<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholder:
Following is Colonial Municipal Income Trust's semi-annual report for the
six months ended May 31, 1995. Your Fund is designed to provide investors with a
high level of tax-exempt income and an attractive relative total return through
investments in rated and non-rated municipal bonds.
Rated bonds are selected for their relative value and expected return. This
characteristic may have a positive impact on the Fund's net asset value and
total return. Non-rated bonds, on the other hand, are perceived by investors as
being somewhat more volatile because they have not been rated by the major bond
rating agencies. These bonds may therefore provide superior yields to rated
bonds of similar quality.
FUND PERFORMANCE (11/30/94 - 5/31/95)
<TABLE>
<S> <C>
Distributions declared per share(1) $0.294
- -------------------------------------------------------------------------------
Annualized distribution rate on 5/31/95, based
on net asset value 7.61%
- -------------------------------------------------------------------------------
Taxable-equivalent distribution rate on 5/31/95,
based on net asset value(2) 12.60%
- -------------------------------------------------------------------------------
Six-month total return, based on net asset value
and assuming reinvestment of all distributions 6.75%
- -------------------------------------------------------------------------------
Six-month total return, based on 5/31/95 NYSE
closing market price, assuming reinvestment of
all distributions 8.02%
- -------------------------------------------------------------------------------
Net asset value per share on 5/31/95 $7.33
- -------------------------------------------------------------------------------
NYSE market price per share on 5/31/95 $7.000
- -------------------------------------------------------------------------------
</TABLE>
ECONOMIC/MARKET OVERVIEW
The U.S. economy may be coming in for the "soft landing" that has been the
Federal Reserve Board's goal for the last two years. Annualized gross domestic
product (GDP) for the first three months of 1995 was 2.8%, down significantly
from the annualized GDP of 5.1% for the final quarter of 1994. This weakness in
the U.S. economy, which translated into lower interest rates, had a favorable
impact on the municipal bond market. As the pace of economic growth diminished,
interest rates moved lower and prices in the municipal bond market improved.
The non-rated bonds that are the Fund's primary focus tend to reflect the
fiscal strength of the corporations that issue them. Therefore, at a time when
corporate profits are historically high, non-rated bonds have been a source of
attractive returns.
SUPPLY AND DEMAND
Although interest rates have declined in recent months, there has not been
a significant increase in refinancing activity. At the same time, the new issue
supply of municipal bonds remains limited. Colonial management believes that the
supply of new issue bonds may go as low as $114 billion by the end of 1995, down
from a high of $292 billion in 1993.
INVESTMENT STRATEGY
Although the Fund maintains a diversified portfolio, certain high yield
sectors, including paper and airlines, have recently been a focus due to high
levels of profitability.
On May 31, the Fund owned 129 individual issues in 32 public sectors. More
than 65% of the securities in the portfolio were non-rated, and more than 30%
were rated. The rated bonds included some higher-yielding, lower-rated
securities.
During the semiannual period there was a decrease in non-rated and
higher-yielding rated investments, with a corresponding increase in investments
in bonds rated AAA, AA, and A. While higher-yielding bonds may offset price
declines during periods of rising interest rates, when interest rates decline,
higher quality bonds may offer greater potential for capital appreciation.
As expected, interest rates have moved lower during 1995. Although there
may be periods of consolidation when rates move slightly higher, we believe the
overall interest rate trend will continue to favor municipal bonds.
[PHOTO OF JOHN A. McNEICE, JR. PRESIDENT]
Sincerely,
/s/ John A. McNeice, Jr.
- ------------------------
John A. McNeice, Jr.
President
July 15, 1995
(1) A portion of the Fund's income may be subject to the alternative minimum
tax.
(2) The taxable-equivalent distribution rate is based on the maximum federal
income tax rate of 39.6%.
