-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CezSFZptXKildSaxXNB3I1pRo5ciT1Lited0lCrkEwxbz4qPeTNiC0M17HnKftGd Sr62vZ86Z5EAGSiVzIqfSA== 0000950123-95-003030.txt : 19951027 0000950123-95-003030.hdr.sgml : 19951027 ACCESSION NUMBER: 0000950123-95-003030 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951026 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUNICIPAL INCOME TRUST/MA CENTRAL INDEX KEY: 0000817130 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133422754 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05214 FILM NUMBER: 95584286 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CNTR STREET 2: C/O DEAN WITTER INTERCAPITAL INC CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123922550 FORMER COMPANY: FORMER CONFORMED NAME: ALLSTATE MUNICIPAL INCOME TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WITTER DEAN TAX FREE INCOME TRUST DATE OF NAME CHANGE: 19870817 N-30D 1 MUNICIPAL INCOME TRUST I 1 MUNICIPAL INCOME TRUST Two World Trade Center, New York, New York 10048 LETTER TO THE SHAREHOLDERS August 31, 1995 DEAR SHAREHOLDER: MARKET SUMMARY Bond market conditions have improved steadily since late last year. Progressive tightening of Federal Reserve Board monetary policy over the 12 months through February 1995 led to slower economic growth and caused bonds to rally. The move toward lower long-term interest rates this year reversed 1994's prevailing trend of rapidly rising rates. Long-term municipal bond yields, as tracked by The Bond Buyer Revenue Bond Index*, moved from a high of 7.37 percent in November 1994 to 6.26 percent at the end of August 1995. This 111 basis point decline in yield corresponded to a 9 percent price increase for callable municipal bonds with 30-year maturities. Tax-exempt bonds outperformed U.S. Treasury bonds in early 1995. The ratio of the Revenue Bond Index yield to the 30-year U.S. Treasury bond yield moved from a high of 89 percent in December 1994 to 84 percent by the end of February 1995. A declining ratio means that municipal bond prices have been stronger than U.S. Treasury prices. Tax reform proposals advocating the flat-tax concept were introduced in Congress in the wake of the mid-term elections. The risk of eventual passage of comprehensive changes in the tax code caused municipals to adjust in relation to Treasuries. By the end of August, the ratio of the Revenue Bond Index yield to the 30-year U.S. Treasury bond yield had risen to 94 percent. The pace of new-issue underwriting over the first eight months of 1995 declined 25 percent compared to the same period last year. With bond maturities and calls for redemption estimated to exceed new issues coming to market in 1995, the outstanding supply of municipal securities is expected to decline for the second year in a row. The resulting demand for tax-free securities has tended to counteract the uncertainty created by flat tax proposals. - --------------------- * The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of 25 selected municipal revenue bonds with 30-year maturities. Credit ratings of these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by Standard & Poor's. 2 MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS, continued PERFORMANCE The net asset value (NAV) of Municipal Income Trust (TFA) declined from $10.16 to $9.92 per share during the fiscal year ended August 31, 1995. Based on this NAV change plus reinvestment of tax-free dividends totaling $0.60 per share and capital gains distributions totaling $0.34 per share, the Fund's total NAV return was 8.15 percent. Over the same period, the Fund's market price on the New York Stock Exchange declined from $9.25 to $9.00 per share. Based on this stock price change and reinvestment of dividends and distributions, TFA's total market return for the fiscal year was 7.78 percent. On August 31, 1995 the Fund had undistributed net investment income of $0.13 per share, an increase of $0.06 per share during the fiscal year. This dividend reserve or "cushion" has been accumulated to better sustain future dividends. The Fund's market price began and ended the period trading at a discount to NAV of approximately nine percent. At the end of the fiscal year, the Fund had net assets in excess of $313 million. PORTFOLIO STRUCTURE Long-term investments were diversified among 15 municipal sectors and 68 separate credits. The three largest municipal sectors -- refunded, industrial development/pollution control revenue and general obligation bonds -- represented 46 percent of net assets. The average maturity and call protection of the Fund's long-term holdings was 18 and 6 years, respectively. More than $45 million of bonds callable prior to 1999 have been eliminated from the portfolio over the past 12 months. The credit quality ratings of the Fund's long-term portfolio are summarized below:
