<PAGE>
[graphic omitted]
- ------------------------------------------------
COLONIAL MUNICIPAL INCOME TRUST ANNUAL REPORT
- ------------------------------------------------
November 30, 1998
<PAGE>
COLONIAL MUNICIPAL INCOME TRUST HIGHLIGHTS
DECEMBER 1, 1997 - NOVEMBER 30, 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: "During the past 12 months, investors were
challenged by significant interest rate volatility. In addition, tax-exempt
credit-quality spreads were very narrow for much of the year, indicating that
investors were not recognizing the relatively higher risk of lower-rated,
economically sensitive municipal bonds. Early in the period, our credit research
team identified certain cyclical sectors, including steel, paper and airlines,
whose prices did not appear to reflect their risk. We aggressively reduced our
investment in those industries, a move that benefited the Trust during the
year's final months when quality spreads began to widen, and prices of some
bonds in those sectors declined." - Maureen Newman
COLONIAL MUNICIPAL INCOME TRUST PERFORMANCE
12-month distributions declared per share(1) $0.492
- -------------------------------------------------------------------------------
12-month total return, assuming
reinvestment of all distributions
|X| NAV 8.99%
|X| Market Price 14.57%
- -------------------------------------------------------------------------------
Price per share on 11/30/98
|X| NAV $7.57
|X| Market Price $8.13
TOP FIVE SECTORS QUALITY BREAKDOWN
(as of 11/30/98) (as of 11/30/98)
- -------------------------------------------------------------------------------
Nursing Home ..................16.6% Non-rated: 49.3%
Housing .......................13.5% AAA: 12.9%
Refunded ......................11.0% AA: 2.9%
Hospital .......................9.9% A: 7.7%
Industrial .....................6.2% BBB: 21.6%
BB: 3.7%
B: 0.9%
Net Cash & Equiv: 1.0%
(1) A portion of the Trust's income may be subject to the alternative minimum
tax.
The Trust may at times purchase tax-exempt securities at a discount, and some or
all of this discount may be included in the Trust'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]
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, 1998.
The past year presented investors with a number of challenges. Concern about
Asia's weakening economies and the potential for a negative impact on the U.S.
economy was offset by signs of well-balanced growth and the possibility that the
Federal Reserve Board would raise interest rates. This resulted in volatile
interest rates during the first part of the period. That sentiment prevailed
until early summer, when weaker economic statistics hinting at slower growth
encouraged fixed-income investors, and bond prices rose. In July, a monetary and
political crisis in Russia emerged. Investors worried that this crisis, along
with continued weakness in Asia, would result in a global economic slowdown.
Volatility increased as investors sought relatively stable investments, such as
U.S. Treasury securities. This "flight to quality" pushed long maturity Treasury
yields to their lowest levels in 30 years.
The tax-exempt market also generated a gain over the period, although it
experienced volatility much like the broader bond market. In addition to the
trends mentioned above, supply and demand factors contributed to periods of
weakness in municipal bond prices, as many tax-exempt issuers rushed to take
advantage of lower interest rates. At times, the market found it difficult to
absorb unusually high levels of supply.
For investors seeking competitive levels of tax-free income as well as an
opportunity to diversify their fixed-income portfolio, Colonial Municipal Income
Trust provides a suitable investment option. Thank you for giving us the
opportunity to help you achieve your financial goals. We hope to continue
serving you in the years to come.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
January 13, 1999
Because market and economic conditions change, there can be no assurance that
the trends described above will continue.
