<PAGE> 1
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COLONIAL MUNICIPAL INCOME TRUST ANNUAL REPORT
- ---------------------------------------- ----------------------------------
NOVEMBER 30, 1999
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President's Message
Dear Shareholder:
The U.S. bond market continued to show negative returns during the past year, as
interest rates across the board rose steadily throughout the 12-month period.
The rise in bond yields over the past year has come primarily in response to
continued economic strength in the U.S. and a dramatic recovery in the economies
of Southeast Asia and Japan. This growth has caused concern among bond investors
that inflation could potentially begin to increase if the economy becomes
"overheated."
In the bond market, rising interest rates can hurt performance because as rates
rise, prices fall. During the period, the Fund's performance was affected not
only by the general decline in the bond market, but also by unforeseen
disappointments with certain holdings and strategies we undertook to help the
Fund improve its returns over the long-term. The holdings that experienced
difficulties have been sold, and we believe the Fund is positioned for the
economic environment we are forecasting in the coming year.
In the pages that follow, the Fund's portfolio manager will provide more
specific information about its performance and the strategies employed during
the fiscal year. As always, thank you for choosing Liberty Funds, and for giving
us the opportunity to serve your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
January 12, 2000
- ---------- -------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
- ---------- -------------------
Because market and economic conditions change, there can be no assurance that
the trends described in this report will continue or come to pass.
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HIGHLIGHTS
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- MUNICIPALS OUTPERFORMED TREASURY BONDS DURING THE PERIOD
Municipal bonds were slightly undervalued at the start of the period, and
they gained value, relative to Treasury bonds, during the year. The yield
on the 30-year AAA-rated general obligation (GO) bond - a benchmark of
municipal bond market performance - rose from 4.82% on November 30, 1998
to 5.73% on November 30, 1999.
- RISING RATES MADE FOR A CHALLENGING YEAR IN THE BOND MARKET
During the 12-month period, short-, intermediate- and long-term interest
rates rose dramatically. These increases significantly affected bond
performance in every sector because bond prices move in the opposite
direction of yields. Municipal bonds were no exception, although their
declines were mitigated somewhat by a reduction in supply.
- PORTFOLIO MANAGER'S COMMENTARY
The declines in the Fund and the Lehman Brothers Municipal Bond Index
reflect the difficult market conditions of the past year. During the
period, the Fund had a total return of negative 8.11%, based on net asset
value. The Fund experienced difficulties due to a few poor performing
holdings, some of which have been sold. In addition, the Fund issued
preferred shares during the period. By increasing the Fund's duration,
preferred shares can increase the Fund's sensitivity to changes in
interest rates and, by paying a short-term variable rate to other
investors, can increase the potential for volatility in the dividend
rate. However, we employ certain hedging techniques that are designed to
reduce these risks.
- Maureen Newman
TOTAL RETURN FOR THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX - 11/30/98 TO 11/30/99
[GRAPH]
Month Ended Index
----------- ------
11/30/98 10,000
12/31/98 10,025
1/31/99 10,144
2/28/99 10,100
3/31/99 10,114
4/30/99 10,139
5/31/99 10,080
6/30/99 9,935
7/31/99 9,971
8/31/99 9,891
9/30/99 9,895
10/31/99 9,788
11/30/99 9,892
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. Unlike mutual funds,
indexes are not investments and do not incur fees or expenses. It is not
possible to invest directly in an index.
12-MONTH TOTAL RETURN, ASSUMING REINVESTMENT OF ALL DISTRIBUTIONS:
NAV (8.11)%
- ---------------------- ------
Market price (24.33)%
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12-MONTH DISTRIBUTIONS DECLARED PER COMMON SHARE: $0.458(1)
PRICE PER SHARE AS OF 11/30/1999:
NAV $6.51
- ---------------------- ------
Market price $5.75
- ---------------------- ------
(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. Some
or all of this discount may be included in the Trust's ordinary income, and is
taxable when distributed.
TOP FIVE INDUSTRY SECTORS
Nursing Homes 12.5%
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Hospitals 10.9%
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Refunded 8.5%
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Water & Sewer 8.2%
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Multi-Family Housing 5.9%
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QUALITY BREAKDOWN AS OF 11/30/1999
AAA 23.7%
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AA 8.0%
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A 5.0%
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BBB 18.8%
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BB 2.2%
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B 0.3%
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CC 0.4%
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Non-rated 40.6%
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Cash equivalents 1.0%
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Quality and sector breakdowns are calculated as a percentage of total
investments, including short-term obligations. Ratings shown in the Quality
Breakdown represent the highest rating assigned to a particular bond by one of
the following respected rating agencies: Standard & Poor's Corp., Moody's
Investors Service, Inc. or Fitch Investors Service.
Because the Trust is actively managed, there can be no guarantee that the Trust
will continue to maintain this quality breakdown 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.
