-----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, E42oAKyEJhb2TZXhDo/s9uenjNoQ979u6etO3Xnk7zkIZVnZyijwd7GoIBo1sKyQ 1U2b5i5Oi/QEM9x8724ikQ== 0000950123-98-004308.txt : 19980504 0000950123-98-004308.hdr.sgml : 19980504 ACCESSION NUMBER: 0000950123-98-004308 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980430 SROS: NONE 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: SEC FILE NUMBER: 811-05214 FILM NUMBER: 98604980 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 DEAN WITTER INTERCAPITAL MUNI INCOME TRUST 1 MUNICIPAL INCOME TRUST Two World Trade Center, New York, New York 10048 LETTER TO THE SHAREHOLDERS February 28, 1998 DEAR SHAREHOLDER: We are pleased to present the semiannual report on the operations of Municipal Income Trust (TFA) for the period ended February 28, 1998. Over the past six months the securities markets were impacted by the Asian financial crisis and its effect on the U.S. economy. International currency turmoil strengthened the value of the U.S. dollar and created a "flight to quality" demand for U.S. Treasury securities. Municipal bonds followed the trend of Treasuries with yields declining to a range last seen 20 years ago. Domestic employment conditions strengthened as unemployment declined to its lowest level since 1973. The bond market rally was also aided by prospects of a federal budget surplus, the first in more than two decades. Inflation remained subdued despite the economy's strength. MUNICIPAL MARKET CONDITIONS Long-term insured municipal index yields declined from 5.50 percent in August 1997 to 5.20 percent at the end of February 1998. As usually BOND YIELDS 1994-1998
30-Year Insured 30-Year U.S. Municipal Yields Treasury Yields ---------------- --------------- Dec '93 5.4% 6.34% 5.4 6.24 5.8 6.66 6.4 7.09 6.35 7.32 6.25 7.43 Jun '94 6.5 7.61 6.25 7.39 6.3 7.45 6.55 7.81 6.75 7.96 7 8 Dec '94 6.75 7.88 6.4 7.7 6.15 7.44 6.15 7.43 6.2 7.34 5.8 6.66 Jun '95 6.1 6.62 6.1 6.86 6 6.66 5.95 6.48 5.75 6.33 5.5 6.14 Dec '95 5.35 5.94 5.4 6.03 5.8 6.46 5.85 6.66 5.95 6.89 6.05 6.99 Jun '96 5.9 6.89 5.85 6.97 5.9 7.11 5.7 6.93 5.65 6.64 5.5 6.35 Dec '96 5.6 6.63 5.7 6.79 5.65 6.8 5.9 7.1 5.75 6.94 5.65 6.91 Jun '97 5.6 6.78 5.3 6.3 5.5 6.61 5.4 6.4 5.35 6.15 5.3 6.05 Dec '97 5.15 5.92 Jan '98 5.15 5.8 Feb. '98 5.2 5.92
Insured Municipal Revenue Yields as a Percentage of U.S. Treasury Yields -------------------- Dec '93 85.17% 86.54 87.09 90.27 86.75 84.12 Jun '94 85.41 84.57 84.56 83.87 84.80 87.50 Dec '94 85.66 83.12 82.66 82.77 84.47 87.09 Jun '95 92.15 88.92 90.08 91.82 90.84 89.56 Dec '95 90.07 89.55 86.69 87.84 86.36 86.55 Jun '96 85.63 83.93 82.98 82.25 85.09 86.61 Dec '96 84.46 83.95 83.08 83.10 82.85 81.77 Jun '97 82.60 84.00 83.00 84.40 86.90 87.60 Dec '97 86.90 Jan '98 88.80 Feb '98 87.80
Source: Municipal Market Data 2 MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 28, 1998, continued happens when yields change rapidly, the municipal rally lagged the rally in Treasuries. The ratio of municipal yields to Treasury yields improved from an historically rich 83 percent in August to a more attractive 88 percent in February. A rising yield ratio means that municipals have underperformed Treasuries and have become relatively more attractive. Total municipal volume increased 20 percent to $220 billion in 1997. Half of the underwritings were enhanced by bond insurance. Much of this growth came from refunding issues sold in the second half of the year as interest rates declined. Overall, refundings represented one quarter of total new volume. So far in 1998, the pace of refunding activity has increased and total volume has exceeded last year's level. PERFORMANCE The Fund's net asset value (NAV) increased from $9.99 per share to $10.13 over the past six months. Based on this NAV change plus reinvestment of tax-free dividends and capital gain distributions totaling $0.36 per share, the Fund's total NAV return was 5.44 percent. The Fund's market price on the New York Stock Exchange increased slightly from $9.50 to $9.5625 per share. Based on this market price change and reinvestment of dividends and capital gains, the Fund's total market return was 4.57 percent. On February 28, 1998, the TFA's