<PAGE>
INVESTMENT PORTFOLIO
NOVEMBER 30, 1998 (IN THOUSANDS)
MUNICIPAL BONDS - 98.1% PAR VALUE
- -------------------------------------------------------------------------------
EDUCATION - 3.1%
EDUCATION - 2.1%
CA Statewide Communities Development Authority,
Crossroads School for Arts & Sciences,
Series 1998,
6.000% 08/01/28 (a) $ 1,200 $ 1,215
IL State Development Finance Authority,
Latin School of Chicago,
Series 1998:
5.600% 08/01/18 250 254
5.650% 08/01/28 500 507
MA State Industrial Finance Agency,
St. John's High School,
Series 1998,
5.350% 06/01/28 300 299
MI Southfield Economic Development Corp.,
Lawrence University,
Series 1998-A,
5.400% 02/01/18 1,000 1,003
VT State Educational & Health Buildings
Finance Agency, Norwich University,
Series 1998,
5.500% 07/01/21 1,000 1,011
--------
4,289
--------
STUDENT LOAN - 1.0%
SD State Student Loan Finance Corp.,
Series 1996-E,
6.550% 08/01/20 2,000 2,198
--------
- -------------------------------------------------------------------------------
HEALTHCARE - 31.7%
HEALTH SERVICES - 0.1%
IL State Health Facilities Authority,
Midwest Physician Group, Ltd.,
Series 1998,
5.500% 11/15/19 325 319
--------
HOSPITALS - 9.9%
AL Alabama Special Care Facilities Authority,
Montgomery Healthcare,
Series 1989,
11.000% 10/01/19 2,250 2,284
CO State Health Care Facilities Authority,
National Jewish Medical & Research Center,
Series 1998,
5.375% 01/01/23 840 837
GA Baldwin County Hospital Authority,
Oconee Regional Medical Center,
Series 1998,
5.250% 12/01/22 500 489
GA Clayton Hospital Authority,
The Woodlands Foundation, Inc.,
Series 1991-A,
9.750% 05/01/21 (b) 1,500 975
GA Forsyth County Hospital Authority,
Georgia Baptist Heathcare System,
Series 1998,
6.000% 10/01/08 1,000 996
IL Health Facilities Authority,
Thorek Hospital & Medical Center,
5.375% 08/15/28 500 497
LA State Public Facilities Authority,
Pendleton Memorial Methodist Hospital,
Series 1998,
5.250% 06/01/17 500 487
MA State Health & Educational
Facilities Authority, Milford-Whitinsville
Regional Hospital, Series C,
5.250% 07/15/18 500 494
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1998-A,
5.375% 07/01/20 625 621
MN St. Paul Housing & Redevelopment Authority,
Healtheast Project, Series A,
5.700% 11/01/15 2,000 2,046
MN Washington County Housing &
Redevelopment Authority,
Healtheast, Inc., Series 1998,
5.250% 11/15/12 1,250 1,229
MO State Housing Development Commission,
Freeman Health Systems,
Series 1998,
5.250% 02/15/18 750 740
MS State Business Finance Corp.,
Medical Foundation, Inc.,
Series 1998,
5.625% 07/01/23 1,150 1,156
NH State Higher Educational & Health
Facilities Authority,
Littleton Hospital Assoc., Inc.:
Series 1998-A,
5.900% 05/01/28 675 670
6.000% 05/01/28 625 632
OH Belmont County,
East Ohio Regional Hospital,
Series 1998,
5.700% 01/01/13 1,500 1,481
OH Sandusky County,
Memorial Hospital,
Series 1998,
5.150% 01/01/08 270 276
PA Allegheny County Hospital Development,
Ohio Valley General Hospital,
Series 1998-A,
5.450% 01/01/28 1,050 1,050
PA Pottsville Hospital Authority,
Pottsville Hospital & Warner Clinic,
Series 1998,
5.625% 07/01/24 755 759
TX Lufkin Health Facilities Development Corp.,
Memorial Health Systems of East Texas,
Series 1998,
5.700% 02/15/28 750 760
VT State Educational & Health
Buildings Finance Agency,
Springfield Hospital, Series A,
7.750% 01/01/13 1,040 1,172
VT State Educational & Health Buildings
Finance Agency,
Brattleboro Memorial Hospital,
5.375% 03/01/28 1,000 985
--------
20,636
--------
INTERMEDIATE CARE FACILITIES - 1.4%
MA State Health & Educational Facilities Authority,
Corp. for Independent Living,
8.100% 07/01/18 680 761
PA State Economic Development Financing Authority,
Northwestern Human Services, Inc.,
Series 1998-A,
5.250% 06/01/14 2,150 2,105
--------
2,866
--------