Moody's or Standard & Poor's Ratings Percent -------------------------------------------------------------------------------- Aaa or AAA............................................................ 20% Aa or AA.............................................................. 29 A or A................................................................ 35 Baa or BBB............................................................ 9 Not Rated............................................................. 7 --- 100% ---
LOOKING AHEAD The slower pace of economic growth in 1995 and the Federal Reserve Board's previous interest rate moves have improved bond market expectations. The decreasing supply of new issues combined with significant maturities and calls for redemption should continue to be positive for the municipal market. However, tax-reduction proposals may continue to receive publicity and cloud the outlook for tax-exempt bonds. With long-term municipals yielding more than 90 percent of the yield on Treasuries, the market has begun the process of discounting the risk that a flat tax will eventually become law. 3 MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS, continued Among the factors that will determine the Fund's future dividend level are changes in market yields and the sale or redemption of older, higher-yielding portfolio holdings. At present market levels, the Fund cannot replace the tax-free income attributable to many investments purchased more than five years ago. The Fund's procedure for reinvestment of all dividends and distributions on common shares is through purchase in the open market. This method helps to support the market value of the Fund's shares. In addition, we would like to remind you that the Trustees have approved a procedure whereby the Fund, when appropriate, may repurchase shares in the open market or in privately negotiated transactions at a price not above market value or net asset value, whichever is lower at the time of purchase. During the fiscal year ended August 31, 1995, TFA purchased 1,017,500 shares of common stock at a weighted average market discount of 8.89 percent. We appreciate your ongoing support of Municipal Income Trust and look forward to continuing to serve your investment needs. Very truly yours, /s/ C. FIUMEFREDDO - ----------------------- CHARLES A. FIUMEFREDDO Chairman of the Board 4 MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS August 31, 1995
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- MUNICIPAL BONDS (97.6%) General Obligation (12.0%) $ 6,000 Moulton-Niguel Water District, California, Refg 1993 (MBIA).............. 5.00 % 09/01/19 $ 5,248,860 6,270 Washington Suburban Sanitary District, Maryland, Gen Constr Refg 1994.... 5.00 06/01/10 5,883,141 10,000 Massachusetts, 1994 Ser A................................................ 5.00 01/01/11 9,184,300 New York City, New York, 4,000 1995 Ser D (MBIA)....................................................... 6.20 02/01/07 4,362,520 850 1988 Ser D.............................................................. 8.50 08/01/08 924,035 5,000 New York State, Refg Ser 1995 B.......................................... 5.625 08/15/09 5,036,600 7,000 Shelby County, Tennessee, Refg 1995 Ser A................................ 5.625 04/01/11 7,013,440 - -------- ---------- 39,120 37,652,896 - -------- ---------- Educational Facilities Revenue (5.5%) 5,000 California Public Works Board, University of California 1993 Ser A....... 5.50 06/01/21 4,493,000 3,500 Georgetown University, District of Columbia, Ser 1989 A.................. 8.25 04/01/18 3,882,515 4,000 FSU Financial Assistance Inc, Florida, Impr & Refg Ser 1994.............. 5.25 10/01/15 3,696,160 5,000 New Jersey Economic Development Authority, Educational Testing Service Ser 1995 B (MBIA)....................................................... 6.25 05/15/25 5,051,100 - -------- ---------- 17,500 17,122,775 - -------- ---------- Electric Revenue (8.8%) 1,500 North Carolina Municipal Power Agency #1, Catawba Refg Ser 1988 A........ 7.50 01/01/17 1,598,610 20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C....................... 4.70 02/01/06 18,668,800 Intermountain Power Agency, Utah, 1,000 First Crossover Ser..................................................... 7.875 07/01/14 1,048,580 3,000 Refg Ser 1987 D......................................................... 8.625 07/01/21 3,272,100 2,750 Chelan County Public Utility District #1, Washington, Ser 1987 B (AMT)... 