market price was trading at a modest discount of 5.60 percent to its NAV. Monthly dividends for the first quarter of 1998 were declared in December. Undistributed net investment income totaled $0.095 per share on February 28, 1998 versus $0.115 per share six months earlier. The Fund's procedure for reinvestment of all dividends and distributions on common shares is through purchases 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 purchase shares in the open market or in privately negotiated transactions at a price not above market value or net asset value, whichever is lower at the time of purchase. During the six-month period ended February 28, 1998, the Fund purchased and retired 267,600 shares of common stock at a weighted average market discount of 6.20 percent. PORTFOLIO STRUCTURE Since last August, the Fund has extended maturity and improved call protection. At the end of February the portfolio's average maturity was 22 years. The distribution of bond call dates (illustrated in the accompanying chart) produced average call protection of 9 years. The Fund's net assets of $303 million were diversified among 13 long-term sectors and 63 credits. Credit quality continued to be upgraded with 83 percent of long-term holdings rated triple or double "A." 3 MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 28, 1998, continued LARGEST SECTORS as of February 28, 1998 (% of Net Assets) Mortgage 16% Water & Sewer 14 Transportation 13 General Obligation 11 Hospital 11 Electric 9 Education 8 IDR/PCR* 6 All Others 12
* Industrial Development/Pollution Control Revenue Portfolio structure is subject to change. CREDIT RATINGS as of February 28, 1998 (% of Total Long-Term Portfolio) Aaa or AAA 57% Aa or AA 26 A or A 8 Baa or BBB 6 N/R 3
As rated by Moody's Investor Service, Inc. or Standard & Poor's Corp. Portfolio structure is subject to change. CALL STRUCTURE as of February 28, 1998 (% of Total Long-Term Portfolio)
Years Bonds Callable Percent Callable 1998 2% 1999 2 2000 3 2001 1 2002 3 2003 6 2004 9 2005 18 2006 15 2007 22 2008+ 19
WEIGHTED AVERAGE CALL PROTECTION: 9 YEARS Portfolio structure is subject to change. 4 MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 28, 1998, continued LOOKING AHEAD The economic fundamentals are in place for another year of solid, albeit less spectacular, domestic growth in 1998. Events in the Far East have strengthened the U.S. dollar and led to lower interest rates. The Asian financial crisis seems likely to moderate U.S. economic growth and inflationary pressures. Under these conditions the outlook for municipal bonds remains favorable. We appreciate your continued support of Municipal Income Trust and look forward to serving your investment needs. Very truly yours, /S/ CHARLES A. FIUMEFREDDO CHARLES A. FIUMEFREDDO Chairman of the Board 5 MUNICIPAL INCOME TRUST RESULTS OF ANNUAL MEETING (unaudited) * * * On December 18, 1997, an annual meeting of the Fund's shareholders was held for the purpose of voting on three separate matters, the results of which were as follows: (1) ELECTION OF TRUSTEES: Edwin J. Garn For......................................................... 22,793,588 Withheld.................................................... 726,425 John R. Haire For......................................................... 22,768,020 Withheld.................................................... 751,993 Michael E. Nugent For......................................................... 22,801,905 Withheld.................................................... 718,108 Philip J. Purcell For......................................................... 22,815,638 Withheld.................................................... 704,375
The following Trustees were not standing for reelection at this meeting: Michael Bozic, Charles A. Fiumefreddo, Wayne E. Hedien, Dr. Manuel H. Johnson and John L. Schroeder. (2) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS: For......................................................... 22,280,187 Against..................................................... 341,307 Abstain..................................................... 898,519
