<PAGE>
[Graphic Omitted]
- --------------------------------------------------------------------------------
COLONIAL MUNICIPAL INCOME TRUST Semiannual report
- --------------------------------------------------------------------------------
May 31, 1998
<PAGE>
- --------------------------------------------------------------------------------
COLONIAL MUNICIPAL INCOME TRUST HIGHLIGHTS
DECEMBER 1, 1997 - MAY 31, 1998
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. The Trust's
secondary objective is to preserve its capital.
PORTFOLIO MANAGER COMMENTARY: "Based on our long-term outlook for low
inflation and modest economic growth, we structured the Fund to take advantage
of a potential decline in interest rates, and the Fund benefited. We seized this
opportunity to add to our holdings in non-cyclical sectors, such as community
hospitals. In general, we think non-cyclicals offer good value and the potential
to perform well in an environment characterized by slower economic growth."
-- Bonny Boatman
COLONIAL MUNICIPAL INCOME TRUST PERFORMANCE
Distributions declared per share(1) $0.246
- --------------------------------------------------------------------------------
Six-month total return, assuming
reinvestment of all distributions
|X| NAV 5.25%
|X| Market Price 3.30%
- --------------------------------------------------------------------------------
Price per share
|X| NAV $7.55
|X| Market Price $7.56
TOP FIVE SECTORS QUALITY BREAKDOWN
(as of 5/31/98) (as of 5/31/98)
- ------------------------------------ ------------------------------------
Nursing Home ................. 16.7% NON-RATED: ................... 48.5%
Housing ...................... 12.6% BBB: ......................... 20.6%
Refunded ..................... 11.5% AAA: ......................... 13.1%
Hospital ..................... 8.2% A: ........................... 11.0%
Industrial ................... 6.0% AA: .......................... 3.7%
BB: .......................... 2.7%
B: ........................... 0.4%
(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.
Sector breakdowns are calculated as a percent of total net assets. Quality
breakdowns are calculated as a percent of total investments, including
short-term obligations.
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. Industry sectors in the following financial statements are based upon
the standard industrial classifications (SIC) published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon Colonial's defined criteria as used in the investment process.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
----------------------------
[Photo of Stephen E. Gibson]
----------------------------
In June 1998, Harold Cogger retired as president of Colonial Municipal Income
Trust's Board of Trustees. I would like to take this opportunity to thank him
for his guidance over the past few years and wish him well. As the new president
of the Fund, I am pleased to present the semiannual report for Colonial
Municipal Income Trust for the six months ended May 31, 1998.
A variety of factors caused bond prices to seesaw during the period, as
different sectors of the economy provided mixed signals to fixed-income
investors. The economic turmoil in Southeast Asia, its potential to slow U.S.
economic growth, and the possibility of interest rate increases by the Federal
Reserve Board were strong contributors to price volatility. By the end of the
period, fixed-income investors saw something they liked. With hints that growth
might slow, investors' fear of inflation was reduced. As interest rates dropped,
bond prices finished on a positive note.
The tax-exempt market in which the Fund invests showed a similar pattern. In
addition to the trends mentioned above, supply and demand factors contributed
towards rising and declining prices during the period.
Municipal bond funds such as Colonial Municipal Income Trust offer investors a
number of attractive benefits including tax-exempt income that compares
favorably to inflation, and diversification of your fixed-income portfolio.
Thank you for choosing Colonial Municipal Income Trust and for giving us the
opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
July 10, 1998
Because market and economic conditions change, there can be no assurance that
the trends described above will continue.
