UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4992
---------------------
Colonial Municipal Income Trust
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Vincent Pietropaolo, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-772-3698
-------------------
Date of fiscal year end: 11/30/2004
------------------
Date of reporting period: 05/31/2004
-----------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
COLONIAL MUNICIPAL INCOME TRUST SEMIANNUAL REPORT
MAY 31, 2004
[photo of domed building]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
PRESIDENT'S MESSAGE
July 21, 2004
Dear Shareholder:
We are pleased to let you know that FleetBoston Financial Corporation and Bank
of America Corporation have merged, effective April 1, 2004. As a result of the
merger, Columbia Management Group and your Colonial Municipal Income Trust
became part of the Bank of America family of companies. Looking ahead, we
believe this merger will be a real benefit to our shareholders. Preserving and
leveraging our strengths, the combined organization intends to deliver
additional research and management capabilities, as well as new products. There
are no immediate changes planned for fund names, product lines, or customer
service contacts.
As you might know, on March 15, 2004, FleetBoston Financial announced an
agreement in principle with the staff of the Securities and Exchange Commission
("SEC") and the New York Attorney General ("NYAG") to settle charges involving
market timing in Columbia Management mutual funds. (You may also know that Bank
of America came to a similar settlement in principle at the same time.) The
agreement requires the final approval of the SEC and the NYAG. This settlement
in principle reflects our strong wish to put this regrettable situation behind
us. Columbia Management has taken and will continue to take steps to strengthen
policies, procedures and oversight to curb frequent trading of Columbia open-end
fund shares.
Both your fund's trustees and Columbia Management are committed to serving the
interests of our shareholders, and we will continue to work hard to help you
achieve your financial goals.
As always, thank you for choosing Colonial Municipal Income Trust, and for
giving us the opportunity to help you build a strong financial future.
Sincerely,
/s/ Thomas C. Theobald /s/ J. Kevin Connaughton
Thomas C. Theobald J. Kevin Connaughton
Chairman, Board of Trustees President
J. Kevin Connaughton was named president of Colonial Municipal Income Trust on
February 27, 2004.
Economic and market conditions change frequently. There is no assurance that the
trends described in this report will continue or commence.
PORTFOLIO MANAGER'S REPORT
[SIDEBAR DATA]:
PRICE PER SHARE AS OF 05/31/04 ($)
Net asset value 5.54
-----------------------------
Market price 5.20
-----------------------------
SIX-MONTH (CUMULATIVE) TOTAL
RETURN AS OF 05/31/04 (%)
Net asset value -1.77
-----------------------------
Market price -4.48
-----------------------------
Lipper High Yield
Municipal Debt Funds
Category average 0.74
-----------------------------
All returns shown assume reinvestment of distributions.
DISTRIBUTIONS DECLARED
PER COMMON SHARE
12/01/03 - 05/31/04 ($)
0.21
-----------------------------
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 from their
original issue price. Some or all of this discount may be included in the
trust's ordinary income, and any market discount is taxable when distributed.
TOP 5 SECTORS AS OF 05/31/04 (%)
Hospitals 10.8
------------------------------
Congregate care retirement 6.8
------------------------------
Local general obligations 6.4
------------------------------
Water & sewer 6.0
------------------------------
Refunded/escrowed 5.7
------------------------------
QUALITY BREAKDOWN
AS OF 05/31/04 (%)
AAA 35.7
------------------------------
AA 0.6
------------------------------
A 5.8
------------------------------
BBB 19.7
------------------------------
BB 5.8
------------------------------
B 0.7
------------------------------
CCC 0.3
------------------------------
C 0.1
------------------------------
Non-rated 29.9
------------------------------
Cash equivalents 1.4
------------------------------
Sector breakdown is calculated as a percentage of net assets (including auction
preferred shares). Quality breakdown is calculated as a percentage of total
investments. Ratings shown in the quality breakdown represent the highest rating
assigned to a particular bond by one of the following nationally recognized
rating agencies: Standard & Poor's Corporation, Moody's Investors Service, Inc.
or Fitch Ratings Ltd.
Because the trust is actively managed, there is no guarantee that the trust will
continue to invest in these sectors or maintain this quality breakdown in the
future.
For the six-month period ended May 31, 2004, Colonial Municipal Income Trust
returned negative 1.77%, based on investment at net asset value. The trust
trailed its peer group, the Lipper High Yield Municipal Debt Funds Category,
which averaged 0.74%.1 It also fell short of its benchmark, the Lehman Brothers
Municipal Bond Index, which returned negative 0.22% during the period.
CERTAIN BONDS DETRACTED FROM PERFORMANCE
The trust's investments in multi-family housing and airline bonds detracted from
performance. Multi-family housing bond prices declined as low interest rates
allowed more renters to become homeowners, resulting in high apartment vacancy
rates. Delta Air Lines and US Airways (0.2% and 0.2% of total investments,
respectively)2 were among the airlines that turned in disappointing returns. The
trust's above-average stake in zero coupon municipal bonds further hampered
returns. Bought at a steep discount, zeros appreciate to face value at maturity.
They pay no periodic interest payments. Zeros that have longer maturities tend
to underperform when interest rates are rising, as they were during this
six-month period.
The trust's slightly short duration also hindered relative performance early on
when stagnant job growth caused interest rates to decline. Duration is a
measure, expressed in years, of a bond's sensitivity to changes in interest
rates. As interest rates fell, bonds with shorter durations did not appreciate
as much as bonds with longer durations. We made up some, but not all, of this
relative underperformance in the spring when job growth picked up and interest
rates moved higher.
