<PAGE>
[COLONIAL LOGO]
COLONIAL
MUNICIPAL
INCOME
TRUST
SEMIANNUAL REPORT
MAY 31, 1997
<PAGE>
COLONIAL MUNICIPAL INCOME TRUST HIGHLIGHTS
DECEMBER 1, 1996 - MAY 31, 1997
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. Secondary is to
preserve its capital.
THE FUND IS DESIGNED TO OFFER:
- Potential for high tax-free income
- Experienced professional management
- Expert credit analysis
PORTFOLIO MANAGER COMMENTARY: "Our investment strategy focused on identifying
undervalued industrial revenue bonds issued by corporate borrowers. Not only do
these bonds have "household name" value in the marketplace, they tend to have
more diversified earnings and lower debt levels. Many of the companies included
in the portfolio have operations around the world. By emphasizing these
investments, the Fund is able to benefit from a growing global economy. In
contrast, many municipal bond funds look no farther than local or state
economies. We will continue to invest in this class of bonds as long as our
economic outlook is positive and we have expectations for corporate earnings
increases." -- Peter Andersen
COLONIAL MUNICIPAL INCOME TRUST PERFORMANCE
<TABLE>
<CAPTION>
<S> <C>
Distributions declared per share(1) $0.255
Six-month total return, assuming
reinvestment of all distributions
- NAV 2.54%
- Market Price 5.30%
Price per share
- NAV $7.34
- Market Price $7.38
</TABLE>
(1) A portion of the Fund's income may be subject to the alternative minimum
tax.
The Fund may at times purchase tax-exempt securities at a discount, and some or
all of this discount may be included in the Fund's ordinary income which will be
taxable when distributed.
<TABLE>
<CAPTION>
TOP FIVE SECTORS
(as of 5/31/97)
<S> <C>
Nursing Home ................................................... 20.4%
Housing ........................................................ 13.2%
Hospital ....................................................... 8.9%
Manufacturing .................................................. 6.2%
Air Transportation ............................................. 5.5%
</TABLE>
<TABLE>
<CAPTION>
QUALITY BREAKDOWN
(as of 5/31/97)
<S> <C>
NON-RATED: ..................................................... 56.6%
AAA: ........................................................... 12.4%
AA: ............................................................ 2.8%
A: ............................................................. 6.8%
BBB: ........................................................... 19.3%
BB: ............................................................ 2.1%
</TABLE>
[PIECHART]
Sector and quality breakdowns are calculated as a percent of total net assets.
Because the Trust is actively managed, there can be no guarantee the Trust will
continue to maintain these quality weightings or invest in these sectors in the
future.
2
<PAGE>
PRESIDENT'S MESSAGE
To Fund Shareholders
I am pleased to present the semiannual report for Colonial Municipal Income
Trust. This report reflects on the investment environment for the six months
ended May 31, 1997.
[PHOTO]
Harold W. Cogger
President
The economy continued to grow at a healthy pace during the past six months. A
firm job market buoyed consumer confidence, resulting in strong retail, auto and
housing sales. The strength of the economy during the first quarter of 1997 led
the Federal Reserve Board to raise short-term interest rates in March for the
first time in two years. This action responded to growing concern for wage and
price inflation. As interest rates rose, bond prices declined.
Despite the increase in interest rates, investments in municipal bonds had
smaller price declines than those of some alternative fixed-income investments,
including Treasury bonds. A lower supply of new municipal issues, low dealer
inventories and strong demand helped support tax-exempt prices. In addition, the
specter of potential tax reform that would have negatively affected municipal
bonds faded with the outcome of the November presidential and congressional
elections.
The investment environment for municipal bonds was not without challenge. The
yield advantage for investing in lower quality municipal bonds was at a
historically low level. Narrow spreads combined with tight supply created higher
prices and lower yields for new investments. Additional uncertainty was
experienced as Congress struggled to reach a balanced budget agreement, although
a compromise reached later in the period encouraged municipal market investors.