<PAGE>
INVESTMENT PORTFOLIO (UNAUDITED, IN THOUSANDS) MAY 31, 1995
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 98.6% PAR VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
AGRICULTURE/FORESTRY/FISHING - 0.5%
AGRICULTURE - CROPS
LA Port New Orleans Industrial Development
Continental Grain Co., Series 1993,
7.500% 07/01/13 ................................ $ 1,000 $ 1,039
- ---------------------------------------------------------------------------------
CERTIFICATES OF PARTICIPATION - 1.2%
CA Statewide Communities
Development Corp.,
5.000% 10/01/23 (a) ........................... 2,000 1,790
MA Health and Educational Facilities,
Independent Living Bonds,
Series 1993-A,
8.100% 07/01/18 ................................ 700 700
-------
2,490
- ---------------------------------------------------------------------------------
CONSTRUCTION - 1.1%
BUILDING CONSTRUCTION
IN Hammond Sewer & Solid Waste Disposal,
American Maize Products Co.,
Series A,
8.000% 12/01/24 ................................ 2,000 2,153
- ---------------------------------------------------------------------------------
FINANCE/INSURANCE/REAL ESTATE - 0.5%
REAL ESTATE
MD Baltimore,
Economic Development,
Park Charles Project, Series 1986,
8.000% 01/01/10 ................................ 910 960
- ---------------------------------------------------------------------------------
GENERAL OBLIGATION - 2.7%
AZ Apache County School District
Number 010 Round Valley
Project of 1987, Series 1990-C,
9.875% 07/01/05 ................................ 2,000 2,242
CA State of California,
5.750% 03/01/19 ................................ 2,000 1,935
PR Commonwealth of Puerto Rico,
5.375% 07/01/22 ................................ 1,250 1,191
-------
5,368
- ---------------------------------------------------------------------------------
HEALTH - 33.3%
HOSPITAL - 10.0%
AL Alabama Special Care Facilities Authority,
Montgomery Healthcare,
Series 1989,
11.000% 10/01/19 ............................... 2,280 2,246
DE State Economic Development,
Riverside Hospital, Series 1992-A,
9.500% 01/01/22 ................................ 910 1,023
GA Clayton Hospital Authority,
The Woodlands Foundation, Inc.,
Series 1991 A,
9.800% 05/01/21 (b) ........................... 1,500 1,050
ID State Health Facilities Authority,
IHC Hospitals, Inc.,
7.920% 02/15/21 ................................ 2,750 3,049
IL Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 07/01/24 ................................ 2,250 2,275
MI State Hospital Finance Authority:
Detroit Osteopathic Hospital C,
Series 1987-A,
7.500% 11/01/10 ................................ 950 931
Saratoga Community Hospital Obligation,
Series 1992,
8.750% 06/01/10 ................................ 535 572
MO Hannibal Industrial Development,
Medical Systems of Northeast Missouri,
Series 1992,
9.500% 03/01/22 ................................ 2,000 2,330
NC Lincoln County,
9.000% 05/01/07 ................................ 560 622
NJ Health Care Facilities Financing
Authority, Raritan Bay Medical Center,
7.250% 07/01/27 ................................ 1,000 991
VA Dickenson County Industrial
Development, Volunteer Health Care
Systems, Inc., Series 1988-A,
10.750% 06/01/18 (b) .......................... 5,500 1,650
VT Educational & Health Buildings
Financing Agency,
7.750% 01/01/13 ................................ 1,090 1,059
WA Washington State Health Care
Facility, Grays Harbor Community
Hospital, Series 1993:
7.200% 07/01/03 ................................ 385 408
8.025% 07/01/20 ................................ 1,770 1,870
-------
20,076
-------
HUMAN SERVICES PROVIDERS - 0.6%
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/19 ................................ 535 617
Series 1992-C,
9.750% 08/01/19 ................................ 545 629
-------
1,246
-------
NURSING HOME - 22.7%
AZ Tucson Industrial Development,
Authority, Villa Maria Care Center,
10.125% 11/01/21 ............................... 510 485
</TABLE>
See notes to investment portfolio.
2
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
HEALTH - CONT
NURSING HOME - CONT.
CO Health Facility,
American Housing Foundation I,
Series 1990,
10.250% 12/01/20 ............................ $ 1,500 $ 1,614
DE State Economic Development Authority,
12.000% 04/01/25 ............................ 2,325 2,560
DE Sussex County, Health Care Facility,
Delaware Health Corp., Series
1994-A,
7.600% 01/01/24 ............................ 1,000 950
FL Flagler County Industrial,
Redevelopment Authority,
South Florida Properties, Series 1988,
10.500% 12/01/18 ........................... 1,485 1,487
IA Finance Authority Health Care Facility,
Mercy Health Initiatives,
Series 1989,
9.950% 07/01/19 ............................. 2,000 1,960
IN Gary Industrial Economic Development,
West Side Health Care Center,
Series 1987-A,
11.500% 10/01/17 ............................ 2,500 2,375
IN Michigan City Health Facilities,
Metropolitan Health Foundation,
Inc., Project,
10.000% 11/01/22 (b) ....................... 4,500 3,150
KS Halstead Industrial Health Care
Project,
10.250% 08/01/13 ............................ 1,355 1,402
KY Jefferson County
First Mortgage,
Kentucky Iowa, Inc., Project, Series 1990,
10.250% 01/01/20 ............................ 1,000 1,039
KY Lexington-Fayette Urban County
Government, First Mortgage, AHF
Kentucky-Iowa, Inc., Project, Series 1990,
10.250% 01/01/20 ............................ 1,000 1,039
MA Boston,
St. Joseph Nursing Care Center, Inc.,
10.000% 01/01/20 (c) ....................... 1,980 2,190
MA State Industrial Finance Agency:
GF/Massachusetts Inc.,
Series 1994,
8.300% 07/01/23 ............................. 1,000 956
Mary Ann Morse Nursing Home,
Series 1991-I,
10.000% 01/01/21 ............................ 1,200 1,529
MI Cheboygan County Economic
Development Corp.,
Metro Health Foundation Project,
10.000% 11/01/22 (b) ....................... 2,440 1,708
MO Grove Industrial Development Authority,
First Mortgage Health Care Facility,
Heritage Manor GR Series 1988,
10.250% 11/01/13 ............................ 545 518
MO Saint Louis County Industrial
Development Authority,
10.250% 12/01/16 ............................ 1,915 1,956
MO Springfield Industrial Development
Authority,
10.250% 12/01/10 ............................ 1,275 1,326
NJ Economic Development Authority
Geriatric and Medical Service,
Inc., Series A,
10.500% 05/01/04 ............................ 850 925
NM Clovis Industrial Development,
Retirement Ranches Project:
10.750% 04/01/19 ............................ 195 212
10.750% 04/01/19 ............................ 1,980 2,156
NM Espanola,
First Mortgage Medical Facilities
Pilot Development, Southwest Series 1988,
10.250% 05/01/13 ............................ 920 920
NM Silver City First Leasehold Mortgage
Medical Facilities, RC Development,
Series 1988,
10.250% 11/01/13 ............................ 965 965
OH Lucas County,
Villa North Nursing Home,
Series 1988-B,
10.500% 06/01/18 ............................ 2,500 2,250
OH Montgomery County,
Grafton Oaks Project,
Series 1986,
9.750% 12/01/16 ............................. 1,480 1,406
OK Muskogee County Economic Development
Authority Health Facilities,
Heartway Corp. Series 1989 A-3,
10.250% 03/01/19 ............................ 1,970 1,970
PA Nursing Home, Series 1988,
10.250% 11/01/18 ............................ 1,485 1,544
PA Philadelphia Authority for Industrial
Development, First Mortgage,
The Care Pavilion, Series 1988,
10.250% 02/01/18 ............................ 975 1,009
</TABLE>
See notes to investment portfolio.