For the six-month period ended May 31, 2004, the trust had an even lower return
of negative 4.48%, based on its market price, as the discount to net asset value
increased. Fears that short-term interest rates would rise and hurt the trust's
high dividend yield put pressure on the stock's price.
LEVERAGE HELPED BOOST INCOME
During the period the trust derived added income from its leverage. The leverage
comes from preferred shares, issued in 1999, which allowed the trust to borrow
against its underlying investments. We invested the proceeds from these shares
in longer maturity, higher-yielding bonds, while paying out a short-term rate
that is influenced by the federal funds rate. The trust earns the difference
between the rate paid to the preferred shareholders and the yield on the longer
maturity securities. With the federal funds rate at 1.0% during this reporting
period, the difference was significant and resulted in added income for the
trust. However, going forward, if the trend is toward higher interest rates, the
rate paid on the preferred shares could rise, lowering the income available to
pay the dividend on the common shares.
--------------
1 Lipper, Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as those of the trust.
2 Holdings are disclosed as of May 31, 2004, and are subject to change.
1
PORTFOLIO MANAGER'S REPORT (CONTINUED)
To bolster the trust's yield, we sold some higher quality bonds and replaced
them with higher-yielding issues. We also replaced 30-year bonds with 20-year
bonds with comparable yields but shorter durations, which should make them less
volatile as interest rates rise. These shorter-maturity bonds did well.
The trust further benefited from its above-average stake in health care bonds,
which were strong performers. Specific issues such as HealthEast, a Minnesota
hospital (0.8% of total investments),2 rallied amid credit improvement. In
addition, we took advantage of attractive yields in the retirement housing
sector, buying bonds issued by well-run companies that were expanding their
facilities. We also purchased securities issued by Charter Mac, a multi-family
housing loan pool (0.7% of total investments).2
LOOKING AHEAD TO RISING INTEREST RATES
We plan to maintain the trust's slightly short duration on the expectation that
short-term interest rates will rise gradually as job gains fuel the economy
while high oil prices keep growth somewhat in check. In this environment, we
continue to believe that high-yield bonds will outpace higher quality issues.
/s/ Maureen G. Newman
Maureen G. Newman has been the portfolio manager of Colonial Municipal Income
Trust since August 1998. Ms. Newman has managed various other municipal funds
for Columbia Management Advisors, Inc. or its predecessors since May 1996.
Past performance is no guarantee of future investment results. Current
performance may be higher or lower than performance data shown.
Tax-exempt investing offers current tax-free income, but it also involves
certain risks. The value of the trust shares will be affected by interest rate
changes and the creditworthiness of issues held in the trust. Investing in
high-yield securities offers the potential for high current income and
attractive total return, but involves certain risks. Lower-rated bond risks
include default of the issuer and rising interest rates. Interest income from
certain tax-exempt bonds may be subject to the federal alternative minimum tax
for individuals and corporations.
2
INVESTMENT PORTFOLIO
May 31, 2004 (Unaudited)
MUNICIPAL BONDS - 96.9% PAR ($) VALUE ($)
-----------------------------------------------------------
EDUCATION - 4.8%
CA Educational Facilities Authority,
Loyola Marymount University,
Series 2001,
(a) 10/01/14 1,250,000 776,275
CA Public Works Board Lease
Revenue, UCLA, Series 2002 A,
5.375% 10/01/15 1,000,000 1,078,990
CA Statewide Community
Development Authority,
Crossroads School for Arts
& Sciences, Series 1998,
6.000% 08/01/28 (b) 1,110,000 1,130,490
MA Development Finance Agency,
Western New England College,
Series 2002,
6.125% 12/01/32 200,000 199,864
MA Industrial Finance Agency,
St. John's High School, Series 1998,
5.350% 06/01/28 300,000 292,326
MI Southfield Economic
Development Corp., Lawrence
University, Series 1998 A,
5.400% 02/01/18 750,000 744,218
NC Capital Facilities Finance
Authority, Meredith College,
Series 2001,
5.125% 06/01/15 1,000,000 1,052,150
VT Educational & Health Buildings
Finance Agency, Norwich
University, Series 1998,
5.500% 07/01/21 1,000,000 1,007,660
WA Higher Education Facilities
Authority, University of Puget
Sound, Series 1998,
5.375% 10/01/30 5,000,000 5,063,300
WV University, Series 2000 A,
(a) 04/01/25 750,000 235,687
-----------
EDUCATION TOTAL 11,580,960
-----------
-----------------------------------------------------------
HEALTH CARE - 24.6%
CONGREGATE CARE RETIREMENT - 6.8%
CA La Verne Certificates of
Participation, Brethren Hillcrest
Homes, Series 2003 B,
6.625% 02/15/25 525,000 527,730
CA Statewide Community
Development Authority,
Eskaton Village - Grass Valley,
Series 2000,
8.250% 11/15/31 (b) 750,000 817,140
CT Development Authority, First
Mortgage, The Elim Park Baptist,
Inc. Project,
Series 2003,
5.850% 12/01/33 430,000 427,484
PAR ($) VALUE ($)
------------------------------------------------------------
FL Capital Projects Finance Authority,
Continuing Care Retirement,
Glenridge on Palmer Ranch,
Series 2002 A,
8.000% 06/01/32 500,000 491,610
FL Lee County Industrial
Development Authority, Shell Point
Village Project, Series 1999 A,
5.500% 11/15/29 400,000 369,648
GA Fulton County Residential Care
Facilities, Canterbury Court Project,
Series 2004 A,
6.125% 02/15/26 500,000 490,160
GA Savannah Economic Development
Authority, 1st Mortgage, Marshes
of Skidaway, Series 2003 A,
7.400% 01/01/34 350,000 338,898
HI Department of Budget & Finance,
Kahala Nui Project, Series 2003 A,
8.000% 11/15/33 750,000 745,125
IL Health Facilities Authority Revenue:
Lutheran Senior Ministries,
Series 2001,
7.375% 08/15/31 250,000 242,625
Washington and Jane Smith
Community, Series 2003 A,
7.000% 11/15/32 525,000 512,888
KS Manhattan, Meadowlark Hills
Retirement Home, Series 1999 A:
6.375% 05/15/20 250,000 251,245
6.500% 05/15/28 1,500,000 1,515,375
MA Boston Industrial Development
Finance Authority, Springhouse, Inc.,
Series 1988,
5.875% 07/01/20 235,000 226,695
MA Development Finance Agency,
Loomis Communities:
Series 1999 A,
5.625% 07/01/15 250,000 238,735
Series 2002 A,
6.900% 03/01/32 125,000 127,064
MD Westminster Economic
Development, Carroll Lutheran
Village, Series 2004 A,
6.250% 05/01/34 500,000 494,700
NH Higher Educational & Health
Facilities Authority, Rivermead at
Peterborough, Series 1998,
5.750% 07/01/28 1,100,000 962,456
NJ Economic Development
Authority, Seabrook Village, Inc.,
Series 2000 A,
8.250% 11/15/30 500,000 530,190
See notes to investment portfolio.