LIFECARE - 3.7%
CO Health Care Facilities Authority,
National Benevolent Association:
Series 1998-A,
5.250% 01/01/27 430 423
Series 1998-B,
5.250% 02/01/18 1,000 984
KY State Economic Development Finance Authority,
Christian Church Homes of Kentucky, Inc.,
Series 1998,
5.500% 11/15/30 750 751
MI State Strategic Fund,
Holland Home,
Series 1998,
5.750% 11/15/18 1,250 1,234
MN Columbia Heights,
Crest View Corp.,
Series 1998,
6.000% 03/01/33 745 746
NH State Higher Educational & Health
Facilities Authority, Rivermead at
Peterborough, Series 1998,
5.750% 07/01/28 500 496
PA Philadelphia Authority for Industrial
Development, Baptist Home of Philadelphia,
Series 1998-A:
5.500% 11/15/18 360 355
5.600% 11/15/28 570 554
TN Metropolitan Government,
Nashville & Davidson County,
Blakeford at Green Hills, Series 1998,
5.650% 07/01/24 575 563
TX Abilene Health Facilities Development Corp.,
Sears Methodist Retirement Obligation Group,
Series 1998-A,
5.900% 11/15/25 750 742
WI State Health & Educational
Facilities Authority,
Attic Angel Obligated Group,
5.750% 11/15/27 875 853
--------
7,701
--------
NURSING HOMES - 16.6%
CO State Health Facilities Authority,
American Housing Foundation, Inc.,
Series 1990-A,
10.250% 12/01/20 1,500 1,500
CO State Health Facilities Authority,
Volunteers of America Care Facilities, Inc.,
Series 1998-A:
5.450% 07/01/08 250 250
5.750% 07/01/20 700 688
DE State Economic Development Authority,
Georgetown Health Center,
12.000% 04/01/25 2,225 2,398
DE Sussex County, Healthcare Facility,
Delaware Health Corp.,
Series 1994-A,
7.600% 01/01/24 1,000 1,059
IA State Finance Authority,
Care Initiatives Project:
Series 1996,
9.250% 07/01/25 1,000 1,335
Series 1998-B:
5.750% 07/01/18 550 549
5.750% 07/01/28 1,475 1,462
IN Gary Industrial Economic Development,
West Side Health Care Center,
Series 1987-A,
11.500% 10/01/17 2,435 2,516
IN Michigan City Health Facilities,
Metro Health Foundation, Inc. Project,
10.000% 11/01/22 4,500 4,500
KS Halstead Industrial
Kansas Health Care Project,
10.250% 08/01/13 (b) 1,330 452
KY Jefferson County First Mortgage
AHF Kentucky Iowa, Inc. Project,
Series 1990,
10.250% 01/01/20 960 1,001
KY Lexington-Fayette Urban County
Government, First Mortgage, AHF
Kentucky-Iowa, Inc. Project,
Series 1990,
10.250% 01/01/20 960 1,001
MA Boston, St. Joseph Nursing Care
Center, Inc., Series 1990,
10.000% 01/01/20 (c) 1,915 2,059
MA State Industrial Finance Agency:
American Health Foundation, Inc.,
Series 1989,
10.125% 03/01/19 (b) 475 356
GF/Massachusetts, Inc.,
Series 1994,
8.300% 07/01/23 970 1,089
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,
BSM Properties,
Series 1998-A,
5.875% 12/01/28 250 249
MN Minneapolis, Walker Methodist
Senior Services Group, Series 1998-A,
6.000% 11/15/28 (d) 1,000 998
MO Springfield Industrial Development
Authority,
10.250% 12/01/10 1,125 1,130
NJ Economic Development Authority
Geriatric and Medical Service, Inc.,
Series A,
10.500% 05/01/04 650 689
NM State Hospital Equipment Loan Council,
Memorial Medical Center,
Series 1998,
5.500% 06/01/28 1,000 979
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 1,576
Series B,
(e) 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 1,587
TX Kirbyville Health Facilities Development Corp.,
Heartway III Project:
Series 1997-A,
10.000% 03/20/18 591 593
Series 1997-B,
(e) 03/20/04 100 54
WA Kitsap County Housing Authority,
Martha & Mary Nursing Home,
7.100% 02/20/36 643 764
--------
34,743
--------
HOUSING - 13.5%
ASSISTED LIVING/SENIOR - 4.8%
IL Clarendon Hills Residential Facilities,
Churchill Estate,
Series 1998 A:
6.750% 03/01/24 1,050 1,067
6.750% 03/01/31 1,365 1,387
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 06/01/25 1,500 1,688
MA Boston Industrial Development
Finance Authority, Springhouse, Inc.,
Series 1988,