9.30 07/01/62 3,072,547 - -------- ---------- 28,250 27,660,637 - -------- ---------- Hospital Revenue (5.8%) Illinois Health Facilities Authority, 1,375 Glen Oaks Medical Center Inc Refg 1990 Ser D............................ 9.50 11/15/15 1,610,799 1,000 Mercy Center for Health Care Services Ser 1992.......................... 6.65 10/01/22 1,000,590 950 Kentucky Development Finance Authority, Ashland Hospital/King's Daughters Refg & Impr Ser 1987.................................................... 9.75 08/01/11 1,081,632 1,500 Winchester, Kentucky, Clark County Hospital Refg Ser 1987................ 7.75 04/01/13 1,571,610 7,500 North Carolina Medical Care Commission, Presbyterian Health Services Corp Refg Ser 1993........................................................... 5.50 10/01/20 7,146,900 3,275 Washington Health Care Facilities Authority, Sisters of Providence Ser 1988..................................................................... 8.625 10/01/07 3,597,522 1,850 Fayette County, West Virginia, MPC Inc Refg Ser 1990..................... 9.75 02/01/11 2,073,517 - -------- ---------- 17,450 18,082,570 - -------- ----------
SEE NOTES TO FINANCIAL STATEMENTS 5 MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS August 31, 1995, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- Industrial Development/Pollution Control Revenue (12.5%) $ 5,000 California Pollution Control Finance Authority, Pacific Gas & Electric Co 1987 Ser B (AMT)........................................................ 8.875% 01/01/10 $ 5,603,500 5,000 Oxnard Industrial Development Finance Authority, California, Green Foods Corp Ser 1987 (AMT)..................................................... 9.50 10/01/97 5,074,600 2,860 Lapeer Economic Development Corporation, Michigan, Dott Manufacturing Co Ser 1989 A (AMT)........................................................ 10.65 11/15/17 3,213,639 5,390 Missouri Environment Improvement & Energy Resource Authority, Associated Electric Coop Inc/NRU-CFC Gtd Ser 84G-5 & 6.................. 7.90 11/15/14 5,696,961 6,000 New York State Energy Research & Development Authority, New York State Electric & Gas Corp 1987 Ser A (AMT) (MBIA).............. 6.15 07/01/26 6,039,480 6,000 Ohio Air Quality Development Authority, Dayton Power & Light Co Ser 1985..................................................................... 9.50 12/01/15 6,231,240 5,000 Tulsa Municipal Airport Trust, Oklahoma, American Airlines Inc Ser 1988 (AMT)................................................................... 7.375 12/01/20 5,212,400 1,965 Matagorda County Navigation District #1, Texas, Houston Lighting & Power Co Collateralized Ser 1989 A (AMT)...................................... 7.875 02/01/19 2,134,835 - -------- ---------- 37,215 39,206,655 - -------- ---------- Mortgage Revenue - Multi-Family (4.5%) 57,797 Eden Prairie, Minnesota, Fountain Place Apts - Phase II Refg Ser 1989 B....................................................................... 0.00 07/15/19 577,967 5,000 New York City Housing Development Corporation, New York, Ser 1987 A...... 9.625 01/01/19 5,411,900 940 Rhode Island Housing & Mortgage Finance Corporation, Rental 1989 Ser B (AMT)................................................................... 7.95 10/01/20 994,605 30,935 Oak Ridge Industrial Development Board, Tennessee, Gardens/Southern Hill/ Woodlands Apts GNMA-Backed Refg Ser 1988................................ 0.00 10/20/19 3,834,393 3,000 Virginia Housing Development Authority, Ser 1987 B....................... 9.45 11/01/12 3,265,110 - -------- ---------- 97,672 14,083,975 - -------- ---------- Mortgage Revenue - Single Family (5.5%) 5,000 Alaska Housing Finance Corporation, 1993 1st Ser......................... 5.90 12/01/33 4,725,250 Maine Housing Authority, Purchase 4,265 1988 Ser D-2 (AMT)...................................................... 8.10 11/15/19 4,577,923 1,000 1988 Ser D-2 (AMT)...................................................... 8.10 11/15/22 1,072,680 3,775 North Dakota Housing Finance Agency, 1990 Ser B (AMT).................... 7.75 07/01/24 4,013,391 1,820 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser C (AMT)................ 7.85 09/01/21 1,934,660 1,000 Pennsylvania Housing Finance Agency, 1987 Ser R (AMT).................... 8.125 10/01/19 1,060,650 - -------- ---------- 16,860 17,384,554 - -------- ---------- Nursing & Health Related Facilities Revenue (3.2%) Vista, California, Long-Term Care Foundation of America 1,591 Ser 1994 A COPs (a)..................................................... 8.50 01/01/20 1,273,060 196 Ser 1994 B COPs (a)..................................................... 0.00 01/01/20 1,962 2,720 Newton County Industrial Development Authority, Missouri, Skilled Health Care - Joplin Refg Ser 1987............................................. 10.50 10/01/11 2,820,069 7,000 New York State Medical Care Facilities Finance Agency, Mental Health Ser F....................................................................... 5.25 02/15/19 6,082,230 - -------- ---------- 11,507 10,177,321 - -------- ----------
