[COLONIAL LOGO]
COLONIAL
MUNICIPAL
INCOME
TRUST
SEMIANNUAL REPORT
MAY 31,1996
COLONIAL MUNICIPAL INCOME TRUST HIGHLIGHTS
DECEMBER 1, 1995 - MAY 31, 1996
INVESTMENT OBJECTIVE: Colonial Municipal Income Trust seeks to provide high
current income, generally exempt from federal income taxes, by investing
primarily in medium and lower quality municipal securities.
POLICY CHANGE: At a meeting held on February 17, 1995, the Trustees approved a
policy change to allow the segregation of high-quality debt securities, in
addition to cash and cash equivalents, for futures trading.
THE FUND IS DESIGNED TO OFFER:
- Potential for high tax-free income
- Experienced professional management
- Expert credit analysis
PORTFOLIO MANAGER COMMENTARY: "Despite recent adverse conditions in the bond
market, we continue to take a long-range outlook and to maintain our `big
picture' strategy which is based on the fundamental prospects of the companies
in which the Trust invests. While we believe that the tax-exempt bond market may
continue to experience lower prices in the months ahead, we remain confident
that our approach will continue to provide attractive returns for investors."
- --Peter Andersen
COLONIAL MUNICIPAL INCOME TRUST PERFORMANCE
<TABLE>
<S> <C>
Distributions declared per share (1) $0.255
Six-month total return, assuming
reinvestment of all distributions
- - NAV 0.32%
- - Market Price 5.60%
Price per share
- - NAV $ 7.24
- - Market Price $ 6.88
</TABLE>
(1) A portion of the Fund's income may be subject to the alternative minimum
tax.
<TABLE>
<CAPTION>
TOP FIVE SECTORS QUALITY BREAKDOWN
(as of 5/31/96) (as of 5/31/96)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Nursing........... 20.55% AAA 4.7%
Housing........... 11.34% AA 2.5%
Hospital.......... 9.39% A 5.2%
Paper............. 8.36% BBB 18.1%
Manufacturing..... 5.16% BB 2.4%
B .7%
NON-RATED: 62.2%
OTHER 4.2%
</TABLE>
2
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[PHOTO OF HAROLD W. COGGER, PRESIDENT]
I am pleased to present your Fund's semiannual report for the period ended May
31, 1996. First, however, I would like to extend my thanks to President John A.
McNeice, Jr., who has retired after a career with Colonial that spanned 40
years. We look forward to his continued involvement on the executive committee
of the board of directors at our parent company, Liberty Financial Companies,
Inc.
In my new position, I am directing Colonial's focus on the delivery of superior
investment performance over the long term. To achieve this mission, we will
continue to seek the optimal combination of talented people and effective
investment disciplines.
The receipt of your semiannual report is a good time to reflect on market
conditions and the performance of your Fund during the past 6 months. Falling
interest rates and minimal inflation helped the economy grow at a comfortable
pace throughout 1995 and created a positive environment for financial
investments. The stock market received additional impetus from strong growth of
corporate profits. Currently, while there may be some market volatility, we
expect moderate growth and low inflation to continue. Earnings should continue
to make progress but at a slower pace than in 1995. Opportunities are not
confined to the U.S., as we anticipate growth in certain foreign markets.
With over 12 years of service at Colonial and more than 25 years in the
industry, I am enthusiastic about-- and dedicated to achieving-- Colonial's
mission of providing you with competitive investment returns. In my new role, I
look forward to communicating with you about your Colonial investment. We
appreciate the opportunity to help you meet your investment goals.
Respectfully,
/s/ Harold W. Cogger
- --------------------
Harold W. Cogger
President
July 11, 1996
Because market conditions change frequently, there can be no assurance that the
trends described here will continue, come to pass, or affect Fund
performance.