1
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INVESTMENT PORTFOLIO
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November 30, 1999
(In thousands)
MUNICIPAL BONDS (97.5%) PAR VALUE
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EDUCATION (4.8%)
EDUCATION
CA Statewide Communities
Development Authority,
Crossroads School for Arts & Sciences,
Series 1998,
6.000% 8/1/28 (a) $ 1,180 $ 1,104
MA Industrial Finance Agency,
St. John's High School,
Series 1998,
5.350% 6/1/28 300 255
MI Southfield Economic
Development Corp.,
Lawrence University,
Series 1998-A,
5.400% 2/1/18 1,000 885
MN Victoria,
Holy Family Catholic High School,
Series 1999-A,
5.875% 9/1/29 1,000 914
VT Educational & Health Buildings
Finance Agency:
Norwich University,
Series 1998,
5.500% 7/1/21 1,000 906
Middlebury College,
Series 1999,
5.000% 11/1/38 5,180 4,303
WA Higher Education Facilities
Authority, Puget Sound University,
Series 1998,
5.375% 10/1/30 (b) 5,000 4,505
--------
12,872
--------
- ------------------------------------------------------------------------------
HEALTHCARE (28.1%)
CONGREGATE CARE RETIREMENT (3.9%)
KS Manhattan,
Meadowlark Hills Retirement Home,
Series 1999-A:
6.375% 5/15/20 500 466
6.500% 5/15/28 1,750 1,628
KY Economic Development
Finance Authority,
Christian Church Homes
of Kentucky, Inc.,
Series 1998,
5.500% 11/15/30 500 415
MA Boston Industrial
Development Financing Authority,
Springhouse, Inc.,
Series 1988,
5.875% 7/1/20 500 434
MA Development Finance Agency,
Series 1999-A,
5.625% 7/1/15 250 223
MI Strategic Fund,
Holland Home,
Series 1998,
5.750% 11/15/18 1,250 1,084
MN Columbia Heights,
Crest View Corp.,
Series 1998,
6.000% 3/1/33 745 665
NH Higher Educational
& Health Facilities Authority,
Rivermead at Peterborough,
Series 1998,
5.750% 7/1/28 500 430
PA Chartiers Valley Industrial
& Commercial Development Authority,
Asbury Health Center,
Series 1999,
6.375% 12/1/24 1,000 913
PA Philadelphia Authority for
Industrial Development,
Baptist Home of Philadelphia,
Series 1998-A:
5.500% 11/15/18 360 315
5.600% 11/15/28 570 486
TN Metropolitan Government,
Nashville and Davidson County,
Blakeford at Green Hills,
Series 1998,
5.650% 7/1/24 575 492
TX Abilene Health Facilities
Development Corp.,
Sears Methodist Retirement
Obligation Group:
Series 1998-A,
5.900% 11/15/25 750 662
Series 1999,
5.875% 11/15/18 500 450
WI Health & Educational
Facilities Authority:
Attic Angel Obligated Group,
5.750% 11/15/27 875 758
Clement Manor, Series 1998,
5.750% 8/15/24 450 395
United Lutheran Program for Aging, Inc.,
5.700% 3/1/28 750 660
--------
10,476
--------
See notes to financial statements.
2
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INVESTMENT PORTFOLIO (CONTINUED)
- ---------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED) PAR VALUE
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HEALTH SERVICES (0.0%)
IL Health Facilities Authority,
Midwest Physician Group, Ltd.,
Series 1998,
5.500% 11/15/19 $ 90 $ 76
MA Development Finance Agency,
Boston Biomedical Research Institute,
Series 1999,
5.650% 2/1/19 120 106
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182
--------
HOSPITALS (10.8%)
AL Alabama Special Care
Facilities Authority,
Montgomery Healthcare,
Series 1989,
11.000% 10/1/19 (c) 2,250 1,237
AR Conway Health Facilities Board,
Conway Regional Medical Center:
Series 1999-A,
6.400% 8/1/29 350 346
Series 1999-B,
6.400% 8/1/29 850 821
CA Health Facilities
Financing Authority,
Cedars-Sinai Medical Center,
Series 1999-A,
6.125% 12/1/30 2,500 2,447
CO Health Care
Facilities Authority,
National Jewish Medical
& Research Center,
Series 1998:
5.375% 1/1/16 1,500 1,303
5.375% 1/1/23 840 701
GA Forsyth County Hospital Authority,
Georgia Baptist Healthcare System,
Series 1998,
6.000% 10/1/08 1,000 939
IL Health Facilities Authority,
Thorek Hospital & Medical Center,
5.375% 8/15/28 500 410
IL Southwestern Development Authority,
Anderson Hospital,
Series 1999:
5.375% 8/15/15 500 432
5.500% 8/15/20 550 471
IN Health Facilities
Financing Authority,
Riverview Hospital Project,
Series 1999,
5.500% 8/1/24 275 234
LA Public Facilities Authority,
Touro Infirmary:
Series 1999-A,
5.500% 8/15/19 500 439
Series 1999,
5.625% 8/15/29 2,000 1,718
MA Health & Educational
Facilities Authority,
Milford-Whitinsville Regional Hospital,
Series C,
5.250% 7/15/18 500 419
MI Dickinson County Healthcare System,
Series 1999,
5.700% 11/1/18 585 517
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1998-A,
5.375% 7/1/20 625 530
MI Hospital Finance Authority,
Detroit Medical Center,
Series 1998-A,
5.250% 8/15/28 600 462
MN St. Paul Housing
& Redevelopment Authority,
Healtheast Project,
Series A,
5.700% 11/1/15 2,000 1,730
MN Washington County Housing
& Redevelopment Authority,
Healtheast, Inc.,
Series 1998,
5.250% 11/15/12 1,250 1,058
MS Business Finance Corp.,
Medical Foundation, Inc.,
Series 1998,
5.625% 7/1/23 1,150 983
NH Higher Educational & Health
Facilities Authority,
Littleton Hospital Association, Inc.,
Series 1998-A:
5.900% 5/1/18 500 446
5.900% 5/1/28 675 580
6.000% 5/1/28 625 545
NM Hospital Equipment
Loan Council,
Memorial Medical Center, Inc. Project,
Series 1998,
5.500% 6/1/28 1,000 844
See notes to financial statements.