- --------------------------------------------------------------------------------
<PAGE>
INVESTMENT PORTFOLIO
MAY 31, 1998 (UNAUDITED, IN THOUSANDS)
MUNICIPAL BONDS - 97.2% PAR VALUE
- --------------------------------------------------------------------------------
EDUCATION - 2.6%
EDUCATION - 1.5%
MI Southfield Economic Development Corp.,
Lawrence University,
Series 1998-A,
5.400% 02/01/18 $1,000 $ 996
NY State Dormitory Authority,
New York University,
Series 1998-A,
5.750% 07/01/27 1,000 1,118
VT State Educational & Health Buildings
Finance Agency, Norwich University,
Series 1998,
5.500% 07/01/21 1,000 991
--------
3,105
--------
STUDENT LOAN - 1.1%
SD State Student Loan Finance Corp.,
Series 1996-E,
6.550% 08/01/20 2,000 2,198
--------
................................................................................
HEALTHCARE - 28.6%
HEALTH SERVICES - 0.1%
IL Health Facilities Authority,
Midwest Physician Group, Ltd.,
Series 1998,
5.500% 11/15/19 325 316
--------
HOSPITALS - 8.2%
AL Alabama Special Care Facilities Authority,
Montgomery Healthcare,
Series 1989,
11.000% 10/01/19 2,280 2,326
CO Health Care Facilities Authority,
National Jewish Medical & Research Center,
Series 1998,
5.375% 01/01/23 840 823
CT Health & Educational
Facilities Authority,
Hospital for Special Care, Series B,
5.375% 07/01/17 500 493
GA Clayton Hospital Authority,
The Woodlands Foundation, Inc.,
Series 1991-A,
9.750% 05/01/21(a) 1,500 975
IL Health Facilities Authority,
Thorek Hospital & Medical Center,
5.375% 08/15/28 500 489
MA Health & Educational
Facilities Authority,
Milford-Whitinsville Regional Hospital, Series C,
5.250% 07/15/18 500 487
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1998-A,
5.375% 07/01/20 625 611
MI Tawas City Finance Authority,
St. Joseph Health System,
Series 1998-A,
5.750% 02/15/23 450 450
MN Monticello-Big Lake Community Hospital
District,
5.750% 12/01/19 1,000 1,036
MN St. Paul Housing & Redevelopment Authority,
Healtheast Project, Series A,
5.700% 11/01/15 2,000 2,034
MO Housing Development Commission,
Freeman Health Systems,
Series 1998:
5.250% 02/15/18 750 732
5.250% 02/15/28 500 482
NC State Medical Care Commission,
Annie Penn Memorial Hospital,
Series 1998,
5.375% 01/01/22 250 245
NH Higher Educational & Health
Facilities Authority,
Littleton Hospital Assoc., Inc., Series 1998-A,
6.000% 05/01/28 625 630
NJ Health Care Facilities Financing
Authority, Raritan Bay Medical Center,
7.250% 07/01/27 1,000 1,092
NY Dormitory Authority,
Bronx-Lebanon Hospital Center,
Series 1998-E,
5.200% 02/15/14 1,000 998
OH Sandusky County,
Series 1998,
5.150% 01/01/08 270 271
PA Allegheny County Hospital Development,
Ohio Valley General Hospital,
Series 1998-A,
5.450% 01/01/28 1,050 1,041
PA Pottsville Hospital Authority,
5.625% 07/01/24 755 750
VT Educational & Health
Buildings Authority,
Springfield Hospital, Series A,
7.750% 01/01/13 1,040 1,178
--------
17,143
--------
INTERMEDIATE CARE FACILITIES - 1.0%
MA State Health & Educational
Facilities Authority,
Corp. for Independent Living,
8.100% 07/01/18 685 774
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/19 510 606
