<PAGE>
- --------------------------------------------------------------------------------
COLONIAL
MUNICIPAL
INCOME
TRUST
- --------------------------------------------------------------------------------
ANNUAL REPORT
NOVEMBER 30, 1997
<PAGE>
COLONIAL MUNICIPAL INCOME TRUST HIGHLIGHTS
DECEMBER 1, 1996 - NOVEMBER 30, 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. The Trust's
secondary objective is to preserve its capital.
The Fund is Designed to Offer:
|X| Potential for high tax-free income
|X| Experienced professional management
|X| Expert credit analysis
PORTFOLIO MANAGER COMMENTARY: "With the supply of high yield municipal bonds
continuing to diminish while demand remains strong, careful credit analysis and
broad diversification become more important than ever. In this challenging
environment, we continually analyze the current holdings in our portfolio, and
are constantly studying new issues across sectors in a search for value."
-- Bonny Boatman
COLONIAL MUNICIPAL INCOME TRUST PERFORMANCE
Distributions declared per share(1) $0.507
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12-month total return, assuming
reinvestment of all distributions
|X| NAV 7.07%
|X| Market Price 11.67%
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Price per share
|X| NAV $7.41
|X| Market Price $7.56
(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.
TOP FIVE SECTORS QUALITY BREAKDOWN
(as of 11/30/97) (as of 11/30/97)
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(as of 11/30/97)
Nursing Home ................. 19.8% AAA: ......................... 14.5%
Housing ...................... 13.5% Non-rated: ................... 49.6%
Refunded ..................... 9.1% AA: .......................... 3.4%
Hospital ..................... 6.2% A: ........................... 7.1%
Industrial ................... 6.0% BBB: ......................... 21.4%
BB: .......................... 2.5%
Net Cash & Equivalents: ...... 1.1%
B: ........................... 0.4%
Sector and quality breakdowns are calculated as a percent of total unaudited
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 Harold W. Cogger]
I am pleased to present the annual report for Colonial Municipal Income Trust.
This report reflects on the investment environment for the 12 months ended
November 30, 1997.
The economy grew at a healthy pace during the past year. 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
was a response to growing concern about future wage and price inflation. As
interest rates rose, bond prices declined. However, by mid-April, economic
growth appeared to slow while inflation remained under control. During the
second half of the period, interest rates declined and bond prices rose. Looking
forward, we anticipate that moderate economic growth will continue in 1998 and
that inflation will remain subdued despite low levels of unemployment.
During the year, the yield spreads between high and low quality municipal bonds
decreased. This means that investors were not rewarded for taking on additional
risk associated with lower quality bonds, particularly in the non-rated sector.
As interest rates declined during the last months of the period, investors
increasingly "reached" for yield, despite an increase in supply. This resulted
in further rising prices for lower quality municipal bonds. While these
conditions made identifying attractive new investments more difficult, the
Fund's lower quality holdings benefited from this trend.
The long-term benefits of investing in any municipal bond fund include tax-free
income as well as the opportunity to diversify your fixed-income portfolio.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
January 9, 1998
Because market conditions change frequently, there can be no assurance that the
trends described here will continue.