Colonial Municipal Income Trust's emphasis on corporate-backed industrial
revenue bonds provides investors with attractive growth prospects. Furthermore ,
the Trust offers you tax-free income as well as the opportunity to diversify
your fixed-income portfolio and to invest in America's infrastructure.
We look forward to updating you on the Fund's performance six months from now,
in the annual report.
Respectfully,
/s/Harold W. Cogger
Harold W. Cogger
President
July 15, 1997
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
<PAGE>
INVESTMENT PORTFOLIO
MAY 31, 1997 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 98.3% PAR VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 3.5%
SCHOOL DISTRICT GENERAL OBLIGATIONS - 2.5%
AZ Apache County School District
Number 010 Round Valley
Project of 1987, Series 1990-C,
9.875% 07/01/05 $ 2,000 $ 2,185
LA New Orleans,
Series 1991,
(a) 09/01/15 4,000 1,420
NY New York City,
Series 1997-H,
6.000% 08/01/17 1,330 1,332
--------
4,937
--------
STUDENT LOAN - 1.0%
SD State Student Loan Finance Corp.,
Series 1996-E,
6.550% 08/01/20 2,000 2,013
--------
...........................................................................
HEALTHCARE - 30.3%
HOSPITAL - 8.9%
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% 01/01/22 895 1,159
GA Clayton Hospital Authority,
The Woodlands Foundation, Inc.,
Series 1991-A,
9.750% 05/01/21 (b) 1,500 975
ID State Health Facilities Authority,
IHC Hospitals, Inc.,
7.820% 02/15/21 2,750 2,977
IL State Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 07/01/24 2,250 2,655
NJ Health Care Facilities Financing
Authority, Raritan Bay Medical Center,
7.250% 07/01/27 1,000 1,046
</TABLE>
4
<PAGE>
Investment Portfolio/May 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PA Delaware County Authority,
Southeastern Pennsylvania Obligated Group,
Series 1996:
6.000% 12/15/16 $ 1,400 $ 1,393
6.000% 12/15/26 500 489
VA Dickenson County Industrial
Development Authority, Volunteer
Healthcare Systems, Inc., Series 1988-A,
10.750% 06/01/18 (b) 4,290 1,287
VT State Educational & Health
Buildings Authority, Financing Agency,
Springfield Hospital, Series A,
7.750% 01/01/13 1,040 1,127
WA State Health Care Facilities Authority,
Grays Harbor Community Hospital,
Series 1993:
7.200% 07/01/03 (c) 375 411
8.025% 07/01/20 (c) 1,770 1,991
--------
17,836
--------
INTERMEDIATE CARE FACILITIES - 1.0%
MA State Health & Educational
Facilities Authority,
Corp. for Independent Living,
8.100% 07/01/18 685 734
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/19 520 599
Series 1992-C,
9.750% 08/01/19 530 610
--------
1,943
--------
NURSING HOME - 20.4%
CO State Health Facilities Authority,
American Housing Foundation, Inc.,
Series 1990-A,
10.250% 12/01/20 1,500 1,500
DE State Economic Development Authority,
12.000% 04/01/25 2,265 2,474
DE Sussex County, Healthcare Facility,
Delaware Health Corp.,
Series 1994-A,
7.600% 01/01/24 1,000 1,003
</TABLE>
5
<PAGE>
Investment Portfolio/May 31, 1997
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 98.3% CONT. PAR VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE - CONT.
NURSING HOME - CONT.
FL Flagler County Industrial
Development Authority,
South Florida Properties, Series 1988,
10.500% 12/01/18 $ 1,455 $ 1,311
IA State Finance Authority,
Care Initiatives Project,
Series 1996,
9.250% 07/01/25 1,000 1,226
IN Gary Industrial Economic Development,
West Side Health Care Center,
Series 1987-A,
11.500% 10/01/17 2,500 2,583
IN Michigan City Health Facilities,
Metropolitan Health Foundation, Inc.