3
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2004 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH CARE (CONTINUED)
CONGREGATE CARE RETIREMENT (CONTINUED)
PA Chartiers Valley Industrial &
Commercial Development
Authority, Asbury Health Center,
Series 1999,
6.375% 12/01/24 1,000,000 960,480
PA County Authority, Dunwoody
Village, Series 2003 A,
5.375% 04/01/17 400,000 408,864
PA Lancaster Industrial Development
Authority, Garden Spot Village,
Series 2000 A,
7.625% 05/01/31 325,000 338,751
PA Philadelphia Authority for
Industrial Development, Baptist
Home of Philadelphia,
Series 1998 A,
5.500% 11/15/18 360,000 321,019
TN Metropolitan Government,
Nashville & Davidson Counties,
Blakeford at Green Hills,
Series 1998,
5.650% 07/01/24 575,000 512,647
TN Shelby County Health,
Educational & Housing
Facilities Board, Germantown
Village, Series 2003 A,
7.250% 12/01/34 600,000 581,310
TX Abilene Health Facilities
Development Corp., Sears
Methodist Retirement
Obligated Group:
Series 1998 A,
5.900% 11/15/25 750,000 688,305
Series 2003 A,
7.000% 11/15/33 200,000 201,702
TX Houston Health Facilities
Development Corp., Retirement
Facilities Revenue, Buckingham
Senior Living Community, Inc.,
Series 2004 A,
7.000% 02/15/26 500,000 486,070
WI Health & Educational Facilities
Authority:
Attic Angel Obligated Group,
Series 1998,
5.750% 11/15/27 875,000 765,826
Clement Manor, Series 1998,
5.750% 08/15/24 1,000,000 881,970
Three Pillars Senior Living
Communities, Series 2003,
5.750% 08/15/26 500,000 482,935
United Lutheran Program for
Aging, Inc., Series 1998,
5.700% 03/01/28 750,000 657,893
-----------
Congregate Care Retirement Total 16,597,540
-----------
PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH SERVICES - 0.7%
MA Development Finance Agency,
Boston Biomedical Research
Institute, Series 1999,
5.650% 02/01/19 620,000 583,972
MA Health & Educational Facilities
Authority, Civic Investments, Inc.,
Series 2002 A,
9.000% 12/15/15 750,000 842,797
MN Minneapolis & St. Paul Housing
& Redevelopment Authority,
Healthpartners Project, Series 2003,
5.625% 12/01/22 200,000 200,218
-----------
Health Services Total 1,626,987
-----------
HOSPITALS - 10.8%
AR Conway Health Facilities Board,
Conway Regional Medical Center:
Series 1999 A,
6.400% 08/01/29 350,000 362,603
Series 1999 B,
6.400% 08/01/29 850,000 879,597
AZ Yavapai County Industrial
Development Authority, Yavapai
Regional Medical Center,
Series 2003 A,
6.000% 08/01/33 150,000 150,405
CA Health Facilities Financing
Authority, Cedars-Sinai Medical
Center, Series 1999 A,
6.125% 12/01/30 650,000 685,769
CA Rancho Mirage Joint Powers
Finance Authority, Eisenhower
Medical Center, Series 2004,
5.625% 07/01/29 750,000 744,473
CO Health Care Facilities Authority,
National Jewish Medical &
Research Center, Series 1998:
5.375% 01/01/16 1,500,000 1,478,955
5.375% 01/01/23 340,000 316,363
FL Orange County Health Facilities
Authority, Orlando Regional
Healthcare, Series 2002,
5.750% 12/01/32 150,000 152,012
FL South Lake County Hospital
District, South Lake Hospital, Inc.,
Series 2003,
6.375% 10/01/34 250,000 249,407
FL West Orange Healthcare District,
Series 2001 A,
5.650% 02/01/22 400,000 400,456
IL Health Facilities Authority:
Swedish American Hospital,
Series 2000,
6.875% 11/15/30 500,000 543,865
Thorek Hospital & Medical
Center, Series 1998,
5.375% 08/15/28 500,000 435,630
See notes to investment portfolio.