(3) SHAREHOLDER PROPOSAL TO AMEND THE FUND'S DECLARATION OF TRUST TO REQUIRE EACH TRUSTEE, WITHIN 30 DAYS OF ELECTION, TO BECOME A SHAREHOLDER OF THE FUND: For......................................................... 5,045,786 Against..................................................... 11,225,787 Abstain..................................................... 1,441,162
6 MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- TAX-EXEMPT MUNICIPAL BONDS (97.0%) General Obligation (11.3%) $ 5,000 Moulton-Niguel Water District, California, Refg 1993 (MBIA)..................................................... 5.00% 09/01/19 $ 4,890,400 2,000 Chicago, Illinois, Refg Ser 1995 B (FGIC)................... 5.125 01/01/25 1,961,260 5,000 Washington Suburban Sanitary District, Maryland, Gen Constr Refg 1994.................................................. 5.00 06/01/10 5,108,250 5,000 Massachusetts, 1994 Ser A**................................. 5.00 01/01/11 5,057,900 4,000 New York City, New York, 1995 Ser D (MBIA).................. 6.20 02/01/07 4,498,400 5,000 New York State, Refg Ser 1995 B............................. 5.625 08/15/09 5,366,150 7,000 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/11 7,445,970 - -------- ----------- 33,000 34,328,330 - -------- ----------- Educational Facilities (7.7%) 5,000 California Public Works Board, University of California 1993 Refg Ser A................................................. 5.50 06/01/21 5,098,400 2,000 Massachusetts Health & Educational Facilities Authority, Massachusetts Institute of Technology 1998 Ser I........... 5.20 01/01/28 2,077,400 5,000 New Jersey Economic Development Authority, Educational Testing Service Ser 1995 B (MBIA).......................... 6.25 05/15/25 5,544,000 New York State Dormitory Authority, 2,500 State University Ser 1995 A................................ 6.50 05/15/05 2,816,475 2,500 State University Ser 1995 A................................ 6.50 05/15/06 2,843,750 5,000 State University Ser 1997.................................. 5.125 05/15/27 4,884,850 - -------- ----------- 22,000 23,264,875 - -------- ----------- Electric Revenue (9.1%) 15,000 Southern California Public Power Authority, Mead-Adelanto 1994 Ser A (AMBAC)......................................... 5.15 07/01/15 15,415,800 10,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA)**..................................................... 5.00 07/01/21 9,717,600 2,500 Washington Public Power Supply System, Project #1 Refg Ser 1998 A..................................................... 5.125 07/01/17 2,453,200 - -------- ----------- 27,500 27,586,600 - -------- ----------- Hospital Revenue (10.7%) 3,000 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama, Carraway Methodist Health Ser 1995 A (Connie Lee)............................................... 5.875 08/15/15 3,197,160 3,000 Chatham County Hospital Authority, Georgia, Memorial Medical Center Inc Ser 1996 A (AMBAC).............................. 5.25 01/01/16 3,026,970 1,000 Illinois Health Facilities Authority, Mercy Center for Health Care Services Ser 1992.............................. 6.65 10/01/22 1,074,750 950 Kentucky Development Finance Authority, Ashland Hospital/King's Daughters Refg & Impr Ser 1987............. 9.75 08/01/11 990,365 4,000 Michigan Hospital Finance Authority, Detroit Medical Center Ser 1997 A (AMBAC)......................................... 5.25 08/15/27 3,988,000 7,500 North Carolina Medical Care Commission, Presbyterian Health Services Corp Refg Ser 1993................................ 5.50 10/01/20 7,672,350 2,500 Delaware County Authority, Pennsylvania, Catholic Health East Ser 1998 A (AMBAC).................................... 4.875 11/15/26 2,368,650 5,000 Pennsylvania Higher Educational Facilities Authority, University of Pennsylvania Ser A 1996**.................... 5.75 01/01/22 5,251,200