Project,
10.000% 11/01/22 4,500 4,050
KS Halstead Industrial
Health Care Project,
10.250% 08/01/13 (b) 1,330 532
KY Jefferson County
First Mortgage,
Kentucky Iowa, Inc. Project, Series 1990,
10.250% 01/01/20 975 1,010
KY Lexington-Fayette Urban County
Government, First Mortgage, AHF
Kentucky-Iowa, Inc. Project, Series 1990,
10.250% 01/01/20 975 1,010
MA Boston,
St. Joseph Nursing Care Center, Inc.,
Series 1990,
10.000% 01/01/20 (d) 1,940 2,115
MA State Industrial Finance Agency,
GF/Massachusetts, Inc.,
Series 1994,
8.300% 07/01/23 990 995
MI Cheboygan County Economic
Development Corp.,
Metro Health Foundation Project, Series 1993,
10.000% 11/01/22 (c) 2,440 2,196
MO Grove Industrial Development Authority,
First Mortgage Health Care Facility,
Heritage Mannor GR, Series 1988,
10.250% 11/01/13 520 468
</TABLE>
6
<PAGE>
Investment Portfolio/May 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
MO Saint Louis County Industrial
Development Authority,
10.250% 12/01/16 $ 1,860 $ 1,908
MO Springfield Industrial Development
Authority,
10.250% 12/01/10 1,195 1,222
NJ Economic Development Authority
Geriatric and Medical Service, Inc.,
Series A,
10.500% 05/01/04 725 778
NM City of Clovis,
Retirement Ranches Project,
10.750% 04/01/19 2,135 2,308
OH Lucas County,
Gericare, Inc.,
Series 1988-B,
10.500% 06/01/18 2,500 2,525
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 (b) 1,970 1,615
PA Philadelphia Authority for
Industrial Development:
First Mortgage, The Care Pavilion,
Series 1988,
10.250% 02/01/18 965 961
RHA/Philadelphia Project,
10.250% 11/01/18 1,450 1,445
TN New Tazewell Health, Education and
Housing Facilities Board,
New Tazewell Series 1987,
10.000% 06/01/17 1,615 1,648
VA Virginia Beach Development Authority,
Beverly Enterprises, Series 1985,
10.000% 04/01/10 1,795 1,970
WA Kitsap County Housing Authority,
Martha & Mary Nursing Home,
7.100% 02/20/36 643 700
--------
40,959
--------
</TABLE>
7
<PAGE>
Investment Portfolio/May 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
HOUSING - 13.2%
ASSISTED LIVING/SENIOR - 2.8%
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 06/01/25 $ 1,500 $ 1,571
MN Roseville,
Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 1,630 1,553
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility, Series 1993-A,
8.250% 05/01/23 810 839
TX Bell County Health Facilities
Development Corp., Care Institutions, Inc.,
9.000% 11/01/24 1,500 1,633
--------
5,596
--------
MULTI-FAMILY - 9.5%
FL Clearwater Housing Authority,
Hampton Apartments,
Series 1994,
8.250% 05/01/24 2,500 2,619
FL Hialeah Housing Authority,
Series 1991,
9.500% 11/01/21 1,000 950
FL State Housing Finance Agency,
Windsong Apartments,
Series 1993-C,
9.250% 01/01/19 830 835
IL Chicago,
Michigan Boulevard Garden Apartment
Rehabilitation Project, Series 1985,
12.000% 01/01/00 340 344
MN Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 06/01/22 1,085 1,177
MN White Bear Lake,
Birch Lake Townhomes Project,
Series 1989-A,
10.250% 07/15/19 1,770 1,766
NC Eastern Carolina Regional Housing
Authority, New River Apartments
Jacksonville, Series 1994,
8.250% 09/01/14 1,935 1,983
</TABLE>
8
<PAGE>
Investment Portfolio/May 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Resolution Trust Corp.,
Pass Through Certificates,
Series 1993-A,
8.500% 12/01/16 (c) $ 4,248 $ 4,418
SC State Housing Finance and Development
Multi-family Housing Finance Revenue,
Westbridge Apartments, Series A,
9.500% 09/01/20 2,200 2,233