SEE NOTES TO FINANCIAL STATEMENTS 6 MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS August 31, 1995, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- Public Facilities Revenue (1.1%) $ 3,245 Illinois, Civic Center Dedicated Tax Ser 1991 (AMBAC).................... 6.25 % 12/15/20 $ 3,392,875 - -------- ---------- Resource Recovery Revenue (4.7%) 9,110 Greater Detroit Resource Recovery Authority, Michigan, 1984 Ser B & G.... 9.25 12/13/08 9,496,082 4,500 Charleston County, South Carolina, Foster-Wheeler Charleston Inc Ser 1987 A (AMT)................................................................. 9.25 01/01/10 5,130,315 - -------- ---------- 13,610 14,626,397 - -------- ---------- Retirement & Lifecare Facilities Revenue (1.2%) 3,000 Atlanta Urban Residential Finance Authority, Georgia, Renaissance on Peachtree Apts Ser 1988 (b)............................................. 10.50 12/01/10 2,100,000 2,065 Charleston County, South Carolina, Sandpiper Village Inc Refg Ser 1988... 7.00 11/01/13 1,528,100 - -------- ---------- 5,065 3,628,100 - -------- ---------- Transportation Facilities Revenue (5.5%) 865 Southwestern Development Authority, Illinois, Tri-City Regional Port District Ser 1989 A (AMT) (a)........................................... 7.90 07/01/14 946,673 4,500 Charlotte, North Carolina, Airport Ser 1987 (AMT)........................ 8.50 07/01/17 4,870,890 5,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA) (WI)........... 6.125 11/15/25 4,975,550 6,600 Dallas-Fort Worth International Airport, Texas, Refg Ser 1995 (FGIC)..... 5.625 11/01/15 6,356,790 - -------- ---------- 16,965 17,149,903 - -------- ---------- Water & Sewer Revenue (4.8%) 5,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994.................. 5.50 01/01/20 4,687,750 5,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water Ser 1994... 5.45 07/01/19 4,665,200 2,000 Chicago, Illinois, Wastewater Ser 1994 (MBIA)............................ 6.375 01/01/24 2,047,600 3,000 Massachusetts Water Resources Authority, 1993 Ser C...................... 5.25 12/01/20 2,680,410 1,000 New York City Municipal Water Finance Authority, New York, 1991 Ser A (Secondary FGIC)............................................. 6.75 06/15/16 1,067,420 - -------- ---------- 16,000 15,148,380 - -------- ---------- Other Revenue (0.9%) 3,000 New York Local Government Assistance Corporation, Ser 1995 A............. 6.00 04/01/24 2,959,410 - -------- ---------- Refunded (21.6%) 5,000 Chicago, Illinois, Refg 1987 Ser B....................................... 9.25 01/01/13 5,550,150 6,750 Hamilton, Indiana, Southeastern Building Corp Cons Ser 1988.............. 8.40 01/01/15 7,621,155 10,600 Indiana Health Facilities Financing Authority, St Anthony Medical Center & Home Inc Ser 1987..................................................... 9.25 10/01/17 11,889,384 7,700 Breckenridge, Minnesota, Franciscan Sisters Health Care Inc Ser 1987 B-1..................................................................... 9.375 09/01/17 8,604,827 5,000 Albuquerque, New Mexico, Gross Receipts Airport Ser 1987 B (AMT)......... 8.75 07/01/19 5,460,900 2,500 New York City, New York, 1988 Ser A...................................... 8.25 11/01/02 2,749,850 4,735 Cass County, North Dakota, Franciscan Sisters Health Care Ser 1987 C..... 9.375 09/01/17 5,325,596 8,000 Berks County Municipal Authority, Pennsylvania, University of Pennsylvania Ser 1985................................................... 7.00 09/01/15 8,467,840