3
<PAGE> 6
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INVESTMENT PORTFOLIO (CONTINUED)
- ---------------------------------------------------------------------------
November 30, 1999
(In thousands)
MUNICIPAL BONDS (CONTINUED) PAR VALUE
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HOSPITALS (CONTINUED)
OH Belmont County,
East Ohio Regional Hospital,
Series 1998,
5.700% 1/1/13 $ 1,500 $ 1,327
OH Franklin County,
Doctors OhioHealth Corp.,
Series 1998-A,
5.600% 12/1/28 1,600 1,340
OH Highland County Joint Township
Hospital District,
Series 1999,
6.750% 12/1/29 750 710
OH Miami County,
Upper Valley Medical Center, Inc.,
Series 1996-A,
6.250% 5/15/16 665 633
OH Sandusky County,
Memorial Hospital,
Series 1998,
5.150% 1/1/08 270 261
OR Clackamas County Hospital
Facilities Authority,
Willamette Falls Hospital,
Series 1999,
6.000% 4/1/19 1,000 936
PA Allegheny County Hospital
Development,
Ohio Valley General Hospital,
Series 1998-A,
5.450% 1/1/28 1,050 887
PA Pottsville Hospital Authority,
Pottsville Hospital & Warner Clinic,
Series 1998,
5.625% 7/1/24 755 643
TX Lufkin Health Facilities
Development Corp.,
Memorial Health Systems of East Texas,
Series 1998,
5.700% 2/15/28 750 646
TX Richardson Hospital Authority,
Baylor Richardson Medical Center,
Series 1998,
5.625% 12/1/28 600 507
VT Educational & Health Buildings
Authority:
Brattleboro Memorial Hospital,
5.375% 3/1/28 500 415
Springfield Hospital, Series A,
7.750% 1/1/13 1,040 1,127
--------
29,044
--------
INTERMEDIATE CARE FACILITIES (1.1%)
IN Health Facilities Financing
Authority, Hoosier Care, Inc.,
Series 1999-A,
7.125% 6/1/34 1,100 1,027
PA Economic Development
Financing Authority,
Northwestern Human Services, Inc.,
Series 1998-A,
5.250% 6/1/14 2,150 1,914
--------
2,941
--------
NURSING HOMES (12.3%)
AK Juneau,
St. Ann's Care Center,
Series 1999,
6.875% 12/1/25 1,000 940
CO Health Facilities Authority:
American Housing Foundation, Inc.,
Series 1990-A,
10.250% 12/1/20 (c) 1,500 1,200
Volunteers of America Care Facilities, Inc.:
Series 1998-A:
5.450% 7/1/08 250 236
5.750% 7/1/20 700 616
Series 1999-A,
6.000% 7/1/29 350 311
DE Economic Development Authority,
Georgetown Health Center,
12.000% 4/1/25 2,190 2,332
DE Sussex County, Healthcare Facility,
Delaware Health Corp.
Series 1994-A,
7.600% 1/1/24 1,000 1,009
IA Finance Authority,
Care Initiatives Project:
Series 1996,
9.250% 7/1/25 1,000 1,249
Series 1998-B:
5.750% 7/1/18 550 499
5.750% 7/1/28 1,475 1,302
IN Gary Industrial Economic
Development,
West Side Health Care Center,
Series 1987-A,
11.500% 10/1/17 2,395 2,444
IN Michigan City Health Facilities,
Metro Health Foundation, Inc. Project,
10.000% 11/1/22 (c) 4,500 3,600
See notes to financial statements.
4
<PAGE> 7
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INVESTMENT PORTFOLIO (CONTINUED)
- ---------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED) PAR VALUE
- ------------------------------------------------------------------------------
NURSING HOMES (CONTINUED)
IN Health Facilities Financing
Authority,
Metro Health Indiana, Inc.,
Series 1998,
6.400% 12/1/33 $ 1,000 $ 887
KY Jefferson County First Mortgage,
AHF Kentucky-Iowa, Inc. Project,
Series 1990,
10.250% 1/1/20 945 960
KY Lexington-Fayette Urban County
Government, First Mortgage,
AHF Kentucky-Iowa, Inc. Project,
Series 1990,
10.250% 1/1/20 950 965
MA Development Finance Agency,
Alliance Health Care Facilities,
Series 1999,
7.100% 7/1/32 1,250 1,202
MA Industrial Finance Agency:
American Health Foundation, Inc.,
Series 1989,
10.125% 3/1/19 (c) 463 328
GF/Massachusetts, Inc.,
Series 1994,
8.300% 7/1/23 970 1,042
MI Cheboygan County Economic
Development Corp., Metro Health
Foundation Project,
Series 1993,
10.000% 11/1/22 (c) 2,440 1,952
MN Duluth Economic Development
Authority,
BSM Properties, Inc.,
Series 1998-A,
5.875% 12/1/28 250 218
MN Minneapolis,
Walker Methodist Senior Services Group,
Series 1998-A,
6.000% 11/15/28 1,000 859
MN New Hope,
North Ridge Care Center, Inc.,
Series 1999,
5.875% 3/1/29 500 434
MN Sartell,
Foundation for Healthcare,
Series 1999-A,
6.625% 9/1/29 2,500 2,294
NJ Economic Development Authority,
Geriatric and Medical Service, Inc.,
Series A,
10.500% 5/1/04 570 575
OH Montgomery County,
Grafton Oaks Limited Partners,
Series 1986,
9.750% 12/1/16 1,480 1,406
OK Muskogee County Economic
Development Authority Health
Facilities, Heartway Corp. Project:
Series A,
9.500% 3/1/19 1,545 1,390
Series B,
10.000% 3/1/19 (c) 250 (d)
TN New Tazewell Health Education and
Housing Facilities Board,
New Tazewell Series 1987,
10.000% 6/1/17 1,560 1,583
TX Kirbyville Health Facilities
Development Corp.,
Heartway III Project:
Series 1997-A,
10.000% 3/20/18 581 543
Series 1997-B,
(e) 3/20/04 100 58
WA Kitsap County Housing Authority,
Martha & Mary Nursing Home,
7.100% 2/20/36 643 708
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33,142
--------
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HOUSING (9.7%)
ASSISTED LIVING/SENIOR (3.6%)
DE Kent County,
Heritage at Dover,
Series 1999,
7.625% 1/1/30 1,250 1,242
GA Columbus Housing Authority,
The Gardens at Calvary,
Series 1999,
7.000% 11/15/19 500 475
IL Clarendon Hills Residential Facilities,
Churchill Estate,
Series 1998-A:
6.750% 3/1/24 1,050 979
6.750% 3/1/31 1,365 1,266
IL Development Finance Authority,
Care Institute, Inc.,
8.250% 6/1/25 1,500 1,624
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/1/23 1,630 1,524
NC Medical Care Commission,
DePaul Community Facilities Project,
Series 1999,
7.625% 11/1/29 (f) 1,000 1,000
See notes to financial statements.
