-----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, H54FCUlcvaokrJFN/ADO+7FN2eSC8oFCovoVaNXSQOw9ZPTCdMYiQ5BJmzIdeXxU T8vE5JkzC9zkAfhFiqXhvg== 0000950136-96-000166.txt : 19960417 0000950136-96-000166.hdr.sgml : 19960417 ACCESSION NUMBER: 0000950136-96-000166 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960416 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: 96547658 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 SEMIANNUAL REPORT MUNICIPAL INCOME TRUST Two World Trade Center, New York, New York 10048 LETTER TO THE SHAREHOLDERS February 29, 1996 DEAR SHAREHOLDER: Progressive tightening of monetary policy by the Federal Reserve Board through early 1995 slowed economic growth and caused bond prices to advance. However, the pace of the rally moderated between September 1995 and February 1996, coinciding with the first half of Municipal Income Trust's current fiscal year. The trend toward lower long-term interest rates was aided by the central bank's easing of short-term interest rates in three separate moves between July 1995 and January 1996. MUNICIPAL MARKET CONDITIONS Long-term municipal bond yields as tracked by The Bond Buyer Revenue Bond Index* moved from 6.26 percent in August 1995 to 5.86 percent at the end of February. This 40 basis point decline in yield corresponded to a 4 percent price increase for a callable bond with a 30-year maturity. Similarly, yields on 1-year municipal notes moved from 3.92 percent to 3.30 percent. The yield pickup for extending maturity from 1-to-30 years was 256 basis points in February 1996. Municipal market concern over the risk of flat tax legislation caused the ratio of Revenue Bond Index yields to 30-year U.S. Treasury bond yields to rise to 94 percent in August 1995. A rising ratio means that municipal bond prices have lagged U.S. Treasury prices. As the prospect of flat tax passage in 1996 faded, the yield ratio improved to 91 percent at the end of February. Between 1987 and 1994, long-term municipal revenue yields averaged 89 percent of U.S. Treasury yields. Municipal underwriting activity increased by one-third over the past six-months as a result of lower interest rates. Despite a resurgence in new issue volume, the municipal market has continued to experience consolidation with several major dealers withdrawing from the business. - ------------ *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 Investors Service, Inc., and AA+ to A- by Standard & Poor's Corp. MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 29, 1996, continued TAX REFORM Flat tax advocates have continued to generate publicity for their proposals and have effected the municipal market since early 1995. Most of the discussion on proposed tax-reform measures is based on theoretical concepts, which contain broad assumptions and lack specific details. Basically, the various plans raise questions about the fairness of changing from a progressive tax structure. Low flat-tax rate plans call for the elimination of deductions of mortgage interest, charitable contributions, property taxes, and state and local income taxes. As politicians attempted to make tax reform a major issue in the 1996 elections, media coverage expanded from the financial page to the front page. One advantage of this publicity is increased recognition of the impact of tax reform on different tax payers. In addition to the market risk associated with the flat-tax proposals, municipal credits would also be negatively affected. If mortgage interest and property tax deductions were eliminated, municipalities would experience a decline in their property tax base. The loss of state and local income tax deductions would increase the relative economic disadvantage that high-tax states already face. The flat tax may be considered an attempt to shift tax accountability from the federal to local governments. PERFORMANCE The net asset value (NAV) of Municipal Income Trust (TFA) rose from $9.92 to $9.97 per share during the six-month period ended February 29, 1996. Based on the $0.05 per share NAV change plus reinvestment of tax-free dividends totaling $0.30 per share and taxable capital gains distributions totaling approximately $0.09 per share, the Fund's total NAV return was 4.83 percent. Over the same period, the Fund's market price on the New