3
INVESTMENT PORTFOLIO
MAY 31, 1996 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 95.4% PAR VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 2.6%
EDUCATION - 0.5%
CT HEFA University of New Haven,
6.625% 07/01/16 $1,000 $ 981
------
SCHOOL DISTRICT GENERAL OBLIGATION - 1.1%
AZ Apache County School District,
Number 010 Round Valley
Project of 1987, Series 1990-C,
9.875% 07/01/05 2,000 2,185
------
STUDENT LOAN - 1.0%
SD Student Loan Financial Corp.,
6.550% 08/01/20 2,000 2,000
------
- -----------------------------------------------------------------------------
HEALTH - 30.6%
HOSPITAL - 9.3%
AL Special Care Facilities Authority,
Montgomery Healthcare,
Series 1989,
11.000% 10/01/19 2,280 2,326
DE State Economic Development Authority,
Riverside Hospital,
Series 1992 A,
9.500% 01/01/22 905 1,178
GA Clayton Hospital Authority,
The Woodlands Foundation, Inc.,
Series 1991 A,
9.750% 05/01/21 1,500 1,275
ID State Health Facilities Authority,
IHC Hospitals, Inc.,
8.190% 02/15/21 2,750 2,894
IL Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 07/01/24 2,250 2,421
MO Hannibal Industrial Development,
Medical Systems of Northeast Missouri,
Series 1992,
9.500% 03/01/22 2,000 2,283
NJ Health Care Facilities Financing
Authority, Raritan Bay Medical Center,
7.250% 07/01/27 1,000 1,002
</TABLE>
4
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
VA Dickenson County Industrial
Development Authority, Volunteer
Healthcare Systems, Inc., Series 1,
10.750% 06/01/18 (a) $5,500 $ 1,650
VT Educational & Health Buildings
Financing Agency, Springfield Hospital,
Series A,
7.750% 01/01/13 1,050 1,122
WA State Health Care Facility,
Grays Harbor Community
Hospital, Series 1993,
7.200% 07/01/03 385 402
8.025% 07/01/20 1,770 1,863
-------
18,416
-------
INTERMEDIATE CARE FACILITIES - 1.0%
MA State Health & Educational
Facilities Authority, Corp.
for Independent Living,
8.100% 07/01/18 695 683
TN Shelby County Health, Education
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/19 530 600
Series 1992-C,
9.750% 08/01/19 540 612
-------
1,895
-------
NURSING HOME - 20.3%
CO Health Facility,
American Housing Foundation I,
Series 1990,
10.250% 12/01/20 1,500 1,661
DE State Economic Development Authority,
12.000% 04/01/25 2,275 2,500
DE Sussex County, Healthcare Facility,
Delaware Health Corp.,
Series 1994-A,
7.600% 01/01/24 1,000 963
FL Flagler County Industrial
Development Authority,
South Florida Properties, Series 1988,
10.500% 12/01/18 1,470 1,479
IA State Finance Authority,
Care Initiatives Project,
Series 1996,
9.250% 07/01/25 2,000 2,137
</TABLE>
5
Investment Portfolio/May 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH - CONT.
NURSING HOME - CONT.
IN Gary Industrial Economic Development,
West Side Health Care Center,
Series 1987 A,
11.500% 10/01/17 $2,500 $2,450
IN Michigan City Health Facilities,
Metropolitan Health Foundation, Inc.
Project,
10.000% 11/01/22 4,500 3,150
KS Halstead Industrial Health Care
Project,
10.250% 08/01/13 1,330 532
KY Jefferson County
First Mortgage,
Kentucky Iowa, Inc. Project, Series 1990,
10.250% 01/01/20 990 1,030
KY Lexington-Fayette Urban County
Government, First Mortgage, AHF
Kentucky-Iowa, Inc. Project, Series 1990,
10.250% 01/01/20 990 1,030
MA Boston,
St. Joseph Nursing Care Center, Inc.,
Series 1990,
10.000% 01/01/20 (b) 1,960 2,149
MA State Industrial Finance Agency,
GF/Massachusetts, Inc.,
Series 1994,
8.300% 07/01/23 1,000 971
MI Cheboygan County Economic
Development Corp.,
Metro Health Foundation Project,
Series 1993,
10.000% 11/01/22 2,440 1,708
MO Grove Industrial Development Authority,
First Mortgage Health Care Facility,
Heritage Manor GR, Series 1988,
10.250% 11/01/13 530 477
MO Saint Louis County Industrial
Development Authority,
10.250% 12/01/16 1,890 1,930
MO Springfield Industrial Development
Authority,
10.250% 12/01/10 1,235 1,274
NJ Economic Development Authority,
Geriatric and Medical Service, Inc.,
Series A,
10.500% 05/01/04 790 857
</TABLE>
6
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
NM Clovis Industrial Development,
Retirement Ranches Project,
10.750% 04/01/19 $2,160 $ 2,368
OH Lucas County,
Gericare, Inc.,
Series 1988 B,
10.500% 06/01/18 2,500 2,488
OH Montgomery County,
Grafton Oaks Limited Partners,
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 1,477
PA Philadelphia Authority For
Industrial Development:
First Mortgage, The Care Pavilion,
Series 1988,
10.250% 02/01/18 975 994
RHA/Philadelphia Project,
10.250% 11/01/18 1,470 1,519
TN New Tazewell Health Education and
Housing Facilities Board,
New Tazewell, Series 1987,
10.000% 06/01/17 1,640 1,686
VA Beach Development Authority,
Beverly Enterprises, Series 1985,
10.000% 04/01/10 1,860 2,058
-------
40,294
-------
- ------------------------------------------------------------------------------
HOUSING - 14.6%
ASSISTED LIVING/SENIOR - 2.8%
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 06/01/25 1,500 1,528
MN Roseville,
Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 1,630 1,559
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility, Series 1993-A,
8.250% 05/01/23 820 830
</TABLE>
7
Investment Portfolio/May 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING - CONT.