5
<PAGE> 8
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INVESTMENT PORTFOLIO (CONTINUED)
- ---------------------------------------------------------------------------
November 30, 1999
(In thousands)
MUNICIPAL BONDS (CONTINUED) PAR VALUE
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HOUSING (CONTINUED)
TX Bell County Health Facilities
Development Corp., Care
Institutions, Inc.,
9.000% 11/1/24 $ 1,500 $ 1,644
--------
9,754
--------
MULTI-FAMILY (5.8%)
DE Wilmington,
Electra Arms Senior Association Project,
6.250% 6/1/28 1,000 883
GA Clayton County Housing Authority,
Magnolia Park Apartments,
Series 1999-A,
6.250% 6/1/30 750 691
IL Chicago, Michigan Boulevard Garden
Apartment Rehabilitation Project,
Series 1985,
12.000% 1/1/00 70 63
MN Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 6/1/22 1,060 1,124
MN White Bear Lake,
Birch Lake Townhomes Project:
Series 1989-A,
10.250% 7/15/19 1,770 1,770
Series 1989-B,
(e) 7/15/19 (g) 664 199
NC Eastern Carolina Regional Housing
Authority, New River
Apartments-Jacksonville,
Series 1994,
8.250% 9/1/14 1,790 1,848
Resolution Trust Corp.,
Pass Through Certificates,
Series 1993-A,
9.250% 12/1/16 (h) 4,248 4,284
SC Housing Finance and
Development Multi-Family Housing
Finance Revenue,
Westbridge Apartments, Series A,
9.500% 9/1/20 2,110 2,102
TN Franklin Industrial Development
Board, Landings Apartment Project,
Series 1996-B,
8.750% 4/1/27 775 798
TX Galveston Health Facilities Center,
Driftwood Apartments,
8.000% 8/1/23 1,000 1,026
VA Alexandria Redevelopment &
Housing Authority, Courthouse
Commons Apartments,
Series 1990-A,
10.000% 1/1/21 $ 1,000 $ 980
--------
15,768
--------
SINGLE FAMILY (0.3%)
AK Housing Finance Corp.,
Series 1996-A,
6.050% 12/1/17 (b) 700 704
KY Kentucky Counties Single Family
Mortgage Revenue,
Class A,
9.000% 9/1/16 30 30
--------
734
--------
- ------------------------------------------------------------------------------
INDUSTRIAL (7.8%)
FOOD PRODUCTS (1.7%)
IN Hammond,
American Maize Products Co.,
Series 1994,
8.000% 12/1/24 2,000 2,181
LA Port New Orleans Industrial
Development,
Continental Grain Co.,
Series 1993,
7.500% 7/1/13 1,000 1,001
LA Southern Louisiana Port Commission,
Cargill, Inc. Project,
5.850% 4/1/17 500 488
MI Strategic Fund,
Michigan Sugar Co., Sebewaing Project,
Series 1998-A,
6.250% 11/1/15 1,000 932
--------
4,602
--------
FOREST PRODUCTS (1.7%)
AL Courtland Industrial Development
Board, Champion International Corp.,
Series 1999,
6.000% 8/1/29 2,000 1,833
GA Rockdale County Development
Authority, Solid Waste Disposal,
Visy Paper, Inc.,
Series 1993,
7.500% 1/1/26 800 832
SC Darlington County,
Industrial Development Authority,
Sonoco Products Co. Project,
6.125% 6/1/25 2,000 1,945
--------
4,610
--------
See notes to financial statements.
6
<PAGE> 9
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INVESTMENT PORTFOLIO (CONTINUED)
- ---------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED) PAR VALUE
- --------------------------------------------------------------------------------
MANUFACTURING (2.3%)
IL Development Finance Authority,
Armstrong World Industries, Inc.