5.875% 07/01/20 500 497
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 1,610 1,626
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility, Series 1993-A,
8.250% 05/01/23 800 887
TX Bell County Health Facilities
Development Corp., Care Institute, Inc. ,
9.000% 11/01/24 1,500 1,719
WI State Health & Educational
Facilities Authority, United
Lutheran Program for Aging, Inc.,
5.700% 03/01/28 750 740
WI State Health & Educational
Facilities Authority, Clement
Manor, Series 1998,
5.750% 08/15/24 450 435
--------
10,046
--------
MULTI-FAMILY - 7.9%
DE Wilmington, Electra Arms
Senior Association Project,
6.250% 06/01/28 1,000 977
FL State Housing Finance Agency,
Windsong Apartments,
Series 1993-C,
9.250% 01/01/19 830 747
IL Chicago, Michigan Boulevard Garden
Apartment Rehabilitation Project,
Series 1985,
12.000% 01/01/00 185 166
MN Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 06/01/22 1,070 1,181
MN White Bear Lake,
Birch Lake Townhomes Project:
Series 1989-A,
10.250% 07/15/19 1,770 1,797
Series 1989-B,
(e) 07/15/19 (f) 671 201
NC Eastern Carolina Regional Housing
Authority, New River Apartments
Jacksonville, Series 1994,
8.250% 09/01/14 1,850 2,000
Resolution Trust Corp.,
Pass Through Certificates,
Series 1993-A,
9.500% 12/01/16 (g) 4,248 4,381
SC State Housing Finance and Development
Multi-Family Housing Finance Revenue,
Westbridge Apartments, Series A,
9.500% 09/01/20 2,143 2,202
TN Franklin Industrial Board,
Landings Apartment Project,
Series 1996-B,
8.750% 04/01/27 785 803
TX Galveston Health Facilities Center,
Driftwood Apartments,
8.000% 08/01/23 1,000 1,074
VA Alexandria Redevelopment
& Housing Authority, Courthouse
Commons Apartments, Series 1990-A,
10.000% 01/01/21 1,000 1,020
--------
16,549
--------
SINGLE FAMILY - 0.8%
AK State Housing Finance Corp.,
Series 1996-A,
6.050% 12/01/17 800 857
KY Kentucky Counties Single-Family
Mortgage Revenue, Class A,
9.000% 09/01/16 30 30
PA Allegheny County,
Residential Financial Authority,
Single Family Mortgage, Series 1987-G,
9.500% 12/01/18 660 667
--------
1,554
--------
- -------------------------------------------------------------------------------
OTHER - 13.0%
OTHER - 2.0%
IN Hammond, American Maize
Products Co., Series 1994,
8.000% 12/01/24 2,000 2,338
LA Port New Orleans Industrial Development,
Continental Grain Co., Series 1993,
7.500% 07/01/13 1,000 1,061
MD Baltimore, Park Charles Project,
Series 1986,
8.000% 01/01/10 755 812
--------
4,211
--------
REFUNDED/ESCROWED (H) - 11.0%
CA San Joaquin Hills Transportation
Corridor Agency, Series 1993,
(e) 01/01/25 (i) 10,000 2,705
FL Clearwater Housing Authority,
Hampton Apartments,
Series 1994,
8.250% 05/01/24 2,500 3,081
ID State Health Facilities Authority,
IHC Hospitals, Inc.,
8.700% 02/15/21 2,750 3,385
IL Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 07/01/24 2,235 2,840
MA State Industrial Finance Agency,
Tunnel Revenue,
Series 1990,
9.000% 10/01/20 920 1,026
MN Mille Lacs Capital Improvement Authority,
Mille Lacs Band of Chippewa,
Series 1992-A,
9.250% 11/01/12 1,015 1,241
NC Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 470 568
NM City of Clovis,
Retirement Ranches Project:
10.750% 04/01/19 1,920 2,024
10.750% 04/01/19 190 200
PA Delaware County Authority,
Health Facility Mercy Health Corp. Project,
Series 1996:
6.000% 12/15/16 1,400 1,568
6.000% 12/15/26 500 562
TN Shelby County, Health, Education, & Housing
Facilities Board, Open Arms Development Center:
Series 1992-A,
9.750% 08/01/19 505 716
Series 1992-C,
9.750% 08/01/19 515 730
WA State Health Care Facilities Authority,
Grays Harbor Community Hospital,
Series 1993:
7.200% 07/01/03 330 353
8.025% 07/01/20 1,770 1,956
--------
22,955
--------
- -------------------------------------------------------------------------------