ASSISTED LIVING/SENIOR - CONT.
TX Bell County Health Facilities
Development Corp., Care Institutions, Inc.,
9.000% 11/01/24 $1,500 $1,598
------
5,515
------
MULTI-FAMILY - 11.4%
FL Clearwater Housing Authority,
Hampton Apartments,
Series 1994,
8.250% 05/01/24 2,500 2,594
FL Hialeah Housing Authority,
Series 1991,
9.500% 11/01/21 1,000 1,031
FL State Housing Finance Agency,
Windsong Apartments,
Series 1993 C,
9.250% 01/01/19 830 829
FL West Palm Beach Housing, Inc.,
Cypress Run,
10.500% 03/15/19 (a) 2,040 1,081
IL Chicago,
Michigan Boulevard Garden Apartment
Rehabilitation Project, Series 1985,
12.000% 01/01/00 435 440
MN Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 06/01/22 1,095 1,115
MN White Bear Lake,
Birch Lake Townhomes Project:
Series 1989-A,
10.250% 07/15/19 1,770 1,768
Series 1989 B,
(c) 07/15/19 730 1,151
NC Durham,
Durham Hosiery Mill Project,
Series 1987,
7.500% 08/01/29 1,000 1,060
NC Eastern Carolina Regional Housing
Authority, New River Apartments,
Jacksonville, Series 1994,
8.250% 09/01/14 1,980 1,985
Pass Through Certificates,
Series 1993-A,
8.500% 12/01/16 (d) 4,248 4,328
</TABLE>
8
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
SC State Housing Finance and Development,
Multi-family Housing Finance Revenue,
Westbridge Apartments, Series A,
9.500% 09/01/20 $2,200 $ 2,225
TX Galveston Pass Health Facilities Center,
Pass Through Certificates,
8.000% 08/01/23 1,000 1,006
VA Alexandria Redevelopment
& Housing Authority, Courthouse
Commons Apartments, Series 1990-A,
10.000% 01/01/21 1,000 1,004
VA Roanoke Redevelopment & Housing
Authority, First Mortgage, Mountain
Ridge,
9.250% 11/01/22 1,000 950
-------
22,567
-------
SINGLE-FAMILY - 0.4%
KY 1986 County Single-family Mortgage
Revenue, Class A,
9.000% 09/01/16 30 31
PA Allegheny County,
Residential Financial Authority,
Single-family Mortgage, Series 1987-G,
9.500% 12/01/18 710 733
-------
764
-------
- ------------------------------------------------------------------------------
OTHER - 4.4%
PUBLIC FACILITIES IMPROVEMENT - 0.9%
CA Statewide Communities
Development Corp.,
J. Paul Getty Trust Center,
5.000% 10/01/23 2,000 1,715
-------
REFUNDED/ESCROW/SPECIAL OBLIGATION - 3.5%
AL Marshall County Hospital Board,
Boaz-Albertville Medical Center,
8.875% 01/01/05 2,645 2,770
MA State Industrial Finance Agency,
Mary Ann Morse Nursing Home, Inc.,
Series 1990,
9.000% 10/01/20 960 1,132
Series 1991 I,
10.000% 01/01/21 1,200 1,476
MI State Hospital Finance Authority,
Detroit Osteopathic Hospital,
Series 1987 A,
7.500% 11/01/10 950 1,014
</TABLE>
9
Investment Portfolio/May 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER -CONT.
