-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ReBenwXOPjrPJkDYVn0E6Y/XqsSj2LBZnnlD8Jme7SLygb2x8O8HnxSAvNuef9Oo Vph6L+kF/avoiE0dWNnPOA== 0000883163-98-000018.txt : 19980210 0000883163-98-000018.hdr.sgml : 19980210 ACCESSION NUMBER: 0000883163-98-000018 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980209 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL MUNICIPAL INCOME TRUST CENTRAL INDEX KEY: 0000809844 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04992 FILM NUMBER: 98525987 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CTR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 N-30D 1 - -------------------------------------------------------------------------------- COLONIAL MUNICIPAL INCOME TRUST - -------------------------------------------------------------------------------- ANNUAL REPORT NOVEMBER 30, 1997 COLONIAL MUNICIPAL INCOME TRUST HIGHLIGHTS DECEMBER 1, 1996 - NOVEMBER 30, 1997 INVESTMENT OBJECTIVE: Colonial Municipal Income Trust seeks to provide high current income, generally exempt from federal income taxes, by investing primarily in medium and lower quality municipal securities. The Trust's secondary objective is to preserve its capital. The Fund is Designed to Offer: |X| Potential for high tax-free income |X| Experienced professional management |X| Expert credit analysis PORTFOLIO MANAGER COMMENTARY: "With the supply of high yield municipal bonds continuing to diminish while demand remains strong, careful credit analysis and broad diversification become more important than ever. In this challenging environment, we continually analyze the current holdings in our portfolio, and are constantly studying new issues across sectors in a search for value." -- Bonny Boatman COLONIAL MUNICIPAL INCOME TRUST PERFORMANCE Distributions declared per share(1) $0.507 - -------------------------------------------------------------------------------- 12-month total return, assuming reinvestment of all distributions |X| NAV 7.07% |X| Market Price 11.67% - -------------------------------------------------------------------------------- Price per share |X| NAV $7.41 |X| Market Price $7.56 (1) A portion of the Fund's income may be subject to the alternative minimum tax. The Fund may at times purchase tax-exempt securities at a discount, and some or all of this discount may be included in the Fund's ordinary income which will be taxable when distributed. TOP FIVE SECTORS QUALITY BREAKDOWN (as of 11/30/97) (as of 11/30/97) - -------------------------------------------------------------------------------- (as of 11/30/97) Nursing Home ................. 19.8% AAA: ......................... 14.5% Housing ...................... 13.5% Non-rated: ................... 49.6% Refunded ..................... 9.1% AA: .......................... 3.4% Hospital ..................... 6.2% A: ........................... 7.1% Industrial ................... 6.0% BBB: ......................... 21.4% BB: .......................... 2.5% Net Cash & Equivalents: ...... 1.1% B: ........................... 0.4% Sector and quality breakdowns are calculated as a percent of total unaudited investments, including short-term obligations. Because the Trust is actively managed, there can be no guarantee the Trust will continue to maintain these quality weightings or invest in these sectors in the future. Industry sectors in the following financial statements are based upon the standard industrial classifications (SIC) published by the U.S. Office of Management and Budget. The sector classifications used on this page are based upon Colonial's defined criteria as used in the investment process. PRESIDENT'S MESSAGE TO FUND SHAREHOLDERS [Photo of Harold W. Cogger] I am pleased to present the annual report for Colonial Municipal Income Trust. This report reflects on the investment environment for the 12 months ended November 30, 1997. The economy grew at a healthy pace during the past year. The strength of the economy during the first quarter of 1997 led the Federal Reserve Board to raise short-term interest rates in March for the first time in two years. This action was a response to growing concern about future wage and price inflation. As interest rates rose, bond prices declined. However, by mid-April, economic growth appeared to slow while inflation remained under control. During the second half of the period, interest rates declined and bond prices rose. Looking forward, we anticipate that moderate economic growth will continue in 1998 and that inflation will remain subdued despite low levels of unemployment. During the year, the yield spreads between high and low quality municipal bonds decreased. This means that investors were not rewarded for taking on additional risk associated with lower quality bonds, particularly in the non-rated sector. As