<PAGE>
INVESTMENT PORTFOLIO
NOVEMBER 30, 1997
MUNICIPAL BONDS - 97.1% PAR VALUE
- --------------------------------------------------------------------------------
EDUCATION - 2.9%
EDUCATION - 0.9%
CA Statewide Communities
Development Corp., J. Paul Getty
Trust Center,
5.000% 10/01/23 (a) $ 2,000 $ 1,905
--------
LOCAL GENERAL OBLIGATIONS - 1.0%
LA New Orleans,
Series 1991,
(b) 09/01/15 4,000 1,570
NY New York City,
Series C,
5.375% 11/15/17 550 540
--------
2,110
--------
STUDENT LOAN - 1.0%
SD State Student Loan Finance Corp.,
Series 1996-E,
6.550% 08/01/20 2,000 2,062
--------
- --------------------------------------------------------------------------------
HEALTHCARE - 26.3%
HOSPITAL - 6.0%
AL Alabama Special Care Facilities Authority,
Montgomery Healthcare,
Series 1989,
11.000% 10/01/19 2,280 2,326
GA Clayton Hospital Authority,
The Woodlands Foundation, Inc.,
Series 1991-A,
9.750% 05/01/21 (c) 1,500 975
IL State Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 07/01/24 2,250 2,745
MN St. Paul Housing & Redevelopment Authority,
Healtheast Project, Series A,
5.700% 11/01/15 (d) 2,000 2,002
NJ Health Care Facilities Financing
Authority, Raritan Bay Medical Center,
7.250% 07/01/27 1,000 1,076
PA Delaware County Authority,
Southeastern Pennsylvania Obligated Group,
Series 1996:
6.000% 12/15/16 1,400 1,451
6.000% 12/15/26 500 516
VT State Educational & Health
Buildings Authority, Financing Agency,
Springfield Hospital, Series A,
7.750% 01/01/13 1,040 1,164
--------
12,255
--------
INTERMEDIATE CARE FACILITIES - 1.0%
MA State Health & Educational
Facilities Authority Corp. for
Independent Living,
8.100% 07/01/18 685 744
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/19 510 600
Series 1992-C,
9.750% 08/01/19 520 612
--------
1,956
--------
NURSING HOMES - 19.3%
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 2,255 2,450
DE Sussex County, Healthcare Facility,
Delaware Health Corp.,
Series 1994-A,
7.600% 01/01/24 1,000 1,030
FL Flagler County Industrial
Development Authority,
South Florida Properties, Series 1988,
10.500% 12/01/18 (c) 1,455 1,164
IA State Finance Authority,
Care Initiatives Project,
Series 1996,
9.250% 07/01/25 1,000 1,331
IN Gary Industrial Economic Development,
West Side Health Care Center,
Series 1987-A,
11.500% 10/01/17 2,470 2,555
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 (c) 1,330 532
KY Jefferson County First Mortgage
Kentucky Iowa, Inc. Project,
Series 1990,
10.250% 01/01/20 975 1,023
KY Lexington-Fayette Urban County
Government, First Mortgage, AHF
Kentucky-Iowa, Inc. Project,
Series 1990,
10.250% 01/01/20 975 1,023
MA Boston, St. Joseph Nursing Care
Center, Inc., Series 1990,
10.000% 01/01/20 (e) 1,940 2,110
MA State Industrial Finance Agency,
GF/Massachusetts, Inc.,
Series 1994,
8.300% 07/01/23 980 1,011
MI Cheboygan County Economic
Development Corp., Metro Health
Foundation Project, Series 1993,
10.000% 11/01/22 (f) 2,440 2,440
MO Springfield Industrial Development
Authority,
10.250% 12/01/10 1,175 1,191
NJ Economic Development Authority,
Geriatric and Medical Service, Inc.,
Series A,
10.500% 05/01/04 725 772
NM City of Clovis,
Retirement Ranches Project,
10.750% 04/01/19 2,135 2,292
OH Lucas County, Gericare, Inc.,
Series 1988-B,
10.500% 06/01/18 2,500 2,556
OH Montgomery County,
Grafton Oaks Limited Partners,
Series 1986,
9.750% 12/01/16 1,480 1,406
OK Muskogee County Economic Development Authority,
Authority Health Facilities,
Heartway Corp.:
Series A,
9.500% 03/01/19 1,545 1,560
Series B,
(b) 03/01/19 250 63
PA Philadelphia Authority for
Industrial Development:
First Mortgage, The Care Pavilion,
Series 1988,
10.250% 02/01/18 965 966
RHA/Philadelphia Project,
10.250% 11/01/18 1,450 1,448
TN New Tazewell Health, Education and
Housing Facilities Board,