York Stock Exchange improved from $9.00 to $9.375 per share. Based on this market price change and reinvestment of tax-free dividends and taxable distributions, the Fund's total market return was 8.65 percent. The Fund began the period trading at a nine percent discount to NAV and closed at a six percent discount. Undistributed net investment income totaled $0.14 per share on February 29, 1996 versus $0.13 per share six months ago. PORTFOLIO STRUCTURE On February 29, 1996, the Fund's $313 million in net assets was diversified among 15 long-term municipal sectors and 65 credits. The three largest sectors -- general obligation bonds, industrial development/pollution control and electric revenue bonds -- represented 35 percent of net assets. Bonds callable in the next four years were reduced from 44 to 31 percent of the long-term portfolio MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 29, 1996, continued over the past six months. Average call protection improved from six to seven years. The average maturity of the long- term portfolio was maintained at 18 years. Holdings rated AAA or AA rose from 49 to 57 percent of the long-term portfolio. The Fund's current credit quality ratings are illustrated on the right. MOODY'S OR STANDARD & POOR'S CREDIT RATING AS OF FEBRUARY 29, 1996 (% OF TOTAL LONG-TERM INVESTMENTS) (The chart below represents information which appears as a graphic in the printed report) A pie chart reflecting the credit quality of the portfolio as rated by Moody's or Standard & Poors Credit Ratings as of February 29, 1996. CREDIT RATING PERCENT ------------- ------- Aa or AA 30% A or A 28% Aaa or AAA 27% Baa or BBB 12% Not rated 3% LOOKING AHEAD Tax-reduction proposals may continue to receive publicity. However, the balance between the supply of new issues and demand created by maturities and calls for redemption should continue to be positive for the municipal market. Long-term municipal securities continued to yield 90 percent of U.S. Treasuries and are likely to move in tandem with the Treasury market. The Fund's procedures 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 29, 1996, the Fund purchased and retired 260,900 shares of common stock at a weighted average market discount of 8.9 percent. We appreciate your ongoing support of Municipal Income Trust and look forward to continuing to serve your investment needs. Very truly yours, /s/ Charles A. Fiumefreddo CHARLES A. FIUMEFREDDO Chairman of the Board MUNICIPAL INCOME TRUST RESULTS OF ANNUAL MEETING (unaudited) * * * On December 20, 1995, 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 BY ALL SHAREHOLDERS: Jack F. Bennett For ........................ 21,203,797 Withheld ................... 241,328 Michael Bozic For ........................ 21,205,344 Withheld .................. 239,781 Charles A. Fiumefreddo For ........................ 21,211,923 Withheld .................. 233,202 (2) CONTINUANCE OF THE CURRENTLY EFFECTIVE INVESTMENT ADVISORY AGREEMENT: For ........................ 20,821,638 Against ................... 103,902 Abstain ................... 519,585 (3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS: For ........................ 20,968,289 Against .................... 255,306 Abstain .................... 221,530 MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ---------------------------------------------------------------- -------- ------------ -------------- MUNICIPAL BONDS (96.8%) General Obligation (14.0%) $ 6,000 Moulton-Niguel Water District, California, Refg 1993 (MBIA) .... 5.00 % 09/01/19 $ 5,539,980 5,000 Chicago, Illinois, Refg Ser 1995 B (FGIC) ...................... 5.125 01/01/25 4,648,300 6,270 Washington Suburban Sanitary District, Maryland, Gen Constr Refg 1994 .......................................................... 5.00 06/01/10 6,187,800 10,000 Massachusetts, 1994 Ser A ...................................... 5.00 01/01/11 9,574,800 New York City, New York, 4,000 1995 Ser D (MBIA) ............................................. 6.20 02/01/07 4,457,120 850 1988 Ser D .................................................... 8.50 08/01/08 917,405 5,000 New York State, Refg Ser 1995 B ................................ 5.625 08/15/09 5,192,550 7,000 Shelby County, Tennessee, Refg 1995 Ser A ...................... 