Series 1992-C,
9.750% 08/01/19 520 618
--------
1,998
--------
LIFECARE - 2.6%
CO Health Care Facilities Authority,
National Benevolent Association:
Series 1998-A,
5.250% 01/01/27 430 417
Series 1998-B,
5.250% 02/01/18 1,500 1,473
KY Economic Development Finance Authority,
Christian Church Homes of Kentucky, Inc.,
Series 1998,
5.500% 11/15/30 750 741
MN Columbia Heights,
Crest View Corp.,
Series 1998,
6.000% 03/01/33 745 747
PA Philadelphia Authority for Industrial
Development, Baptist Home of Philadelphia,
Series 1998-A:
5.500% 11/15/18 360 356
5.600% 11/15/28 570 556
TN Metropolitan Government:
Nashville & Davidson County,
Blakeford at Green Hills, Series 1998,
5.650% 07/01/24 575 565
Richland Place,
5.500% 05/01/23 495 507
--------
5,362
--------
NURSING HOMES - 16.7%
CO Health Facilities Authority,
American Housing Foundation, Inc.,
Series 1990-A,
10.250% 12/01/20 1,500 1,500
DE Economic Development Authority,
12.000% 04/01/25 2,240 2,435
DE Sussex County, Healthcare Facility,
Delaware Health Corp.,
Series 1994-A,
7.600% 01/01/24 1,000 1,051
IA Finance Authority,
Care Initiatives Project:
Series 1996,
9.250% 07/01/25 1,000 1,346
Series 1998-B:
5.750% 07/01/18 550 543
5.750% 07/01/28 1,475 1,431
IA Gary Industrial Economic Development,
West Side Health Care Center,
Series 1987-A,
11.500% 10/01/17 2,470 2,552
IN Michigan City Health Facilities,
Metropolitan Health Foundation, Inc.
Project,
10.000% 11/01/22 4,500 4,500
KS Halstead Industrial Health Care
Project,
10.250% 08/01/13(a) 1,330 532
KY Jefferson County First Mortgage
Kentucky Iowa, Inc. Project,
Series 1990,
10.250% 01/01/20 960 1,006
KY Lexington-Fayette Urban County
Government, First Mortgage, AHF
Kentucky-Iowa, Inc. Project,
Series 1990,
10.250% 01/01/20 960 1,006
MA Boston, St. Joseph Nursing Care
Center, Inc., Series 1990,
10.000% 01/01/20 1,915 2,073
MA State Industrial Finance Agency:
American Health Foundation, Inc.,
Series 1989,
10.125% 03/01/19 475 356
GF/Massachusetts, Inc.,
Series 1994,
8.300% 07/01/23 980 1,019
MI Cheboygan County Economic
Development Corp., Metro Health
Foundation Project, Series 1993,
10.000% 11/01/22 2,440 2,440
MN Duluth Economic Development Authority,
Series A,
5.875% 12/01/28 250 250
MO Springfield Industrial Development
Authority,
10.250% 12/01/10 1,150 1,166
NJ Economic Development Authority
Geriatric and Medical Service, Inc.,
Series A,
10.500% 05/01/04 650 692
NM City of Clovis,
Retirement Ranches Project,
10.750% 04/01/19 190 206
OH Lucas County, Gericare, Inc.,
Series 1988-B
10.500% 06/01/18 2,465 2,587
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 A,
9.500% 03/01/19 1,545 1,580
Series B,
(b) 03/01/19 250 63
TN New Tazewell Health Education and
Housing Facilities Board,
New Tazewell, Series 1987,
10.000% 06/01/17 1,585 1,607
TX Kirbyville Health Facilities Development Corp.,
Heartway III Project:
Series 1997-A,
10.000% 03/20/18 596 600
Series 1997-B,
(b) 03/20/04 100 52
WA Kitsap County Housing Authority,
Martha & Mary Nursing Home,
7.100% 02/20/36 643 743
--------
34,742
--------
................................................................................