4
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2004 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH CARE (CONTINUED)
HOSPITALS (CONTINUED)
IL Southwestern Development
Authority, Anderson Hospital,
Series 1999:
5.375% 08/15/15 500,000 500,995
5.500% 08/15/20 550,000 533,319
IN Health Facility Authority,
Community Foundation,
Northwest Indiana, Inc.,
Series 2004 A,
6.000% 03/01/34 425,000 405,114
LA Public Facilities Authority,
Touro Infirmary, Series 1999:
5.500% 08/15/19 250,000 253,123
5.625% 08/15/29 525,000 516,269
MA Health & Educational Facilities
Authority:
Jordan Hospital, Series 2003 E,
6.750% 10/01/33 250,000 254,333
Milford-Whitinsville
Regional Hospital:
Series 1998 C,
5.250% 07/15/18 500,000 465,925
Series 2002 D,
6.350% 07/15/32 250,000 250,628
MD Health & Higher Educational
Facilities Authority, Adventist
Healthcare, Series 2003 A:
5.000% 01/01/16 365,000 356,824
5.750% 01/01/25 400,000 396,168
MI Dickinson County Healthcare
System, Series 1999,
5.700% 11/01/18 770,000 738,553
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1998 A,
5.375% 07/01/20 460,000 422,027
MN St. Paul Housing & Redevelopment
Authority, HealthEast Project,
Series 2001 A,
5.700% 11/01/15 2,000,000 1,912,360
NH Higher Educational & Health
Facilities Authority:
Catholic Medical Center,
Series 2002,
6.125% 07/01/32 200,000 200,060
Littleton Hospital Association, Inc.,
Series 1998 A:
5.900% 05/01/18 500,000 450,315
6.000% 05/01/28 625,000 546,113
Series 1998 B,
5.900% 05/01/28 675,000 582,073
PAR ($) VALUE ($)
-----------------------------------------------------------
NJ Health Care Facilities Financing
Authority Revenue, Capital Health
Systems Obligated Group, Inc.,
Series 2003 A,
5.750% 07/01/23 500,000 508,465
NV Henderson Healthcare Facility
Revenue, Catholic Healthcare West,
Series 1998,
5.375% 07/01/26 500,000 461,420
NY State Dormitory Authority Revenue:
North Shore - Long Island Jewish
Medical Center, Series 2003,
5.500% 05/01/33 200,000 199,702
South Nassau Communities Hospital,
Series 2003,
5.500% 07/01/23 400,000 404,252
OH Belmont County, East Ohio
Regional Hospital, Series 1998,
5.700% 01/01/13 700,000 621,166
OH Highland County Joint Township
Hospital District, Series 1999,
6.750% 12/01/29 715,000 661,025
OH Lakewood Hospital Improvement
Revenue, Lakewood Hospital
Association, Series 2003,
5.500% 02/15/14 400,000 422,312
OH Miami County, Upper Valley
Medical Center, Inc., Series 1996 A,
6.250% 05/15/16 665,000 688,501
OH Sandusky County, County
Memorial Hospital, Series 1998,
5.150% 01/01/08 270,000 275,389
PA Allegheny County Hospital
Development, Ohio Valley General
Hospital, Series 1998 A,
5.450% 01/01/28 1,050,000 943,425
PA Pottsville Hospital Authority,
Pottsville Hospital & Warne
Clinic, Series 1998,
5.625% 07/01/24 605,000 528,952
SC Jobs Economic Development
Authority, Bon Secours Health Care
Systems, Inc., Series 2002 A,
5.250% 11/15/23 1,250,000 1,209,387
SC Lexington County Health Services
District, Inc. Hospital Improvement,
Series 2003,
5.500% 11/01/23 750,000 753,248
TX Richardson Hospital Authority,
Baylor Richardson Medical Center,
Series 1998,
5.625% 12/01/28 300,000 280,551
TX Tyler Health Facilities
Development Corp., Mother Frances
Hospital, Series 2001,
6.000% 07/01/31 750,000 755,198
See notes to investment portfolio.
5
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2004 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH CARE (CONTINUED)
HOSPITALS (CONTINUED)
VA Prince William County Industrial
Development Authority Revenue,
Potomac Hospital Corp.,
Series 2003,
5.200% 10/01/30 350,000 333,120
VT Educational & Health Buildings
Finance Agency, Brattleboro
Memorial Hospital, Series 1998,
5.375% 03/01/28 500,000 453,615
WI Health & Educational Facilities
Authority:
Aurora Health Care, Inc.,
Series 2003,
6.400% 04/15/33 350,000 360,521
Fort Health Care, Inc. Project,
Series 2004,
6.100% 05/01/34 750,000 759,255
Wheaton Franciscan Services,
Series 2002,
5.750% 08/15/30 450,000 461,736
-----------
Hospitals Total 26,264,974
-----------
INTERMEDIATE CARE FACILITIES - 1.0%
IN Health Facilities Financing
Authority, Hoosier Care, Inc.,
Series 1999 A,
7.125% 06/01/34 1,060,000 860,529
PA Economic Development Financing
Authority, Northwestern Human
Services, Inc., Series 1998 A,
5.250% 06/01/14 2,150,000 1,711,292
-----------
Intermediate Care Facilities Total 2,571,821
-----------
NURSING HOMES - 5.3%
AK Juneau, St. Ann's Care Center,
Series 1999,
6.875% 12/01/25 1,000,000 1,005,740
CO Health Facilities Authority:
American Housing Foundation I,
Inc. Project, Series 1990 A,
8.500% 12/01/31 545,000 513,940
Volunteers of America:
Series 1998 A:
5.450% 07/01/08 250,000 243,222
5.750% 07/01/20 700,000 617,638
Series 1999 A,
6.000% 07/01/29 350,000 305,036
IA Finance Authority, Care Initiatives
Project:
Series 1996,
9.250% 07/01/25 985,000 1,147,436
Series 1998 B:
5.750% 07/01/18 550,000 494,489
5.750% 07/01/28 1,475,000 1,231,197
PAR ($) VALUE ($)
-----------------------------------------------------------
IN Gary Industrial Economic
Development, West Side Health
Care Center, Series 1987 A,
11.500% 10/01/17 (c) 2,230,000 1,115,000
IN Michigan City Health Facilities,
Metro Health Foundation, Inc.
