHN G. WEITHERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT ZURICH KEMPER SERVICE COMPANY
P.O. Box 419066
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[RECYCLED LOGO]
Printed on recycled paper.
KMIT - 3 (7/97) 1034790
Printed in the U.S.A. [KEMPER FUNDS LOGO]