interest rates declined during the last months of the period, investors increasingly "reached" for yield, despite an increase in supply. This resulted in further rising prices for lower quality municipal bonds. While these conditions made identifying attractive new investments more difficult, the Fund's lower quality holdings benefited from this trend. The long-term benefits of investing in any municipal bond fund include tax-free income as well as the opportunity to diversify your fixed-income portfolio. Respectfully, /s/ Harold W. Cogger Harold W. Cogger President January 9, 1998 Because market conditions change frequently, there can be no assurance that the trends described here will continue. INVESTMENT PORTFOLIO NOVEMBER 30, 1997 MUNICIPAL BONDS - 97.1% PAR VALUE - -------------------------------------------------------------------------------- EDUCATION - 2.9% EDUCATION - 0.9% CA Statewide Communities Development Corp., J. Paul Getty Trust Center, 5.000% 10/01/23 (a) $ 2,000 $ 1,905 -------- LOCAL GENERAL OBLIGATIONS - 1.0% LA New Orleans, Series 1991, (b) 09/01/15 4,000 1,570 NY New York City, Series C, 5.375% 11/15/17 550 540 -------- 2,110 -------- STUDENT LOAN - 1.0% SD State Student Loan Finance Corp., Series 1996-E, 6.550% 08/01/20 2,000 2,062 -------- - -------------------------------------------------------------------------------- HEALTHCARE - 26.3% HOSPITAL - 6.0% AL Alabama Special Care Facilities Authority, Montgomery Healthcare, Series 1989, 11.000% 10/01/19 2,280 2,326 GA Clayton Hospital Authority, The Woodlands Foundation, Inc., Series 1991-A, 9.750% 05/01/21 (c) 1,500 975 IL State Health Facilities Authority, Edgewater Medical Center, Series A, 9.250% 07/01/24 2,250 2,745 MN St. Paul Housing & Redevelopment Authority, Healtheast Project, Series A, 5.700% 11/01/15 (d) 2,000 2,002 NJ Health Care Facilities Financing Authority, Raritan Bay Medical Center, 7.250% 07/01/27 1,000 1,076 PA Delaware County Authority, Southeastern Pennsylvania Obligated Group, Series 1996: 6.000% 12/15/16 1,400 1,451 6.000% 12/15/26 500 516 VT State Educational & Health Buildings Authority, Financing Agency, Springfield Hospital, Series A, 7.750% 01/01/13 1,040 1,164 -------- 12,255 -------- INTERMEDIATE CARE FACILITIES - 1.0% MA State Health & Educational Facilities Authority Corp. for Independent Living, 8.100% 07/01/18 685 744 TN Shelby County, Health, Education, & Housing Facilities Board, Open Arms Development Center: Series 1992-A, 9.750% 08/01/19 510 600 Series 1992-C, 9.750% 08/01/19 520 612 -------- 1,956 -------- NURSING HOMES - 19.3% CO State Health Facilities Authority, American Housing Foundation, Inc., Series 1990-A, 10.250% 12/01/20 1,500 1,500 DE State Economic Development Authority, 12.000% 04/01/25 2,255 2,450 DE Sussex County, Healthcare Facility, Delaware Health Corp., Series 1994-A, 7.600% 01/01/24 1,000 1,030 FL Flagler County Industrial Development Authority, South Florida Properties, Series 1988, 10.500% 12/01/18 (c) 1,455 1,164 IA State Finance Authority, Care Initiatives Project, Series 1996, 9.250% 07/01/25 1,000 1,331 IN Gary Industrial Economic Development, West Side Health Care Center, Series 1987-A, 11.500% 10/01/17 2,470 2,555 IN Michigan City Health Facilities, Metropolitan Health Foundation, Inc., Project, 10.000% 11/01/22 4,500 4,500 KS Halstead Industrial Health Care Project, 10.250% 08/01/13 (c) 1,330 532 KY Jefferson County First Mortgage Kentucky Iowa, Inc. Project, Series 1990, 10.250% 01/01/20 975 1,023 KY Lexington-Fayette Urban County Government, First Mortgage, AHF Kentucky-Iowa, Inc. Project, Series 1990, 10.250% 01/01/20 975 1,023 MA Boston, St. Joseph Nursing Care Center, Inc., Series 1990, 10.000% 01/01/20 (e) 1,940 2,110 MA State Industrial Finance Agency, GF/Massachusetts, Inc., Series 1994, 8.300% 07/01/23 980 1,011 MI Cheboygan County Economic Development Corp., Metro Health Foundation Project, Series 1993, 10.000% 11/01/22 (f) 2,440 2,440 MO Springfield Industrial Development Authority, 10.250% 12/01/10 1,175 1,191 NJ Economic Development Authority, Geriatric and Medical Service, Inc., Series A, 10.500% 05/01/04 725 772 NM City of Clovis, Retirement Ranches Project, 10.750% 04/01/19 2,135 2,292 OH Lucas County, Gericare, Inc., Series 1988-B, 10.500% 06/01/18 2,500 2,556 OH Montgomery County, Grafton Oaks Limited Partners, Series 1986, 9.750% 12/01/16 1,480 1,406 OK Muskogee County Economic Development Authority, Authority Health Facilities, Heartway Corp.: Series A, 9.500% 03/01/19 1,545 1,560 Series B, (b) 03/01/19 250 63 PA Philadelphia Authority for Industrial Development: First Mortgage, The Care Pavilion, Series 1988, 10.250% 02/01/18 965 966 RHA/Philadelphia Project, 10.250% 11/01/18 1,450 1,448 TN New Tazewell Health, Education and Housing Facilities Board, New Tazewell, Series 1987, 10.000% 