SEE NOTES TO FINANCIAL STATEMENTS 7 MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS August 31, 1995, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- $ 3,500 Lehigh County General Purpose Authority, Pennsylvania, HealthEast Inc Ser 1987 A & B.......................................................... 9.00 % 07/01/15 $ 3,829,805 1,000 Montgomery County Higher Education & Health Authority, Pennsylvania, Frankford Hospital Ser 1986............................................. 7.875 01/01/19 1,067,890 4,000 Washington, 1991 Ser B................................................... 6.70 06/01/16 4,432,520 2,500 Washington Public Power Supply System, Nuclear Proj #2 Refg Ser 1990 C... 7.625 07/01/10 2,898,225 - -------- ---------- 61,285 67,898,142 - -------- ---------- 384,744 TOTAL MUNICIPAL BONDS (Identified Cost $296,308,314)............................................. 306,174,590 - -------- ---------- SHORT-TERM MUNICIPAL OBLIGATIONS (2.2%) 2,600 Indiana Hospital Equipment Financing Authority, Pooled Ser 1985 (MBIA) (Demand 09/06/95)....................................................... 3.60 * 12/01/15 2,600,000 900 Jasper County, Indiana, Northern Indiana Public Service Co Ser 1994 C (Demand 09/01/95)....................................................... 3.45 * 04/01/19 900,000 3,380 Dallas-Fort Worth Regional Airport Board, Texas, Dallas-Fort Worth Intl Airport Ser 1985 (Prerefunded 11/01/95)................................. 9.125 11/01/15 3,493,805 - -------- ---------- 6,880 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (Identified Cost $6,898,103).............................. 6,993,805 - -------- ---------- $391,624 TOTAL INVESTMENTS (Identified Cost $303,206,417) (c).................................... 99.8% 313,168,395 - -------- - -------- CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................ 0.2 599,922 ---- ---------- NET ASSETS............................................................................... 100.0% $313,768,317 ====== ============
- --------------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. WI Security purchased on a when issued basis. * Current coupon of variable rate security. (a) Resale is restricted to qualified institutional investors. (b) Non-income producing, bond in default. (c) The aggregate cost for federal income tax purposes is $303,206,417; the aggregate gross unrealized appreciation is $20,368,611 and the aggregate gross unrealized depreciation is $10,406,633, resulting in net unrealized appreciation of $9,961,978. Bond Insurance: AMBAC AMBAC Indemnity Corporation. FGIC Financial Guaranty Insurance Company. MBIA Municipal Bond Investors Assurance Corporation. SEE NOTES TO FINANCIAL STATEMENTS 8 MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS August 31, 1995, continued ------------------------------------------------------------------------------ GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percentage of Net Assets August 31, 1995 Alabama............ 1.5% Alaska............. 1.5 Arizona............ 1.5 California......... 6.9 District of Columbia.......... 1.2 Florida............ 1.2 Georgia............ 0.7 Illinois........... 4.6 Indiana............ 7.3 Kentucky........... 0.8 Maine.............. 1.8 Maryland........... 1.9% Massachusetts...... 3.8 Michigan........... 4.1 Minnesota.......... 2.9 Missouri........... 2.7 New Jersey......... 1.6 New Mexico......... 1.7 New York........... 11.0 North Carolina..... 4.3 North Dakota....... 3.0 Ohio............... 2.6 Oklahoma........... 1.7% Pennsylvania....... 4.6 Rhode Island....... 0.3 South Carolina..... 2.1 Tennessee.......... 3.5 Texas.............. 11.4 Utah............... 1.4 Virginia........... 1.0 Washington......... 4.5 West Virginia...... 0.7 --- Total.............. 99.8% ====
SEE NOTES TO FINANCIAL STATEMENTS 9 MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES August 31, 1995 ASSETS: Investments in securities, at value (identified cost $303,206,417)....................................... $313,168,395 Cash.................................................................. 28,289 Receivable for: Interest.......................................................... 5,585,700 Investments sold.................................................. 95,000 Prepaid expenses and other assets..................................... 14,743 ---------- TOTAL ASSETS...................................................... 318,892,127 ---------- LIABILITIES: Payable for: Investments purchased............................................. 4,838,283 Investment advisory fee........................................... 95,929 Administration fee................................................ 55,222 Shares of beneficial interest repurchased......................... 17,810 Accrued expenses and other payables................................... 116,566 ---------- TOTAL LIABILITIES................................................. 5,123,810 ---------- NET ASSETS: Paid-in-capital....................................................... 298,041,839 Net unrealized appreciation........................................... 9,961,978 Accumulated undistributed net investment income....................... 4,097,193 Accumulated undistributed net realized gain........................... 1,667,307 ---------- NET ASSETS........................................................ $313,768,317 ============ NET ASSET VALUE PER SHARE, 31,623,450 shares outstanding (unlimited shares authorized of $.01 par value)...................... $9.92 =====