SEE NOTES TO FINANCIAL STATEMENTS 7 MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- $ 3,000 Washington Health Care Facilities Authority, Virginia Mason Medical Center Refg Ser 1997 A (MBIA)...................... 5.125% 08/15/17 $ 2,961,750 1,650 Fayette County, West Virginia, MPC Inc Refg Ser 1990........ 9.75 02/01/11 1,792,890 - -------- ----------- 31,600 32,324,085 - -------- ----------- Industrial Development/Pollution Control Revenue (6.4%) 2,750 Lapeer Economic Development Corporation, Michigan, Dott Manufacturing Co Ser 1989 A (AMT).......................... 10.65 11/15/17 2,062,500 3,150 New York City Industrial Development Agency, Japan Airlines Co 1991 (AMT) (FSA)........................................ 6.00 11/01/15 3,388,801 3,000 New York State Energy Research & Development Authority, New York State Electric & Gas Corp 1987 Ser A (AMT) (MBIA)..... 6.15 07/01/26 3,257,220 5,000 Tulsa Municipal Airport Trust, Oklahoma, American Airlines Inc Ser 1988 (AMT)......................................... 7.375 12/01/20 5,449,100 5,000 Dallas-Fort Worth International Airport Facility Improvement Corporation, Texas, American Airlines Inc Ser 1995......... 6.00 11/01/14 5,281,250 - -------- ----------- 18,900 19,438,871 - -------- ----------- Mortgage Revenue - Multi-Family (3.7%) 5,000 New Jersey Housing & Mortgage Finance Agency, 1995 Ser A (AMBAC).................................................... 6.00 11/01/14 5,311,050 940 Rhode Island Housing & Mortgage Finance Corporation, Rental 1989 Ser B (AMT)........................................... 7.95 10/01/20 992,311 30,935 Oak Ridge Industrial Development Board, Tennessee, Gardens/Southern Hill/ Woodlands Apts GNMA-Backed Refg Ser 1988....................................................... 0.00 10/20/19 4,941,557 - -------- ----------- 36,875 11,244,918 - -------- ----------- Mortgage Revenue - Single Family (12.5%) 10,000 Alaska Housing Finance Corporation, 1997 Ser A (MBIA)....... 6.00 06/01/27 10,474,500 2,250 Colorado Housing Finance Authority, 1997 Ser B-2 (AMT)...... 7.00 05/01/26 2,500,335 10,000 Hawaii Housing Finance & Development Corporation, FNMA-Collateralized 1997 Ser A (AMT)....................... 5.75 07/01/30 10,233,500 2,500 Chicago, Illinois, GNMA-Backed Ser 1997-A (AMT)............. 7.25 09/01/28 2,820,400 Maine Housing Authority, 4,265 Purchase 1988 Ser D-2 (AMT)................................ 8.10 11/15/19 4,434,193 1,000 Purchase 1988 Ser D-2 (AMT)................................ 8.10 11/15/22 1,039,080 1,935 Missouri Housing Development Commission, GNMA-Backed 1997 Ser A-2 (AMT).............................................. 7.30 03/01/28 2,185,118 2,835 North Dakota Housing Finance Agency, 1990 Ser B (AMT)....... 7.75 07/01/24 3,022,082 1,145 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser C (AMT)... 7.85 09/01/21 1,215,635 - -------- ----------- 35,930 37,924,843 - -------- ----------- Public Facilities Revenue (1.3%) 3,495 Illinois, Civic Center Dedicated Tax Ser 1991 (AMBAC)....... 6.25 12/15/20 4,005,445 - -------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 8 MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- Resource Recovery Revenue (1.9%) $ 5,000 Greater Detroit Resource Recovery Authority, Michigan, 1986 - -------- Ser A (AMBAC).............................................. 6.25% 12/13/08 $ 5,736,650 ----------- Retirement & Lifecare Facilities Revenue (0.6%) 1,970 Charleston County, South Carolina, Sandpiper Village Inc - -------- Refg Ser 1988.............................................. 8.00 11/01/13 1,813,484 ----------- Transportation Facilities Revenue (13.0%) 15,000 E-470 Public Highway Authority, Colorado, Ser 1997 B (MBIA)..................................................... 0.00 09/01/14 6,583,650 5,000 Dade County, Florida, Seaport Refg Ser 1996 (MBIA).......... 5.125 10/01/26 4,936,900 815 Southwestern Development Authority, Illinois, Tri-City Regional Port District Ser 1989 A (AMT) (a)................ 7.90 07/01/14 872,376 7,000 Massachusetts Turnpike Authority, Metropolitan Highway 1997 Ser A (MBIA)............................................... 5.00 01/01/37 6,744,360 3,000 Delaware River Port Authority, New Jersey & Pennsylvania, Ser 1995 (FGIC)+........................................... 5.50 01/01/26 3,096,450 5,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)... 6.125 11/15/25 5,434,400 5,000 Dallas-Fort Worth International Airport, Texas, Refg Ser 1995 (FGIC)................................................ 5.625 11/01/15 5,229,250 6,000 Virginia Transportation Board, US Route 28 Ser 1992......... 