06/01/17 1,615 1,636 VA Virginia Beach Development Authority, Beverly Enterprises, Series 1985, 10.000% 04/01/10 1,795 1,972 WA Kitsap County Housing Authority, Martha & Mary Nursing Home, 7.100% 02/20/36 643 727 -------- 39,258 -------- - -------------------------------------------------------------------------------- HOUSING - 13.9% ASSISTED LIVING/SENIOR - 4.2% FL Clearwater Housing Authority, Hampton Apartments, Series 1994, 8.250% 05/01/24 2,500 2,659 IL State Development Finance Authority, Care Institute, Inc., 8.250% 06/01/25 1,500 1,646 MN Roseville, Care Institute, Inc., Series 1993, 7.750% 11/01/23 1,630 1,630 PA Montgomery County Industrial Development Authority, Assisted Living Facility, Series 1993-A, 8.250% 05/01/23 810 860 TX Bell County Health Facilities Development Corp., Care Institutions, Inc., 9.000% 11/01/24 1,500 1,667 -------- 8,462 -------- MULTI-FAMILY - 8.8% FL Hialeah Housing Authority, Series 1991, 9.500% 11/01/21 1,000 950 FL State Housing Finance Agency, Windsong Apartments, Series 1993-C, 9.250% 01/01/19 830 852 IL Chicago, Michigan Boulevard Garden Apartment Rehabilitation Project, Series 1985, 12.000% 01/01/00 295 298 MN Washington County Housing & Redevelopment Authority, Cottages of Aspen, Series 1992, 9.250% 06/01/22 1,080 1,195 MN White Bear Lake, Birch Lake Townhomes Project: Series 1989-A, 10.250% 07/15/19 1,770 1,788 Series 1989-B, (g) 07/15/19 678 1,239 NC Eastern Carolina Regional Housing Authority, New River Apartments, Jacksonville, Series 1994, 8.250% 09/01/14 1,910 1,986 Resolution Trust Corp., Pass Through Certificates, Series 1993-A, 8.500% 12/01/16 (f) 4,248 4,423 SC State Housing Finance and Development Multi-family Housing Finance Revenue, Westbridge Apartments, Series A, 9.500% 09/01/20 2,170 2,224 TN Franklin Industrial Board, Landings Apartment Project, Series 1996-B, 8.750% 04/01/27 800 811 TX Galveston Health Facilities Center, Pass Through Certificates, 8.000% 08/01/23 1,000 1,055 VA Alexandria Redevelopment & Housing Authority, Courthouse Commons Apartments, Series 1990-A, 10.000% 01/01/21 1,000 1,019 -------- 17,840 -------- SINGLE-FAMILY - 0.9% AK State Housing Finance Corp., Series 1996-A, 6.050% 12/01/17 1,000 1,051 KY 1986 County Single Family Mortgage Revenue, Class A, 9.000% 09/01/16 30 31 PA Allegheny County, Residential Financial Authority, Single-family Mortgage, Series 1987-G, 9.500% 12/01/18 660 673 -------- 1,755 -------- - -------------------------------------------------------------------------------- OTHER - 9.4% LOCAL APPROPRIATED - 0.5% CA Compton Civic Center, Project, 5.500% 09/01/15 1,000 986 -------- REFUNDED/ESCROWED (H) - 8.9% AZ Apache County School District, Number 010 Round Valley Project of 1987, Series 1990-C, 9.875% 07/01/05 2,000 2,200 DE State Economic Development Authority, Riverside Hospital, Series 1992-A, 9.500% 01/01/22 885 1,147 ID State Health Facilities Authority, IHC Hospitals, Inc., 8.260% 02/15/21 2,750 3,135 IL Chicago Public Building Commission, Series 1990-A, 7.000% 01/01/20 (a) 2,000 2,455 MA State Industrial Finance Agency Tunnel Revenue, Mary Ann Morse Nursing Home, Inc., Series 1991-I, 10.000% 01/01/21 1,200 1,427 MA State Industrial Finance Agency, Series 1990, 9.000% 10/01/20 935 1,067 MN Mille Lacs Capital Improvement Authority, Mille Lacs Bond of Chippewa, Series 1992-A, 9.250% 11/01/12 1,050 1,295 MO Hannibal Industrial Development Authority, Regional Healthcare Systems, Series 1992, 9.500% 03/01/22 2,000 2,445 NC Lincoln County, Lincoln County Hospital, 9.000% 05/01/07 500 603 WA State Health Care Facilities Authority, Grays Harbor Community Hospital, Series 1993: 7.200% 07/01/03 330 361 8.025% 07/01/20 1,770 1,982 -------- 18,117 -------- - -------------------------------------------------------------------------------- OTHER REVENUE - 15.5% CHEMICALS - 3.6% LA St. Charles Parish, Union Carbide Corp., Series 1992, 7.350% 11/01/22 2,000 2,215 SC York County, Hoechst Celanese Corp., Series 1994, 5.700% 01/01/24 5,000 5,088 -------- 7,303 -------- HOTELS - 1.2% MN Burnsville Commercial Development, Holiday Inn Project, 10.600% 06/01/06 2,500 2,526 -------- MANUFACTURING - 5.9% CO Mesa County Industrial Development, Joy Technologies, Inc., Series 1992, 8.500% 09/15/06 1,000 1,134 IL State Development Finance Authority, Armstrong World Industries, Inc. Project, 5.950% 12/01/24 1,000 1,053 IN State Development Finance Authority, Inland Steel, Series A, 5.750% 10/01/11 750 761 LA Southern Louisiana Port Commission, Cargill, Inc. Project, 5.850% 04/01/17 500 529 MA State Industrial Finance Agency, House of Bianchi, Inc., 8.750% 06/01/18 325 328 MN Brooklyn Park, TL Systems Corp., Series 1991, 10.000% 09/01/16 785 968 OH Cuyahoga County, Joy Technologies, Inc., Series 1992, 8.750% 09/15/07 550 629 TX Trinity River Authority, Texas Instruments