TN Franklin Industrial Board,
Landings Apartment Project,
Series 1996-B,
8.750% 04/01/27 800 796
TX Galveston Health Facilities Center,
Pass Through Certificates,
8.000% 08/01/23 1,000 1,026
VA Alexandria Redevelopment
& Housing Authority, Courthouse
Commons Apartments, Series 1990-A,
10.000% 01/01/21 1,000 1,008
--------
19,155
--------
SINGLE-FAMILY - 0.9%
AK State Housing Finance Corp.,
Series 1996-A,
6.050% 12/01/17 1,000 1,011
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% 12/01/18 710 728
--------
1,770
--------
- --------------------------------------------------------------------------
OTHER - 6.1%
LOCAL APPROPRIATED - 0.4%
CA Taft Public Financing Authority,
Community Correctional Facilities Project,
Series 1997-A,
5.950% 01/01/11 780 784
--------
REFUNDED/ESCROW/SPECIAL OBLIGATION (e) - 5.7%
IL Chicago Public Building Commission,
Series 1990-A,
7.000% 01/01/20 2,000 2,368
</TABLE>
9
<PAGE>
Investment Portfolio/May 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
OTHER - CONT.
REFUNDED/ESCROW/SPECIAL OBLIGATION - CONT.
MA State Industrial Finance Agency:
Series 1990,
9.000% 10/01/20 $ 950 $ 1,096
Mary Ann Morse Nursing Home, Inc.,
Series 1991-I,
10.000% 01/01/21 1,200 1,443
MI State Hospital Finance Authority,
Detroit Osteopathic Hospital,
Series 1987-A,
7.500% 11/01/10 950 983
MN Mille Lacs Capital Improvement Authority,
Mille Lacs Band of Chippewa,
Series 1992-A,
9.250% 11/01/12 1,085 1,345
MN White Bear Lake,
Birch Lake Townhomes Project,
Series 1989-B,
(f) 07/15/19 681 1,245
MO Hannibal Industrial Development Authority,
Regional Healthcare Systems,
Series 1992,
9.500% 03/01/22 2,000 2,468
NC Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 500 592
--------
11,540
--------
- ------------------------------------------------------------------------
OTHER REVENUE - 19.8%
CHEMICALS - 3.5%
LA St. Charles Parish,
Union Carbide Corp.,
Series 1992,
7.350% 11/01/22 2,000 2,153
SC York County,
Hoechst Celanese Corp.,
Series 1994,
5.700% 01/01/24 5,000 4,975
--------
7,128
--------
HOTELS/CAMPS/LODGING - 2.0%
MN Burnsville Commercial Development,
Holiday Inn Project,
10.600% 06/01/06 2,500 2,533
</TABLE>
10
<PAGE>
Investment Portfolio/May 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
MN Minneapolis Commercial Development,
Hometel Associates, Ltd.,
Series 1988,
10.500% 06/01/03 $ 1,500 $ 1,517
--------
4,050
--------
MANUFACTURING - 6.2%
CO Mesa County Industrial Development,
Joy Technologies, Inc.,
Series 1992,
8.500% 09/15/06 1,000 1,110
LA South Louisiana Port Cargill,
5.850% 04/01/17 500 505
MA State Industrial Finance Agency,
House of Bianchi, Inc.,
8.750% 06/01/18 330 321
MN Brooklyn Park,
TL Systems Corp.,
Series 1991,
10.000% 09/01/16 795 975
OH Cuyahoga County,
Joy Technologies, Inc.,
Series 1992,
8.750% 09/15/07 550 616
TX Trinity River Authority,
Texas Instruments Project,
Series 1996,
6.200% 03/01/20 750 760
VA Halifax County Industrial Development,
Craddock-Terry, Inc., Series 1989,
10.000% 12/01/19 1,010 1,077
VA Pittsylvania County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19 1,085 1,150
VA Prince Edward County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19 1,860 1,971
WA Pilchuck Public Development Corp.,
Goodrich (B.F.) Co. Tramco Project,
Series 1993,
6.000% 08/01/23 4,000 3,905
--------
12,390
--------
</TABLE>
11
<PAGE>
Investment Portfolio/May 31, 1997
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
OTHER REVENUE - CONT.