3
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
HEALTH - CONT
NURSING HOME - CONT
TN New Tazewell Health Education and
Housing Facilities Board Industrial
New Tazewell, Series 1987,
10.000% 06/01/17 ............................. $ 1,660 $ 1,722
VA Beach Development Authority,
Beverly Enterprises, Series 1985,
10.000% 04/01/10 ............................. 1,915 2,152
-------
45,475
- ---------------------------------------------------------------------------------
HOUSING - 16.2%
ASSISTED LIVING/SENIOR - 1.5%
MN Roseville,
Care Institute, Inc., Series 1993,
7.750% 11/01/23 ............................. 1,630 1,469
TX Bell County Health Facilities
Development Corp., Care Institutions, Inc.,
9.000% 11/01/24 ............................. 1,500 1,584
-------
3,053
-------
MULTI-FAMILY - 12.4%
CT Church Street Housing Authority,
South Apartments,
Section 8, Series 1983,
11.000% 03/01/01 (b) ........................ 1,995 798
FL Clear Water,
Hampton Apartments,
8.250% 05/01/24 ............................. 2,500 2,628
FL Hialeah Housing Authority,
Series 1991,
9.500% 11/01/21 ............................. 1,000 1,043
FL State Housing Finance Agency,
Windsong Apartments, Series 1993-C,
9.250% 01/01/19 ............................. 830 837
FL West Palm Beach Housing, Inc.,
Multi-family Housing, Cypress Run,
10.500% 03/15/19 (b) ........................ 2,040 714
IL Chicago Multi-Family Housing
Michigan Boulevard Garden Apartment,
Rehabilitation Section 8, Series 1985,
12.000% 01/01/00 ............................. 515 525
MN White Bear Lake,
Birch Lake Townhouse Project:
Series 1989-A,
10.250% 07/15/19 ............................. 1,770 1,779
Series 1989-B,
(d) 07/15/19 (e) ........................ 730 1,060
NC Durham Urban Development Authority,
Durham Hosiery Mill Project,
7.500% 08/01/29 ............................. 1,000 1,079
NC Eastern Carolina Regional Housing
Authority, Jacksonville New River
Apartments,
8.250% 09/01/14 ............................. 2,000 2,022
PA Montgomery County Industrial
Living Facility, Series 1993-A,
8.250% 05/01/23 ............................. 820 798
PA Philadelphia Redevelopment
Authority, Multi-family Housing,
School Lane House Apartments,
Series 1988,
9.375% 10/01/18 ............................. 2,500 1,875
Pass Through Certificates, Series
1993-A,
8.500% 12/01/16 (f) ........................ 4,248 4,376
SC State Housing Finance and Development,
Multi-family Housing Finance Revenue,
Westbridge Apartments, Series A,
9.500% 09/01/20 ............................. 2,200 2,244
TX Galveston Pass Health Facilities Center,
Pass Through Certificates,
8.000% 08/01/23 ............................. 1,000 1,024
VA Alexandria Redevelopment
& Housing Authority, Courthouse
Commons Apartments, Series 1990-A,
10.000% 01/01/21 ............................ 1,000 1,010
VA Roanoke Redevelopment & Housing
Authority, First Mortgage, Mountain
Ridge,
9.250% 11/01/22 ............................. 1,000 1,021
-------
24,833
-------
SINGLE FAMILY - 2.3%
IL Development Finance Authority,
Retirement Housing Redevelopment,
Regency Park at Lincolnwood,
(d) 07/15/25 .......................... 22,000 2,722
KY 1986 County Single Family Mortgage
Revenue, Class A,
9.000% 09/01/16 ............................. 30 31
MN Washington County Housing &
Redevelopment Authority, Cottages of
Aspen Project,
9.250% 06/01/22 ............................. 1,105 1,111
PA Allegheny County,
Residential Financial Authority,
Single-family Mortgage, Series 1987-G,
9.500% 12/01/18 ............................. 710 741
-------
4,605
- ---------------------------------------------------------------------------------
</TABLE>
See notes to investment portfolio.