Project, Series 1993,
11.000% 11/01/22 (d) 4,500,000 585,000
KY Economic Development Finance
Authority, Health Facilities Revenue,
Series 2003,
6.500% 01/01/29 925,000 828,633
MA Development Finance Agency:
Alliance Health Care Facilities,
Series 1999,
7.100% 07/01/32 1,150,000 1,081,954
American Health Woodlawn
Manor, Inc.:
Series 2000 A,
7.750% 12/01/27 370,000 309,594
Series 2000 B,
10.250% 06/01/27 (c) 113,186 77,852
GF/Massachusetts Inc.,
Series 1994,
8.300% 07/01/23 895,000 904,210
MI Cheboygan County Economic
Development Corp., Metro Health
Foundation Project, Series 1993,
11.000% 11/01/22 (d) 2,440,000 317,200
MN Carlton Inter-Faith Social
Services, Inc., Series 2000,
7.500% 04/01/19 250,000 256,170
MN Sartell, Foundation for
Healthcare, Series 1999 A,
6.625% 09/01/29 1,025,000 968,943
TX Kirbyville Health Facilities
Development Corp., Heartway III
Project, Series 1997 A,
10.000% 03/20/18 (c) 539,215 188,725
WA Kitsap County Housing
Authority, Martha & Mary Nursing
Home, Series 1996,
7.100% 02/20/36 643,000 749,352
-----------
Nursing Homes Total 12,941,331
-----------
HEALTH CARE TOTAL 60,002,653
-----------
-----------------------------------------------------------
HOUSING - 6.8%
ASSISTED LIVING/SENIOR - 2.9%
DE Kent County, Heritage at Dover,
Series 1999, AMT,
7.625% 01/01/30 1,210,000 999,157
GA Columbus Housing Authority,
The Gardens at Calvary,
Series 1999,
7.000% 11/15/19 495,000 417,404
See notes to investment portfolio.
6
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2004 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HOUSING (CONTINUED)
ASSISTED LIVING/SENIOR (CONTINUED)
IL Development Finance Authority,
Care Institute, Inc., Series 1995,
8.250% 06/01/25 1,435,000 1,364,570
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 (c) 1,630,000 1,059,500
NC Medical Care Commission,
DePaul Community Facilities
Project, Series 1999,
7.625% 11/01/29 985,000 1,003,331
NY Huntington Housing Authority,
Gurwin Jewish Senior Center,
Series 1999:
5.875% 05/01/19 420,000 391,814
6.000% 05/01/29 650,000 590,648
TX Bell County Health Facilities
Development Corp., Care
Institutes, Inc., Series 1994,
9.000% 11/01/24 1,415,000 1,275,736
-----------
Assisted Living/Senior Total 7,102,160
-----------
MULTI-FAMILY - 3.9%
DE Wilmington, Electra Arms Senior
Association Project, Series 1998, AMT,
6.250% 06/01/28 945,000 743,942
FL Broward County Housing Finance
Authority, Chaves Lake Apartment
Project, Series 2000, AMT,
7.500% 07/01/40 500,000 490,150
FL Clay County Housing Finance
Authority, Madison Commons
Apartments, Series 2000 A, AMT,
7.450% 07/01/40 500,000 493,170
MN Washington County Housing &
Redevelopment Authority, Cottages
of Aspen, Series 1992, AMT,
9.250% 06/01/22 990,000 1,012,117
MN White Bear Lake, Birch Lake
Townhome Project:
Series 1989 A, AMT,
10.250% 07/15/19 1,770,000 1,771,239
Series 1989 B, AMT,
(a) 07/15/19 625,000 304,619
Resolution Trust Corp., Pass-Through
Certificates, Series 1993 A,
8.750% 12/01/16 (e) 455,481 436,606
SC Housing Finance & Development,
Multi-Family Housing Finance
Revenue, Westbridge Apartments,
Series 1990 A, AMT,
9.500% 09/01/20 1,921,000 1,871,054
TN Franklin Industrial Development
Board, Landings Apartment Project,
Series 1996 B,
8.750% 04/01/27 710,000 726,692
PAR ($) VALUE ($)
-----------------------------------------------------------
TX Affordable Housing Corp.,
NHT/GTEX Project, Series 2001 C,
10.000% 10/01/31 (c) 685,000 171,250
TX El Paso County Housing Finance
Corp., American Village Communities:
Series 2000 C,
8.000% 12/01/32 300,000 303,492
Series 2000 D,
10.000% 12/01/32 300,000 304,779
VA Alexandria Redevelopment &
Housing Authority, Courthouse
Commons Apartments,
Series 1990 A, AMT,
10.000% 01/01/21 1,000,000 858,130
-----------
Multi-Family Total 9,487,240
-----------
SINGLE FAMILY - 0.0%
KY Kentucky County Single Family
Mortgage Revenue,
Series 1987 A, AMT,
9.000% 09/01/16 25,000 25,048
-----------
Single Family Total 25,048
-----------
HOUSING TOTAL 16,614,448
-----------
-----------------------------------------------------------
INDUSTRIAL - 5.4%
FOOD PRODUCTS - 1.5%
GA Cartersville Development Authority,
Anheuser Busch Project, Inc.,
Series 2002, AMT,
5.950% 02/01/32 1,000,000 1,024,570
IN Hammond, American Maize
Products Co., Series 1994, AMT,
8.000% 12/01/24 260,000 273,039
LA Port of New Orleans Industrial
Development, Continental Grain
Co., Series 1993,
7.500% 07/01/13 1,000,000 1,026,150
LA Southern Louisiana Port
Commission, Cargill, Inc. Project,
Series 1997,
5.850% 04/01/17 500,000 523,910
MI Strategic Fund, Michigan Sugar
Co., Sebewaing Project,
Series 1998 A,
6.250% 11/01/15 1,000,000 933,930
-----------
Food Products Total 3,781,599
-----------
FOREST PRODUCTS - 1.8%
AL Camden Industrial Development
Board, Weyerhaeuser Co.,
Series 2003 B, AMT,
6.375% 12/01/24 400,000 416,924
AL Courtland Industrial Development
Board, Champion International
Corp., Series 1999,
6.000% 08/01/29 1,000,000 996,040
See notes to investment portfolio.