MISCELLANEOUS RETAIL - 0.4%
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 09/01/11 $ 710 $ 746
---------
OTHER REVENUE - 2.1%
IN Hammond,
American Maize Products Co.,
Series 1994,
8.000% 12/01/24 2,000 2,250
LA Port New Orleans Industrial Development,
Continental Grain Co., Series 1993,
7.500% 07/01/13 1,000 1,074
MD Baltimore,
Park Charles Project,
Series 1986,
8.000% 01/01/10 830 874
---------
4,198
---------
PAPER PRODUCTS - 2.7%
MI State Strategic Fund,
Blue Water Fiber Project,
Series 1994,
8.000% 01/01/12 (b) 2,000 1,340
MI State Strategic Fund,
Great Lakes Pulp & Fibre Project,
Series 1994,
10.250% 12/01/16 (b) 2,000 910
SC Darlington County,
Industrial Development Authority,
SONOCO Products Co. Project,
6.125% 06/01/25 2,000 2,063
WA Walla Walla Public Corp.,
Ponderosa Fibres Project,
Series 1995,
9.125% 01/01/26 1,230 1,079
---------
5,392
---------
PETROLEUM REFINING - 0.7%
WA Pierce County Economic
Development Corp.,
Occidental Petroleum Co.,
5.800% 09/01/29 1,500 1,419
---------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1997
- --------------------------------------------------------------------------
<S> <C> <C>
STATE APPROPRIATED - 2.2%
CA Statewide Communities
Development Corp.,
J. Paul Getty Trust Center,
5.000% 10/01/23 $ 2,000 $ 1,812
NY State Dormitory Authority,
State University,
Series 1995-A,
5.300% 07/01/24 2,700 2,555
--------
4,367
--------
- -------------------------------------------------------------------------
Resource Recovery - 3.5%
MISCELLANEOUS DISPOSAL - 2.3%
CT State Development Authority,
Sewer Sludge Disposal Facilities,
Series 1996,
8.250% 12/01/06 1,250 1,272
MA Boston Industrial Development
Finance Authority,
Jet-A-Way, Inc.,
10.500% 01/01/11 1,000 1,106
MA State Industrial Finance Agency:
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 1,110 1,206
Massachusetts Environmental Services,
Series 1994-A,
8.750% 11/01/21 990 970
--------
4,554
--------
RECYCLING - 0.7%
GA Fulton County Development
Authority,
Very, Inc.,
10.500% 12/01/07 1,445 1,507
--------
RESOURCE RECOVERY - 0.5%
PA Delaware County BFI,
6.200% 07/01/19 1,000 1,011
--------
- -------------------------------------------------------------------------
Taxed-Backed - 4.8%
SALES & EXCISE TAX - 4.8%
IL Metropolitan Pier & Exposition
Authority,
Series 1996-A:
(a) 12/15/13 5,000 1,950
(a) 12/15/21 8,000 1,910
</TABLE>
13
<PAGE>
Investment Portfolio/May 31, 1997
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Taxed-Backed - Cont.
SALES & EXCISE TAX - CONT.