HOUSING - 12.6%
ASSISTED LIVING/SENIOR - 4.0%
IL Clarendon Hills Residential Facilities,
Churchill Estate,
Series 1998-A:
6.750% 03/01/24 1,050 1,050
6.750% 03/01/31 1,365 1,365
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 06/01/25 1,500 1,695
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 1,630 1,650
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility, Series 1993-A,
8.250% 05/01/23 800 895
TX Bell County Health Facilities
Development Corp., Care Institutions, Inc.,
9.000% 11/01/24 1,500 1,735
--------
8,390
--------
MULTI-FAMILY - 7.8%
FL State Housing Finance Agency,
Windsong Apartments,
Series 1993-C,
9.250% 01/01/19 830 664
IL Chicago, Michigan Boulevard Garden
Apartment Rehabilitation Project,
Series 1985,
12.000% 01/01/00 245 220
MN Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 06/01/22 1,075 1,193
MN White Bear Lake,
Birch Lake Townhomes Project:
Series 1989-A,
10.250% 07/15/19 1,770 1,801
Series 1989-B,
(c) 07/15/19 674 617
NC Eastern Carolina Regional Housing
Authority, New River Apartments,
Jacksonville, Series 1994,
8.250% 09/01/14 1,880 2,045
Resolution Trust Corp.,
Pass Through Certificates,
Series 1993-A,
8.500% 12/01/16(d) 4,248 4,418
SC State Housing Finance and Development
Multi-family Housing Finance Revenue,
Westbridge Apartments, Series A,
9.500% 09/01/20 2,170 2,241
TN Franklin Industrial Board,
Landings Apartment Project,
Series 1996-B,
8.750% 04/01/27 800 821
TX Galveston Pass Health Facilities Center,
Pass Through Certificates,
8.000% 08/01/23 1,000 1,079
VA Alexandria Redevelopment
& Housing Authority, Courthouse
Commons Apartments, Series 1990-A,
10.000% 01/01/21 1,000 1,026
--------
16,125
--------
SINGLE-FAMILY - 0.8%
AK Housing Finance Corp.,
Series 1996-A,
6.050% 12/01/17 935 990
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% 12/01/18 590 603
--------
1,624
--------
................................................................................
OTHER - 13.6%
OTHER - 2.1%
IL Hammond, American Maize
Products Co., Series 1994,
8.000% 12/01/24 2,000 2,358
LA Port New Orleans Industrial Development,
Continental Grain Co., Series 1993,
7.500% 07/01/13 1,000 1,106
MD Baltimore, Park Charles Project,
Series 1986,
8.000% 01/01/10 780 849
--------
4,313
--------
REFUNDED/ESCROWED (E) - 11.5%
CA San Joaquin Hills Transportation
Corridor Agency, Series 1993,
(b) 01/01/25 10,000 2,547
FL Clearwater Housing Authority,
Hampton Apartments,
Series 1994,
8.250% 05/01/24 2,500 3,075
ID Health Facilities Authority,
IHC Hospitals, Inc.,
8.320% 02/15/21 2,750 3,339
IL Chicago Public Building Commission,
Series 1990-A,
7.000% 01/01/20(f) 2,000 2,531
IL Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 07/01/24 2,250 2,863
MA State Industrial Finance Agency,
Series 1990,
9.000% 10/01/20 935 1,054
MN Mille Lacs Capital Improvement Authority,
Mille Lacs Band of Chippewa,
Series 1992-A,
9.250% 11/01/12 1,050 1,288
NC Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 470 565
NM City of Clovis,
Retirement Ranches Project,
10.750% 04/01/19 1,920 2,081
PA Delaware County Authority:
Series 1996,
6.000% 12/15/26 500 561
Southeastern Pennsylvania Obligated Group,
6.000% 12/15/16 1,400 1,571
WA State Health Care Facilities Authority,
Grays Harbor Community Hospital,
Series 1993:
7.200% 07/01/03 330 359
8.025% 07/01/20 1,770 1,969
--------
23,803
--------
................................................................................