Project, Series 1996, 6.200% 03/01/20 750 788 VA Halifax County Industrial Development, Craddock-Terry, Inc., Series 1989, 10.000% 12/01/19 (c) 1,010 404 VA Pittsylvania County Industrial Development, Craddock-Terry, Inc., Series 1989, 10.000% 12/01/19 (c) 1,085 358 VA Prince Edward County Industrial Development, Craddock-Terry, Inc., Series 1989, 10.000% 12/01/19 (c) 1,860 930 WA Pilchuck Public Development Corp., Goodrich (B.F.) Co. Tramco Project, Series 1993, 6.000% 08/01/23 4,000 4,095 -------- 11,977 -------- OIL & GAS - 0.8% WA Pierce County Economic Development Corp., Occidental Petroleum Co., 5.800% 09/01/29 1,500 1,511 -------- OTHER - 2.1% IN Hammond, American Maize Products Co., Series 1994, 8.000% 12/01/24 2,000 2,333 LA Port New Orleans Industrial Development, Continental Grain Co., Series 1993, 7.500% 07/01/13 1,000 1,096 MD Baltimore, Park Charles Project, Series 1986, 8.000% 01/01/10 805 872 -------- 4,301 -------- PAPER PRODUCTS - 1.0% SC Darlington County, Industrial Development Authority, SONOCO Products Co. Project, 6.125% 06/01/25 2,000 2,093 -------- RETAIL - 0.4% OH Lake County, North Madison Properties, Series 1993, 8.819% 09/01/11 710 764 -------- STATE APPROPRIATED - 0.5% NY Metropolitan Transportation Authority, Commuter Facilities, Series 1997-8, 5.250% 07/01/17 945 918 -------- - -------------------------------------------------------------------------------- RESOURCE RECOVERY - 3.4% DISPOSAL - 2.9% CT State Development Authority, Sewer Sludge Disposal Facilities, Series 1996, 8.250% 12/01/06 1,250 1,303 GA Fulton County Development Authority, Very, Inc., 10.500% 12/01/07 1,370 1,432 MA Boston Industrial Development Finance Authority, Jet-A-Way, Inc., 10.500% 01/01/11 1,000 1,108 MA State Industrial Finance Agency: Massachusetts Environmental Services, Series 1994-A, 8.750% 11/01/21 (c) 975 731 Peabody Monofill Associates, Inc., Series 1995, 9.000% 09/01/05 1,110 1,228 -------- 5,802 -------- RESOURCE RECOVERY - 0.5% PA Delaware County Industrial Development Authority, Series A, 6.200% 07/01/19 1,000 1,061 -------- - -------------------------------------------------------------------------------- TAX-BACKED - 5.2% SALES & EXCISE TAX - 4.9% IL Metropolitan Pier & Exposition Authority, Series 1996-A: (b) 12/15/13 (a) 5,000 2,175 (b) 12/15/21 (a)(i) 8,000 2,190 IL Metropolitan Pier & Exposition Authority, McCormick Project: (b) 06/15/14 (a)(i) 5,000 2,088 (b) 06/15/15 3,000 1,185 IL State Development Finance Authority, City of Marion Project, Series 1991, 9.625% 09/15/21 1,460 1,095 PR Commonwealth of Puerto Rico Highway & Transportation Authority, Series 1996-Y, 5.500% 07/01/36 1,300 1,321 -------- 10,054 -------- SPECIAL PROPERTY TAX - 0.3% CA Riverside County Public Financing Authority Redevelopment Projects, Series A, 5.500% 10/01/22 650 640 -------- - -------------------------------------------------------------------------------- TRANSPORTATION - 8.0% AIR TRANSPORTATION - 5.1% IN Indianapolis Airport Authority: Federal Express Corp., Series 1994, 7.100% 01/15/17 2,000 2,235 United Airlines Project, Series A, 6.500% 11/15/31 2,000 2,150 KY Kenton County Airport Board, Delta Airlines, Inc., Series 1992-A, 7.500% 02/01/20 2,500 2,772 NY Port Authority of New York/New Jersey, JFK International Airport, Series 6, 6.250% 12/01/08 1,000 1,123 TX Alliance Airport Authority: American Airlines Project, 7.500% 12/01/29 1,000 1,094 Federal Express Corp., Series 1996, 6.375% 04/01/21 1,000 1,071 -------- 10,445 -------- TOLL FACILITIES - 2.9% CA San Joaquin Hills Transportation Corridor Agency: Series 1993: (b) 01/01/25 10,000 2,350 5.000% 01/01/33 2,480 2,300 Series A, (b) 01/15/15 3,000 1,211 -------- 5,861 -------- UTILITY - 12.5% INDIVIDUAL POWER PRODUCER - 3.9% FL Martin County Industrial Development Authority, Indiantown Cogeneration Project, Series 1994-A, 7.875% 12/15/25 1,000 1,160 NY Port Authority of New York & New Jersey, KIAC Partners, Series 1996-IV, 6.750% 10/01/11 2,000 2,175 PA Economic Development Finance Authority, Colver Project, Series D: 7.125% 12/01/15 500 551 7.150% 12/01/18 3,750 4,134 -------- 8,020 -------- INVESTOR OWNED - 2.0% AZ Pima County Industrial Development Authority, Tucson Electric Power Co., Series A, 6.100% 09/01/25 750 758 IL Bryant Pollution Control Revenue, Central Illinois Light Co., Series 1993, 5.900% 08/01/23 2,000 2,060 NM Farmington, San Juan Public Service Co. Project, Series D, 6.375% 04/01/22 1,250 1,325 -------- 4,143 -------- MUNICIPAL ELECTRIC - 2.5% TX Austin, Series 1994: (b) 05/15/17 (a) 6,600 2,327 (b) 05/15/18 5,000 1,669 WA Chelan County Public Utilities, District No. 1, Series A, 5.600% 07/01/20 1,000 1,005 -------- 5,001 -------- WATER & SEWER - 4.1% LA Public Facility Belmont Water Authority, 9.000% 03/15/24 (f) 730 657 MS Five Lakes Utility District, 8.250% 07/15/24 