IL Metropolitan Pier & Exposition
Authority,
McCormick Project:
(a) 06/15/14 $ 5,000 $ 1,881
(a) 06/15/15 3,000 1,054
IL State Development Finance Authority,
City of Marion Project,
Series 1991,
9.625% 09/15/21 1,475 1,519
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series 1996-Y,
5.500% 07/01/36 1,300 1,258
--------
9,572
--------
- -------------------------------------------------------------------------
Transportation - 7.4%
AIR TRANSPORTATION - 5.5%
IN Indianapolis Airport Authority:
Federal Express Project,
Series 1994,
7.100% 01/15/17 2,000 2,163
United Airlines Project,
Series A,
6.500% 11/15/31 2,000 2,040
KY Kenton County Airport Board,
Delta Airlines, Inc.,
Series 1992-A,
7.500% 02/01/20 2,500 2,684
NY Port Authority New York/New Jersey,
JFK Airport,
6.250% 12/01/08 1,000 1,082
OH Dayton,
Emery Air Freight Facilities,
Series 1993-E,
6.050% 10/01/09 1,000 1,016
TX Alliance Airport Authority:
American Airlines Project,
7.500% 12/01/29 1,000 1,070
Federal Express Corp.,
Series 1996,
6.375% 04/01/21 1,000 1,019
--------
11,074
--------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1997
- ------------------------------------------------------------------------
<S> <C> <C>
TURNPIKE/TOLLROAD/BRIDGE - 1.9%
CA San Joaquin Hills Transportation
Corridor Agency,
Series 1993:
(a) 01/01/25 $ 10,000 $ 1,763
5.000% 01/01/33 2,480 2,114
--------
3,877
--------
- ------------------------------------------------------------------------
UTILITY - 9.7%
INDIVIDUAL POWER PRODUCER - 4.7%
FL Martin County Industrial
Development Authority,
Indiantown Cogeneration Project, Series 1994-A,
7.875% 12/15/25 1,000 1,122
MD State Energy Financing Administration,
AES Warrior Cogeneration Project,
7.400% 09/01/19 1,750 1,811
NY Port Authority of New York & New Jersey,
KIAC Partners,
Series 1996 IV,
6.750% 10/01/11 2,000 2,105
PA Economic Development Finance
Authority, Colver Project, Series D:
7.125% 12/01/15 500 528
7.150% 12/01/18 3,750 3,952
--------
9,518
--------
INVESTOR OWNED - 1.6%
IL Bryant Pollution Control Revenue,
Central Illinois Light Co.,
Series 1993,
5.900% 08/01/23 2,000 2,012
NM Farmington San Juan,
6.375% 04/01/22 1,250 1,272
--------
3,284
--------
MUNICIPAL ELECTRIC - 1.8%
TX Austin,
Series 1994:
(a) 05/15/17 6,600 2,104
(a) 05/15/18 5,000 1,506
--------
3,610
--------
WATER & SEWER - 1.6%
LA Public Facility Belmont Water
Authority,
9.000% 03/15/24 (c) 730 657
</TABLE>
15
<PAGE>
Investment Portfolio/May 31, 1997
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
UTILITY - CONT.
WATER & SEWER - CONT.
MS V Lakes Utility District,
8.250% 07/15/24 $ 500 $ 489
NJ State Economic Development
Authority,
Hills Development Co.,
10.500% 09/01/08 2,100 2,108
-----------
3,254
-----------
TOTAL MUNICIPAL BONDS (cost of $196,566) (g) 197,484
-----------
OTHER ASSETS & LIABILITIES - 1.7% 3,521
- ---------------------------------------------------------------------------
NET ASSETS - 100.0% $ 201,005
-----------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- ---------------------------------------------------------------------------
(a) Zero coupon bond.
(b) This issuer is in default of certain debt covenants. Income is not
being accrued.
(c) 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, 1997
the value of these securities amounted to $9,673 or 4.8% of net assets.