5.625 04/01/11 7,228,130 - ----------- -------------- 44,120 43,746,085 - ----------- -------------- Educational Facilities Revenue (7.4%) 5,000 California Public Works Board, University of California 1993 Ser A ......................................................... 5.50 06/01/21 4,776,450 3,500 Georgetown University, District of Columbia, Ser 1989 A ........ 8.25 04/01/18 3,828,370 4,000 FSU Financial Assistance Inc, Florida, Impr & Refg Ser 1994 .... 5.25 10/01/15 3,811,680 5,000 New Jersey Economic Development Authority, Educational Testing Service Ser 1995 B (MBIA) ..................................... 6.25 05/15/25 5,344,750 New York State Dormitory Authority, 2,500 State University Ser 1995 A ................................... 6.50 05/15/05 2,733,325 2,500 State University Ser 1995 A ................................... 6.50 05/15/06 2,731,925 - ----------- -------------- 22,500 23,226,500 - ----------- -------------- Electric Revenue (9.1%) 1,500 North Carolina Municipal Power Agency #1, Catawba Refg Ser 1988 A ........................................................ 7.50 01/01/17 1,592,355 20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C ............. 4.70 02/01/06 19,611,400 Intermountain Power Agency, Utah, 1,000 First Crossover Ser ........................................... 7.875 07/01/14 1,033,920 3,000 Refg Ser 1987 D ............................................... 8.625 07/01/21 3,219,360 2,750 Chelan County Public Utility District #1, Washington, Ser 1987 B (AMT) .................................................. 9.30 07/01/62 3,034,790 - ----------- -------------- 28,250 28,491,825 - ----------- -------------- Hospital Revenue (6.3%) 5,000 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama, Carraway Methodist Health Ser 1995 A (Connie Lee) ..... 5.875 08/15/15 5,070,650 Illinois Health Facilities Authority, 1,320 Glen Oaks Medical Center Inc Refg 1990 Ser D .................. 9.50 11/15/15 1,549,244 1,000 Mercy Center for Health Care Services Ser 1992 ................ 6.65 10/01/22 1,019,220 950 Kentucky Development Finance Authority, Ashland Hospital/King's Daughters Refg & Impr Ser 1987 ................................ 9.75 08/01/11 1,045,057 1,500 Winchester, Kentucky, Clark County Hospital Refg Ser 1987 ...... 7.75 04/01/13 1,564,590
SEE NOTES TO FINANCIAL STATEMENTS MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ---------------------------------------------------------------- -------- ------------ -------------- $ 7,500 North Carolina Medical Care Commission, Presbyterian Health Services Corp Refg Ser 1993 .................................. 5.50 % 10/01/20 $ 7,331,550 1,850 Fayette County, West Virginia, MPC Inc Refg Ser 1990 ........... 9.75 02/01/11 2,061,048 - ----------- -------------- 19,120 19,641,359 - ----------- -------------- Industrial Development/Pollution Control Revenue (12.1%) 5,000 California Pollution Control Finance Authority, Pacific Gas & Electric Co 1987 Ser B (AMT) ................................. 8.875 01/01/10 5,426,100 5,000 Oxnard Industrial Development Finance Authority, California, Green Foods Corp Ser 1987 (AMT) .............................. 9.50 10/01/97 5,073,050 2,825 Lapeer Economic Development Corporation, Michigan, Dott Manufacturing Co Ser 1989 A (AMT) ............................ 10.65 11/15/17 3,152,333 5,285 Missouri Environment Improvement & Energy Resource Authority, Associated Electric Coop Inc/NRU-CFC Gtd Ser 84G-5 & 6 ........ 7.90 11/15/14 5,481,761 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 6,227,760 5,000 Tulsa Municipal Airport Trust, Oklahoma, American Airlines Inc Ser 1988 (AMT) ............................................... 7.375 12/01/20 5,363,150 5,000 Dallas-Fort Worth International Airport Facility Improvement Corporation, Texas, American Airlines Inc Ser 1995 ........... 6.00 11/01/14 4,892,450 1,965 Matagorda County Navigation District #1, Texas, Houston Lighting & Power Co Collateralized Ser 1989 A (AMT) ................... 7.875 02/01/19 2,104,810 - ----------- -------------- 36,075 37,721,414 - ----------- -------------- Mortgage Revenue - Multi-Family (5.9%) 5,000 New Jersey Housing & Mortgage Finance Agency, 1995 Ser A (AMBAC) 6.00 11/01/14 5,101,500 5,000 New York City Housing Development Corporation, New York, Ser 1987 A ........................................................ 