4
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING - 8.3%
APPAREL - 1.2%
VA Halifax County Industrial Development,
Craddock-Terry Inc., Series 1989,
10.000% 12/01/19 ....................... $ 1,030 $ 1,116
VA Pittsylvania County Industrial
Development, Craddock-Terry Inc.,
Series 1989,
10.000% 12/01/19 ....................... 1,105 1,193
-------
2,309
-------
ELECTRONIC & ELECTRIC EQUIPMENT - 0.6%
SD Rapid City Economic Development,
Corporate Headquarters, Series 1985,
11.875% 11/01/10 ....................... 1,245 1,289
-------
FOOD & KINDRED PRODUCTS - 0.5%
IA Ellsworth Industrial Development,
Bagel Works Project,
Series 1990,
7.500% 01/15/12 ....................... 945 923
-------
MEASURING & ANALYZING INSTRUMENTS - 0.4%
MN Brooklyn Park,
TL Systems Corp., Series 1991,
10.000% 09/01/16 ....................... 820 843
-------
PAPER PRODUCTS - 5.6%
GA Rockdale County Development,
Solid Waste Disposal Bonds,
Visy Paper, Inc., Series 1993,
7.400% 01/01/08 ....................... 5,000 5,094
MI State Strategic Fund,
Blue Water Fiber Project, Series 1994,
8.000% 01/01/12 ....................... 2,000 1,910
MI Strategic Fund Limited,
Great Lakes Pulp & Fiber Project,
10.250% 12/01/16 ....................... 4,000 4,215
-------
11,219
- --------------------------------------------------------------------------------
MINING - 0.8%
METAL MINING
CO Mesa County Industrial Development,
Joy Technologies, Inc.,
Series 1992,
8.500% 09/15/06 ....................... 1,000 1,063
OH Cuyahoga County,
Joy Technologies, Inc.,
8.750% 09/15/07 ....................... 550 592
-------
1,655
- --------------------------------------------------------------------------------
POLLUTION CONTROL REVENUE - 5.1%
IL Bryant Pollution Control Revenue,
Central Illinois Light Co. Project,
5.900% 08/01/23 ....................... 2,000 1,975
LA St. Charles Parish Pollution
Control Revenue,
Union Carbide Project,
7.350% 11/01/22 ....................... 2,000 2,113
SC York County Industrial Revenue,
Hoechst Celanese Corp.,
5.700% 01/01/24 ....................... 5,000 4,719
WV Weirton Pollution Control, Weirton
Steel Corp., Series 1989,
8.625% 11/01/14 ....................... 1,400 1,481
-------
10,288
- --------------------------------------------------------------------------------
PUBLIC ADMINISTRATION - 0.1%
ECONOMIC PROGRAMS
MI Saginaw County Economic Development
Corp.,
9.000% 12/01/00 ....................... 207 228
- --------------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 2.5%
IL Metropolitan Pier and Exposition
Authority, McCormick Place Expansion
Project,
(d) 06/15/14 (a) .................. 5,000 1,612
MN Mille Lacs Capital Improvement
Infrastructure, Band of Chippewa,
Series 1992-A,
9.250% 11/01/12 ....................... 1,140 1,285
TX Dallas-Fort Worth International Airport
American Airlines, Inc., Series 1990,
7.500% 11/01/25 ....................... 2,000 2,095
-------
4,992
- --------------------------------------------------------------------------------
PUBLIC INFRASTRUCTURE - 6.8%
AIRPORT - 2.6%
CO Denver City & County Airport,
Denver International Airport,
Series 1991-D,
7.750% 11/15/21 ....................... 3,000 3,214
IN Airport Authority,
7.100% 01/15/17 ....................... 2,000 2,112
-------
5,326
-------
TURNPIKE/TOLL ROAD/BRIDGE - 4.2%
CA San Joaquin Hills Transcorridor
Agency Senior Toll Road:
Current Interest Bonds, Series 1993,
5.000% 01/01/33 ....................... 2,000 1,570
Series 1993-CABS,
(d) 01/01/25 ....................... 45,000 5,737
MA State Industrial Finance Agency,
Series 1990,
9.000% 10/01/20 ....................... 970 1,054
-------
8,361
- --------------------------------------------------------------------------------
</TABLE>
See notes to investment portfolio.