Project,
5.950% 12/1/24 $ 1,000 $ 950
IL Will-Kankakee Regional
Development Authority, Flanders
Corp./Precisionaire Project,
Series 1997,
6.500% 12/15/17 950 936
MA Industrial Finance Agency,
House of Bianchi, Inc.,
8.750% 6/1/18 235 227
MN Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 9/1/16 755 868
NV Henderson Public Improvement
Trust, Dongsung America Co., Inc.,
Series 1998,
7.000% 11/1/10 (c) 287 237
TX Trinity River Authority,
Texas Instruments Project,
Series 1996,
6.200% 3/1/20 750 742
VA Halifax County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/1/19 (c) 256 23
VA Pittsylvania County Industrial
Development, Craddock-Terry, Inc.,
Series 1989,
10.000% 12/01/19 (c) 120 24
VA Prince Edward County Industrial
Development,
Craddock-Terry, Inc.,
Series 1989,
10.000% 12/1/19 (c) 750 262
VA Small Business Financing
Authority, Dongsung America,
Series 1998,
7.250% 11/1/15 (c) 156 129
WA Pilchuck Public Development Corp.,
Goodrich (B.F.) Co. Tramco, Inc. Project,
Series 1993,
6.000% 8/1/23 2,000 1,839
--------
6,237
--------
METALS & MINING (0.4%)
NV Department of Business
& Industry, Wheeling-Pittsburgh
Steel Corp.,
Series 1999-A,
8.000% 9/1/14 $ 250 $ 242
VA Greensville County Industrial
Development Authority, Wheeling Steel,
Series 1999-A:
6.375% 4/1/04 75 73
7.000% 4/1/14 375 349
VA Peninsula Ports Authority,
Ziegler Coal,
Series 1997,
6.900% 5/2/22 500 440
--------
1,104
--------
OIL AND GAS (1.7%)
NY Energy Research &
Development Authority, Central
Hudson Gas & Electric Corp.,
Series 1999,
5.450% 8/1/27 3,500 3,250
WA Pierce County Economic
Development Corp.,
Occidental Petroleum Co.,
5.800% 9/1/29 1,500 1,322
--------
4,572
--------
- ------------------------------------------------------------------------------
OTHER (9.3%)
OTHER (0.2%)
MD Baltimore,
Park Charles Project,
Series 1986,
8.000% 1/1/10 690 721
--------
POOL/BOND BANK (0.7%)
IN Indianapolis Local Public
Improvement Bond Bank,
Series 1999-E,
5.750% 2/1/29 2,000 1,884
--------
REFUNDED/ESCROWED (I) (8.4%)
CA San Joaquin Hills Transportation
Corridor Agency,
Series 1993,
(e) 1/1/25 (b) 10,000 2,226
FL Clearwater Housing Authority,
Hampton Apartments,
Series 1994,
8.250% 5/1/24 2,500 2,881
ID Health Facilities Authority,
IHC Hospitals, Inc.,
6.650% 2/15/21 2,750 3,004
See notes to financial statements.
7
<PAGE> 10
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INVESTMENT PORTFOLIO (CONTINUED)
- ---------------------------------------------------------------------------
November 30, 1999
(In thousands)
MUNICIPAL BONDS (CONTINUED) PAR VALUE
- --------------------------------------------------------------------------------
REFUNDED/ESCROWED (CONTINUED)
IL Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 7/1/24 (b) $ 2,210 $ 2,608
MA Boston,
St. Joseph Nursing Care Center, Inc.,
Series 1990,
10.000% 1/1/20 1,890 1,955
MA Health & Educational
Facilities Authority,
Corp. for Independent Living,
8.100% 7/1/18 670 760
MA Industrial Finance Agency,
Series 1990,
9.000% 10/1/20 905 956
MN Mille Lacs Capital Improvement
Authority, Mille Lacs
Band of Chippewa,
Series 1992-A,
9.250% 11/1/12 975 1,124
NC Lincoln County,
Lincoln County Hospital,
9.000% 5/1/07 430 488
PA Delaware County Authority,
Southeastern Pennsylvania Obligated
Group,
Series 1996:
6.000% 12/15/16 (b) 1,400 1,437
6.000% 12/15/26 (b) 500 502
PA Montgomery County Industrial
Development Authority,
Assisted Living Facility,
Series 1993-A,
8.250% 5/1/23 790 876
SD Student Loan Finance Corp.,
Series 1996-1E,
6.550% 8/1/20 2,000 2,123
TN Shelby County, Health, Education,
& Housing Facilities Board,
Open Arms Development Center:
Series 1992-A,
9.750% 8/1/19 500 649
Series 1992-C,
9.750% 8/1/19 510 662
WA Health Care Facilities Authority,
Grays Harbor Community Hospital,
Series 1993,
7.200% 7/1/03 330 340
--------
22,591
--------
OTHER REVENUE (1.7%)
HOTELS (0.7%)
PA Philadelphia Authority for
Industrial Development,
Doubletree Project,
6.500% 10/1/27 $ 2,000 $ 1,953
--------
RECREATION (0.4%)
NM Red River Sports Facility,
Red River Ski Area Project,
Series 1998,
6.450% 6/1/07 930 896
--------
RETAIL (0.6%)
NJ Economic Development Authority,
Glimcher Properties L.P. Project,
6.000% 11/1/28 1,000 909
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 9/1/11 710 780
--------
1,689
--------
- ------------------------------------------------------------------------------
RESOURCE RECOVERY (2.1%)
DISPOSAL (1.4%)
CT Development Authority,
Sewer Sludge Disposal Facilities,
NETCO New Haven,
Series 1996,
8.250% 12/1/06 1,045 1,153
MA Boston Industrial Development
Finance Authority,
Jet-A-Way, Inc.,
10.500% 1/1/11 900 959
MA Industrial Finance Agency:
Massachusetts Environmental Services,
Series 1994-A,
8.750% 11/1/21 975 780
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 9/1/05 925 975
--------
3,867
--------
RESOURCE RECOVERY (0.7%)
MA Industrial Finance Agency,
Ogden Haverhill Project,
Series 1998-A,
5.500% 12/1/13 1,000 922
PA Delaware County Industrial
Development Authority,
Series A,
6.200% 7/1/19 1,000 912
--------
1,834
--------
See notes to financial statements.