REFUNDED/ESCROW/SPECIAL OBLIGATION - CONT.
NC Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 $ 530 $ 636
------
7,028
------
OTHER REVENUE - 21.9%
AMUSEMENTS & RECREATION - 0.6%
MN Mille Lacs Capital Improvement
Infrastructure, Band of Chippewa,
Series 1992-A,
9.250% 11/01/12 1,115 1,235
------
CHEMICALS - 3.4%
LA St. Charles Parish Pollution
Control Revenue,
Union Carbide Project,
7.350% 11/01/22 2,000 2,115
SC York County Industrial Revenue,
Hoechst-Celanese Corp.,
5.700% 01/01/24 5,000 4,631
------
6,746
------
HOTELS/CAMPS/LODGING - 2.0%
MN Burnsville Commercial Development,
Holiday Inn Project,
10.600% 06/01/06 2,500 2,565
MN Minneapolis Commercial Development,
Hometel Associates Ltd.,
Series 1988,
10.500% 06/01/03 1,500 1,515
------
4,080
------
MANUFACTURING - 5.1%
CO Mesa County Industrial Development,
Joy Technologies, Inc.,
Series 1992,
8.500% 09/15/06 1,000 1,051
MA State Industrial Finance Agency,
House of Bianchi, Inc.,
8.750% 06/01/18 330 337
MN Brooklyn Park,
TL Systems Corp.,
Series 1991,
10.000% 09/01/16 810 998
OH Cuyahoga County,
Joy Technologies, Inc.,
Series 1992,
8.750% 09/15/07 550 586
</TABLE>
10
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
VA Halifax County Industrial Development,
Craddock-Terry, Inc., Series 1989,
10.000% 12/01/19 $1,020 $ 1,096
VA Pittsylvania County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19 1,095 1,169
VA Prince Edward County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19 1,880 2,008
WA Pilchuck Development Public Corp.
6.000% 08/01/23 1,500 1,399
WV Weirton Pollution Control, Weirton
Steel Corp., Series 1989,
8.625% 11/01/14 1,400 1,468
-------
10,112
-------
MISCELLANEOUS RETAIL - 0.4%
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 09/01/11 710 732
-------
OTHER REVENUE - 2.1%
IN Hammond,
American Maize Products Co.,
Series 1994,
8.000% 12/01/24 2,000 2,183
LA Port New Orleans Industrial Development,
Continental Grain Co., Series 1993,
7.500% 07/01/13 1,000 1,027
MD Baltimore,
Park Charles Project,
Series 1986,
8.000% 01/01/10 875 900
-------
4,110
-------
PAPER PRODUCTS - 8.3%
GA Rockdale County Development,
Solid Waste Disposal Bonds,
Visy Paper, Inc., Series 1993,
7.400% 01/01/08 5,000 5,037
MI State Strategic Fund,
Blue Water Fiber Project,
Series 1994,
8.000% 01/01/12 2,000 1,770
</TABLE>
11
Investment Portfolio/May 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER REVENUE - CONT.
PAPER PRODUCTS - CONT.