500 400 NJ State Economic Development Authority, Hills Development Co., 10.500% 09/01/08 2,100 2,132 NY New York City Municipal Water Finance Authority, Series B, 5.250% 06/15/29 4,000 3,875 TX Houston Water & Sewer System, Series C, (b) 12/01/12 (a) 3,000 1,376 -------- 8,440 -------- TOTAL MUNICIPAL BONDS (cost of $189,471) (j) 197,566 -------- SHORT-TERM OBLIGATIONS - 1.0% - -------------------------------------------------------------------------------- VARIABLE RATE DEMAND NOTES (k) IN Portage Economic Development Revision, Pedcor Investments, Series A, 4.050% 08/01/30 400 400 MI Monroe County Economic Development Corp., Detroit Edison Co., Series CC, 3.850% 10/01/24 100 100 MS Perry County, Leaf River Forest Project, 3.900% 03/01/02 300 300 NC Halifax County Industrial Facilities & Pollution Control Authority, Westmoreland Coal Co., 3.900% 12/01/19 300 300 NY State, Series 1994-A4, 3.850% 08/01/21 1,000 1,000 -------- TOTAL SHORT-TERM OBLIGATIONS 2,100 -------- OTHER ASSETS & LIABILITIES, NET- 1.9% 3,867 - -------------------------------------------------------------------------------- NET ASSETS - 100% $203,533 ======== NOTES TO INVESTMENT PORTFOLIO: - -------------------------------------------------------------------------------- (a) These securities, or a portion thereof, with a total market value of $9,221 are being used to collateralize open future contracts. (b) Zero coupon bond. (c) This issuer is in default of certain debt covenants. Income is not being accrued. (d) This security has been purchased on a delayed delivery basis for settlement at a future date beyond the customary settlement time. (e) This is a restricted security which was acquired on April 25, 1990 at a cost of $1,921. This security represents 1.0% of the Fund's net assets at November 30, 1997 (f) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 1997, the value of these securities amounted to $7,520 or 3.7% of net assets. (g) Accrued interest accumulates in the value of the security and is payable at redemption. The value of this security represents fair value as determined under procedures approved by the Trustees. (h) The Fund has been informed that the issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of the interest and principal. (i) These securities, or a portion thereof, with a total market value of $2,191 are being used to collateralize the delayed delivery purchase indicated in note (d) above. (j) Cost for federal income tax purposes is $189,499. (k) Variable rate demand notes are considered short-term obligations. Interest rates change periodically on specified dates. These securities are payable on demand and are secured by either letters of credit or other credit support agreements from banks. The rates listed are as of November 30, 1997. Long futures contracts open at November 30, 1997: Par value Unrealized covered by Expiration appreciation Type contracts month at 11/30/97 - -------------------------------------------------------------------------------- Municipal bonds $1,800 December $ 25 Treasury bonds 1,700 March 8 ---- $ 33 ==== See notes to financial statements. STATEMENT OF ASSETS & LIABILITIES NOVEMBER 30, 1997 (in thousands except for per share amount) ASSETS Investments at value (cost $189,471) $ 197,566 Short-term obligations 2,100 ---------- 199,666 Receivable for: Interest $ 4,955 Investments sold 2,061 Other 8 7,024 -------- ---------- Total Assets 206,690 LIABILITIES Payable for: Investments purchased 1,992 Distributions 1,125 Accrued: Deferred Trustees fees 4 Other 36 -------- Total Liabilities 3,157 ---------- NET ASSETS at value for 27,449 shares of beneficial interest outstanding $ 203,533 ========== Net asset value per share $ 7.41 ========= COMPOSITION OF NET ASSETS Capital paid in $ 244,936 Undistributed net investment income 510 Accumulated net realized loss (50,041) Net unrealized appreciation on: Investments 8,095 Open futures contracts 33 ---------- $ 203,533 ========== See notes to financial statements. STATEMENT OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1997 (in thousands) INVESTMENT INCOME Interest $15,540 EXPENSES Management fee $1,315 Transfer agent 91 Bookkeeping fee 54 Trustees fee 19 Custodian fee 13 Audit fee 42 Legal fee 100 Reports to shareholders 17 Other 83 1,734 ------ ------- Net Investment Income 13,806 ------- NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS Net realized loss (7,104) Change in net unrealized appreciation during the period on: Investments 7,279 Open futures contracts 33 ------ Net change in unrealized appreciation 7,312 ------- Net Gain 208 ------- Net Increase in Net Assets from Operations $14,014 ======= See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS (in thousands) Year ended November 30 ----------------------------- INCREASE (DECREASE) IN NET ASSETS 