OTHER REVENUE - 10.4%
CHEMICALS - 1.1%
LA St. Charles Parish,
Union Carbide Corp.,
Series 1992,
7.350% 11/01/22 2,000 2,199
--------
INDUSTRIAL - 6.2%
CO Mesa County Industrial Development
Joy Technologies, Inc.,
Series 1992,
8.500% 09/15/06 1,500 1,671
IL State Development Finance Authority,
Armstrong World Industries, Inc. Project,
5.950% 12/01/24 1,000 1,119
IL Will-Kankakee Regional Development Authority,
Flanders Corp./Precisionaire Project,
Series 1997,
6.500% 12/15/17 975 1,031
LA Southern Louisiana Port Commission,
Cargill, Inc. Project,
5.850% 04/01/17 500 536
MA State Industrial Finance Agency,
House of Bianchi, Inc.,
8.750% 06/01/18 280 288
MI State Strategic Fund,
Michigan Sugar Co., Sebewang Project,
Series 1998-A,
6.250% 11/01/15 1,000 996
MN Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 09/01/16 770 938
NV Henderson Public Improvement Trust,
Dongsung America Co., Inc.,
Series 1998,
7.000% 11/01/10 500 501
OH Cuyahoga County,
Joy Technologies, Inc.,
Series 1992,
8.750% 09/15/07 550 617
TX Trinity River Authority,
Texas Instruments Project,
Series 1996,
6.200% 03/01/20 750 818
VA Halifax County Industrial Development,
Craddock-Terry, Inc., Series 1989,
10.000% 12/01/19 (b) 677 203
VA Pittsylvania County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19 (b) 533 219
VA Prince Edward County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19 (b) 1,610 966
WA Pilchuck Public Development Corp.,
Goodrich (B.F.) Co. Tramco Project,
Series 1993,
6.000% 08/01/23 3,000 3,096
--------
12,999
--------
OIL & GAS - 0.7%
WA Pierce County Economic
Development Corp.,
Occidental Petroleum Co.,
5.800% 09/01/29 1,500 1,517
--------
PAPER PRODUCTS - 1.0%
SC Darlington County,
Industrial Development Authority,
Sonoco Products Co. Project,
6.125% 06/01/25 2,000 2,140
--------
RECREATION - 0.5%
NM Red River Sports,
6.450% 06/01/07 1,000 1,005
--------
RETAIL - 0.9%
NJ State Economic Development Authority,
Glimcher Properties L.P. Project,
6.000% 11/01/28 1,000 1,001
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 09/01/11 710 815
--------
1,816
--------
RESOURCE RECOVERY - 3.7%
DISPOSAL - 2.7%
CT State Development Authority,
Sewer Sludge Disposal Facilities,
Series 1996,
8.250% 12/01/06 1,250 1,417
GA Fulton County Development
Authority, Very, Inc.,
10.500% 12/01/07 1,120 1,185
MA Boston Industrial Development
Finance Authority, Jet-A-Way, Inc.,
10.500% 01/01/11 1,000 1,114
MA State Industrial Finance Agency:
Massachusetts Environmental Services,
Series 1994-A,
8.750% 11/01/21 (b) 975 780
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 1,025 1,134
--------
5,630
--------
RESOURCE RECOVERY - 1.0%
MA State Industrial Finance Agency,
Ogden Haverhill Project, Series 1998-A,
5.500% 12/01/13 1,000 1,014
PA Delaware County Industrial
Development Authority, Series A,
6.200% 07/01/19 1,000 1,071
--------
2,085
--------
- -------------------------------------------------------------------------------
TAX-BACKED - 6.7%
LOCAL APPROPRIATED - 0.5%
CA Compton, Civic Center Project,
5.500% 09/01/15 1,000 1,023
--------
LOCAL GENERAL OBLIGATIONS - 1.3%
LA New Orleans,
Series 1991,
(e) 09/01/15 4,000 1,720
TX Irving Independent School District,
Series 1997:
(e) 02/15/15 1,500 679
(e) 02/15/16 1,000 427
--------
2,826
--------
SPECIAL NON-PROPERTY TAX - 3.4%
IL Metropolitan Pier & Exposition
Authority, Series 1996-A,
(e) 12/15/13 (i) 5,000 2,407
IL Metropolitan Pier & Exposition Authority,
McCormick Project:
(e) 06/15/14 (i) 5,000 2,331
(e) 06/15/15 3,000 1,321
IL State Development Finance Authority,
City of Marion Project,
Series 1991,
9.625% 09/15/21 1,445 1,084
--------
7,143
--------
SPECIAL PROPERTY TAX - 1.5%
CA Poway Community Facilities District,
No. 88-1 Parkway Business Center,
Series 1998,
6.750% 08/15/15 575 629