7
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2004 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
INDUSTRIAL (CONTINUED)
FOREST PRODUCTS (CONTINUED)
AL Phenix City Industrial
Development Board Environmental
Improvement Revenue,
Meadwestvaco Corp.,
Series 2001 A, AMT,
6.350% 05/15/35 400,000 412,576
GA Rockdale County Development
Authority, Solid Waste Disposal,
Visy Paper, Inc., Series 1993, AMT,
7.500% 01/01/26 800,000 819,736
LA Beauregard Parish, Boise Cascade
Corp. Project, Series 2002,
6.800% 02/01/27 1,000,000 1,005,830
MI Delta County Economic
Development Corp., Mead
Westvaco-Escanaba,
Series 2002 B, AMT,
6.450% 04/15/23 300,000 309,492
VA Bedford County Industrial
Development Authority, Nekoosa
Packaging Corp.,
Series 1998, AMT,
5.600% 12/01/25 400,000 357,192
-----------
Forest Products Total 4,317,790
-----------
MANUFACTURING - 0.7%
IL Will-Kankakee Regional
Development Authority, Flanders
Corp. Precisionaire Project,
Series 1997, AMT,
6.500% 12/15/17 825,000 804,796
TX Trinity River Authority,
Texas Instruments Project,
Series 1996, AMT,
6.200% 03/01/20 750,000 779,062
-----------
Manufacturing Total 1,583,858
-----------
METALS & MINING - 0.2%
NV Department of Business &
Industry, Wheeling-Pittsburgh
Steel Corp., Series 1999 A, AMT,
8.000% 09/01/14 (e) 237,097 180,630
VA Greensville County Industrial
Development Authority,
Wheeling-Pittsburgh Steel Corp.,
Series 1999 A, AMT,
7.000% 04/01/14 375,000 289,916
-----------
Metals & Mining Total 470,546
-----------
OIL & GAS - 1.2%
TX Gulf Coast Industrial
Development Authority, Solid Waste
Disposal, Citgo Petroleum,
Series 1998, AMT,
8.000% 04/01/28 375,000 391,264
PAR ($) VALUE ($)
-----------------------------------------------------------
VI Government Refinery Facilities,
Hovensa Coker Project,
Series 2002, AMT,
6.500% 07/01/21 250,000 264,203
VI Public Finance Authority, Refinery
Facilities Revenue, Hovensa Refinery:
Series 2003, AMT,
6.125% 07/01/22 425,000 437,546
Series 2004, AMT,
5.875% 07/01/22 400,000 404,832
WA Pierce County Economic
Development Corp., Occidental
Petroleum Co., Series 1993, AMT,
5.800% 09/01/29 1,500,000 1,484,550
-----------
Oil & Gas Total 2,982,395
-----------
INDUSTRIAL TOTAL 13,136,188
-----------
-----------------------------------------------------------
OTHER - 7.7%
OTHER - 0.4%
NY Convention Center Operating
Corp., Yale Building Project,
Series 2003,
(a) 06/01/08 1,000,000 830,310
-----------
Other Total 830,310
-----------
POOL/BOND BANK - 0.3%
MI Municipal Bond Authority,
Local Government Loan Project,
Series 2001 A,
5.375% 11/01/17 550,000 589,391
-----------
Pool/Bond Bank Total 589,391
-----------
REFUNDED/ESCROWED (f) - 5.7%
CA San Joaquin Hills Transportation
Corridor Agency,
Series 1993, AMT,
(a) 01/01/25 10,000,000 3,284,900
CT Development Authority, Sewer
Sludge Disposal Facilities,
Series 1996, AMT,
8.250% 12/01/06 570,000 623,819
GA Forsyth County Hospital
Authority, Georgia Baptist
Healthcare System, Series 1998,
6.000% 10/01/08 755,000 812,810
ID Health Facilities Authority, IHC
Hospitals, Inc., Series 1992,
6.650% 02/15/21 2,750,000 3,374,497
IL Metropolitan Pier & Exposition
Authority, McCormick Project,
Series 1993 A,
(a) 06/15/14 1,010,000 638,926
IL University of Illinois,
Series 2001 A,
5.500% 08/15/17 600,000 671,784
NC Lincoln County, Lincoln County
Hospital, Series 1991,
9.000% 05/01/07 200,000 223,710
See notes to investment portfolio.