8
<PAGE> 11
- ---------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
- ---------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED) PAR VALUE
TAX-BACKED (10.6%)
LOCAL APPROPRIATED (0.4%)
CA Compton
Center Project,
5.500% 9/1/15 $ 1,000 $ 941
--------
LOCAL GENERAL OBLIGATIONS (0.9%)
LA New Orleans,
Series 1991,
(e) 9/1/15 (b) 4,000 1,598
TX Irving Independent School District,
Series 1997:
(e) 2/15/15 (b) 1,500 615
(e) 2/15/16 (b) 1,000 382
--------
2,595
--------
SPECIAL NON-PROPERTY TAX (5.6%)
IL Metropolitan Pier & Exposition
Authority:
McCormick Project:
(e) 6/15/14 (b) 5,000 2,162
(e) 6/15/15 (b) 3,000 1,206
Series 1996-A,
(e) 12/15/13 (b) 5,000 2,256
IL Development Finance Authority,
City of Marion Project,
Series 1991,
9.625% 9/15/21 1,425 1,069
NY New York City Transitional
Finance Authority,
Series 1999-C,
5.000% 5/1/29 9,985 8,527
--------
15,220
--------
SPECIAL PROPERTY TAX (2.4%)
CA Orange County Community
Facilities District, Ladera Ranch,
Series 1999-A,
6.500% 8/15/21 1,000 985
CA Poway Community Facilities District,
No. 88-1 Parkway Business Center,
Series 1998,
6.750% 8/15/15 575 596
CA Riverside County Public
Financing Authority,
Redevelopment Projects,
Series A,
5.500% 10/1/22 650 576
CA Yorba Linda Redevelopment Agency,
Series 1998-A,
(e) 9/1/24 (b) 1,325 296
FL Heritage Springs Community
Development District,
Series 1999-B,
6.250% 5/1/05 $ 1,000 $ 996
FL Lexington Oaks Community
Development District,
Series 1998-A,
6.125% 5/1/19 800 767
FL Northern Palm Beach County
Improvement District,
Series 1999,
5.900% 8/1/19 500 474
FL Orlando,
Conroy Road Interchange Project,
Series 1998-A:
5.500% 5/1/10 125 120
5.800% 5/1/26 500 454
FL Stoneybrook Community
Development District:
Series 1998-A,
6.100% 5/1/19 250 238
Series 1998-B,
5.700% 5/1/08 930 903
--------
6,405
--------
STATE GENERAL OBLIGATIONS (1.3%)
WA State,
Series 1999-B,
5.000% 1/1/24 4,000 3,484
--------
- ------------------------------------------------------------------------------
TRANSPORTATION (7.7%)
AIR TRANSPORTATION (2.6%)
IN Indianapolis Airport Authority,
Federal Express Corp.,
Series 1994,
7.100% 1/15/17 2,000 2,115
IN Indianapolis Airport Authority,
United Airlines Project,
Series A,
6.500% 11/15/31 1,000 959
KY Kenton County Airport Board,
Delta Airlines, Inc.,
Series 1992-A,
7.500% 2/1/20 2,500 2,620
PA Philadelphia Authority for Industrial
Development, Aero Philadelphia LLC,
Series 1999,
5.250% 1/1/09 500 467
See notes to financial statements.
9
<PAGE> 12
- ---------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
- ---------------------------------------------------------------------------
November 30, 1999
(In thousands)
MUNICIPAL BONDS (CONTINUED) PAR VALUE
- --------------------------------------------------------------------------------
AIR TRANSPORTATION (CONTINUED)
TX Alliance Airport Authority,
Federal Express Corp.,
Series 1996,
6.375% 4/1/21 $ 1,000 $ 976
--------
7,137
--------
AIRPORT (3.1%)
MI Wayne Charter County,
Detroit Metropolitan Airport,
Series 1998-A,
5.000% 12/1/28 10,000 8,394
--------
TOLL FACILITIES (2.0%)
CA San Joaquin Hills Transportation
Corridor Agency,
Series A,
(e) 1/15/15 3,000 1,271
MA Turnpike Authority,
Series 1999-A,
5.000% 1/1/39 (b) 5,000 4,165
--------
5,436
--------
- ------------------------------------------------------------------------------
UTILITY (15.7%)
INDEPENDENT POWER PRODUCER (2.9%)
NY Port Authority of New York & New Jersey,
KIAC Partners,
Series 1996-IV,
6.750% 10/1/11 2,000 2,107
OH Water Development Authority,
Bay Shore Power Project,
Series 1998-A,
5.875% 9/1/20 2,500 2,266
PA Economic Development
Financing Authority,
Colver Project,
Series D:
7.125% 12/1/15 500 530
7.150% 12/1/18 2,750 2,873
--------
7,776
--------
INVESTOR OWNED (3.3%)
AZ Pima County Industrial Develop-
ment Authority, Tucson Electric Power Co.,
Series A,
6.100% 9/1/25 750 680
CT Development Authority,
Connecticut Light & Power Co.,
Series 1993-B,
5.950% 9/1/28 300 273
IL Bryant Pollution Control Revenue,
Central Illinois Light Co.,
Series 1993,
5.900% 8/1/23 2,000 1,883
LA Calcasieu Parish Industrial
Development Board,
Entergy Gulf States, Inc.,
Series 1999,
5.450% 7/1/10 $ 500 $ 472
LA West Feliciana Parish,
Entergy Gulf States, Inc.,
Series 1999-B,
6.600% 9/1/28 500 485
MS Business Finance Corp.,
Systems Energy Resources Project,
Series 1998,
5.875% 4/1/22 1,500 1,324
NM Farmington,
San Juan Public Service Co. Project,
Series D,
6.375% 4/1/22 1,250 1,217
NV Clark County,
Nevada Power Co.,
Series 1997-A,
5.900% 11/1/32 3,000 2,636
--------
8,970
--------
MUNICIPAL ELECTRIC (1.5%)
TX Austin, Series 1994:
(e) 5/15/17 (b) 6,600 2,320
(e) 5/15/18 (b) 5,000 1,640
--------
3,960
--------
WATER & SEWER (8.0%)
CA Castaic Lake Water Agency,
Series 1999 A:
(e) 8/1/25 (b) 10,445 2,195
(e) 8/1/26 (b) 10,445 2,066
GA Atlanta,
Series 1999-A,
5.000% 11/1/38 7,500 6,268
LA Public Facility Belmont Water
Authority,
9.000% 3/15/24 (c)(j) 730 620
MA Water Resources Authority,
Series 1997 D,
5.000% 8/1/24 (b) 10,000 8,686
MS Five Lakes Utility District,
8.250% 7/15/24 500 400
TX Houston Water & Sewer System,
Series C,
(e) 12/1/12 (b) 3,000 1,454
--------
21,689
--------
TOTAL MUNICIPAL BONDS
(cost of $279,096) (k) 263,480
--------
See notes to financial statements.