MI State Strategic Fund,
Great Lakes Pulp & Fibre Project,
Series 1994,
10.250% 12/01/16 $4,000 $ 3,490
NY New York City Industrial
Development Agency,
Visy Paper, Inc., Series 1995,
7.950% 01/01/28 2,200 2,225
SC Darlington County,
Industrial Development Authority,
SONOCO Products Co. Project,
6.125% 06/01/25 2,000 1,942
WA Walla Walla Public Corp.,
Ponderosa Fibres Project,
9.125% 01/01/26 2,000 1,933
-------
16,397
-------
- ------------------------------------------------------------------------------
RESOURCE RECOVERY - 3.4%
CO-GENERATION - 1.5%
FL Martin County Industrial
Development Authority,
Indiantown Co-generation Project,
Series 1994 A,
7.875% 12/15/25 1,000 1,110
MD State Energy Financing Administration,
AES Warrior Co-generation Project,
7.400% 09/01/19 1,750 1,785
-------
2,895
-------
LAND FILL - 0.6%
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 1,140 1,188
-------
MISCELLANEOUS DISPOSAL - 0.5%
MA Boston Industrial Development
Finance Authority, Jet-A-Way, Inc.,
10.500% 01/01/11 1,000 1,111
-------
RECYCLING - 0.8%
GA Fulton County Development
Authority, Very, Inc.,
10.500% 12/01/07 1,515 1,588
-------
</TABLE>
12
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
TAX-BACKED - 2.1%
SALES & EXCISE TAX - 2.1%
IL Development Finance Authority,
City of Marion Project,
Series 1991,
9.625% 09/15/21 $ 1,485 $1,496
IL Metropolitan Pier & Exposition Authority,
McCormick Project:
(e) 06/15/14 5,000 1,669
(e) 06/15/15 3,000 934
------
4,099
------
- --------------------------------------------------------------------------------
TRANSPORTATION - 7.5%
AIR TRANSPORTATION - 4.1%
IN Indianapolis Airport Authority:
Federal Express Project,
7.100% 01/15/17 2,000 2,073
United Airlines Project,
Series A,
6.500% 11/15/31 2,000 1,923
TX Alliance Airport Authority:
American Airlines Project,
7.500% 12/01/29 1,000 1,052
Federal Express Corp.,
Series 1996,
6.375% 04/01/21 1,000 966
TX Dallas-Fort Worth International Airport,
American Airlines, Inc., Series 1990,
7.500% 11/01/25 2,000 2,112
------
8,126
------
AIRPORT - 1.7%
CO Denver City & County Airport,
Denver International Airport,
Series 1991-D,
7.750% 11/15/21 3,000 3,300
------
TURNPIKE/TOLLROAD/BRIDGE - 1.7%
CA San Joaquin Hills Transcorridor,
Agency Senior Toll Road,
Series 1993:
(e) 01/01/25 10,000 1,450
5.000% 01/01/33 2,480 1,975
------
3,425
------
</TABLE>
13
Investment Portfolio/May 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITY - 8.3%
INDIVIDUAL POWER PRODUCER - 2.2%
PA Economic Development Finance
Authority, Colver Project, Series D:
7.125% 12/01/15 $ 500 $ 511
7.150% 12/01/18 3,750 3,830
--------
4,341
--------
INVESTOR OWNED - 2.8%
IL Bryant Pollution Control Revenue,
Central Illinois Light Co. Project,
5.900% 08/01/23 2,000 1,915
NY State Energy Research & Development
Authority, Consolidated Edison Co.,
Series 1991 A,
7.500% 01/01/26 1,500 1,609
OH State Water Development Pollution
Collateralized Control, The Cleveland
Electric Illumination, Series 1987-A-1,
9.750% 11/01/22 2,000 2,085
--------
5,609
--------
JOINT POWER AUTHORITY - 1.1%
MN Southern Minnesota Municipal
Power Agency, Series 1994A,
(e) 01/01/25 12,000 2,115
--------
WATER & SEWER - 2.2%
LA Public Facility Belmont Water
Authority,
9.000% 03/15/24 790 809
MA State Industrial Finance Agency,
Massachusetts Environmental Services,
Series 1994 A,
8.750% 11/01/21 1,000 1,004
MS V Lakes Utility District,
8.250% 07/15/24 500 504
NJ State Economic Development
Authority, Hills Development Co.,
10.500% 09/01/08 2,100 2,158
--------
4,475
--------
TOTAL MUNICIPAL BONDS (cost of $192,851) (f) 189,044
--------
</TABLE>
14
Investment Portfolio/May 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 4.1% PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (g)
ID State Health Facilities Authority,
St. Lukes Regional Medical Facility,
Series 1995,
3.70% 05/01/22 $1,600 $ 1,600
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1995 B,
3.75% 07/01/15 1,750 1,750
NM Farmington,
Arizona Public Service Co.,
Four Corners Project, Series 1994 B,
3.70% 09/01/24 3,700 3,700
NY Niagara Mohawk, Series 1985-A,
3.80% 07/01/15 1,100 1,100
--------
TOTAL SHORT-TERM OBLIGATIONS 8,150
--------
OTHER ASSETS & LIABILITIES, NET - 0.5% 977
- -------------------------------------------------------------------------------
NET ASSETS - 100% $198,171
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) This issuer is in default of certain debt covenants. Income is not
being accrued.
(b) 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, 1996.
(c) Accrued interest accumulates in the value of the security and is
payable at redemption.