New Tazewell, Series 1987,
10.000% 06/01/17 1,615 1,636
VA Virginia Beach Development Authority,
Beverly Enterprises, Series 1985,
10.000% 04/01/10 1,795 1,972
WA Kitsap County Housing Authority,
Martha & Mary Nursing Home,
7.100% 02/20/36 643 727
--------
39,258
--------
- --------------------------------------------------------------------------------
HOUSING - 13.9%
ASSISTED LIVING/SENIOR - 4.2%
FL Clearwater Housing Authority,
Hampton Apartments,
Series 1994,
8.250% 05/01/24 2,500 2,659
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 06/01/25 1,500 1,646
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 1,630 1,630
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility, Series 1993-A,
8.250% 05/01/23 810 860
TX Bell County Health Facilities
Development Corp., Care Institutions, Inc.,
9.000% 11/01/24 1,500 1,667
--------
8,462
--------
MULTI-FAMILY - 8.8%
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% 01/01/19 830 852
IL Chicago, Michigan Boulevard Garden
Apartment Rehabilitation Project,
Series 1985,
12.000% 01/01/00 295 298
MN Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 06/01/22 1,080 1,195
MN White Bear Lake,
Birch Lake Townhomes Project:
Series 1989-A,
10.250% 07/15/19 1,770 1,788
Series 1989-B,
(g) 07/15/19 678 1,239
NC Eastern Carolina Regional Housing
Authority, New River Apartments,
Jacksonville, Series 1994,
8.250% 09/01/14 1,910 1,986
Resolution Trust Corp.,
Pass Through Certificates,
Series 1993-A,
8.500% 12/01/16 (f) 4,248 4,423
SC State Housing Finance and Development
Multi-family Housing Finance Revenue,
Westbridge Apartments, Series A,
9.500% 09/01/20 2,170 2,224
TN Franklin Industrial Board,
Landings Apartment Project,
Series 1996-B,
8.750% 04/01/27 800 811
TX Galveston Health Facilities Center,
Pass Through Certificates,
8.000% 08/01/23 1,000 1,055
VA Alexandria Redevelopment
& Housing Authority, Courthouse
Commons Apartments, Series 1990-A,
10.000% 01/01/21 1,000 1,019
--------
17,840
--------
SINGLE-FAMILY - 0.9%
AK State Housing Finance Corp.,
Series 1996-A,
6.050% 12/01/17 1,000 1,051
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% 12/01/18 660 673
--------
1,755
--------
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OTHER - 9.4%
LOCAL APPROPRIATED - 0.5%
CA Compton Civic Center,
Project,
5.500% 09/01/15 1,000 986
--------
REFUNDED/ESCROWED (H) - 8.9%
AZ Apache County School District,
Number 010 Round Valley
Project of 1987, Series 1990-C,
9.875% 07/01/05 2,000 2,200
DE State Economic Development Authority,
Riverside Hospital,
Series 1992-A,
9.500% 01/01/22 885 1,147
ID State Health Facilities Authority,
IHC Hospitals, Inc.,
8.260% 02/15/21 2,750 3,135
IL Chicago Public Building Commission,
Series 1990-A,
7.000% 01/01/20 (a) 2,000 2,455
MA State Industrial Finance Agency Tunnel
Revenue, Mary Ann Morse Nursing Home, Inc.,
Series 1991-I,
10.000% 01/01/21 1,200 1,427
MA State Industrial Finance Agency,
Series 1990,
9.000% 10/01/20 935 1,067
MN Mille Lacs Capital Improvement Authority,
Mille Lacs Bond of Chippewa,
Series 1992-A,
9.250% 11/01/12 1,050 1,295
MO Hannibal Industrial Development Authority,
Regional Healthcare Systems,
Series 1992,
9.500% 03/01/22 2,000 2,445
NC Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 500 603
WA State Health Care Facilities Authority,
Grays Harbor Community Hospital,
Series 1993:
7.200% 07/01/03 330 361
8.025% 07/01/20 1,770 1,982
--------
18,117
--------
- --------------------------------------------------------------------------------
OTHER REVENUE - 15.5%
CHEMICALS - 3.6%
LA St. Charles Parish,
Union Carbide Corp.,
Series 1992,
7.350% 11/01/22 2,000 2,215
SC York County,
Hoechst Celanese Corp.,
Series 1994,
5.700% 01/01/24 5,000 5,088
--------
7,303
--------
HOTELS - 1.2%
MN Burnsville Commercial Development,