CA Riverside County Public Financing
Authority Redevelopment Projects, Series A,
5.500% 10/01/22 650 663
CA Yorba Linda Redevelopment Agency,
Series 1998-A,
(e) 09/01/24 1,325 356
FL Lexington Oaks Community Development
District, Series 1998-A,
6.125% 05/01/19 800 805
FL Orlando, Conroy Road Interchange Project,
Series 1998-A:
5.500% 05/01/10 (d) 125 124
5.800% 05/01/26 (d) 500 492
--------
3,069
--------
- -------------------------------------------------------------------------------
TRANSPORTATION - 4.8%
AIR TRANSPORTATION - 3.9%
IN Indianapolis Airport Authority:
Federal Express Corp.,
Series 1994,
7.100% 01/15/17 2,000 2,227
United Airlines Project, Series A,
6.500% 11/15/31 2,000 2,142
KY Kenton County Airport Board,
Delta Airlines, Inc.,
Series 1992-A,
7.500% 02/01/20 2,500 2,737
TX Alliance Airport Authority,
Federal Express Corp.,
Series 1996,
6.375% 04/01/21 1,000 1,078
--------
8,184
--------
AIRPORT - 0.3%
OH Toledo-Lucas County Port Authority,
Series 1998,
5.500% 05/15/20 585 573
-----------
TOLL FACILITIES - 0.6%
CA San Joaquin Hills Transportation
Corridor Agency, Series A,
(e) 01/15/15 3,000 1,361
-----------
- -------------------------------------------------------------------------------
UTILITY - 11.2%
INDIVIDUAL POWER PRODUCER - 3.9%
FL Martin County Industrial
Development Authority, Indiantown
Cogeneration Project, Series 1994-A,
7.875% 12/15/25 1,000 1,153
NY Port Authority of New York &
New Jersey, KIAC Partners,
Series 1996-IV,
6.750% 10/01/11 2,000 2,242
PA Economic Development Finance
Authority, Colver Project, Series D:
7.125% 12/01/15 500 555
7.150% 12/01/18 3,750 4,174
--------
8,124
--------
INVESTOR OWNED - 2.9%
AZ Pima County Industrial Development Authority,
Tucson Electric Power Co., Series A,
6.100% 09/01/25 750 757
CT State Development Authority,
Connecticut Light & Power Co.,
Series 1993-B,
5.950% 09/01/28 300 301
IL Bryant Pollution Control Revenue,
Central Illinois Light Co.,
Series 1993,
5.900% 08/01/23 2,000 2,080
MS State Business Finance Corp.,
Systems Energy Resources Project,
Series 1998,
5.875% 04/01/22 1,500 1,494
NM Farmington, San Juan Public
Service Co. Project, Series D,
6.375% 04/01/22 1,250 1,342
--------
5,974
--------
MUNICIPAL ELECTRIC - 2.1%
TX Austin Utility System Revenue,
Series 1994:
(e) 05/15/17 (i) 6,600 2,629
(e) 05/15/18 (i) 5,000 1,884
--------
4,513
--------
WATER & SEWER - 2.3%
LA Public Facility Belmont Water
Authority,
9.000% 03/15/24 (j) 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 2,155
TX Houston Water & Sewer System,
Series C,
(e) 12/01/12 (i) 3,000 1,555
--------
4,767
--------
TOTAL MUNICIPAL BONDS (cost of $196,856)(k) 205,015
--------
SHORT -TERM OBLIGATIONS - 1.0%
- -------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (l)
CA Irvine Improvement Bond Act of 1915:
Series 1997,
3.250% 09/02/22 300 300
Series 1998,
3.250% 09/02/23 200 200
CA State Health Facilities Financing
Authority, Sutter Health, Series A,
3.250% 03/01/20 700 700
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1995-B,
3.400% 07/01/15 200 200
MS Perry County,
Leaf River Forest Project,
3.250% 03/01/02 300 300
NM Farmington,
Arizona Public Service Co.,
Four Corners Project, Series 1994-B,
3.250% 09/01/24 200 200
NY New York City Municipal Water
Finance Authority,
Series 1995-A,
3.750% 06/15/25 200 200
--------
TOTAL SHORT-TERM OBLIGATIONS 2,100
--------
OTHER ASSETS & LIABILITIES, NET - 0.9% 1,816
- -------------------------------------------------------------------------------
NET ASSETS - 100% $208,931
--------
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------
(a) This is a restricted security which was acquired on August 21, 1998 and
August 31, 1998 at an aggregate cost of $1,200. This security represents
0.6% of the Fund's net assets as of November 30, 1998.