(d) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31,
1996 the value of this security amounted to $4,328 or 2.2% of net
assets.
(e) Zero coupon bond.
(f) Cost for federal income tax purposes is the same.
(g) 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, 1996.
See notes to financial statements.
STATEMENT OF ASSETS & LIABILITIES
MAY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
(in thousands except for per share amount)
ASSETS
Investments at value (cost $192,851) $ 189,044
Short-term obligations 8,150
-----------
197,194
Receivable for:
Interest $ 5,233
Investments sold 45
Other 43 5,321
------------ -----------
Total Assets 202,515
LIABILITIES
Payable for:
Investments purchased 3,000
Distributions 1,163
Accrued:
Deferred Trustees Fees 2
Other 179
------------
Total Liabilities 4,344
-----------
NET ASSETS at value for 27,367
shares of beneficial interest outstanding $ 198,171
-----------
Net asset value per share $ 7.24
-----------
COMPOSITION OF NET ASSETS
Capital paid in $ 249,674
Undistributed net investment income 398
Accumulated net realized loss (48,094)
Net unrealized depreciation (3,807)
-----------
$ 198,171
-----------
</TABLE>
See notes to financial statements.
16
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Interest $ 7,893
EXPENSES
Management fee $ 661
Transfer agent 64
Bookkeeping fee 27
Trustees fee 11
Custodian fee 9
Audit fee 23
Legal fee 34
Reports to shareholders 5
Other 194 1,028
------------ -----------
Net Investment Income 6,865
-----------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO
POSITIONS
Net realized gain
Net unrealized 81
depreciation during the period
(6,462)
------------
Net Loss (6,381)
-----------
Net Increase in Net Assets from Operations $ 484
-----------
</TABLE>
See notes to financial statements.
17
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months ended Year ended
(in thousands) May 31 November 30
---------------- -----------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
<S> <C> <C>
Operations: $ 6,865 $ 14,955
Net investment income 80 (7,350)
Net realized gain (loss) (6,462) 16,568
--------- ---------
Net unrealized appreciation (depreciation) 483 24,173
Net Increase from Operations
Distributions:
From net investment income (6,978) (15,104)
Fund Share Transactions:
Value of distributions reinvested -- 158
--------- ---------
Total Increase (Decrease) (6,495) 9,222
NET ASSETS
Beginning of period 204,666 195,444
--------- ---------
End of period (including undistributed
net investment income
of $398 and $511, respectively) $198,171 $204,666
--------- ---------
NUMBER OF FUND SHARES
Issued for distributions reinvested -- 21
Outstanding at
Beginning of period 27,367 27,346
--------- ---------
End of period 27,367 27,367
--------- ---------
</TABLE>
See notes to financial statements.
18
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (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, 1996, 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
ORGANIZATION: The Fund is a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended, as a diversified,
closed-end, management investment company. The Fund's objective is to
provide high current income, generally exempt from federal income
taxes. The Fund may issue an unlimited number of shares. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates. The following is a summary of significant
accounting policies that are consistently followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Debt securities are valued by a
pricing service based upon market transactions for normal,
institutional-size trading 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, sold or mature.
Cost is determined and gains (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.
19
Notes to Financial Statements/May 31, 1996
NOTE 2. ACCOUNTING POLICIES - CONT.
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. Reclassifications are
made to the Fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryforwards)
under income tax regulations.
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 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. Obligations of the plan will be
paid solely out of the Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY: During the six months ended May 31, 1996,
purchases and sales of investments, other than short-term obligations,
were $15,331,523 and $17,412,253, respectively.
Unrealized appreciation (depreciation) at May 31, 1996, based on cost
of investments for both financial statement and federal income tax
purposes was approximately:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 6,719,000
Gross unrealized depreciation (10,526,000)
------------
Net unrealized depreciation $ (3,807,000)
------------
</TABLE>
CAPITAL LOSS CARRYFORWARDS: At November 30, 1995, capital loss
carryforwards available (to the extent provided in regulations) to
offset future realized gains were approximately as follows:
20
Notes to Financial Statements/May 31, 1996
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
---------- -----------
<S> <C>
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
2003 7,499,000
-----------
$48,131,000
-----------
</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 ANNUAL SHAREHOLDER MEETING
On April 30, 1996, the Annual Meeting of Shareholders was held to elect
four Trustees and to ratify the selection of Price Waterhouse LLP as
independent accountants for the fiscal year ending November 30, 1996.