OTHER REVENUE - 10.0%
CHEMICALS - 1.1%
LA St. Charles Parish,
Union Carbide Corp.,
Series 1992,
7.350% 11/01/22 2,000 2,217
--------
INDUSTRIAL - 6.0%
CO Mesa County Industrial Development,
Joy Technologies, Inc.,
Series 1992,
8.500% 09/15/06 1,500 1,695
IL State Development Finance Authority,
Armstrong World Industries, Inc. Project,
5.950% 12/01/24 1,000 1,101
IL Will-Kankakee Regional Development Authority,
Flanders Corp./Precisionaire Project,
Series 1997,
6.500% 12/15/17 1,000 1,024
LA Southern Louisiana Port Commission,
Cargill, Inc. Project,
5.850% 04/01/17 500 530
MA State Industrial Finance Agency,
House of Bianchi, Inc.,
8.750% 06/01/18 325 335
MN Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 09/01/16 785 965
OH Cuyahoga County,
Joy Technologies, Inc.,
Series 1992,
8.750% 09/15/07 550 626
TX Trinity River Authority,
Texas Instruments Project,
Series 1996,
6.200% 03/01/20 750 801
VA Halifax County Industrial Development,
Craddock-Terry, Inc., Series 1989,
10.000% 12/01/19(a) 870 322
VA Pittsylvania County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19(a) 533 48
VA Prince Edward County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19(a) 1,610 805
WA Pilchuck Public Development Corp.,
Goodrich (B.F.) Co. Tramco Project,
Series 1993,
6.000% 08/01/23 4,000 4,133
--------
12,385
--------
OIL & GAS - 0.7%
WA Pierce County Economic
Development Corp.,
Occidental Petroleum Co.,
5.800% 09/01/29 1,500 1,517
--------
PAPER PRODUCTS - 1.3%
AL Phenix City Industrial Development Board,
Mead Boated Board, Inc.,
Series 1998-A,
5.300% 04/01/27 650 642
SC Darlington County,
Industrial Development Authority,
SONOCO Products Co. Project,
6.125% 06/01/25 2,000 2,124
--------
2,766
--------
RECREATION - 0.5%
NM Red River Sports,
6.450% 06/01/07 1,000 1,005
--------
RETAIL - 0.4%
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 09/01/11 710 816
--------
................................................................................
RESOURCE RECOVERY - 3.3%
DISPOSAL - 2.8%
CT State Development Authority,
Sewer Sludge Disposal Facilities,
Series 1996,
8.250% 12/01/06 1,250 1,319
GA Fulton County Development
Authority, Very, Inc.,
10.500% 12/01/07 1,370 1,425
MA Boston Industrial Development
Finance Authority, Jet-A-Way, Inc.,
10.500% 01/01/11 1,000 1,129
MA State Industrial Finance Agency:
Massachusetts Environmental Services,
Series 1994-A,
8.750% 11/01/21(a) 975 731
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 1,110 1,236
--------
5,840
--------
RESOURCE RECOVERY - 0.5%
PA Delaware County Industrial
Development Authority, Series A,
6.200% 07/01/19 1,000 1,089
--------
................................................................................
TAX-BACKED - 10.8%
LOCAL APPROPRIATED - 0.5%
CA Compton, Civic Center Project,
5.500% 09/01/15 1,000 1,012
--------
LOCAL GENERAL OBLIGATIONS - 3.8%
LA New Orleans,
Series 1991,
(b) 09/01/15 4,000 1,683
NY New York City:
Series 1998-F,
5.000% 08/01/23 $ 700 $ 670
Series C,
5.375% 11/15/17 550 555
Series 1998-D,
5.375% 08/01/17 4,000 4,035
TX Irving Independent School District,
Series 1997:
(b) 02/15/15 1,500 638
(b) 02/15/16 1,000 401
--------
7,982
--------
SPECIAL NON-PROPERTY TAX - 5.1%
IL Metropolitan Pier & Exposition
Authority, Series 1996-A:
(b) 12/15/13(f) 5,000 2,279
(b) 12/15/21 8,000 2,334
IL Metropolitan Pier & Exposition Authority,
McCormick Project:
(b) 06/15/14(f) 5,000 2,204
(b) 06/15/15 3,000 1,246
IL State Development Finance Authority,
City of Marion Project,
Series 1991,
9.625% 09/15/21 1,460 1,095
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series 1996-Y,
5.500% 07/01/36 1,300 1,359
--------
10,517
--------
SPECIAL PROPERTY TAX - 1.0%
CA Fontana Redevelopment Agency,
Jurupa Hills Project, Series 1997-A,
5.500% 10/01/27 700 709
CA Poway Community Facilities District,
No. 88-1 Parkway Business Center,
Series 1998,
6.750% 08/15/15 575 627
CA Riverside County Public Financing
Authority Redevelopment Projects, Series A,
5.500% 10/01/22 650 658
--------
1,994
--------
STATE APPROPRIATED - 0.4%
NY Metropolitan Transportation Authority,
Commuter Facilities, Series 1997-8,
5.250% 07/01/17 945 937
--------
................................................................................