9.625 01/01/19 5,336,200 940 Rhode Island Housing & Mortgage Finance Corporation, Rental 1989 Ser B (AMT) .................................................. 7.95 10/01/20 998,177 30,935 Oak Ridge Industrial Development Board, Tennessee, Gardens/Southern Hill/Woodlands Apts GNMA-Backed Refg Ser 1988 ...................................................... 0.00 10/20/19 3,957,205 3,000 Virginia Housing Development Authority, Ser 1987 B ............. 9.45 11/01/12 3,201,780 - ----------- -------------- 44,875 18,594,862 - ----------- -------------- Mortgage Revenue - Single Family (5.4%) 5,000 Alaska Housing Finance Corporation, 1993 1st Ser ............... 5.90 12/01/33 4,917,700 Maine Housing Authority, 4,265 Purchase 1988 Ser D-2 (AMT) ................................... 8.10 11/15/19 4,595,665 1,000 Purchase 1988 Ser D-2 (AMT) ................................... 8.10 11/15/22 1,072,830 3,525 North Dakota Housing Finance Agency, 1990 Ser B (AMT) .......... 7.75 07/01/24 3,725,713 1,770 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser C (AMT) ...... 7.85 09/01/21 1,874,342 750 Pennsylvania Housing Finance Agency, 1987 Ser R (AMT) .......... 8.125 10/01/19 778,462 - ----------- -------------- 16,310 16,964,712 - ----------- --------------
SEE NOTES TO FINANCIAL STATEMENTS MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ---------------------------------------------------------------- -------- ------------ -------------- Nursing & Health Related Facilities Revenue (2.5%) Vista, California, Long-Term Care Foundation of America $ 1,581 Ser 1994 A COPs (a) ........................................... 8.50 % 01/01/20 $ 1,265,090 189 Ser 1994 B COPs (a) ........................................... 0.00 01/01/20 1,890 7,000 New York State Medical Care Facilities Finance Agency, Mental Health Ser F .................................................. 5.25 02/15/19 6,439,790 - ----------- -------------- 8,770 7,706,770 - ----------- -------------- Public Facilities Revenue (1.1%) 3,245 Illinois, Civic Center Dedicated Tax Ser 1991 (AMBAC) .......... 6.25 12/15/20 3,539,354 - ----------- -------------- Resource Recovery Revenue (4.6%) 9,110 Greater Detroit Resource Recovery Authority, Michigan, 1984 Ser B & G ......................................................... 9.25 12/13/08 9,411,450 4,500 Charleston County, South Carolina, Foster-Wheeler Charleston Inc Ser 1987 A (AMT) .............................................. 9.25 01/01/10 4,959,000 - ----------- -------------- 13,610 14,370,450 - ----------- -------------- 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 2,340,000 2,065 Charleston County, South Carolina, Sandpiper Village Inc Refg Ser 1988 ...................................................... 7.00 11/01/13 1,528,100 - ----------- -------------- 5,065 3,868,100 - ----------- -------------- Transportation Facilities Revenue (9.0%) 865 Southwestern Development Authority, Illinois, Tri-City Regional Port District Ser 1989 A (AMT) (a) ........................... 7.90 07/01/14 958,100 4,000 Delaware River Port Authority, New Jersey & Pennsylvania, Ser 1995 (FGIC)** ................................................. 5.50 01/01/26 3,936,280 4,500 Charlotte, North Carolina, Airport Ser 1987 (AMT) .............. 8.50 07/01/17 4,804,110 5,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA) ...... 6.125 11/15/25 5,222,750 6,600 Dallas-Fort Worth International Airport, Texas, Refg Ser 1995 (FGIC) ........................................................ 5.625 11/01/15 6,564,492 6,000 Virginia Transportation Board, US Route 28 Ser 1992 ............ 6.50 04/01/18 6,532,800 - ----------- -------------- 26,965 28,018,532 - ----------- -------------- Water & Sewer Revenue (8.3%) 5,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994 ........ 5.50 01/01/20 4,940,700 5,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water Ser 1994 ...................................................... 5.45 07/01/19 4,851,900 2,000 Chicago, Illinois, Wastewater Ser 1994 (MBIA) .................. 6.375 01/01/24 2,127,820 Massachusetts Water Resources Authority, 3,000 1993 Ser C .................................................... 5.25 12/01/20 2,821,800 6,000 1995 Ser B (MBIA) ............................................. 5.00 12/01/25 5,521,500 1,000 New York City Municipal Water Finance Authority, New York, 1991 Ser A (Secondary FGIC) ....................................... 6.75 06/15/16 1,111,270 5,000 Upper Occoquan Sewerage Authority, Virginia, Regional Sewerage Ser 1995 A (MBIA) ............................................. 5.00 07/01/25 4,630,750 - ----------- -------------- 27,000 26,005,740 - ----------- --------------