5
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
REFUNDED/ESCROW/SPECIAL OBLIGATIONS - 6.2%
AL Marshall County Health Care Authority,
Hospital, Guntersville-Arab Medical
Center, Series 1988,
10.250% 10/01/13 ....................... $ 1,500 $ 1,744
AL Marshall County Hospital Board,
Boaz-Albertville Medical Center,
8.875% 01/01/05 ....................... 2,645 2,873
DC Hospital,
Washington Hospital Center
Corp. Series 1990 A,
8.750% 01/01/15 ....................... 750 899
DE New Castle County Single Family
Mortgage, Series 1987,
10.250% 11/01/05 ....................... 415 426
DE Wilmington, Riverside Hospital,
Series 1988-A,
10.000% 10/01/03 ....................... 200 240
IA Montgomery County Public Hospital,
Series 1987:
9.400% 12/01/05 ....................... 350 414
9.400% 12/01/06 ....................... 375 443
9.500% 12/01/12 ....................... 675 801
MA Municipal Wholesale Electric
Power Supply System,
Series 1985-B,
13.000% 07/01/18 ....................... 5 5
PA Washington County Hospital Authority,
Washington Hospital, Series 1987,
9.500% 07/01/17 ....................... 2,600 2,886
SC Charleston County
Baker Hospital, Series 1986,
9.250% 10/01/11 ....................... 1,500 1,641
-------
12,372
- --------------------------------------------------------------------------------
RETAIL TRADE - 0.5%
APPAREL & ACCESSORY STORES - 0.2%
MA State Industrial Finance Agency,
House of Bianchi, Inc.,
8.750% 06/01/18 ....................... 330 344
-------
MISCELLANEOUS RETAIL - 0.3%
OH Lake County Economic Development,
North Madison Properties, Series 1993,
8.819% 09/01/11 ....................... 710 741
- --------------------------------------------------------------------------------
SERVICES - 2.1%
HOTELS, CAMPS & LODGING
MN Burnsville Commercial Development,
Holiday Inn Project,
10.600% 06/01/06 ....................... 2,500 2,584
MN Minneapolis Commercial Development,
Hometel Associates, Ltd.,
Series 1988,
10.500% 06/01/03 ....................... 1,500 1,524
-------
4,108
- --------------------------------------------------------------------------------
SOLID WASTE - 2.0%
LAND FILL - 0.6%
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc., Project,
9.000% 09/01/05 ....................... 1,140 1,200
-------
MISCELLANEOUS DISPOSAL - 0.6%
MA Boston,
Industrial Development Financing,
Solid Waste Disposal,
10.500% 01/01/11 ....................... 1,000 1,133
-------
RECYCLING - 0.8%
GA Fulton County Development
Authority,
10.500% 12/01/07 ....................... 1,575 1,662
- --------------------------------------------------------------------------------
TAX ALLOCATION - 0.8%
IL Development Finance Authority,
City of Marion Project,
Series 1991,
9.625% 09/15/21 ....................... 1,500 1,528
- --------------------------------------------------------------------------------
TRANSPORTATION/COMMUNICATION/ELECTRIC/
GAS & SANITATION - 0.5%
Air transportation
NY New York City Industrial
Development Agency, American
Airlines,
6.900% 08/01/24 ....................... 1,000 1,034
- --------------------------------------------------------------------------------
UTILITY - 3.1%
CO-GENERATION - 0.5%
FL Martin County Industrial
Development Authority, Indian to
Co-generation Project,
7.875% 12/15/25 ....................... 1,000 1,097
-------
MUNICIPAL ELECTRIC - 2.6%
MN Southern Minnesota Municipal
Power Agency, Series 1994A,
(d) 01/01/25 ....................... 18,000 3,172
SC State Public Service Authority,
Series A,
6.250% 01/01/22 (g) ................... 2,000 2,042
-------
5,214
- --------------------------------------------------------------------------------
</TABLE>
See notes to investment portfolio.
6
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
WATER & SEWER - 3.3%
LA Public Facility Belmont Water
Authority,
9.000% 03/15/24 ....................... $ 790 $ 821
MA State Industrial Finance Agency,
Environmental Service Project,
Series 1994 A,
8.750% 11/01/21 ....................... 1,000 1,015
MS V Lakes Utility District,
8.250% 07/15/24 ....................... 500 509
NJ Economic Development Authority,
Hills Development Co.
Series 1988,
10.500% 09/01/08 ....................... 2,100 2,181
OH State Water Development Pollution
Collateralized Control, The Cleveland
Electric Illumination, Series 1987A-1,
9.750% 11/01/22 ....................... 2,000 2,140
-------
6,666
- --------------------------------------------------------------------------------
OTHER - 1.0%
VA Prince Edward County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19 ....................... 1,895 2,047
- --------------------------------------------------------------------------------
Total investments (cost $203,665) (h)................... 197,877
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 0.4%
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (I)
NY New York City Water and Sewer
Series G,
4.400% 06/15/24 ....................... 900 900
- --------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 1.0% ................. 1,947
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% .................................... $200,724
- --------------------------------------------------------------------------------
<FN>
Notes to investment portfolio:
(a) These securities, or a portion thereof, with a total market value of
$3,402, are being used to collaterize the delayed delivery purchase
indicated in note (g) below.
(b) This issuer is in default of certain debt covenants. Income is not being
accrued.
(c) This is a restricted security which was acquired at a cost of $1,980. This
security represents 1.1% of the Fund's net assets at May 31, 1995.
(d) Zero coupon bond.
(e) Accrued interest accumulates in the value of the security and is payable
at redemption.
(f) This is a restricted security which was acquired at a cost of $4,740. This
security represents 2.2% of the Fund's net assets at May 31, 1995.
(g) This security has been purchased on a delayed delivery basis, for
settlement at a future date beyond customary settlement time.
(h) Cost for federal income tax purposes is the same.
(i) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of May 31, 1995.
</TABLE>
See notes to financial statements.