8
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2004 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
OTHER (CONTINUED)
REFUNDED/ESCROWED (f) (CONTINUED)
PA Delaware County Authority,
Mercy Health Corp., Southeastern
Pennsylvania Obligated,
Series 1996:
6.000% 12/15/16 1,400,000 1,541,316
6.000% 12/15/26 500,000 547,210
TN Shelby County, Health, Education
& Housing Facilities Board,
Open Arms Development Center:
Series 1992 A,
9.750% 08/01/19 465,000 570,639
Series 1992 C,
9.750% 08/01/19 470,000 575,261
TX Board of Regents University
of Texas, Series 2001 B,
5.375% 08/15/18 350,000 388,178
WV Hospital Finance Authority,
Charleston Area Medical Center,
Series 2000 A,
6.750% 09/01/30 605,000 721,590
-----------
Refunded/Escrowed Total 13,974,640
-----------
TOBACCO - 1.3%
CA Golden State Tobacco
Securitization Authority,
Asset Backed:
Series 2002 A-1:
6.250% 06/01/33 1,600,000 1,439,136
6.750% 06/01/39 1,000,000 885,370
Series 2003 B,
5.500% 06/01/43 500,000 484,410
WA Tobacco Settlement Authority,
Series 2002,
6.625% 06/01/32 500,000 436,045
-----------
Tobacco Total 3,244,961
-----------
OTHER TOTAL 18,639,302
-----------
-----------------------------------------------------------
OTHER REVENUE - 2.8%
HOTELS - 0.8%
PA Philadelphia Authority for
Industrial Development, Doubletree
Project, Series 1997 A,
6.500% 10/01/27 2,000,000 2,011,520
-----------
Hotels Total 2,011,520
-----------
RECREATION - 1.3%
CA Agua Caliente, Band of Cahuilla
Indians Revenue, Series 2003,
5.600% 07/01/13 775,000 768,219
CT Gaming Authority Mohegan Tribe,
Series 2001,
6.250% 01/01/31 (e) 200,000 207,064
CT Mashantucket Western Pequot
Revenue, Series B,
(a) 09/01/18 (e) 1,100,000 477,708
PAR ($) VALUE ($)
-----------------------------------------------------------
FL Capital Trust Agency, Seminole
Tribe Convention Center,
Series 2002 A,
10.000% 10/01/33 (e) 900,000 1,082,646
NM Red River Sports Facility, Red
River Ski Area Project, Series 1998,
6.450% 06/01/07 665,000 669,475
-----------
Recreation Total 3,205,112
-----------
RETAIL - 0.7%
NJ Economic Development Authority,
Glimcher Properties LP Project,
Series 1998, AMT,
6.000% 11/01/28 1,000,000 1,006,960
OH Lake County, North Madison
Properties, Series 1993,
8.819% 09/01/11 630,000 618,181
-----------
Retail Total 1,625,141
-----------
OTHER REVENUE TOTAL 6,841,773
-----------
-----------------------------------------------------------
RESOURCE RECOVERY - 1.3%
DISPOSAL - 0.5%
MA Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 395,000 404,804
UT Carbon County, Laidlaw
Environmental, Series 1997 A, AMT:
7.500% 02/01/10 250,000 253,615
7.450% 07/01/17 500,000 505,425
-----------
Disposal Total 1,163,844
-----------
RESOURCE RECOVERY - 0.8%
MA Industrial Finance Agency,
Ogden Haverhill Project,
Series 1998 A, AMT,
5.500% 12/01/13 1,000,000 979,400
PA Delaware County Industrial
Development Authority, BFI Project,
Series 1988 A,
6.200% 07/01/19 1,000,000 1,024,260
-----------
Resource Recovery Total 2,003,660
-----------
RESOURCE RECOVERY TOTAL 3,167,504
-----------
-----------------------------------------------------------
TAX-BACKED - 17.2%
LOCAL APPROPRIATED - 0.6%
CA Compton Certificates of
Participation, Civic Center &
Capital Improvements,
Series 1997 A,
5.500% 09/01/15 1,000,000 1,019,080
SC Dorchester County School District
No. 2 Installment Purchase Revenue,
Series 2004,
5.250% 12/01/29 500,000 481,640
-----------
Local Appropriated Total 1,500,720
-----------
See notes to investment portfolio.