(b) This issuer is in default of certain debt covenants. Income is not being
accrued.
(c) 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, 1998.
(d) This security has been purchased on a delayed delivery basis for settlement
at a future date beyond the customary settlement date.
(e) Zero coupon bond.
(f) 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.
(g) 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,
1998, the value of this security amounted to $4,381 or 2.1% of net assets.
(h) The Fund has been informed that each 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
$12,192, are being used to collateralize the delayed delivery purchases
indicated in note (d) above and open future contracts.
(j) This is a restricted security which was acquired on March 22, 1994 at a cost
of $730. This security represents 0.3% of the Fund's net assets as of
November 30, 1998.
(k) Cost for federal income tax purposes is $196,921.
(l) 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, 1998.
Short futures contracts open at November 30, 1998:
Unrealized
Par value Expiration depreciation
Type covered by contracts month at 11/30/98
- -------------------------------------------------------------------------------
Treasury Bond $200 March $ 5
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1998
(in thousands except for per share amount)
ASSETS
Investments at value (cost $196,856) $205,015
Short-term obligations 2,100
--------
207,115
Receivable for:
Interest $ 4,262
Investments sold 330
Other 12 4,604
------- --------
Total Assets 211,719
LIABILITIES
Payable for:
Investments purchased 1,615
Distributions 1,131
Payable due to custodian bank 18
Variation margin on futures 3
Accrued:
Deferred Trustees fees 2
Other 19
-------
Total Liabilities 2,788
--------
NET ASSETS at value for 27,590
shares of beneficial interest outstanding $208,931
--------
Net asset value per share $ 7.57
--------
COMPOSITION OF NET ASSETS
Capital paid in $244,568
Overdistributed net investment income (96)
Accumulated net realized loss (43,695)
Net unrealized appreciation (depreciation) on:
Investments 8,159
Open futures contracts (5)
--------
$208,931
--------
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1998
(in thousands)
INVESTMENT INCOME
Interest $ 14,607
EXPENSES
Management fee $ 1,353
Transfer agent 65
Bookkeeping fee 55
Trustees fee 14
Custodian fee 4
Audit fee 32
Legal fee 100
Reports to shareholders 12
Other 65 1,700
------- --------
Net Investment Income 12,907
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO
POSITIONS
Net realized gain 4,942
Net change in unrealized appreciation (depreciation)
during the period on:
Investments 64
Open futures contracts (38)
-------
Net unrealized appreciation 26
--------
Net Gain 4,968
--------
Increase in Net Assets from Operations $ 17,875
--------
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended November 30
--------------------------
INCREASE (DECREASE) IN NET ASSETS 1998 1997
Operations:
Net investment income $ 12,907 $ 13,806
Net realized gain (loss) 4,942 (7,104)
Net unrealized appreciation 26 7,312
-------- --------
Net Increase from Operations 17,875 14,014
Distributions:
From net investment income (13,417) (13,887)
In excess of net investment
income (124) --
-------- --------
4,334 127
Fund Share Transactions:
Value of distributions reinvested 1,064 613
-------- --------
Total Increase 5,398 740
NET ASSETS
Beginning of period 203,533 202,793
-------- --------
End of period (net of overdistributed and
including undistributed net investment income
of $96 and $510, respectively) $208,931 $203,533
-------- --------
NUMBER OF FUND SHARES
Issued for distributions reinvested 141 82
Outstanding at
Beginning of period 27,449 27,367
-------- --------
End of period 27,590 27,449
-------- --------
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
NOTE 1. ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ORGANIZATION: Colonial Municipal Income Trust (the Trust) is a Massachusetts
business trust, registered under the Investment Company Act of 1940, as amended,
as a diversified closed-end, management investment company. The Trust'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 Trust's secondary objective is to preserve its
capital. The trust 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 Trust 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 (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Trust 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 Trust to subsequently invest at less advantageous prices.