10
<PAGE> 13
- ---------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
- ---------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS (1.0%) PAR VALUE
- ------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES(l)
GA Richmond County Development Authority,
Monsanto Co.,
Series 1998,
3.900% 6/1/21 $ 500 $ 500
IA Finance Authority,
Burlington Medical Center,
Series 1997,
3.950% 6/1/27 500 500
IN Hospital Equipment
Finance Authority,
Series A,
3.900% 12/1/15 500 500
MI Farmington Hills Hospital
Finance Authority,
Botsford General Hospital,
Series 1991-B,
3.750% 2/15/16 100 100
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1995-B,
3.900% 7/1/15 100 100
NY New York City Municipal Water
Finance Authority,
Series 1994-G,
3.600% 6/15/24 900 900
--------
2,600
--------
OTHER ASSETS & LIABILITIES, NET (1.5%) 4,022
--------
NET ASSETS (100.0%) $270,102
--------
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 $1,180. This security represents
0.4% of the Trust's net assets as of November 30, 1999.
(b) These securities, or a portion thereof, with a total market value of
$40,824, are being used to collateralize the delayed delivery purchases
indicated in note (f) below and open futures contracts.
(c) This issuer is in default of certain debt covenants. Income is not being
accrued.
(d) Rounds to less than one.
(e) Zero coupon bond.
(f) This security has been purchased on a delayed delivery basis for settlement
at a future date beyond the customary settlement date.
(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) This 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,
1999, the value of this security amounted to $4,284 or 1.6% of net assets.
(i) The Trust 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.
(j) This is a restricted security which was acquired on March 22, 1994 at a
cost of $730. This security represents 0.2% of the Trust's net assets as of
November 30, 1999.
(k) Cost for federal income tax purposes is $279,148.
(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,
1999.
Short futures contracts open at November 30, 1999:
Par value Unrealized
covered by Expiration appreciation
Type contracts month at 11/30/99
------------------------------------------------------------
Treasury $36,400 March $76
11
See notes to financial statements.
<PAGE> 14
- ---------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------
November 30, 1999
(In thousands except for per share amount)
ASSETS
Investments at value (cost $279,096) $263,480
Short-term obligations 2,600
--------
266,080
Receivable for:
Interest $4,984
Investments sold 1,385
Other 96 6,465
------ --------
Total Assets 272,545
LIABILITIES
Payable for:
Distributions - common shares 1,009
Distributions - preferred shares 20
Investments purchased 1,000
Variation margin on futures 125
Accrued:
Deferred Trustees fees 5
Other 284
------
Total Liabilities 2,443
--------
NET ASSETS $270,102
========
COMPOSITION OF NET ASSETS
Auction Preferred shares (4 shares issued
and outstanding at $25,000 per share) $ 90,000
Capital paid in - common shares 237,374
Overdistributed net investment income (1,088)
Accumulated net realized loss (40,644)
Net unrealized appreciation (depreciation) on:
Investments (15,616)
Open futures contracts 76
--------
$270,102
--------
Net Assets at value for 27,645 common shares
of beneficial interest outstanding $180,082
--------
Net Asset value per common share $ 6.51
--------
Net Assets at value including undeclared
dividends for 4 preferred shares outstanding $ 90,020
--------
- ---------------------------------------------------------------------------
Statement of Operations
- ---------------------------------------------------------------------------
For the year ended November 30, 1999
(In thousands)
INVESTMENT INCOME
Interest $ 14,891
EXPENSES
Management fee $ 1,519
Transfer agent fee 152
Bookkeeping fee 61
Trustees fee 19
Custodian fee 5
Audit fee 70
Legal fee 119
Reports to shareholders 25
Preferred share remarketing commissions 82
Other 113 2,165
------- --------
Net Investment Income 12,726
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
Net realized loss (3,197)
Net change in unrealized
appreciation/depreciation during
the period on:
Investments (23,775)
Open futures contracts 81
-------
Net change in unrealized
appreciation/depreciation (23,694)
--------
Net Loss (26,891)
--------
Decrease in Net Assets from Operations $(14,165)
========
See notes to financial statements.
12
<PAGE> 15
- ---------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------
(In thousands)
Years Ended November 30,
1999 1998
- -------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 12,726 $ 12,907
Net realized gain (loss) (3,197) 4,942
Net change in unrealized appreciation/
depreciation (23,694) 26
-------- --------
Net Increase (Decrease) from
Operations (14,165) 17,875
Distributions:
From net investment income --
common shares (11,561) (13,417)
From net investment income --
preferred shares (1,165) --
In excess of net investment income --
common shares (1,096) (124)
-------- --------
(27,987) 4,334
Fund Share Transactions:
Preferred share offering
(net of $1,265 offering costs) 88,735 --
Value of distributions reinvested --
common shares 423 1,064
-------- --------
Total Increase 61,171 5,398
NET ASSETS
Beginning of period 208,931 203,533
-------- --------
End of period (net of overdistributed
net investment income of $1,088
and $96, respectively) $270,102 $208,931
======== ========
NUMBER OF FUND SHARES
Common:
Issued for distributions reinvested 55 141
Outstanding at
Beginning of period 27,590 27,449
-------- --------
End of period 27,645 27,590
-------- --------
Preferred:
Issued in initial offering 4 --
Outstanding at
Beginning of period -- --
-------- --------
End of period 4 --
-------- --------
See notes to financial statements.