(d) This is a restricted security which was acquired at a cost of $1,921. This
security represents 1.1% of the Fund's net assets at May 31, 1997.
(e) The Fund has been informed that the issuer has placed direct obligations of
the U.S. Government in an irrevocable trust, solely for the payment of the
interest and principal.
(f) Accrued interest accumulates in the value of the security and is payable
at redemption.
(g) Cost for federal income tax purposes is $196,667.
See notes to financial statements.
16
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
MAY 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
(in thousands except for per share amount)
ASSETS
<S> <C> <C>
Investments at value (cost $196,566) $ 197,484
Receivable for:
Interest $ 4,802
Investments sold 55
Other 12 4,869
------------ ------------
Total Assets 202,353
LIABILITIES
Payable for:
Distributions 1,163
Payable to custodian bank 67
Accrued:
Deferred Trustees fees 2
Other 116
-------------
Total Liabilities 1,348
------------
NET ASSETS at value for 27,367
shares of beneficial interest outstanding $ 201,005
------------
Net asset value per share $ 7.34
------------
COMPOSITION OF NET ASSETS
Capital paid in $ 246,821
Undistributed net investment income 469
Accumulated net realized loss (47,203)
Net unrealized appreciation 918
------------
$ 201,005
------------
</TABLE>
See notes to financial statements.
17
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $ 7,892
EXPENSES
Management fee $ 652
Transfer agent 68
Bookkeeping fee 27
Trustees fee 9
Custodian fee 9
Audit fee 21
Legal fee 27
Reports to shareholders 5
Other 97 915
----------- ------------
Net Investment Income 6,977
------------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized loss (1,889)
Net unrealized appreciation during
the period 102
-----------
Net Loss (1,787)
------------
Net Increase in Net Assets from Operations $ 5,190
------------
</TABLE>
See notes to financial statements.
18
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months ended Year ended
(in thousands) May 31 November 30
---------------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS 1997 1996
Operations:
Net investment income $ 6,977 $ 13,853
Net realized gain (loss) (1,889) 70
Net unrealized appreciation (depreciation) 102 (1,839)
--------- ---------
Net Increase from Operations 5,190 12,084
Distributions:
From net investment income (6,978) (13,957)
--------- ---------
(1,788) (1,873)
Fund Share Transactions:
Value of distributions reinvested - -
--------- ---------
Total Decrease (1,788) (1,873)
NET ASSETS
Beginning of period 202,793 204,666
--------- ---------
End of period (including undistributed
net investment income
of $469 and $467, respectively) $ 201,005 $ 202,793
--------- ---------
NUMBER OF FUND SHARES
Outstanding at
Beginning of period 27,367 27,367
--------- ---------
End of period 27,367 27,367
--------- ---------
</TABLE>
See notes to financial statements.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (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, 1997, 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 investment objective is to provide
high current income, generally exempt from federal income taxes, by investing
primarily in medium and lower quality municipal securities. Secondary is to
preserve capital. The Fund authorized 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.
20
<PAGE>
Notes to Financial Statements/May 31, 1997
- --------------------------------------------------------------------------------
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. 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, 1997, purchases and
sales of investments, other than short-term obligations, were $11,146,784 and
$7,049,473, respectively.
21
<PAGE>
Notes to Financial Statements/May 31, 1997
- --------------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION - CONT.