SEE NOTES TO FINANCIAL STATEMENTS 10 MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS For the year ended August 31, 1995 NET INVESTMENT INCOME: INTEREST INCOME........................................................ $23,085,874 --------- EXPENSES Investment advisory fee................................................ 1,037,633 Administration fee..................................................... 597,511 Transfer agent fees and expenses....................................... 171,304 Professional fees...................................................... 111,336 Shareholder reports and notices........................................ 46,281 Registration fees...................................................... 32,473 Trustees' fees and expenses............................................ 29,023 Other.................................................................. 18,303 --------- TOTAL EXPENSES..................................................... 2,043,864 --------- NET INVESTMENT INCOME.............................................. 21,042,010 --------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain...................................................... 1,667,307 Net change in unrealized appreciation.................................. (1,360,579) --------- NET GAIN........................................................... 306,728 --------- NET INCREASE........................................................... $21,348,738 ===========
SEE NOTES TO FINANCIAL STATEMENTS 11 MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR FOR THE YEAR ENDED ENDED AUGUST 31, AUGUST 31, 1995 1994 - --------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income............................. $ 21,042,010 $ 22,771,576 Net realized gain................................. 1,667,307 13,818,414 Net change in unrealized appreciation............. (1,360,579) (34,589,071) ---------- ---------- NET INCREASE.................................. 21,348,738 2,000,919 ---------- ---------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income............................. (19,216,120) (21,458,878) Net realized gain................................. (11,045,138) (3,123,625) ---------- ---------- TOTAL......................................... (30,261,258) (24,582,503) ---------- ---------- Net decrease from transactions in shares of beneficial interest.............................. (9,064,404) (4,839,155) ---------- ---------- TOTAL DECREASE................................ (17,976,924) (27,420,739) NET ASSETS: Beginning of period............................... 331,745,241 359,165,980 ---------- ---------- END OF PERIOD (Including undistributed net investment income of $4,097,193 and $2,271,294, respectively).... $313,768,317 $331,745,241 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 12 MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS August 31, 1995 1. ORGANIZATION AND ACCOUNTING POLICIES Municipal Income Trust (the "Fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Fund was organized as a Massachusetts business trust on June 16, 1987 and commenced operations on September 29, 1987. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- Portfolio securities are valued for the Fund by an outside independent pricing service approved by the Trustees. The pricing service has informed the Fund that in valuing the Fund's portfolio securities, it uses both a computerized matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the bid side of the market each day. The Fund's portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant. Short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Discounts and premiums on securities purchased are amortized over the life of the respective securities. Interest income is accrued daily except where collection is not expected. C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and distributions to its shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes 13 MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS August 31, 1995, continued are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. 