TRANSPORTATION - 4.9%
AIR TRANSPORTATION - 4.0%
IN Indianapolis Airport Authority:
Federal Express Corp.,
Series 1994,
7.100% 01/15/17 2,000 2,252
United Airlines Project,
Series A,
6.500% 11/15/31 2,000 2,170
KY Kenton County Airport Board,
Delta Airlines, Inc.,
Series 1992-A,
7.500% 02/01/20 2,500 2,753
TX Alliance Airport Authority,
Federal Express Corp.,
Series 1996,
6.375% 04/01/21 1,000 1,077
--------
8,252
--------
AIRPORT - 0.3%
OH Toledo-Lucas County Port Authority,
Series 1998,
5.500% 05/15/20 585 568
--------
TOLL FACILITIES - 0.6%
CA San Joaquin Hills Transportation
Corridor Agency, Series A,
(b) 01/15/15 3,000 1,292
--------
................................................................................
UTILITY - 10.8%
INDIVIDUAL POWER PRODUCER - 4.5%
FL Martin County Industrial
Development Authority, Indiantown
Cogeneration Project, Series 1994-A,
7.875% 12/15/25 1,000 1,174
NY New York City Industrial Development Agency,
Brooklyn Navy Yard Partners,
Series 1997,
5.750% 10/01/36 1,200 1,213
NY Port Authority of New York &
New Jersey, KIAC Partners,
Series 1996-IV,
6.750% 10/01/11 2,000 2,235
PA Economic Development Finance
Authority, Colver Project, Series D:
7.125% 12/01/15 500 558
7.150% 12/01/18 3,750 4,196
--------
9,376
--------
INVESTOR OWNED - 2.0%
AZ Pima County Industrial Development Authority,
Tucson Electric Power Co., Series A,
6.100% 09/01/25 750 774
IL Bryant Pollution Control Revenue,
Central Illinois Light Co.,
Series 1993,
5.900% 08/01/23 2,000 2,072
NM Farmington, San Juan Public
Service Co. Project, Series D,
6.375% 04/01/22 1,250 1,341
--------
4,187
--------
MUNICIPAL ELECTRIC - 2.0%
TX Austin, Series 1994:
(b) 05/15/17(f) 6,600 2,475
(b) 05/15/18 5,000 1,777
--------
4,252
--------
WATER & SEWER - 2.3%
LA Public Facility Belmont Water
Authority,
9.000% 03/15/24 730 657
MS Five Lakes Utility District,
8.250% 07/15/24 500 400
NJ State Economic Development
Authority, Hills Development Co.,
10.500% 09/01/08 2,100 2,177
TX Houston Water & Sewer System,
Series C,
(b) 12/01/12(f) 3,000 1,455
--------
4,689
--------
TOTAL MUNICIPAL BONDS (cost of $193,344) (g) 201,812
--------
OTHER ASSETS & LIABILITIES, NET - 2.8% $ 5,891
- --------------------------------------------------------------------------------
NET ASSETS - 100% $207,703
========
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) This issuer is in default of certain debt covenants. Income is not being
accrued.
(b) Zero coupon bond.
(c) Accrued interest accumulates in the value of the security and is payable
at redemption. The value of this security represents fair value as
determined under procedures approved by the Trustees.
(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, 1998,
the value of this security amounted to $4,418 or 2.1% of net assets.
