<PAGE>
MILLENNIUM INCOME TRUST
TREASURERS' GOVERNMENT MONEY MARKET FUND
SEMI-ANNUAL REPORT
MARCH 31, 1998
<PAGE>
MILLENNIUM INCOME TRUST
- -----------------------------------------------------------------------------
Dear Shareholder,
We are pleased to provide you with the semi-annual report of the Millennium
Income Trust for the six month period ended March 31, 1998. During the
period the Treasurers' Government Money Market Fund portfolio registered
solid performance and achieved its objective of providing maximum current
income from high quality money market securities while maintaining stability
of principal.
Although past performance is no guarantee of future results the table below
presents the Fund's 7 day average yields at the end of the six month period.
7 Day Average Yields (3/31/98)
------------------------------
<TABLE>
<CAPTION>
Current Compound
------- --------
<S> <C> <C>
Treasurers' Government Money Market Fund 5.54% 5.69%
</TABLE>
Thank you for choosing the Treasurers' Government Money Market Fund. We look
forward to the continued opportunity to meet your investment needs.
James A. Casselberry, Jr.
President
May 29, 1998
<PAGE>
MILLENNIUM INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investment securities, at acquisition cost
and value (Note 2) $ 8,148,415
Cash 13,655
Receivables
Accrued income 507
Other assets 18,590
Prepaid organizational expenses, net (Note 3) 8,340
---------
Total assets 8,189,507
---------
LIABILITES:
Income distribution payable 36,358
Payable to related party (Note 3) 8,340
---------
Total liabilities 44,698
---------
Net assets $ 8,144,809
=========
Net assets consist of capital shares $ 8,144,809
=========
Shares of beneficial interest outstanding
(Unlimited number of shares authorized, no par value) $ 8,144,809
=========
Net asset value, redemption price and
offering price per share (Note 2) $ 1.00
=========
</TABLE>
See accompanying Notes to Financial Statements.
1
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Par Value
--------- ----------
<S> <C> <C>
AGENCY DISCOUNT NOTES - 60.4 %
Federal Home Loan Bank
5.43% discount rate, due 4/13/98 $ 3,432,000 $ 3,425,788
Federal Home Loan Mortgage Corp
5.45% discount rate, due 4/23/98 1,500,000 1,495,009
---------
TOTAL AGENCY DISCOUNT NOTES
(Cost $ 4,906,651) 4,920,797
---------
</TABLE>
<TABLE>
<CAPTION>
Maturity Value
--------- ----------
<S> <C> <C>
REPURCHASE AGREEMENT (1) - 39.6 %
Morgan Stanley Group, Inc
5.65% Issue date 3/31/98 due 4/1/98 $ 3,228,124 $ 3,227,618
---------
TOTAL REPURCHASE AGREEMENT
(Cost $ 3,227,618) 3,228,124 3,227,618
--------- ---------
TOTAL INVESTMENTS - 100%
(Cost $ 8,134) $ 8,148,415
=========
</TABLE>
(1) Repurchase agreement is fully collateralized by U.S. Government
securities.
See accompanying Notes to Financial Statements.
2
<PAGE>
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income
U. S. government securities $ 101,923
Repurchase agreements 7,454
-------
Total Income 109,377
EXPENSES: (Note 3)
Management fees 3,960
Administration fees 990
Service fees 10,877
Legal fees 4,937
Audit fees 7,500
Insurance expense 3,000
Amortization of organization expenses 2,344
-------
Total Expenses 33,608
Less fees waived and expenses reimbursed by the Manager (32,571)
-------
Net Expenses 1,037
-------
NET INVESTMENT INCOME AND INCREASE
IN NET ASSETS FROM OPERATIONS $ 108,340
=======
</TABLE>
See accompanying Notes to Financial Statements.
3
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
6 Months Year Year
Ended Ended Ended
3/31/98 9/30/97 9/30/96
--------- --------- ---------
<S> <C> <C> <C>
Operations, dividends & capital share activity:
Net investment income $ 108,340 $ 6,315 $ 6,183
Dividends to shareholders from investment income (108,340) (6,315) (6,183)
Proceeds from shares sold 7,966,245 0 100,318
Shares issued in reinvestment of dividends 67,354 6,315 6,183
Less payments for shares redeemed 0 (26,606) (75,000)
--------- --------- ---------
Total increase (decrease) in net assets 8,033,599 (20,291) 31,501
Net assets:
Beginning of period (Note 1) 111,210 131,501 100,000
--------- --------- ---------
End of period $ 8,144,809 $ 111,210 $ 131,501
========= ========= =========
</TABLE>
See accompanying Notes to Financial Statements.