FEDERAL INCOME TAXES: Consistent with the Trust'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 Trust'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 Advisor) is the
investment Advisor of the Trust and furnishes accounting and other services
and office facilities for a monthly fee equal to 0.65% annually of the Trust's
average weekly net assets.
BOOKKEEPING FEE: The Advisor provides bookkeeping and pricing services
for $18,000 per year plus 0.0233% of the Trust's average net assets over $50
million.
OTHER: The Trust pays no compensation to its officers, all of whom are employees
of the Advisor.
The Trust'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 Trust's assets.
NOTE 3. PORTFOLIO INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended November 30, 1998, purchases
and sales of investments, other than short-term obligations, were $69,789,070
and $68,432,873, respectively.
Unrealized appreciation (depreciation) at November 30, 1998, based on cost of
investments for federal income tax purposes was approximately:
Gross unrealized appreciation $13,775,000
Gross unrealized depreciation (5,681,000)
-----------
Net unrealized appreciation $ 8,094,000
-----------
CAPITAL LOSS CARRYFORWARDS: At November 30, 1998, 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
---------- ------------
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
-----------
$43,435,000
-----------
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 Trust may focus its investments in certain industries, subjecting it to
greater risk than a trust that is more diversified.
The Trust may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Trust 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 Trust 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 Advisor of the future direction of interest rates.
Any of these risks may involve amounts exceeding the variation margin recorded
in the Trust'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
----------------------------------------
1998 1997 1996
Net asset value -
Beginning of period $ 7.410 $ 7.410 $ 7.480
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.469 0.509 0.508
Net realized and
unrealized gain (loss) 0.183 (0.002) (0.068)
------- ------- -------
Total from Investment
Operations 0.652 0.507 0.440
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.487) (0.507) (0.510)
In excess of net
investment income (0.005) - -
------- ------- -------
Total Distributions
Declared to Shareholders (0.492) (0.507) (0.510)
------- ------- -------
Net asset value -
End of period $ 7.570 $ 7.410 $ 7.410
------- ------- -------
Market price per share -
End of period $ 8.125 $ 7.560 $ 7.250
------- ------- -------
Total return - based on net asset
value (a) 8.99% 7.07% 6.38%
------- ------- -------
Total return - based on market
value (b) 14.57% 11.67% 15.36%
------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.82% (c) 0.86% (c) 0.91% (c)
Net investment income 6.20% (c) 6.83% (c) 6.87% (c)
Portfolio turnover 34% 15% 22%
Net assets at end
of period (000) $208,931 $203,533 $202,793
(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
----------------------
1995 1994
$ 7.150 $ 7.830
------- -------
0.547 0.609
0.335 (0.707)
------- -------
0.882 (0.098)
------- -------
(0.552) (0.582)
- -
------- -------
(0.552) (0.582)
------- -------
$ 7.480 $ 7.150
------- -------
$ 6.750 $ 6.750
------- -------
12.96% (0.42)%
------- -------
8.04% (10.06)%
------- -------
0.98% (c) 0.90%
7.47% (c) 8.12%
24% 24%
$204,666 $195,444
--------------------------------------------------------------
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 THE 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, 1998, 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 Trust'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 December 31, 1998
by correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 13, 1999
<PAGE>
DIVIDEND REINVESTMENT PLAN
As a shareholder in the Trust 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 ") 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 uncertificated 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>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<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, LLC (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, Chief Executive Officer and Director,
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-02/343G-1198 (1/99) 98/1423