(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) These securities, or a portion thereof, with a total market value of
$9,645, are being used to collateralize open future contracts.
(g) Cost for federal income tax purposes is $193,372.
Unrealized
appreciation
Par value Expiration (depreciation)
Type covered by contracts month at 5/31/98
- --------------------------------------------------------------------------------
Short Municipal Bond $ 3,600 June $ (63)
Long Municipal Bond $ 3,500 June 52
--------
$ (11)
========
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
MAY 31, 1998 (UNAUDITED)
(in thousands except for per share amount)
ASSETS
Investments at value (cost $193,344) $201,812
Receivable for:
Interest $ 4,510
Investments sold 2,740
Other 51 7,301
-------- --------
Total Assets 209,113
LIABILITIES
Payable for:
Distributions 1,128
Investments purchased 250
Accrued:
Deferred Trustees fees 4
Other 28
--------
Total Liabilities 1,410
--------
NET ASSETS at value for 27,514
shares of beneficial interest outstanding $207,703
========
Net asset value per share $ 7.55
========
COMPOSITION OF NET ASSETS
Capital paid in $245,423
Undistributed net investment income 330
Accumulated net realized loss (46,507)
Net unrealized appreciation (depreciation) on:
Investments 8,468
Open futures contracts (11)
--------
$207,703
========
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1998
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Interest $ 7,419
EXPENSES
Management fee $ 674
Transfer agent 40
Bookkeeping fee 27
Trustees fee 9
Custodian fee 5
Audit fee 20
Legal fee 52
Reports to shareholders 5
Other 43 875
----- ---------
Net Investment Income 6,544
---------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain 3,572
Net unrealized appreciation (depreciation)
during the period on:
Investments 373
Open futures contracts (44)
-----
Net unrealized appreciation 329
---------
Net Gain 3,901
---------
Increase in Net Assets from Operations $ 10,445
=========
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months ended Year ended
May 31 November 30
(in thousands) ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 1998 1997
Operations:
Net investment income $ 6,544 $ 13,806
Net realized gain (loss) 3,572 (7,104)
Net unrealized appreciation 329 7,312
----------- ------------
Net Increase from Operations 10,445 14,014
Distributions:
From net investment income (6,762) (13,887)
----------- ------------
3,683 127
Fund Share Transactions:
Value of distributions reinvested 487 613
----------- ------------
Total Increase 4,170 740
NET ASSETS
Beginning of period 203,533 202,793
----------- ------------
End of period (including undistributed
net investment income
of $330 and $510, respectively) $ 207,703 $ 203,533
=========== ============
NUMBER OF FUND SHARES
Issued for distributions reinvested 65 82
Outstanding at
Beginning of period 27,449 27,367
----------- ------------
End of period 27,514 27,449
----------- ------------
See notes to financial statements.
<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, 1998, 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 primary investment objective is to
provide high current income, generally exempt from federal income taxes, by
investing primarily in medium and lower quality municipal securities. The Fund's
secondary objective is to preserve its 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 generally 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.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Options are valued at the last reported sale price, or in the absence of a sale,
the mean between the last quoted bid and asking price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available 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 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. 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 out of
the Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the six months ended May 31, 1998, purchases and
sales of investments, other than short-term obligations, were $39,718,048 and
$39,977,751, respectively.
Unrealized appreciation (depreciation) at May 31, 1998, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $14,020,060
Gross unrealized depreciation (5,580,520)
-----------
Net unrealized appreciation $ 8,439,540
===========
CAPITAL LOSS CARRYFORWARDS: At November 30, 1997, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
----------- ------------
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
2005 7,197,000
-----------
$49,986,000
===========
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.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the variation margin recorded in the Fund's Statement
of Assets and Liabilities at any given time.