4
<PAGE>
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
6 Months Year Year
Ended Ended Ended
3/31/98 9/30/97 9/30/96
------- ------- -------
<S> <C> <C> <C>
Per share data for a share outstanding
throughout the period:
Net asset value at beginning of period $ 1.000 $ 1.000 $ 1.000
----- ----- -----
Net investment income .026 .051 .052
Distributions from net investment income (.026) (.051) (.052)
Net asset value at end of period $1.000 $ 1.000 $ 1.000
===== ===== =====
Total Return 5.47% * 5.06% 5.27%
===== ===== =====
Net assets at end of period $ 8,144,809 $ 111,210 $ 131,501
Ratios:
Net of expenses waived or absorbed by manager (Note 3)
Ratio of net expenses to average net assets 0.05% * 0.00% 0.00%
Ratio of net investment income to average net assets 5.47% * 5.06% 5.25%
Assuming no fee waivers or expense absorption (Note 3)
Ratio of expenses to average net assets 1.70% * 30.19% 14.42%
Ratio of net investment income to average net assets 3.83% * (25.13%) (9.17%)
</TABLE>
* Annualized
See accompanying Notes to Financial Statements.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
(1) Organization
The Millennium Income Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end diversified management
investment company. The Trust was established as a Massachusetts business
trust under a Declaration of Trust dated August 19, 1994. The Trust has
established one fund series, the Treasurers' Government Money Market Fund
(the "Fund"). The Trust was capitalized on January 17, 1995, when 100,000
shares of the Fund were issued at $1.00 per share to Janis S. England,
chairman and controlling member of Millennium Financial LLC, the Fund's
administrator, and Millennium Capital LLC, the Fund's distributor. The Fund
had no operations prior to the public offering (which occurred on October 2,
1995) of shares except for the initial issuance of shares; accordingly, no
financial statement information is presented for the period prior to fiscal
1996. The Fund's investment objective is to seek high current income,
consistent with protection of capital.
(2) Significant Accounting Policies
The following is a summary of the Fund's significant accounting policies:
Security valuation - Securities are valued on the amortized cost basis, which
approximates market value. This involves initially valuing a security at its
original cost and thereafter assuming a constant amortization to maturity of
any discount or premium. This method of valuation is expected to enable the
Fund to maintain a constant net asset value per share.
Repurchase agreements - Repurchase agreements are collateralized by U.S.
Government securities valued at cost which, together with accrued
interest, approximates market. Collateral for repurchase agreements is held
in safekeeping in the the Fund's custodian customer-only account at the
Federal Reserve Bank of Cleveland. At the time the Fund enters into a
repurchase agreement, the seller agrees that the value of the underlying
securities, including accrued interest, will be equal to or exceed the face
amount of the repurchase agreement. In the event of a bankruptcy or other
default of the seller of a repurchase agreement, the Fund could experience
both delays in liquidating the underlying security and losses. These losses
would equal the face amount of the repurchase agreement(s) and accrued
interest, net of any proceeds received in liquidation of the underlying
securities. To minimize the possibility of loss, the Fund enters into
repurchase agreements only with institutions deemed to be creditworthy.
Security transactions - Investment transactions are accounted for on the
trade date. Securities sold are valued on a specific identification basis.
Fund share valuation, investment income and distributions to shareholders -
The net asset value per share of the Fund is calculated twice a day by
dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. Interest income is accrued as earned.
6
<PAGE>
Distributions from net investment income are declared daily and paid on or
about the first business day of each month.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Federal income tax - It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so
qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of Federal income tax on the
income distributed. Accordingly, no provision for income taxes has been
made. In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned
during the calendar year) and 98% of its net realized capital gains (earned
during the twelve months ended October 31) plus undistributed amounts from
prior years.
(3) Transactions with Affiliates
The President of the Trust is the chairman and controlling shareholder of
Trias Capital Management, Inc. ("Trias"), the Trust's investment manager.
The Treasurer of the Trust is the chairman and controlling member of
Millennium Financial LLC ("MFL"), the Trust's administrator, and Millennium
Capital LLC ("MCL"), the Trust's principal underwriter.
Investment Management Agreement - The Fund's investments are managed by Trias
pursuant to the terms of a management agreement effective June 1, 1997.
Under the terms of the management agreement, the Fund pays Trias a fee, which
is computed and accrued daily and paid monthly at the annual rate of .20% of
its average daily net assets. Since June 1, 1997, Trias voluntarily waived
its advisory fees and absorbed all Fund expenses. Prior to June 1, 1997 the
Fund's investments were managed by MFL. The Fund paid MFL a fee, at the
annual rate of .25% of its average daily net assets.
Administration Agreement - The Fund's business affairs are managed by MFL
pursuant to the terms of an administration agreement effective June 1, 1997.
Under the terms of the administration agreement, the Fund pays MFL a fee,
which is computed and accrued daily and paid monthly at the annual rate of
.05% of its average daily net assets. In order to reduce the operating
expenses of the Fund, MFL voluntarily waived its administration fee.
Transfer Agent and Shareholder Service Agreement - Under the terms of a
Transfer, Dividend Disbursing, Shareholder Service and Plan Agency Agreement
between the Trust and Countrywide Fund Services, Inc. ("CFS") dated October
10, 1997, CFS maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. For these
7
<PAGE>
services CFS receives a monthly fee at an annual rate of $20 per shareholder
account, subject to a minimum monthly fee not to exceed $1,500. In addition
the Fund pays CFS' out-of-pocket expenses including, but not limited to,
postage and supplies.
Accounting Services Agreement - Under the terms of the Accounting Services
Agreement between the Trust and CFS, CFS calculates the daily net asset value
per share and maintains the books and records of the Fund. For these
services, as of October 1, 1997 CFS receives a monthly fee, based on current
assets levels, of $1,000 per month.
Prepaid Organizational Expenses - Expenses paid by MFL amounting to $23,500,
were incurred in connection with the organization of the Trust and the
initial offering of shares. Such organizational expenses are capitalized and
amortized on a straight-line basis over five years. As of January 17, 1995,
all outstanding shares of the Fund were held by the chairman and controlling
member of MFL, who purchased these initial shares in order to provide the
Trust with its required capital. In the event any of the initial shares of
the Fund are redeemed by the chairman and controlling member of MFL or by any
subsequent owner at any time prior to the complete amortization of
organizational expenses, the redemption proceeds payable with respect to such
shares will be reduced by the pro rata share of the unamortized deferred
organizational expenses as of the date of such redemption.
8