7
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
May 31,1995
(in thousands except for per shares amounts)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $203,665)....................... $197,877
Short-term obligations..................................... 900
--------
198,777
Receivable for:
Interest................................................ $4,827
Investments sold........................................ 27
Other...................................................... 318 5,172
------ --------
Total assets................................ 203,949
LIABILITIES
Payable for:
Investments bought..................................... 1,938
Distributions.......................................... 1,273
Accrued:
Management fees......................................... 11
Deferred Trustees fees.................................. 3
------
Total liabilities........................... 3,225
--------
NET ASSETS AT VALUE FOR 27,367
shares of beneficial interest outstanding................ $200,724
========
Net asset value per share.................................. 7.33
========
COMPOSITION OF NET ASSETS
Capital paid in......................................... $255,575
Undistributed net investment income..................... 292
Accumulated net realized loss........................... (49,355)
Net unrealized depreciation............................. (5,788)
--------
$200,724
========
</TABLE>
STATEMENT OF OPERATIONS
Six months ended May 31, 1995
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest................................................... $ 8,604
EXPENSES
Management fee............................................. 659
Transfer agent............................................. 58
Bookkeeping fee............................................ 27
Audit fee.................................................. 23
Custodian fee.............................................. 11
Trustees fees.............................................. 7
Legal fee.................................................. 45
Reports to shareholders.................................... 4
Other...................................................... 61 895
------ --------
Net investment income........................... 7,709
--------
NET REALIZED & UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized loss.......................................... (2,652)
Net unrealized appreciation during
the period............................................. 8,125
--------
Net gain....................................... 5,473
--------
Net increase in net assets from operations................. $ 13,182
--------
</TABLE>
See notes to financial statements.
8
<PAGE>
FINANCIAL STATEMENTS - CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
(unaudited)
Six months
ended Year ended
May 31 November 30
----------- -----------
1995 1994
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income ..................................... $ 7,709 $ 16,650
Net realized loss ......................................... (2,652) (5,234)
Net unrealized appreciation (depreciation) ................ 8,125 (14,182)
--------- ---------
Net increase (decrease) from operations ............. 13,182 (2,766)
Distributions
From net investment income ................................ (8,055) (15,888)
--------- ---------
5,127 (18,654)
Fund share transactions
Value of distributions reinvested ......................... 153 806
--------- ---------
Total increase (decrease) ..................... 5,280 (17,848)
NET ASSETS
Beginning of period ....................................... 195,444 213,292
--------- ---------
End of period (including undistributed
net investment income of $292 and $638, respectively)..... $ 200,724 $ 195,444
========= =========
NUMBER OF FUND SHARES
Issued for distributions reinvested ....................... 21 105
Outstanding at
Beginning of period .................................... 27,346 27,241
--------- ---------
End of period .......................................... 27,367 27,346
========= =========
</TABLE>
See notes to financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial Municipal Income Trust (the Fund),
the accompanying financial statements contain all normal and recurring
adjustments necessary for the fair presentation of the financial position of the
Fund at May 31, 1995 and the results of its operations, the changes in its net
assets and the financial highlights for the six months then ended.
- --------------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES
The Fund is a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as a non-diversified, closed-end, management
investment company. The Fund may issue an unlimited number of shares. The
following significant accounting policies are consistently followed by the Fund
in the preparation of its financial statements and conform to generally accepted
accounting principles.
- --------------------------------------------------------------------------------
SECURITY VALUATION AND TRANSACTIONS
Debt securities generally are valued by a pricing service based upon market
transactions for normal institutional-size units of similar securities. When
management deems it appropriate, an over-the-counter or exchange bid quotation
is used.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions which cannot be valued as set forth above are valued at
fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased or sold.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This
may increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
Consistent with the Fund's policy to qualify as a regulated investment
company and to distribute all of its taxable and tax-exempt income, no federal
income tax has been accrued.
- --------------------------------------------------------------------------------
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM
Interest income is recorded on the accrual basis. Original issue discount
is accreted to interest income over the life of a security with a corresponding
increase in the cost basis; market discount is not accreted. Premium is
amortized against interest income with a corresponding decrease in the cost
basis.
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-date.
The amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.
- --------------------------------------------------------------------------------
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES MANAGEMENT FEE
Colonial Management Associates, Inc. (the Adviser) is the investment
adviser of the Fund and furnishes accounting and other services and office
facilities for a monthly fee equal to 0.65% annually of the Fund's average
weekly net assets.
- --------------------------------------------------------------------------------
BOOKKEEPING FEE
The Adviser provides bookkeeping and pricing services for $18,000 per year
plus 0.0233% of the Fund's average weekly net assets over $50 million.
- --------------------------------------------------------------------------------
OTHER
The Fund pays no compensation to its officers, all of whom are employees of
the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which
may be terminated at any time.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Obligations of the plan will be paid solely out of the Fund's assets.
- --------------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION
During the six months ended May 31, 1995, purchases and sales of
investments, other than short-term obligations, were $32,002,532 and
$30,992,587, respectively.