SEE NOTES TO FINANCIAL STATEMENTS MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ---------------------------------------------------------------- -------- ------------ -------------- Other Revenue (1.0%) $ 3,000 New York Local Government Assistance Corporation, Ser 1995 A ... 6.00 % 04/01/24 $ 3,115,530 - ----------- -------------- Refunded (8.9%) 10,600 Indiana Health Facilities Financing Authority, St Anthony Medical Center & Home Inc Ser 1987 ............................ 9.25 10/01/97++ 11,723,600 5,000 Alburquerque, New Mexico, Gross Receipts Airport Ser 1987 B (AMT) .................................................. 8.75 07/01/97+ 5,361,750 4,000 Washington, 1991 Ser B ......................................... 6.70 06/01/01++ 4,452,920 3,130 Washington Health Care Facilities Authority, Sisters of Providence Ser 1988 ........................................... 8.625 10/01/97++ 3,427,726 2,500 Washington Public Power Supply System, Nuclear Proj #2 Refg Ser 1990 C ........................................................ 7.625 01/01/01++ 2,903,725 - ----------- -------------- 25,230 27,869,721 - ----------- -------------- 324,135 TOTAL MUNICIPAL BONDS (Identified Cost $290,142,516) ................................. 302,880,954 - ----------- -------------- SHORT-TERM MUNICIPAL OBLIGATION (1.5%) 4,700 Guadalupe-Blanco River Authority, Texas, Refg Central Power & Light Co Ser 1995 (Demand 03/01/96) (Identified Cost $4,700,000) ................................................... 3.45* 11/01/15 4,700,000 - ----------- -------------- $328,835 TOTAL INVESTMENTS (Identified Cost $294,842,516) (c) .................... 98.3 % 307,580,954 =========== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .......................... 1.7 5,172,025 -------------- NET ASSETS .............................................................. 100.0 % $312,752,979 ==============
- ------------ AMT Alternative Minimum Tax. COPs Certificates of Participation. ++ Prerefunded to call date shown. + Refunded to call date shown by forward delivery contract. * Current coupon of variable rate security. ** Joint exemption in New Jersey and Pennsylvania. (a) Resale is restricted to qualified institutional investors. (b) Bond in default; income recorded as received. (c) The aggregate cost for federal income tax purposes is $294,842,516; the aggregate gross unrealized appreciation is $15,400,584 and the aggregate gross unrealized depreciation is $2,662,146, resulting in net unrealized appreciation of $12,738,438. Bond Insurance: - --------------- AMBAC AMBAC Indemnity Corporation. Connie Lee Connie Lee Insurance Company. FGIC Financial Guaranty Insurance Company. MBIA Municipal Bond Investors Assurance Corporation. SEE NOTES TO FINANCIAL STATEMENTS MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 29, 1996 (unaudited) continued GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets February 29, 1996 Alabama 3.2% Alaska 1.6 Arizona 1.6 California 7.1 District of Columbia 1.2 Florida 1.2 Georgia 0.7 Illinois 4.4 Indiana 3.7 Kentucky 0.8 Maine 1.8 Maryland 2.0% Massachusetts 5.7 Michigan 4.0 Missouri 1.8 New Jersey 4.6 New Mexico 1.7 New York 12.2 North Carolina 4.4 North Dakota 1.2 Ohio 0.6 Oklahoma 1.7 Pennsylvania 1.5% Rhode Island 0.3 South Carolina 2.1 Tennessee 3.6 Texas 13.8 Utah 1.4 Virginia 4.6 Washington 4.4 West Virginia 0.7 Joint Exemption (1.3) ----- Total 98.3% ===== SEE NOTES TO FINANCIAL STATEMENTS MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES February 29, 1996 (unaudited) ASSETS: Investments in securities, at value (identified cost $294,842,516) .............. $307,580,954 Cash ......................................... 13,054 Receivable for: Interest ................................... 4,963,327 Investments sold ........................... 448,838 Prepaid expenses and other assets ............ 33,882 -------------- TOTAL ASSETS ............................... 