6.50 04/01/18 6,567,480 - -------- ----------- 46,815 39,464,866 - -------- ----------- Water & Sewer Revenue (13.6%) 5,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994..... 5.50 01/01/20 5,111,400 10,000 Jefferson County, Alabama, Sewer Ser 1997 (FGIC)............ 5.75 02/01/22 10,591,300 5,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water Ser 1994............................................. 5.45 07/01/19 5,107,150 2,000 Chicago, Illinois, Wastewater Ser 1994 (MBIA)............... 6.375 01/01/24 2,228,440 3,000 Massachusetts Water Resources Authority, 1993 Ser C......... 5.25 12/01/20 2,980,050 570 New York City Municipal Water Finance Authority, New York, 1991 Ser A (Secondary FGIC)................................ 6.75 06/15/16 617,447 3,000 Cleveland, Ohio, Waterworks Impr & Refg Ser H 1996 (MBIA)... 5.75 01/01/21 3,182,610 8,000 Pittsburgh Water & Sewer Authority, Pennsylvania, 1998 Ser B (FGIC) (WI)................................................ 0.00 09/01/26 1,815,520 10,000 Upper Occoquan Sewerage Authority, Virginia, Ser 1995 A (MBIA)..................................................... 5.00 07/01/25 9,709,200 - -------- ----------- 46,570 41,343,117 - -------- ----------- Other Revenue (3.1%) 4,000 Mashantucket (Western) Pequot Tribe, Connecticut, Special 1997 Ser B (a)............................................. 5.75 09/01/27 4,087,840 2,000 Northern Palm Beach County Improvement District, Florida, Water Control & Impr #9A Ser 1996 A........................ 6.80 08/01/06 2,139,840 3,000 New York Local Government Assistance Corporation, Ser 1995 A.......................................................... 6.00 04/01/24 3,249,450 - -------- ----------- 9,000 9,477,130 - -------- ----------- Refunded (2.1%) 5,000 Southern California Public Power Authority, Palo Verde Ser A (AMBAC) (ETM).............................................. 5.00 07/01/15 4,942,000 1,260 Illinois Health Facilities Authority, Glen Oaks Medical Center Inc Refg 1990 Ser D (ETM)........................... 9.50 11/15/15 1,468,643 - -------- ----------- 6,260 6,410,643 - -------- ----------- 324,915 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $277,312,645)................. 294,363,857 - -------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 9 MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (1.4%) $ 2,400 Louisiana Public Facilities Authority, Kenner Hotel Ser 1985 (Demand 03/02/98).......................................... 3.65*% 12/01/15 $ 2,400,000 1,700 Salt Lake County, Utah, Service Station Holdings British - -------- Petroleum Co Ser 1994 B (Demand 03/02/98).................. 3.65* 08/01/07 1,700,000 ------------ 4,100 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS - -------- (Identified Cost $4,100,000)................................................... 4,100,000 ------------ $329,015 TOTAL INVESTMENTS (Identified Cost $281,412,645) (c)................... 98.4% 298,463,857 ======== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 1.6 4,940,187 ----- ------------ NET ASSETS.............................................................. 100.0% $303,404,044 ===== ============
- --------------------- AMT Alternative Minimum Tax. ETM Escrowed to maturity. WI Security purchased on a "when issued" basis. + Joint exemption in New Jersey and Pennsylvania. * Current coupon of variable rate demand obligation. ** Some or all of these securities are segregated in connection with the purchase of "when issued" securities. (a) Resale is restricted to qualified institutional investors. (b) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross unrealized appreciation is $17,972,038 and the aggregate gross unrealized depreciation is $920,826, resulting in net unrealized appreciation of $17,051,212. Bond Insurance: - --------------- AMBAC AMBAC Indemnity Corporation. Connie Lee Connie Lee Insurance Company. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. SEE NOTES TO FINANCIAL STATEMENTS 10 MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited) continued GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets February 28, 1998 Alabama... 6.2% Alaska... 3.5 Arizona... 1.7 California... 10.0 Colorado... 3.0 Connecticut... 1.3 Florida... 2.3 Georgia... 1.0 Hawaii... 3.4 Illinois... 4.8 Kentucky... 0.3 Louisiana... 0.8 Maine... 1.8% Maryland... 1.7 Massachusetts... 5.6 Michigan... 3.9 Missouri... 0.7 New Jersey... 4.6 New York... 10.2 North Carolina... 2.5 North Dakota... 1.0 Ohio... 1.4 Oklahoma... 1.8 Pennsylvania... 4.1 South Carolina... 0.6% Rhode Island... 0.3 Tennessee... 4.1 Texas... 5.3 Utah... 3.8 Virginia... 6.3 Washington... 0.8 West Virginia... 0.6 Joint Exemption*... (1.0) ---- Total... 98.4% ====