2. INVESTMENT ADVISORY AGREEMENT Pursuant to an Investment Advisory Agreement with Dean Witter InterCapital Inc. (the "Investment Adviser"), the Fund pays its Investment Adviser an advisory fee, calculated weekly and payable monthly, by applying the following annual rates to the Fund's average weekly net assets: 0.35% to the portion of the Fund's average weekly net assets not exceeding $250 million and 0.25% to the portion of the Fund's average weekly net assets exceeding $250 million. Under the terms of the Agreement, in addition to managing the Fund's investments, the Investment Adviser pays the salaries of all personnel, including officers of the Fund, who are employees of the Investment Adviser. 3. ADMINISTRATION AGREEMENT Pursuant to an Administration Agreement with Dean Witter Services Company Inc. (the "Administrator"), the Fund pays an administration fee, calculated weekly and payable monthly, by applying the following annual rates to the Fund's average weekly net assets: 0.20% to the portion of the Fund's average weekly net assets not exceeding $250 million; 0.15% to the portion of the Fund's average weekly net assets exceeding $250 million but not exceeding $500 million; 0.12% to the portion of the Fund's average weekly net assets exceeding $500 million but not exceeding $750 million; and 0.10% to the portion of the Fund's average weekly net assets exceeding $750 million. Under the terms of the Administration Agreement, the Administrator maintains certain of the Fund's books and records and furnishes, at its own expense, office space, facilities, equipment, clerical, bookkeeping and certain legal services and pays the salaries of all personnel, including officers of the Fund who are employees of the Administrator. The Administrator also bears the cost of telephone services, heat, light, power and other utilities provided to the Fund. 4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the year ended August 31, 1995 aggregated $40,730,434 and $54,956,279, respectively. 14 MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS August 31, 1995, continued Dean Witter Trust Company, an affiliate of the Investment Adviser and Administrator, is the Fund's transfer agent. At August 31, 1995, the Fund had transfer agent fees and expenses payable of approximately $17,700. The Fund has an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Fund who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the year ended August 31, 1995 included in Trustees' fees and expenses in the Statement of Operations amounted to $7,779. At August 31, 1995, the Fund had an accrued pension liability of $50,895 which is included in accrued expenses in the Statement of Assets and Liabilities. 5. SHARES OF BENEFICIAL INTEREST Transactions in shares of beneficial interest were as follows:
CAPITAL PAID PAR VALUE IN EXCESS OF SHARES OF SHARES PAR VALUE ---------- ---------- ------------ Balance, August 31, 1993....................................................... 33,153,050 $331,531 $311,613,867 Treasury shares purchased and retired (weighted average discount 7.22%)*....... (512,100) (5,121) (4,834,034) ---------- ---------- ------------ Balance, August 31, 1994....................................................... 32,640,950 326,410 306,779,833 Treasury shares purchased and retired (weighted average discount 8.89%)*....... (1,017,500) (10,175) (9,054,229) ---------- ---------- ------------ Balance, August 31, 1995....................................................... 31,623,450 $316,235 $297,725,604 ========== ======== ============
- --------------------- * The Trustees have voted to retire the shares purchased. 6. DIVIDENDS The Fund has declared the following dividends from net investment income:
DECLARATION AMOUNT RECORD PAYABLE DATE PER SHARE DATE DATE - ------------------- ---------- ------------------ ------------------- August 29, 1995 $0.05 September 8, 1995 September 22, 1995 September 27, 1995 $0.05 October 6, 1995 October 20, 1995
15 MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS August 31, 1995, continued 7. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTERS ENDED ----------------------------------------------------------------------------------------- 8/31/95 5/31/95 2/28/95 11/30/94 ------------------ ------------------- ------------------ ------------------- PER PER PER PER TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE ------- ------ -------- ------ ------- ------ -------- ------ Total investment income............. $ 5,644 $ 0.18 $ 5,775 $ 0.18 $ 5,738 $ 0.18 $ 5,929 $ 0.18 Net investment income............... 5,117 0.16 5,276 0.17 5,222 0.16 5,427 0.17 Net realized and unrealized gain (loss)............................. (2,018) (0.06) 4,914 0.15 11,705 0.37 (14,294) (0.42)