1997 1996 Operations: Net investment income $ 13,806 $ 13,853 Net realized gain (loss) (7,104) 70 Net unrealized appreciation (depreciation) 7,312 (1,839) ---------- -------- Net Increase from Operations 14,014 12,084 Distributions: From net investment income (13,887) (13,957) ---------- -------- 127 (1,873) Fund Share Transactions: Value of distributions reinvested 613 -- ---------- -------- Total Increase (Decrease) 740 (1,873) NET ASSETS Beginning of period 202,793 204,666 ---------- -------- End of period (including undistributed net investment income of $510 and $467, respectively) $ 203,533 $202,793 ========== ======== NUMBER OF FUND SHARES Issued for distributions reinvested 82 -- Outstanding at Beginning of period 27,367 27,367 ---------- -------- End of period 27,449 27,367 ---------- -------- See notes to financial statements. NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1997 NOTE 1. ACCOUNTING POLICIES - ------------------------------------------------------------------------------- ORGANIZATION: Colonial Municipal Income Trust (the Fund) is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Fund's primary investment objective is to provide high current income, generally exempt from federal income taxes, by investing primarily in medium and lower quality municipal securities. The Fund's secondary objective is to preserve its capital. The Fund authorized an unlimited number of shares. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies that are consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION AND TRANSACTIONS: Debt securities generally are valued by a pricing service based upon market transactions for normal, institutional-size trading units of similar securities. When management deems it appropriate, an over-the-counter or exchange bid quotation is used. Futures contracts are valued based on the difference between the last sale price and the opening price of the contract. Short-term obligations with a maturity of 60 days or less are valued at amortized cost. Portfolio positions for which market quotations are not readily available are valued at fair value under procedures approved by the Trustees. Security transactions are accounted for on the date the securities are purchased, sold or mature. Cost is determined and gains and losses are based upon the specific identification method for both financial statement and federal income tax purposes. The Fund may trade securities on other than normal settlement terms. This may increase the risk if the other party to the transaction fails to deliver and causes the Fund to subsequently invest at less advantageous prices. FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a regulated investment company and to distribute all of its taxable and tax-exempt income, no federal income tax has been accrued. INTEREST INCOME, DEBT DISCOUNT AND PREMIUM: Interest income is recorded on the accrual basis. Original issue discount is accreted to interest income over the life of a security with a corresponding increase in the cost basis; market discount is not accreted. Premium is amortized against interest income with a corresponding decrease in the cost basis. DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on the ex-date. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - ------------------------------------------------------------------------------- MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the investment Adviser of the Fund and furnishes accounting and other services and office facilities for a monthly fee equal to 0.65% annually of the Fund's average weekly net assets. BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for $18,000 per year plus 0.0233% of the Fund's average net assets over $50 million. OTHER: The Fund pays no compensation to its officers, all of whom are employees of the Adviser. The Fund's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out out of the Fund's assets. NOTE 3. PORTFOLIO INFORMATION - ------------------------------------------------------------------------------- INVESTMENT ACTIVITY: During the year ended November 30, 1997, purchases and sales of investments, other than short-term obligations, were $31,173,662 and $29,390,408, respectively. Unrealized appreciation (depreciation) at November 30, 1997, based on cost of investments for income tax purposes was: Gross unrealized appreciation $ 13,490,261 Gross unrealized depreciation (5,423,382) ------------ Net unrealized appreciation $ 8,066,879 ============ Capital loss carryforwards: At November 30, 1997, capital loss carryforwards available (to the extent provided in regulations) to offset future realized gains were approximately as follows: Year of Capital loss expiration carryforward ---------- ------------ 1998 $ 6,551,000 1999 6,352,000 2000 9,103,000 2001 7,979,000 