313,040,055 -------------- LIABILITIES: Payable for: Investment advisory fee .................... 97,007 Administration fee ......................... 55,869 Shares of beneficial interest repurchased .. 37,620 Accrued expenses and other payables ......... 96,580 -------------- TOTAL LIABILITIES .......................... 287,076 -------------- NET ASSETS: Paid-in-capital .............................. 295,663,911 Net unrealized appreciation .................. 12,738,438 Accumulated undistributed net investment income ...................................... 4,369,146 Distributions in excess of net realized gain . (18,516) -------------- NET ASSETS ................................. $312,752,979 ============== NET ASSET VALUE PER SHARE, 31,362,550 shares outstanding (unlimited shares authorized of $.01 par value) ...................................... $ 9.97 ============== STATEMENT OF OPERATIONS For the six months ended February 29, 1996 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME ...................... $10,709,068 ------------- EXPENSES Investment advisory fee .............. 518,965 Administration fee ................... 298,880 Transfer agent fees and expenses .... 72,188 Shareholder reports and notices ..... 28,057 Professional fees .................... 26,168 Registration fees .................... 16,375 Trustees' fees and expenses .......... 15,731 Custodian fees ....................... 20,359 Other ................................ 8,007 ------------- TOTAL EXPENSES BEFORE EXPENSE OFFSET ............................. 1,004,730 LESS: EXPENSE OFFSET ............... (20,338) ------------- TOTAL EXPENSES AFTER EXPENSE OFFSET 984,392 ------------- NET INVESTMENT INCOME .............. 9,724,676 ------------- NET REALIZED AND UNREALIZED GAIN: Net realized gain .................... 1,061,286 Net change in unrealized appreciation 2,776,460 ------------- NET GAIN ........................... 3,837,746 ------------- NET INCREASE ......................... $13,562,422 ============= SEE NOTES TO FINANCIAL STATEMENTS MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS, continued STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED AUGUST FEBRUARY 29, 1996 31, 1995 - ------------------------------------------------------ ----------------- --------------- (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ................................. $ 9,724,676 $ 21,042,010 Net realized gain ..................................... 1,061,286 1,667,307 Net change in unrealized appreciation ................. 2,776,460 (1,360,579) ----------------- --------------- NET INCREASE ........................................ 13,562,422 21,348,738 ----------------- --------------- DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income ................................. (9,452,714) (19,216,120) Net realized gain ..................................... (2,747,118) (11,045,138) ----------------- --------------- TOTAL ............................................... (12,199,832) (30,261,258) ----------------- --------------- Net decrease from transactions in shares of beneficial interest ............................................. (2,377,928) (9,064,404) ----------------- --------------- TOTAL DECREASE ...................................... (1,015,338) (17,976,924) NET ASSETS: Beginning of period ................................... 313,768,317 331,745,241 ----------------- --------------- END OF PERIOD (Including undistributed net investment income of $4,369,146 and $4,097,193, respectively) ........ $312,752,979 $313,768,317 ================= ===============
SEE NOTES TO FINANCIAL STATEMENTS MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 29, 1996 (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 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 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 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 MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 29, 1996 (unaudited) continued 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 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 weekly net assets not exceeding $250 million and 0.25% to the portion of the 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 paid 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 