13
<PAGE> 16
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
November 30, 1999
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 common 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 common and preferred 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.
Distributions to preferred shareholders are recorded daily and are payable at
the end of each dividend period. Each dividend payment period for the Auction
Preferred Shares (APS)is generally seven days. The applicable dividend rate for
the Auction Preferred Shares on November 30, 1999 was 4.10%. For the year ended
November 30, 1999, the Trust paid dividends to Auction Preferred shareholders
amounting to $1,165,167 representing an average APS dividend rate for such
period of 3.55%.
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% annually 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, 1999, purchases and sales of investments,
other than short-term obligations, were $131,286,918, and $46,918,751,
respectively.
14
<PAGE> 17
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- ---------------------------------------------------------------------------
November 30, 1999
Unrealized appreciation (depreciation) at November 30, 1999, based on cost of
investments for federal income tax purposes was approximately:
Gross unrealized appreciation $ 4,941,000
Gross unrealized depreciation (20,609,000)
------------
Net unrealized depreciation $(15,668,000)
============
CAPITAL LOSS CARRYFORWARDS:
At November 30, 1999, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
YEAR OF EXPIRATION CAPITAL LOSS CARRYFORWARD
- ---------------------------------------------------------------------
2000 $ 9,102,000
2001 7,979,000
2002 5,301,000
2003 7,499,000
2004 4,000
2005 7,197,000
2007 3,491,000
-----------
$40,573,000
===========
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 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.
PREFERRED SHARE OFFERING:
On July 20, 1999, the Trust offered and currently has outstanding 3,600 Auction
Preferred Shares. The Auction Preferred Shares are redeemable at the option of
the Trust on any dividend payment date at the redemption price of $25,000 per
share, plus an amount equal to any dividends accumulated on a daily basis unpaid
through the redemption date (whether or not such dividends have been declared).
Total proceeds of $88,735,000, net of underwriting and offering costs, were
received upon the offering.
Costs incurred by the Trust in connection with the offering of the Auction
Preferred Shares totaling $1,264,690 were recorded as a reduction of capital
paid in excess of par applicable to common shares.
Under the Investment Company Act of 1940, the Trust is required to maintain
asset coverage of at least 200% with respect to the Auction Preferred Shares as
of the last business day of each month in which any Auction Preferred Shares are
outstanding. Additionally, the Trust is required to meet more stringent asset
coverage requirements under the terms of the Auction Preferred Shares and in
accordance with the guidelines prescribed by the rating agencies. Should these
requirements not be met, or should dividends accrued on the Auction Preferred
Shares not be paid, the Trust may be restricted in its ability to declare
dividends to common shareholders or may be required to redeem certain of the
Auction Preferred Shares. At November 30, 1999 there were no such restrictions
on the Trust.
15
<PAGE> 18
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------
Selected per share data, total return, ratios and supplemental data
throughout each period are as follows (common shares unless otherwise noted):
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.570 $ 7.410 $ 7.410 $ 7.480 $ 7.150
INCOME FROM INVESTMENT OPERATIONS: -------- -------- -------- -------- --------
Net investment income 0.460 0.469 0.509 0.508 0.547
Offering costs (0.046)
Net realized and unrealized gain (loss) (0.974) 0.183 (0.002) (0.068) 0.335
-------- -------- -------- -------- --------
Total from Investment Operations (0.560) 0.652 0.507 0.440 0.882
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income -- common shares (0.418) (0.487) (0.507) (0.510) (0.552)
From net investment income -- preferred shares (0.042) -- -- -- --
In excess of net investment income -- common shares (0.040) (0.005) -- -- --
-------- -------- -------- -------- --------
Total Distributions Declared to Shareholders (0.500) (0.492) (0.507) (0.510) (0.552)
======== ======== ======== ======== ========
NET ASSET VALUE, END OF PERIOD $ 6.510 $ 7.570 $ 7.410 $ 7.410 $ 7.480
======== ======== ======== ======== ========
Market price per share -- End of period $ 5.750 $ 8.125 $ 7.560 $ 7.250 $ 6.750
======== ======== ======== ======== ========
Total return -- based on market value (a) (24.33)% 14.57% 11.67% 15.36% 8.04%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses (b) 1.08%(c) 0.82% 0.86% 0.91% 0.98%
Net investment income (b) 5.78%(c) 6.20% 6.83% 6.87% 7.47%
Portfolio turnover 20% 34% 15% 22% 24%
Net assets at end of period (000) -- Total Fund $270,102 $208,931 $203,533 $202,793 $204,666
</TABLE>
(a)Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(b)The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(c)Ratios reflect net assets available to common shares only; net investment
income ratio also reflects reduction for dividend payments to preferred
shareholders.
- --------------------------------------------------------------------------------
1999 Federal income tax information (unaudited)
99.7% of the distributions will be treated as exempt income for federal income
tax purposes.
- --------------------------------------------------------------------------------
16
<PAGE> 19
- ---------------------------------------------------------------------------
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, 1999, 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 November 30, 1999
by correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 12, 2000
17
<PAGE> 20
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 "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 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.
18
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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.
SHR-43/246A-0100(01/00)
<PAGE> 22
TRUSTEES
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TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
JOHN V. 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)
SALVATORE MACERA
Private Investor (formerly Executive Vice President of Itek Corp. and President
of Itek Optical & Electronic Industries, Inc.)
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
Academic Vice President and Dean of Faculties, Boston College (former Dean,
Boston College School of Management)
THOMAS E. STITZEL
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
ROBERT L. SULLIVAN
Retired Partner, KPMG 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)
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COLONIAL MUNICIPAL INCOME TRUST ANNUAL REPORT
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BULK RATE
U.S. POSTAGE
PAID
HOLLISTON, MA
PERMIT NO. 20
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IT-02/263I-1199(1/00)99/1608