Unrealized appreciation (depreciation) at May 31,1995, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation............. $ 9,481,322
Gross unrealized depreciation............. (15,269,340)
------------
Net unrealized depreciation............ $ (5,788,018)
============
</TABLE>
- --------------------------------------------------------------------------------
CAPITAL LOSS CARRYFORWARDS
At November 30, 1994 capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
<TABLE>
<CAPTION>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
<S> <C>
1995................ $5,901,000
1996................ 2,850,000
1997................ 2,498,000
1998................ 6,551,000
1999................ 6,352,000
2000................ 9,103,000
2001................ 7,977,000
2002................ 5,301,000
-----------
$46,533,000
===========
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized
gains, it is unlikely that such gains would be distributed since they may be
taxable to shareholders as ordinary income.
- --------------------------------------------------------------------------------
OTHER
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
- --------------------------------------------------------------------------------
NOTE 5. RESULTS OF SPECIAL SHAREHOLDERS MEETING
On February 15, 1995, a special meeting of shareholders was held and a new
Management Agreement between the Fund and Colonial Management Associates, Inc.
was approved that became effective upon the completion of the merger of The
Colonial Group, Inc. and Apple Merger Corporation, a subsidiary of Liberty
Financial Companies, Inc. on March 24, 1995. Out of the shares of beneficial
interest outstanding on December 9, 1994, 16,884,554 voted for the new
Management Agreement, 408,926 voted against and 464,096 abstained. Of the shares
of beneficial interest outstanding that abstained, 216,877 represented broker
non-votes.
- --------------------------------------------------------------------------------
NOTE 6. RESULTS OF ANNUAL SHAREHOLDER MEETING
On April 28, 1995, the Annual Meeting of Shareholders (Meeting) was held to
elect seven Trustees and to ratify the selection of Price Waterhouse LLP as
independent accountants for the fiscal year ending November 30, 1995. On
February 1, 1995, the record date for the Meeting, the Fund had outstanding
27,346,098 shares of beneficial interest. The votes cast at the Meeting were as
follows:
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
Election of seven Trustees:
<TABLE>
<CAPTION>
FOR AGAINST
---------- -------
<S> <C> <C>
Robert J. Birnbaum 20,255,535 493,131
James E. Grinnell 20,255,535 493,131
William D. Ireland, Jr. 20,255,535 493,131
Richard W. Lowry 20,255,535 493,131
William E. Mayer 20,255,535 493,131
George L. Shinn 20,255,535 493,131
Robert L. Sullivan 20,255,535 493,131
</TABLE>
The Board of Trustees also consists of Tom Bleasdale, Lora S. Collins, John A.
McNeice, Jr., James L. Moody, Jr., John J. Neuhauser, and Sinclair Weeks, Jr.
Ratification of the selection of Price Waterhouse LLP as independent
accountants:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- ------- -------
<S> <C> <C>
20,187,399 195,497 365,770
</TABLE>
12
<PAGE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
ENDED
MAY 31 YEAR ENDED NOVEMBER 30
----------- ---------------------------------------------------------
1995 1994 1993 1992 1991 1990
----------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period ...... $ 7.150 $ 7.830 $ 7.890 $ 8.060 $ 8.370 $ 8.650
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income ...................... 0.281 0.609 0.639 0.636 0.682 0.751
Net realized and unrealized gain (loss)
on investments ............................. 0.193 (0.707) (0.063) (0.170) (0.279) (0.311)
-------- -------- -------- -------- -------- --------
Total from investment operations ........... 0.474 (0.098) 0.576 0.466 0.403 0.440
Less distributions declared to shareholders -------- -------- -------- -------- -------- --------
From net investment income ................. (0.294) (0.582) (0.632) (0.636) (0.713) (0.720)
In excess of net investment income ......... -- -- (0.004) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions declared to shareholders (0.294) (0.582) (0.636) (0.636) (0.713) (0.720)
-------- -------- -------- -------- -------- --------
Net asset value - End of period ............ $ 7.330 $ 7.150 $ 7.830 $ 7.890 $ 8.060 $ 8.370
-------- -------- -------- -------- -------- --------
Total return based on net asset value (a) .. 6.75%(b) (1.18)% 7.42% 6.00% 4.97% 5.27%
-------- -------- -------- -------- -------- --------
Total return based on market value ......... 8.02%(b) (10.06)% 11.56% 1.82% 17.77% (12.27)%
-------- -------- -------- -------- -------- --------
Ratios to average net assets:
Expenses ................................... 0.90%(c) 0.90% 0.87% 0.87% 0.87% 0.86%
Net investment income ...................... 7.70%(c) 8.12% 8.03% 7.99% 8.29% 8.92%
Portfolio turnover ......................... 32%(c) 24% 21% 10% 12% 20%
Net assets at end of period ($000) ......... $200,724 $195,444 $213,292 $213,420 $216,394 $223,091
<FN>
(a) Total return at net asset value assuming all distributions reinvested.
(b) Not annualized.
(c) Annualized.