QUARTERS ENDED ----------------------------------------------------------------------------------------- 8/31/94 5/31/94 2/28/94 11/30/93 ------------------ ------------------- ------------------ ------------------- PER PER PER PER TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE ------- ------ -------- ------ ------- ------ -------- ------ Total investment income............. $ 6,169 $ 0.19 $ 6,098 $ 0.18 $ 6,176 $ 0.19 $ 6,497 $ 0.20 Net investment income............... 5,657 0.17 5,554 0.17 5,626 0.17 5,935 0.18 Net realized and unrealized loss.... (1,001) (0.03) (12,445) (0.37) (5,024) (0.15) (2,301) (0.07)
- --------------------- * Amounts in thousands. 16 MUNICIPAL INCOME TRUST FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE YEAR ENDED AUGUST 31* -------------------------------------------------------- 1995 1994 1993 1992 1991 ---------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period............................................. $10.16 $10.83 $10.69 $10.37 $10.01 ----- ----- ----- ----- ----- Net investment income............................................ 0.66 0.69 0.72 0.73 0.74 Net realized and unrealized gain (loss).......................... 0.04 (0.62) 0.14 0.31 0.30 ----- ----- ----- ----- ----- Total from investment operations................................. 0.70 0.07 0.86 1.04 1.04 ----- ----- ----- ----- ----- Less dividends and distributions from: Net investment income......................................... (0.60) (0.65) (0.72) (0.72) (0.68) Net realized gain............................................. (0.34) (0.09) -- --** --** ----- ----- ----- ----- ----- Total dividends and distributions................................ (0.94) (0.74) (0.72) (0.72) (0.68) ----- ----- ----- ----- ----- Net asset value, end of period................................... $ 9.92 $10.16 $10.83 $10.69 $10.37 ====== ====== ====== ====== ====== Market value, end of period...................................... $ 9.00 $ 9.25 $11.25 $10.75 $10.25 ====== ====== ====== ====== ====== TOTAL INVESTMENT RETURN+......................................... 7.78% (11.73)% 11.82% 12.28% 8.23% RATIOS TO AVERAGE NET ASSETS: Expenses......................................................... 0.65% 0.63% 0.67% 0.73% 0.75% Net investment income............................................ 6.70% 6.59% 6.70% 6.87% 7.31% SUPPLEMENTAL DATA: Net assets, end of period, in thousands.......................... $313,768 $331,745 $359,166 $354,467 $343,724 Portfolio turnover rate.......................................... 14% 27% 1% 11% 5%
- --------------------- * The per share amounts were computed using an average number of shares outstanding during the period. ** Includes distributions of $0.0041 and $0.0012 for the years ended August 31, 1992 and 1991, respectively. + Total investment return is based upon the current market value on the last day of each period reported. Dividends and distributions are assumed to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Total investment return does not reflect sales charges or brokerage commissions. SEE NOTES TO FINANCIAL STATEMENTS 17 MUNICIPAL INCOME TRUST REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS AND TRUSTEES OF MUNICIPAL INCOME TRUST In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Municipal Income Trust (the "Fund") at August 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 1995 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York 10036 October 10, 1995 -------------------------------------------------------------------- 1995 FEDERAL TAX NOTICE (unaudited) During the year ended August 31, 1995, the Fund paid to shareholders $0.60 per share from net investment income. All of the Fund's dividends from net investment income were exempt interest dividends, excludable from gross income for Federal income tax purposes. For the year ended August 31, 1995, the Fund paid to shareholders $0.34 per share from long-term capital gains. 18 (This page has been left blank intentionally.) 19 (This page has been left blank intentionally.) 20 TRUSTEES Jack F. Bennett Michael Bozic Charles A. Fiumefreddo Edwin J. Garn John R. Haire Dr. Manuel H. Johnson Paul Kolton Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS Charles A. Fiumefreddo Chairman and Chief Executive Officer Sheldon Curtis Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT Dean Witter Trust Company Harborside Financial Center - Plaza Two Jersey City, New Jersey 07311 INDEPENDENT ACCOUNTANTS Price Waterhouse LLP 1177 Avenue of the Americas New York, New York 10036 INVESTMENT ADVISER Dean Witter InterCapital Inc. Two World Trade Center New York, New York 10048 MUNICIPAL INCOME TRUST ANNUAL REPORT AUGUST 31, 1995 -----END PRIVACY-ENHANCED MESSAGE-----