2002 5,301,000 2003 7,499,000 2004 4,000 2005 7,197,000 ------------ $ 49,986,000 ============ Expired capital loss carryforwards, if any, are recorded as a reduction of capital paid in. To the extent loss carryforwards are used to offset any future realized gains, it is unlikely that such gains would be distributed since they may be taxable to shareholders as ordinary income. OTHER: There are certain risks arising from geographic concentration in any state. Certain revenue or tax related events in a state may impair the ability of certain issuers of municipal securities to pay principal and interest on their obligations. The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. The Fund may purchase or sell municipal and Treasury bond futures contracts and purchase and write options on futures. The Fund will invest in these instruments to hedge against the effects of changes in the value of portfolio securities due to anticipated changes in interest rates and/or market conditions, for duration management, or when the transactions are economically appropriate to the reduction of risk inherent in the management of the Fund and not for trading purposes. The use of futures contracts and options involves certain risks which include (1) imperfect correlation between the price movement of the instruments and the underlying securities, (2) inability to close out a position due to different trading hours, or the temporary absence of a liquid market for either the instrument or the underlying securities or (3) an inaccurate prediction by the Adviser of the future direction of interest rates. Any of these risks may involve amounts exceeding the variation margin recorded in the Fund's Statement of Assets and Liabilities at any given time. FINANCIAL HIGHLIGHTS Selected per share data, total return, ratios and supplemental data throughout each period are as follows: Year ended November 30 ---------------------------------------- 1997 1996 1995 Net asset value - Beginning of period $ 7.410 $ 7.480 $ 7.150 -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.509 0.508 0.547 Net realized and unrealized gain (loss) (0.002) (0.068) 0.335 -------- -------- -------- Total from Investment Operations 0.507 0.440 0.882 -------- -------- -------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.507) (0.510) (0.552) In excess of net investment income -- -- -- -------- -------- -------- Total Distributions Declared to Shareholders (0.507) (0.510) (0.552) -------- -------- -------- Net asset value - End of period $ 7.410 $ 7.410 $ 7.480 ======== ======== ======== Market price per share - End of period $ 7.560 $ 7.250 $ 6.750 ======== ======== ======== Total return - based on net asset value (a) 7.07% 6.38% 12.96% ======== ======== ======== Total return - based on market value (b) 11.67% 15.36% 8.04% ======== ======== ======== RATIOS TO AVERAGE NET ASSETS Expenses 0.86%(c) 0.91%(c) 0.98%(c) Net investment income 6.83%(c) 6.87%(c) 7.47%(c) Portfolio turnover 15% 22% 24% Net assets at end of period (000) $203,533 $202,793 $204,666 (a) Total return at net asset value assuming all distributions reinvested. (b) Total return at market value assuming all distributions reinvested and excluding brokerage commissions. (c) The benefits derived from custody credits and directed brokerage arrangements had no impact. Prior years' ratios are net of benefits received, if any. FINANCIAL HIGHLIGHTS - CONT. Year ended November 30 ---------------------------- 1994 1993 $ 7.830 $ 7.890 -------- -------- 0.609 0.639 (0.707) (0.063) -------- -------- (0.098) 0.576 -------- -------- (0.582) (0.632) - (0.004) -------- -------- (0.582) (0.636) -------- -------- $ 7.150 $ 7.830 ======== ======== $ 6.750 $ 8.000 ======== ======== (0.42)% 7.42% ======== ======== (10.06)% 11.56% ======== ======== 0.90% 0.87% 8.12% 8.03% 24% 21% $195,444 $213,292 - ------------------------------------------------------------------------------- Federal income tax information (unaudited) All of the distributions will be treated as exempt income for federal income tax purposes. REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS AND TRUSTEES OF COLONIAL MUNICIPAL INCOME TRUST In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Colonial Municipal Income Trust at November 30, 1997, the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and the financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of portfolio positions at November 30, 1997 by correspondence with the custodian and brokers, and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Boston, Massachusetts January 9, 1998 DIVIDEND REINVESTMENT PLAN As a shareholder in the Fund you are eligible to participate in the Dividend Reinvestment Plan. The Trust generally distributes net investment income monthly and capital gains annually. Under the