</TABLE>
13
<PAGE>
<TABLE>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
- -----------------------------------------------------------------------------------------
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------
MAY 31, 1995 FEBRUARY 28, 1995
-----------------------------------------------
(000) PER SHARE (000) PER SHARE
------- --------- ------ ---------
<S> <C> <C> <C> <C>
Total investment income............ $4,310 $ 0.157 $4,294 $0.157
Net investment income.............. $3,848 $ 0.140 $3,861 $0.141
Net realized and
unrealized gain (loss)........... $ (468) $(0.017) $5,941 $0.210
Market value per share:
High............................ $ 7.375 $7.375
Low............................. $ 7.000 $6.375
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------------------
NOVEMBER 30, 1994 AUGUST 31, 1994 MAY 31, 1994 FEBRUARY 28, 1994
-------------------------------------------------------------------------------------------------
(000) PER SHARE (000) PER SHARE (000) PER SHARE (000) PER SHARE
--------- ----------- --------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income..... $ 4,901 $ 0.180 $4,369 $ 0.160 $ 4,483 $ 0.164 $ 4,736 $ 0.173
Net investment income....... $ 4,363 $ 0.160 $3,932 $ 0.144 $ 4,049 $ 0.148 $ 4,306 $ 0.158
Net realized and
unrealized loss........... $(7,998) $(0.291) $( 427) $(0.014) $(6,691) $(0.245) $(4,300) $(0.158)
Market value per share:
High..................... $ 7.125 $ 7.500 $ 8.375 $ 8.500
Low...................... $ 6.000 $ 7.000 $ 7.250 $ 7.875
</TABLE>
At May 31, 1995, there were 5,493 shareholder accounts.
14
<PAGE>
DIVIDEND REINVESTMENT PLAN (UNAUDITED)
- --------------------------------------------------------------------------------
The Trust generally distributes net investment income monthly and capital
gains annually. Under the Trust's Dividend Reinvestment and Cash Purchase Plan
(the "Plan") shareholders may elect to have all distributions reinvested
automatically in additional shares of the Trust. Shareholders not making such
election will receive all distributions in cash paid by check mailed directly to
the record holder by the dividend paying agent.
Shareholders participating in the Plan will receive distributions in the form
of shares of the Trust. If the market price of the shares on the distribution
payment date is equal to or greater than the net asset value, Plan participants
will be issued shares at the higher of net asset value or 95% of the market
price. The aggregate market value of the shares may constitute income to
shareholders for federal income tax purposes. If net asset value exceeds the
market price, or the distribution is payable only in cash, shares will be bought
in the open market for the accounts of Plan participants. If the market price
surpasses the net asset value before such purchasing is completed, the average
per share price paid may exceed the net asset value of the shares, resulting in
the acquisition of fewer shares than if the distribution had been in
newly-issued shares.
Participants in the Plan have the option of making additional cash payments
to the Plan administrator semi-annually, for investment in the Trust's shares.
Such payments may be made in any amount from $100 to $500. The administrator
will use all funds received from participants (as well as any dividends and
distributions received in cash) to purchase Trust shares in the open market
semiannually. Interest will not be paid on any uninvested cash payments.
All Plan accounts receive monthly written confirmations of all transactions.
Shares purchased under the Plan are ordinarily held in uncertificated form,
although participants have the right to receive certificates for whole shares
held in their account. Though the Trust has no plans to issue additional shares
other than pursuant to the Plan, if participants in the Plan desire to exercise
any rights that may be issued or granted with respect to shares, they should
request that certificates for whole shares be issued to them.
Each shareholder's proxy includes shares purchased pursuant to the Plan. The
automatic reinvestment of distributions does not relieve participants of any
income tax payable on the distributions. Participants may recognize capital gain
or ordinary income for federal income tax purposes in an amount equal to the
market value of shares received under the Plan.
Fees and expenses of the Plan other than brokerage charges will be paid by
the Trust. No brokerage charges are incurred on shares issued directly by the
Trust. Participants will bear a pro-rata share of brokerage charges incurred on
open market purchases.
A Plan participant may terminate his or her participation by written notice
to the Plan administrator. The Plan may be amended or terminated on 90 days'
written notice to the Plan participants. Upon withdrawal by any participant or
any termination of the Plan, certificates for whole shares will be issued and
cash payments will be made for any fractional shares. All correspondence
concerning the Plan, including requests for information, should be directed to
State Street Bank and Trust Company, the Trust's dividend disbursing agent and
administrator of the Plan, at P.O. Box 8200, Boston, Massachusetts 02266-8200.
- --------------------------------------------------------------------------------
ABOUT OUR COVER...
[CAPITOL GRAPHIC]
The symbol on the cover of this Report represents the Fund's primary investment
focus on municipal bonds.
- --------------------------------------------------------------------------------
Colonial Municipal Income Trust mails one shareholder report to each shareholder
address. If you would like more than one report, please call our Literature
Department at 1-800-248-2828 and additional reports will be sent to you.
CUSTODIAN, TRANSFER AGENT, REGISTRAR AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-426-5523
15
<PAGE>
[LOGO]
COLONIAL
MUTUAL FUNDS
[CAPITAL PHOTO]
COLONIAL
MUNICIPAL
INCOME TRUST
----------------------------------------
SEMIANNUAL REPORT
May 31, 1995
[LOGO]
COLONIAL
MUTUAL FUNDS
Printed on recycled paper
IT-03061B-0595
COLONIAL INVESTMENT SERVICES, INC. copyright 1995