On March 1, 1996, the record date of the Meeting, the Fund had
outstanding 27,367,005 shares of beneficial interest. The votes cast at
the Meeting were as follows:
Election of four Trustees:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- ------- ---------
<S> <C> <C> <C>
Robert J. Birnbaum 21,496,766 678,477 5,191,762
Tom Bleasdale 21,502,413 672,830 5,191,762
James E. Grinnell 21,503,348 671,895 5,191,762
James L. Moody, Jr 21,508,703 666,539 5,191,762
</TABLE>
The Board of Trustees also consists of Lora S. Collins, William T.
Ireland, Richard W. Lowry, William E. Mayer, John J. Neuhauser,
George L. Shinn, Robert L. Sullivan and Sinclair Weeks, Jr.
Ratification of the selection of Price Waterhouse LLP as independent
accountants:
FOR AGAINST ABSTAIN
---------- ------- -------
21,493,771 313,997 367,475
21
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
-------- -------------------------
1996 1995 1994
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 7.480 $ 7.150 $ 7.830
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.251 0.547 0.609
Net realized and
unrealized gain (loss) (0.236) 0.335 (0.707)
-------- -------- --------
Total from Investment
Operations 0.015 0.882 (0.098)
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.255) (0.552) (0.582)
In excess of net
investment income -- -- --
-------- -------- --------
Total Distributions
Declared to Shareholders (0.255) (0.552) (0.582)
-------- -------- --------
Net asset value -
End of period $ 7.240 $ 7.480 $ 7.150
-------- -------- --------
Market price per share $ 6.875 $ 6.750 $ 6.750
-------- -------- --------
Total return - based on market
value (a) 5.60%(b) 8.04% (10.06)%
-------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.01%(c)(d) 0.98%(c) 0.90%
Net investment income 6.76 (c)(d) 7.47%(c) 8.12%
Portfolio turnover 16%(d) 24% 24%
Net assets at end
of period (000) $198,171 $204,666 $195,444
</TABLE>
(a) Total return at market value assuming all distribution reinvested and
excluding brokerage commissions.
(b) Not annualized.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior year ratios are net of benefits
received, if any.
(d) Annualized.
22
FINANCIAL HIGHLIGHTS - CONT.
<TABLE>
<CAPTION>
Year ended November 30
------------------------------------------
1993 1992 1991
<S> <C> <C>
$ 7.890 $ 8.060 $ 8.370
-------- -------- --------
0.639 0.636 0.682
(0.063) (0.170) (0.279)
-------- -------- --------
0.576 0.466 0.403
-------- -------- --------
(0.632) (0.636) (0.713)
(0.004) -- --
-------- -------- --------
(0.636) (0.636) (0.713)
-------- -------- --------
$ 7.830 $ 7.890 $ 8.060
-------- -------- --------
$ 8.000 $ 7.875 $ 8.375
-------- -------- --------
11.56% 1.82% 17.77%
-------- -------- --------
0.87% 0.87% 87.00%
8.03% 7.99% 8.29%
21% 10% 12%
$213,292 $213,420 $216,394
</TABLE>
23
DIVIDEND REINVESTMENT PLAN
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. For shares issued at a discount from market value, the difference between
market value and issue price may represent taxable income at the time of
issuance. Any portion of the discount includable in income will increase the
basis of the shares issued. 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 semiannually, 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 uncertified form,
although participants have the right to receive certificates for whole shares
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 agent. 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 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.
24
THIS PAGE INTENTIONALLY LEFT BLANK
25
THIS PAGE INTENTIONALLY LEFT BLANK
26
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Municipal Income Trust is:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-426-5523
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.
This report has been prepared for shareholders of Colonial Municipal Income
Trust.
27
[COLONIAL FUNDS LOGO]
Mutual Funds for
Planned Portfolios
TRUSTEES
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Trustee (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Dean, College of Business and Management, University of Maryland (formerly Dean,
Simon Graduate School of Business, University of Rochester; Chairman and Chief
Executive Officer, C.S. First Boston Merchant Bank; and President and Chief
Executive Officer, The First Boston Corporation)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief Executive Officer,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Management Consultant (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
COLONIAL INVESTMENT SERVICES, INC., Distributor (C) 1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
IT-03/337C-0596 M (7/96)