Trust's Dividend Reinvestment and Cash Purchase Plan (the "Plan") shareholders may elect to have all distributions reinvested automatically in additional shares of the Trust. Shareholders not making such election will receive all distributions in cash paid by check mailed directly to the record holder by the dividend paying agent. Shareholders participating in the Plan will receive distributions in the form of shares of the Trust. If the market price of the shares on the distribution payment date is equal to or greater than the net asset value, Plan participants will be issued shares at the higher of net asset value or 95% of the market price. For shares issued at a discount from market value, the difference between market value and issue price may represent taxable income at the time of issuance. Any portion of the discount includable in income will increase the basis of the shares issued. If net asset value exceeds the market price, or the distribution is payable only in cash, shares will be bought in the open market for the accounts of Plan participants. If the market price surpasses the net asset value before such purchasing is completed, the average per share price paid may exceed the net asset value of the shares, resulting in the acquisition of fewer shares than if the distribution had been in newly-issued shares. Participants in the Plan have the option of making additional cash payments to the Plan administrator semiannually, for investment in the Trust's shares. Such payments may be made in any amount from $100 to $500. The administrator will use all funds received from participants (as well as any dividends and distributions received in cash) to purchase Trust shares in the open market semiannually. Interest will not be paid on any uninvested cash payments. All Plan accounts receive monthly written confirmations of all transactions. Shares purchased under the Plan are ordinarily held in uncertified form, although participants have the right to receive certificates for whole shares issued to them. Each shareholder's proxy includes shares purchased pursuant to the Plan. The automatic reinvestment of distributions does not relieve participants of any income tax payable on the distributions. Participants may recognize capital gain or ordinary income for federal income tax purposes in an amount equal to the market value of shares received under the Plan. Fees and expenses of the Plan other than brokerage charges will be paid by the Trust. No brokerage charges are incurred on shares issued directly by the Trust. Participants will bear a pro-rata share of brokerage charges incurred on open market purchases. A Plan participant may terminate his or her participation by written notice to the Plan agent. The Plan may be amended or terminated on 30 days written notice to the Plan participants. Upon withdrawal by any participant or any termination of the Plan, certificates for whole shares will be issued and cash payments will be made for any fractional shares. All correspondence concerning the Plan should be directed to State Street Bank and Trust Company, the Trust's dividend disbursing agent and administrator of the Plan, at P.O. Box 8200, Boston, Massachusetts 02266-8200. 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. TRUSTEES ROBERT J. BIRNBAUM Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief Operating Officer, New York Stock Exchange, Inc.) TOM BLEASDALE Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank & Trust Company) LORA S. COLLINS Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel) JAMES E. GRINNELL Private Investor (formerly Senior Vice President-Operations, The Rockport Company) WILLIAM D. IRELAND, JR. Retired (formerly Chairman of the Board, Bank of New England-Worcester) RICHARD W. LOWRY Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood Corporation) WILLIAM E. MAYER Partner, Development Capital, L.L.C. (formerly Dean, College of Business and Management, University of Maryland; Dean, Simon Graduate School of Business, University of Rochester; Chairman and Chief Executive Officer, C. S. First Boston Merchant Bank; and President and Chief Executive Officer, The First Boston Corporation) JAMES L. MOODY, JR. Retired (formerly Chairman of the Board and Chief Executive Officer, Hannaford Bros. Co.) JOHN J. NEUHAUSER Dean, Boston College School of Management GEORGE L. SHINN Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant, The First Boston Corporation) ROBERT L. SULLIVAN Retired Partner, Peat Marwick Main & Co. (formerly Management Consultant, Saatchi and Saatchi Consulting Ltd. and Principal and International Practice Director, Management Consulting, Peat Marwick Main & Co.) SINCLAIR WEEKS, JR. Chairman of the Board, Reed & Barton Corporation IT-02/551E-1197 M (1/98) -----END PRIVACY-ENHANCED MESSAGE-----