- --------------------------------------------------------------------------------
Unrealized appreciation (depreciation) at May 31, 1997, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 9,292,020
Gross unrealized depreciation (8,475,172)
-----------------
Net unrealized appreciation $ 816,848
-----------------
</TABLE>
CAPITAL LOSS CARRYFORWARDS: At November 30, 1996, 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> <C>
1997 $ 2,498,000
1998 6,551,000
1999 6,352,000
2000 9,103,000
2001 7,979,000
2002 5,301,000
2003 7,499,000
2004 4,000
-----------------
$ 45,287,000
-----------------
</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, 1997, 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, 1997. On February 3, 1997,
the record date for the Meeting, the Fund had outstanding 27,367,005 shares of
beneficial interest. The votes cast at the Meeting were as follows:
22
<PAGE>
Notes to Financial Statements/May 31, 1997
- --------------------------------------------------------------------------------
Election of four Trustees:
<TABLE>
<CAPTION>
AUTHORITY
FOR WITHHELD
--- ---------
<S> <C> <C>
Lora S. Collins 21,211,399 545,897
Richard W. Lowry 21,226,552 530,744
John J. Neuhauser 21,234,395 522,901
Sinclair Weeks, Jr. 21,201,074 556,222
</TABLE>
The Board of Trustees also consists of Robert J. Birnbaum, Tom Bleasdale, James
E. Grinnell, William D. Ireland, Jr., William E. Mayer, James L. Moody, Jr.,
George L. Shinn and Robert L. Sullivan.
Ratification of the selection of Price Waterhouse LLP as independent
accountants:
FOR AGAINST ABSTAIN
--- ------- -------
21,193,039 187,945 376,312
23
<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
------------ ------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 7.410 $ 7.480 $ 7.150
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.255 0.508 0.547
Net realized and
unrealized gain (loss) (0.070) (0.068) 0.335
------------ ------------ ------------
Total from Investment
Operations 0.185 0.440 0.882
------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.255) (0.510) (0.552)
In excess of net
investment income - - -
------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.255) (0.510) (0.552)
------------ ------------ ------------
Net asset value -
End of period $ 7.340 $ 7.410 $ 7.480
------------ ------------ ------------
Market price per share -
End of period $ 7.375 $ 7.250 $ 6.750
------------ ------------ ------------
Total return - based on market
value (a) 5.30%(b) 15.36% 8.04%
------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.91%(c)(d) 0.91%(c) 0.98%(c)
Net investment income 6.95%(c)(d) 6.87%(c) 7.47%(c)
Portfolio turnover 4%(b) 22% 24%
Net assets at end
of period (000) $ 201,005 $ 202,793 $ 204,666
</TABLE>
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(b) Not annualized.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(d) Annualized.
24
<PAGE>
FINANCIAL HIGHLIGHTS - continued
<TABLE>
<CAPTION>
Year ended November 30
------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 7.830 $ 7.890 $ 8.060
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.609 0.639 0.636
Net realized and
unrealized gain (loss) (0.707) (0.063) (0.170)
------------ ------------ ------------
Total from Investment
Operations (0.098) 0.576 0.466
------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.582) (0.632) (0.636)
In excess of net
investment income - (0.004) -
------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.582) (0.636) (0.636)
------------ ------------ ------------
Net asset value -
End of period $ 7.150 $ 7.830 $ 7.890
------------ ------------ ------------
Market price per share -
End of period $ 6.750 $ 8.000 $ 7.875
------------ ------------ ------------
Total return - based on market
value (a) (10.06%) 11.56% 1.82%
------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.90% 0.87% 0.87%
Net investment income 8.12% 8.03% 7.99%
Portfolio turnover 24% 21% 10%
Net assets at end
of period (000) $ 195,444 $ 213,292 $ 213,420
</TABLE>
25
<PAGE>
DIVIDEND REINVESTMENT PLAN
As a shareholder in the Fund you are eligible to participate in the 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 30 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.
26
<PAGE>
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 Colonial at
1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Municipal Income
Trust.
27
<PAGE>
[COLONIAL MUTUAL FUNDS LOGO]
Mutual Funds for
Planned Portfolios
TRUSTEES
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (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
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; 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.
Retired (formerly Chairman of the Board and 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
Retired Partner, Peat Marwick Main & Co. (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) 1997
A Liberty Financial Company (NYSE:L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
IT-03/805D-0597 M (7/97)