Holiday Inn Project,
10.600% 06/01/06 2,500 2,526
--------
MANUFACTURING - 5.9%
CO Mesa County Industrial Development,
Joy Technologies, Inc.,
Series 1992,
8.500% 09/15/06 1,000 1,134
IL State Development Finance Authority,
Armstrong World Industries, Inc. Project,
5.950% 12/01/24 1,000 1,053
IN State Development Finance Authority,
Inland Steel, Series A,
5.750% 10/01/11 750 761
LA Southern Louisiana Port Commission,
Cargill, Inc. Project,
5.850% 04/01/17 500 529
MA State Industrial Finance Agency,
House of Bianchi, Inc.,
8.750% 06/01/18 325 328
MN Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 09/01/16 785 968
OH Cuyahoga County,
Joy Technologies, Inc.,
Series 1992,
8.750% 09/15/07 550 629
TX Trinity River Authority,
Texas Instruments Project,
Series 1996,
6.200% 03/01/20 750 788
VA Halifax County Industrial Development,
Craddock-Terry, Inc., Series 1989,
10.000% 12/01/19 (c) 1,010 404
VA Pittsylvania County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19 (c) 1,085 358
VA Prince Edward County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19 (c) 1,860 930
WA Pilchuck Public Development Corp.,
Goodrich (B.F.) Co. Tramco Project,
Series 1993,
6.000% 08/01/23 4,000 4,095
--------
11,977
--------
OIL & GAS - 0.8%
WA Pierce County Economic
Development Corp.,
Occidental Petroleum Co.,
5.800% 09/01/29 1,500 1,511
--------
OTHER - 2.1%
IN Hammond, American Maize
Products Co., Series 1994,
8.000% 12/01/24 2,000 2,333
LA Port New Orleans Industrial Development,
Continental Grain Co., Series 1993,
7.500% 07/01/13 1,000 1,096
MD Baltimore, Park Charles Project,
Series 1986,
8.000% 01/01/10 805 872
--------
4,301
--------
PAPER PRODUCTS - 1.0%
SC Darlington County,
Industrial Development Authority,
SONOCO Products Co. Project,
6.125% 06/01/25 2,000 2,093
--------
RETAIL - 0.4%
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 09/01/11 710 764
--------
STATE APPROPRIATED - 0.5%
NY Metropolitan Transportation Authority,
Commuter Facilities, Series 1997-8,
5.250% 07/01/17 945 918
--------
- --------------------------------------------------------------------------------
RESOURCE RECOVERY - 3.4%
DISPOSAL - 2.9%
CT State Development Authority,
Sewer Sludge Disposal Facilities,
Series 1996,
8.250% 12/01/06 1,250 1,303
GA Fulton County Development
Authority, Very, Inc.,
10.500% 12/01/07 1,370 1,432
MA Boston Industrial Development
Finance Authority, Jet-A-Way, Inc.,
10.500% 01/01/11 1,000 1,108
MA State Industrial Finance Agency:
Massachusetts Environmental Services,
Series 1994-A,
8.750% 11/01/21 (c) 975 731
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 1,110 1,228
--------
5,802
--------
RESOURCE RECOVERY - 0.5%
PA Delaware County Industrial
Development Authority, Series A,
6.200% 07/01/19 1,000 1,061
--------
- --------------------------------------------------------------------------------
TAX-BACKED - 5.2%
SALES & EXCISE TAX - 4.9%
IL Metropolitan Pier & Exposition
Authority, Series 1996-A:
(b) 12/15/13 (a) 5,000 2,175
(b) 12/15/21 (a)(i) 8,000 2,190
IL Metropolitan Pier & Exposition Authority,
McCormick Project:
(b) 06/15/14 (a)(i) 5,000 2,088
(b) 06/15/15 3,000 1,185
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 1,321
--------
10,054
--------
SPECIAL PROPERTY TAX - 0.3%
CA Riverside County Public Financing
Authority Redevelopment Projects, Series A,
5.500% 10/01/22 650 640
--------
- --------------------------------------------------------------------------------
TRANSPORTATION - 8.0%
AIR TRANSPORTATION - 5.1%
IN Indianapolis Airport Authority:
Federal Express Corp.,
Series 1994,
7.100% 01/15/17 2,000 2,235
United Airlines Project,
Series A,
6.500% 11/15/31 2,000 2,150
KY Kenton County Airport Board,
Delta Airlines, Inc.,
Series 1992-A,
7.500% 02/01/20 2,500 2,772