- --------------------- * Joint exemption has been included in each geographic location. SEE NOTES TO FINANCIAL STATEMENTS 11 MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES February 28, 1998 (unaudited) ASSETS: Investments in securities, at value (identified cost $281,412,645)............................. $298,463,857 Cash........................................................ 89 Receivable for: Interest................................................ 3,978,868 Investments sold........................................ 3,021,903 Prepaid expenses and other assets........................... 15,710 ------------ TOTAL ASSETS............................................ 305,480,427 ------------ LIABILITIES: Payable for: Investments purchased................................... 1,826,880 Shares of beneficial interest repurchased............... 38,370 Investment advisory fee................................. 80,567 Administration fee...................................... 46,348 Accrued expenses and other payables......................... 84,218 ------------ TOTAL LIABILITIES....................................... 2,076,383 ------------ NET ASSETS.............................................. $303,404,044 ============ COMPOSITION OF NET ASSETS: Paid-in-capital............................................. $282,586,046 Net unrealized appreciation................................. 17,051,212 Accumulated undistributed net investment income............. 2,850,307 Accumulated undistributed net realized gain................. 916,479 ------------ NET ASSETS.............................................. $303,404,044 ============ NET ASSET VALUE PER SHARE, 29,946,650 shares outstanding (unlimited shares authorized of $.01 par value)............ $10.13 ============
SEE NOTES TO FINANCIAL STATEMENTS 12 MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS For the six months ended February 28, 1998 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME............................................. $ 8,504,651 ----------- EXPENSES Investment advisory fee..................................... 500,930 Administration fee.......................................... 288,127 Transfer agent fees and expenses............................ 53,384 Professional fees........................................... 31,580 Shareholder reports and notices............................. 21,366 Registration fees........................................... 16,052 Trustees' fees and expenses................................. 8,121 Custodian fees.............................................. 6,854 Other....................................................... 7,732 ----------- TOTAL EXPENSES.......................................... 934,146 Less: expense offset........................................ (6,292) ----------- NET EXPENSES............................................ 927,854 ----------- NET INVESTMENT INCOME................................... 7,576,797 ----------- NET REALIZED AND UNREALIZED GAIN: Net realized gain........................................... 1,164,621 Net change in unrealized appreciation....................... 6,509,435 ----------- NET GAIN................................................ 7,674,056 ----------- NET INCREASE................................................ $15,250,853 ===========