NOTE 5. RESULTS OF ANNUAL SHAREHOLDER MEETING (UNAUDITED)
- -------------------------------------------------------------------------------
On April 29, 1998, the Annual Meeting of Shareholders of the Fund was held to
elect two Trustees and to ratify the selection of Price Waterhouse LLP as
independent accountants for the fiscal year ending November 30, 1998. On
February 2, 1998, the record date for the Meeting, the Fund had outstanding
27,475,276 shares of beneficial interest. The votes cast at the Meeting were as
follows:
Election of two Trustees: AUTHORITY BROKER
FOR WITHHELD NON-VOTES
William E. Mayer 23,256,480 516,215 0
Robert L. Sullivan 23,247,388 525,307 0
The Board of Trustees also consists of Robert J. Birnbaum, Thomas Bleasdale,
James E. Grinnell, James L. Moody, Jr., Lora S. Collins, Richard W. Lowry and
John J. Neuhauser.
Ratification of the selection of Price Waterhouse LLP as independent
accountants:
FOR: 23,261,850 shares of beneficial interest
being a majority of the shares
represented at the Meeting
AGAINST: 147,287 shares of beneficial interest
ABSTAIN: 363,558 shares of beneficial interest
BROKER NON-VOTES: 0
<PAGE>
FINANCIAL HIGHLIGHTS
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
(Unaudited)
Six months
ended May 31 Year ended November 30
------------ ------------------------
1998 1997 1996
Net asset value -
Beginning of period $ 7.410 $ 7.410 $ 7.480
--------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.239 0.509 0.508
Net realized and
unrealized gain (loss) 0.147 (0.002) (0.068)
--------- -------- ---------
Total from Investment
Operations 0.386 0.507 0.440
--------- -------- ---------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.246) (0.507) (0.510)
In excess of net
investment income - - -
--------- -------- ---------
Total Distributions
Declared to Shareholders (0.246) (0.507) (0.510)
--------- -------- ---------
Net asset value -
End of period $ 7.550 $ 7.410 $ 7.410
========= ======== =========
Market price per share -
End of period $ 7.562 $ 7.560 $ 7.250
========= ======== =========
Total return - based on net
asset value (a) 5.25%(b) 7.07% 6.38%
========= ======== =========
Total return - based on market
value (c) 3.30%(b) 11.67% 15.36%
========= ======== =========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.84%(d)(e) 0.86%(e) 0.91%(e)
Net investment income 6.32%(d)(e) 6.83%(e) 6.87%(e)
Portfolio turnover 20%(b) 15% 22%
Net assets at end
of period (000) $ 207,703 $203,533 $202,793
(a) Total return at net asset value assuming all distributions reinvested.
(b) Not annualized.
(c) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(d) Annualized.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended November 30
--------------------------------------------
1995 1994 1993
$ 7.150 $ 7.830 $ 7.890
--------- -------- ---------
0.547 0.609 0.639
0.335 (0.707) (0.063)
--------- -------- ---------
0.882 (0.098) 0.576
--------- -------- ---------
(0.552) (0.582) (0.632)
- - (0.004)
--------- -------- ---------
(0.552) (0.582) (0.636)
--------- -------- ---------
$ 7.480 $ 7.150 $ 7.830
========= ======== =========
$ 6.750 $ 6.750 $ 8.000
========= ======== =========
12.96% (0.42)% 7.42%
========= ======== =========
8.04% (10.06)% 11.56%
========= ======== =========
0.98% 0.90% 0.87%
7.47% 8.12% 8.03%
24% 24% 21%
$ 204,666 $195,444 $213,292
<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. Please refer to the
Dividend Reinvestment and Cash Purchase Plan pamphlet for further details.
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.
- --------------------------------------------------------------------------------
<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 1-800-426-3750 and
additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Municipal Income
Trust.
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
JOHN CARBERRY
Senior Vice President of Liberty Financial Companies, Inc. (formerly Managing
Director, Salomon Brothers)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
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, CS 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
ROBERT L. SULLIVAN
Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant, Saatchi
and Saatchi Consulting Ltd. and Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
IT-03/453F-0598 M (7/98) 98/677