NY Port Authority of New York/New Jersey,
JFK International Airport, Series 6,
6.250% 12/01/08 1,000 1,123
TX Alliance Airport Authority:
American Airlines Project,
7.500% 12/01/29 1,000 1,094
Federal Express Corp.,
Series 1996,
6.375% 04/01/21 1,000 1,071
--------
10,445
--------
TOLL FACILITIES - 2.9%
CA San Joaquin Hills Transportation
Corridor Agency:
Series 1993:
(b) 01/01/25 10,000 2,350
5.000% 01/01/33 2,480 2,300
Series A,
(b) 01/15/15 3,000 1,211
--------
5,861
--------
UTILITY - 12.5%
INDIVIDUAL POWER PRODUCER - 3.9%
FL Martin County Industrial
Development Authority, Indiantown
Cogeneration Project, Series 1994-A,
7.875% 12/15/25 1,000 1,160
NY Port Authority of New York &
New Jersey, KIAC Partners,
Series 1996-IV,
6.750% 10/01/11 2,000 2,175
PA Economic Development Finance
Authority, Colver Project, Series D:
7.125% 12/01/15 500 551
7.150% 12/01/18 3,750 4,134
--------
8,020
--------
INVESTOR OWNED - 2.0%
AZ Pima County Industrial Development Authority,
Tucson Electric Power Co., Series A,
6.100% 09/01/25 750 758
IL Bryant Pollution Control Revenue,
Central Illinois Light Co.,
Series 1993,
5.900% 08/01/23 2,000 2,060
NM Farmington, San Juan Public
Service Co. Project, Series D,
6.375% 04/01/22 1,250 1,325
--------
4,143
--------
MUNICIPAL ELECTRIC - 2.5%
TX Austin, Series 1994:
(b) 05/15/17 (a) 6,600 2,327
(b) 05/15/18 5,000 1,669
WA Chelan County Public Utilities,
District No. 1, Series A,
5.600% 07/01/20 1,000 1,005
--------
5,001
--------
WATER & SEWER - 4.1%
LA Public Facility Belmont Water
Authority,
9.000% 03/15/24 (f) 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 2,132
NY New York City Municipal Water
Finance Authority, Series B,
5.250% 06/15/29 4,000 3,875
TX Houston Water & Sewer System,
Series C,
(b) 12/01/12 (a) 3,000 1,376
--------
8,440
--------
TOTAL MUNICIPAL BONDS (cost of $189,471) (j) 197,566
--------
SHORT-TERM OBLIGATIONS - 1.0%
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (k)
IN Portage Economic Development Revision,
Pedcor Investments, Series A,
4.050% 08/01/30 400 400
MI Monroe County Economic Development
Corp., Detroit Edison Co.,
Series CC,
3.850% 10/01/24 100 100
MS Perry County,
Leaf River Forest Project,
3.900% 03/01/02 300 300
NC Halifax County Industrial Facilities
& Pollution Control Authority,
Westmoreland Coal Co.,
3.900% 12/01/19 300 300
NY State,
Series 1994-A4,
3.850% 08/01/21 1,000 1,000
--------
TOTAL SHORT-TERM OBLIGATIONS 2,100
--------
OTHER ASSETS & LIABILITIES, NET- 1.9% 3,867
- --------------------------------------------------------------------------------
NET ASSETS - 100% $203,533
========
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) These securities, or a portion thereof, with a total market value of $9,221
are being used to collateralize open future contracts.
(b) Zero coupon bond.
(c) This issuer is in default of certain debt covenants. Income is not being
accrued.
(d) This security has been purchased on a delayed delivery basis for settlement
at a future date beyond the customary settlement time.
(e) This is a restricted security which was acquired on April 25, 1990 at a cost
of $1,921. This security represents 1.0% of the Fund's net assets at
November 30, 1997
(f) 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 November 30,
1997, the value of these securities amounted to $7,520 or 3.7% of net
assets.
(g) 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.
(h) 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.
(i) These securities, or a portion thereof, with a total market value of $2,191
are being used to collateralize the delayed delivery purchase indicated in
note (d) above.
(j) Cost for federal income tax purposes is $189,499.
(k) 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 November 30, 1997.