SEE NOTES TO FINANCIAL STATEMENTS 13 MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED FEBRUARY 28, 1998 AUGUST 31, 1997 - ------------------------------------------------------------------------------------------ (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income.............................. $ 7,576,797 $ 17,132,652 Net realized gain.................................. 1,164,621 2,589,265 Net change in unrealized appreciation.............. 6,509,435 5,563,849 ------------ ------------ NET INCREASE................................... 15,250,853 25,285,766 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income.............................. (8,199,256) (17,614,906) Net realized gain.................................. (2,833,807) (76,631) ------------ ------------ TOTAL.......................................... (11,033,063) (17,691,537) ------------ ------------ Net decrease from transactions in shares of beneficial interest............................... (2,521,984) (7,720,803) ------------ ------------ NET INCREASE (DECREASE)........................ 1,695,806 (126,574) NET ASSETS: Beginning of period................................ 301,708,238 301,834,812 ------------ ------------ END OF PERIOD (Including undistributed net investment income of $2,850,307 and $3,472,766, respectively).... $303,404,044 $301,708,238 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 14 MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited) 1. ORGANIZATION AND ACCOUNTING POLICIES Municipal Income Trust (the "Fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Fund's investment objective is to provide current income which is exempt from federal income tax. The Fund was organized as a Massachusetts business trust on June 16, 1987 and commenced operations on September 29, 1987. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service has informed the Fund that in valuing the 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 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 are accreted and premiums 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 15 MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited) continued nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. 2. INVESTMENT ADVISORY AGREEMENT Pursuant to an Investment Advisory Agreement with Dean Witter InterCapital Inc. (the "Investment Adviser"), the Fund pays the Investment Adviser an advisory fee, calculated weekly and payable monthly, by applying the following annual rates to the Fund's weekly net assets: 0.35% to the portion of the Fund's weekly net assets not exceeding $250 million and 0.25% to the portion of the Fund's 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 weekly net assets: 0.20% to the portion of the Fund's weekly net assets not exceeding $250 million; 0.15% to the portion of the Fund's weekly net assets exceeding $250 million but not exceeding $500 million; 0.12% to the portion of the Fund's weekly net assets exceeding $500 million but not exceeding $750 million; and 0.10% to the portion of the Fund's weekly net assets exceeding $750 million. Under the terms of the Administration Agreement, the Administrator maintains certain of the Fund's books and records and furnishes, at its own expense, office space, facilities, equipment, clerical, bookkeeping and certain legal services and pays the salaries of all personnel, including officers of the Fund who are employees of the Administrator. The Administrator also bears the cost of telephone services, heat, light, power and other utilities provided to the Fund. 4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended February 28, 1998 aggregated $27,988,550 and $37,277,591, respectively. 16 MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited) continued Dean Witter Trust FSB, an affiliate of the Investment Adviser and Administrator, is the Fund's transfer agent. At February 28, 1998, the Fund had transfer agent fees and expenses payable of approximately $4,000. 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 six months ended February 28, 1998, included in Trustee's fees and expenses in the Statement of Operations amounted to $1,798. At February 28, 1998, the Fund had an accrued pension liability of $48,175 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 IN PAR VALUE EXCESS OF SHARES OF SHARES PAR VALUE ---------- --------- ------------ Balance, August 31, 1996.................................... 31,053,450 $310,535 $292,518,298 Treasury shares purchased and retired (weighted average discount 6.41%)*........................................... (839,200) (8,392) (7,712,411) ---------- -------- ------------ Balance, August 31, 1997.................................... 30,214,250 302,143 284,805,887 Treasury shares purchased and retired (weighted average discount 6.20%)*........................................... (267,600) (2,676) (2,519,308) ---------- -------- ------------ Balance, February 28, 1998.................................. 29,946,650 $299,467 $282,286,579 ========== ======== ============