weekly net assets not exceeding $250 million; 0.15% to the portion of the weekly net assets exceeding $250 million but not exceeding $500 million; 0.12% to the portion of the weekly net assets exceeding $500 million but not exceeding $750 million; and 0.10% to the portion of the 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 29, 1996 aggregated $45,620,785 and $56,670,167, respectively. Dean Witter Trust Company, an affiliate of the Investment Adviser and Administrator, is the Fund's transfer agent. At February 29, 1996, the Fund had transfer agent fees and expenses payable of approximately $11,500. MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 29, 1996 (unaudited) continued 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 of service and compensation during the last years of service. Aggregate pension costs for the six months ended February 29, 1996 included in Trustee's fees and expenses in the Statement of Operations amounted to $5,982. At February 29, 1996, the Fund had an accrued pension liability of $56,080 which is included in accrued expenses in the Statements 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 Treasury shares purchased and retired (weighted average discount 8.89%)* ............................................................... (260,900) (2,609) (2,375,319) ------------- ----------- -------------- Balance, February 29, 1996 ............................................. 31,362,550 $313,626 $295,350,285 ============= =========== ==============
- -------------- * The Trustees have voted to retire the shares purchased. 6. DIVIDENDS The Fund has declared the following dividends from net investment income: AMOUNT PER DECLARATION DATE SHARE RECORD DATE PAYABLE DATE - ----------------- ----------- ---------------- ---------------- February 27, 1996 $0.05 March 8, 1996 March 22, 1996 March 26, 1996 $0.05 April 4, 1996 April 19, 1996 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 29, 1996* 1995 1994 1993 1992 1991 - --------------------------------------- ------------------ ---------- ---------- ---------- ---------- ---------- (UNAUDITED) PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period ................... $ 9.92 $10.16 $ 10.83 $10.69 $10.37 $10.01 ------------------ ---------- ---------- ---------- ---------- ---------- Net investment income .................. 0.31 0.66 0.69 0.72 0.73 0.74 Net realized and unrealized gain (loss) 0.13 0.04 (0.62) 0.14 0.31 0.30 ------------------ ---------- ---------- ---------- ---------- ---------- Total from investment operations ...... 0.44 0.70 0.07 0.86 1.04 1.04 ------------------ ---------- ---------- ---------- ---------- ---------- Less dividends and distributions from: Net investment income ................. (0.30) (0.60) (0.65) (0.72) (0.72) (0.68) Net realized gain ..................... (0.09) (0.34) (0.09) -- -- ** -- ** ------------------ ---------- ---------- ---------- ---------- ---------- Total dividends and distributions ..... (0.39) (0.94) (0.74) (0.72) (0.72) (0.68) ------------------ ---------- ---------- ---------- ---------- ---------- Net asset value, end of period ......... $ 9.97 $ 9.92 $ 10.16 $10.83 $10.69 $10.37 ================== ========== ========== ========== ========== ========== Market value, end of period ............ $ 9.375 $ 9.00 $ 9.25 $11.25 $10.75 $10.25 ================== ========== ========== ========== ========== ========== TOTAL INVESTMENT RETURN+ ............... 8.65% (1) 7.78% (11.73)% 11.82% 12.28% 8.23% RATIOS TO AVERAGE NET ASSETS: Expenses ............................... 0.64% (2)(3) 0.65% 0.63% 0.67% 0.73% 0.75% Net investment income .................. 6.16% (2)(3) 6.70% 6.59% 6.70% 6.87% 7.31% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $312,753 $313,768 $331,745 $359,166 $354,467 $343,724 Portfolio turnover rate ................ 15% (1) 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 brokerage commissions. (1) Not annualized. (2) Annualized. (3) The above expense and net investment income ratios would have been 0.63% and 6.17%, respectively, which reflects 0.01% effect for custody cash credits. SEE NOTES TO FINANCIAL STATEMENTS TRUSTEES 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 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 29, 1996 -----END PRIVACY-ENHANCED MESSAGE-----