Long futures contracts open at November 30, 1997:
Par value Unrealized
covered by Expiration appreciation
Type contracts month at 11/30/97
- --------------------------------------------------------------------------------
Municipal bonds $1,800 December $ 25
Treasury bonds 1,700 March 8
----
$ 33
====
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1997
(in thousands except for per share amount)
ASSETS
Investments at value (cost $189,471) $ 197,566
Short-term obligations 2,100
----------
199,666
Receivable for:
Interest $ 4,955
Investments sold 2,061
Other 8 7,024
-------- ----------
Total Assets 206,690
LIABILITIES
Payable for:
Investments purchased 1,992
Distributions 1,125
Accrued:
Deferred Trustees fees 4
Other 36
--------
Total Liabilities 3,157
----------
NET ASSETS at value for 27,449
shares of beneficial interest outstanding $ 203,533
==========
Net asset value per share $ 7.41
=========
COMPOSITION OF NET ASSETS
Capital paid in $ 244,936
Undistributed net investment income 510
Accumulated net realized loss (50,041)
Net unrealized appreciation on:
Investments 8,095
Open futures contracts 33
----------
$ 203,533
==========
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1997
(in thousands)
INVESTMENT INCOME
Interest $15,540
EXPENSES
Management fee $1,315
Transfer agent 91
Bookkeeping fee 54
Trustees fee 19
Custodian fee 13
Audit fee 42
Legal fee 100
Reports to shareholders 17
Other 83 1,734
------ -------
Net Investment Income 13,806
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized loss (7,104)
Change in net unrealized appreciation during
the period on:
Investments 7,279
Open futures contracts 33
------
Net change in unrealized appreciation 7,312
-------
Net Gain 208
-------
Net Increase in Net Assets from Operations $14,014
=======
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended November 30
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1997 1996
Operations:
Net investment income $ 13,806 $ 13,853
Net realized gain (loss) (7,104) 70
Net unrealized appreciation (depreciation) 7,312 (1,839)
---------- --------
Net Increase from Operations 14,014 12,084
Distributions:
From net investment income (13,887) (13,957)
---------- --------
127 (1,873)
Fund Share Transactions:
Value of distributions reinvested 613 --
---------- --------
Total Increase (Decrease) 740 (1,873)
NET ASSETS
Beginning of period 202,793 204,666
---------- --------
End of period (including undistributed
net investment income of $510 and
$467, respectively) $ 203,533 $202,793
========== ========
NUMBER OF FUND SHARES
Issued for distributions reinvested 82 --
Outstanding at
Beginning of period 27,367 27,367
---------- --------
End of period 27,449 27,367
---------- --------
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
NOTE 1. ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ORGANIZATION: Colonial Municipal Income Trust (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.
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 2. 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 3. PORTFOLIO INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended November 30, 1997, purchases and
sales of investments, other than short-term obligations, were $31,173,662 and
$29,390,408, respectively.
Unrealized appreciation (depreciation) at November 30, 1997, based on cost of
investments for income tax purposes was:
Gross unrealized appreciation $ 13,490,261
Gross unrealized depreciation (5,423,382)
------------
Net unrealized appreciation $ 8,066,879
============
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.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected per share data, total return, ratios and supplemental data
throughout each period are as follows:
Year ended November 30
----------------------------------------
1997 1996 1995
Net asset value -
Beginning of period $ 7.410 $ 7.480 $ 7.150
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.509 0.508 0.547
Net realized and
unrealized gain (loss) (0.002) (0.068) 0.335
-------- -------- --------
Total from Investment
Operations 0.507 0.440 0.882
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.507) (0.510) (0.552)
In excess of net
investment income -- -- --
-------- -------- --------
Total Distributions
Declared to Shareholders (0.507) (0.510) (0.552)
-------- -------- --------
Net asset value -
End of period $ 7.410 $ 7.410 $ 7.480
======== ======== ========
Market price per share -
End of period $ 7.560 $ 7.250 $ 6.750
======== ======== ========
Total return - based on net asset
value (a) 7.07% 6.38% 12.96%
======== ======== ========
Total return - based on market
value (b) 11.67% 15.36% 8.04%
======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.86%(c) 0.91%(c) 0.98%(c)
Net investment income 6.83%(c) 6.87%(c) 7.47%(c)
Portfolio turnover 15% 22% 24%
Net assets at end of
period (000) $203,533 $202,793 $204,666
(a) Total return at net asset value assuming all distributions reinvested.
(b) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(c) 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
----------------------------
1994 1993
$ 7.830 $ 7.890
-------- --------
0.609 0.639
(0.707) (0.063)
-------- --------
(0.098) 0.576
-------- --------
(0.582) (0.632)
- (0.004)
-------- --------
(0.582) (0.636)
-------- --------
$ 7.150 $ 7.830
======== ========
$ 6.750 $ 8.000
======== ========
(0.42)% 7.42%
======== ========
(10.06)% 11.56%
======== ========
0.90% 0.87%
8.12% 8.03%
24% 21%
$195,444 $213,292
- -------------------------------------------------------------------------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income for federal income
tax purposes.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES OF COLONIAL MUNICIPAL
INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Municipal Income Trust at
November 30, 1997, the results of its operations, the changes in its net assets
and the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and the
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of portfolio positions at November 30, 1997
by correspondence with the custodian and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 9, 1998
<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.
<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
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
IT-02/551E-1197 M (1/98)