- --------------------- * The Trustees have voted to retire the shares purchased. 6. DIVIDENDS The Fund declared the following dividends from net investment income:
DECLARATION AMOUNT RECORD PAYABLE DATE PER SHARE DATE DATE - ----------------- --------- ------------- -------------- December 30, 1997 $0.045 March 6, 1998 March 20, 1998 March 24, 1998 $0.045 April 3, 1998 April 17, 1998 March 24, 1998 $0.045 May 8, 1998 May 22, 1998 March 24, 1998 $0.045 June 5, 1998 June 19, 1998
17 MUNICIPAL INCOME TRUST FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE SIX FOR THE YEAR ENDED AUGUST 31* MONTHS ENDED ---------------------------------------------------- FEBRUARY 28, 1998* 1997 1996 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------------- (unaudited) PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period.................. $ 9.99 $ 9.72 $ 9.92 $ 10.16 $ 10.83 $ 10.69 ------ -------- -------- -------- -------- -------- Net investment income................................. 0.25 0.57 0.60 0.66 0.69 0.72 Net realized and unrealized gain (loss)............... 0.24 0.26 (0.12) 0.04 (0.62) 0.14 ------ -------- -------- -------- -------- -------- Total from investment operations...................... 0.49 0.83 0.48 0.70 0.07 0.86 ------ -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income.............................. (0.27) (0.58) (0.60) (0.60) (0.65) (0.72) Net realized gain.................................. (0.09) --** (0.09) (0.34) (0.09) -- ------ -------- -------- -------- -------- -------- Total dividends and distributions..................... (0.36) (0.58) (0.69) (0.94) (0.74) (0.72) ------ -------- -------- -------- -------- -------- Anti-dilutive effect of acquiring treasury shares..... 0.01 0.02 0.01 -- -- -- ------ -------- -------- -------- -------- -------- Net asset value, end of period........................ $10.13 $ 9.99 $ 9.72 $ 9.92 $ 10.16 $ 10.83 ====== ======== ======== ======== ======== ======== Market value, end of period........................... $ 9.56 $ 9.50 $ 9.25 $ 9.00 $ 9.25 $ 11.25 ====== ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN+.............................. 4.57%(1) 9.23% 10.75% 7.78% (11.73)% 11.82% RATIOS TO AVERAGE NET ASSETS: Expenses.............................................. 0.62%(2)(3) 0.63% 0.64%(3) 0.65% 0.63% 0.67% Net investment income................................. 5.03%(2) 5.68% 6.03% 6.70% 6.59% 6.70% SUPPLEMENTAL DATA: Net assets, end of period, in thousands............... $303,404 $301,708 $301,835 $313,768 $331,745 $359,166 Portfolio turnover rate............................... 9%(1) 22% 33% 14% 27% 1%
- --------------------- * The per share amounts were computed using an average number of shares outstanding during the period. ** Does not reflect a distribution of $0.0024. + 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 brokerage commissions. (1) Not annualized. (2) Annualized. (3) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS 18 (This Page Intentionally Left Blank) 19 (This Page Intentionally Left Blank) 20 TRUSTEES - ---------------------------- Michael Bozic Charles A. Fiumefreddo Edwin J. Garn John R. Haire Wayne E. Hedien Dr. Manuel H. Johnson Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS - ---------------------------- Charles A. Fiumefreddo Chairman and Chief Executive Officer Barry Fink Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT - ---------------------------- Dean Witter Trust FSB 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 The financial statements included herein have been taken from the records of the Fund without examination by the independent accountants and accordingly they do not express an opinion thereon. MUNICIPAL INCOME TRUST Semiannual Report February 28, 1998 -----END PRIVACY-ENHANCED MESSAGE-----