9
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2004 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TAX-BACKED (CONTINUED)
LOCAL GENERAL OBLIGATIONS - 6.4%
CA East Side Union High School
District, Series 2003 B,
5.100% 02/01/20 750,000 795,652
CA Fresno Unified School District:
Series 2002,
5.750% 07/01/16 600,000 681,342
Series 2002 A,
6.000% 02/01/18 1,245,000 1,443,789
CA Vallejo Unified School District,
Series 2002 A,
5.900% 08/01/25 1,000,000 1,132,210
LA New Orleans, Series 1991,
(a) 09/01/15 4,000,000 2,327,000
NY New York City, Series 1998 H,
5.125% 08/01/25 5,000,000 5,037,800
TX Dallas County Flood Control,
District No. 1, Series 2002,
7.250% 04/01/32 750,000 759,225
TX Irving Independent School
District, Series 1997:
(a) 02/15/15 1,500,000 894,855
(a) 02/15/16 1,000,000 561,380
WA Clark County School District
No. 37, Series 2001 C,
(a) 12/01/18 4,000,000 1,910,120
-----------
Local General Obligations Total 15,543,373
-----------
SPECIAL NON-PROPERTY TAX - 4.4%
CA San Diego Redevelopment
Agency, Series 2001,
(a) 09/01/18 1,015,000 488,185
FL Northern Palm Beach County
Improvement District, Series 1999,
5.900% 08/01/19 500,000 545,525
IL Metropolitan Pier & Exposition
Authority, McCormick Place
Expansion Project:
Series 1993 A,
(a) 06/15/14 3,990,000 2,499,416
Series 1994 A,
(a) 06/15/15 3,000,000 1,766,880
Series 1996 A,
(a) 12/15/13 5,000,000 3,245,250
PR Commonwealth Highway
& Transportation Authority,
Series 2003 AA:
5.500% 07/01/18 375,000 419,640
5.500% 07/01/20 1,500,000 1,668,555
-----------
Special Non-Property Tax Total 10,633,451
-----------
SPECIAL PROPERTY TAX - 4.1%
CA Huntington Beach Community
Facilities District, Grand Coast
Resort, Series 2001,
6.450% 09/01/31 500,000 509,340
PAR ($) VALUE ($)
-----------------------------------------------------------
CA Oakdale Public Finance Authority,
Tax Allocation Revenue,
Central City Redevelopment Project,
Series 2004,
5.375% 06/01/33 1,125,000 1,061,257
CA Orange County Community
Facilities District, Ladera Ranch,
Series 1999 A,
6.500% 08/15/21 1,000,000 1,037,040
CA Orange County Improvement
Bond Act 1915, Phase IV,
No. 01-1-B, Series 2003,
5.750% 09/02/33 500,000 498,545
CA Redwood City Community
Facilities District No. 1 Redwood,
Series 2003 B,
6.000% 09/01/33 300,000 303,573
CA Temecula Valley Unified School
District No. 02-1, Series 2003,
6.125% 09/01/33 355,000 354,957
CA Yorba Linda Redevelopment
Agency, Series 1998 A,
(a) 09/01/24 1,325,000 431,102
FL Celebration Community
Development District, Special
Assessment, Series 2003 A,
6.400% 05/01/34 750,000 760,110
FL Colonial Country Club
Community Development District,
Capital Improvement,
Series 2003,
6.400% 05/01/33 495,000 505,390
FL Double Branch Community
Development District, Special
Assessment, Series 2002 A,
6.700% 05/01/34 500,000 523,815
FL Heritage Palms Community
Development District,
Series 1999 A,
6.250% 11/01/04 370,000 371,454
FL Islands at Doral Southwest
Community Development District,
Series 2003,
6.375% 05/01/35 250,000 255,348
FL Lexington Oaks Community
Development District,
Series 1998 A,
6.125% 05/01/19 685,000 691,206
FL Orlando, Conroy Road
Interchange Project, Series 1998 A:
5.500% 05/01/10 125,000 127,014
5.800% 05/01/26 300,000 299,676
See notes to investment portfolio.
10
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2004 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TAX-BACKED (CONTINUED)
SPECIAL PROPERTY TAX (CONTINUED)
FL Stoneybrook Community
Development District:
Series 1998 A,
6.100% 05/01/19 245,000 247,318
Series 1998 B,
5.700% 05/01/08 35,000 35,192
FL Westchester Community
Development District No. 1, Special
Assessment, Series 2003,
6.125% 05/01/35 275,000 273,347
MI Pontiac Finance Authority,
Development Area No. 3,
Series 2002,
6.375% 06/01/31 450,000 445,149
MI Taylor Tax Increment Finance
Authority, Series 2001,
5.375% 05/01/17 1,000,000 1,067,460
-----------
Special Property Tax Total 9,798,293
-----------
STATE APPROPRIATED - 0.8%
MI Building Authority, Series 2001 I,
5.000% 10/15/24 1,000,000 1,004,230
PR Commonwealth of Puerto Rico,
Public Finance Corp.,
Series 2002 E,
6.000% 08/01/26 900,000 999,090
-----------
State Appropriated Total 2,003,320
-----------
STATE GENERAL OBLIGATIONS - 0.9%
CA State, Series 2003,
5.250% 02/01/23 380,000 380,418
PR Commonwealth, Public
Improvement, Series 2001 A,
5.500% 07/01/21 1,750,000 1,937,127
-----------
State General Obligations Total 2,317,545
-----------
TAX-BACKED TOTAL 41,796,702
-----------
-----------------------------------------------------------
TRANSPORTATION - 8.0%
AIR TRANSPORTATION - 2.7%
CA Los Angeles Regional Airport
Improvement, American Airlines,
Series 2002 C, AMT,
7.500% 12/01/24 500,000 428,385
Laxfuel Corp., Series 2001, AMT,
5.250% 01/01/23 500,000 495,875
FL Capital Trust Agency Revenue,
Air Cargo - Orlando Project,
Series 2003, AMT,
6.750% 01/01/32 350,000 323,655
IN Indianapolis Airport Authority:
FedEx Corp., Series 1994, AMT,
7.100% 01/15/17 1,000,000 1,025,650
United Airlines Project,
Series 1995 A, AMT,
6.500% 11/15/31 (d) 391,911 80,734
PAR ($) VALUE ($)
-----------------------------------------------------------
KY Kenton County Airport Board,
Delta Air Lines, Inc.,
Series 1992 A, AMT,
7.500% 02/01/20 500,000 385,500
MN Minneapolis & St. Paul
Metropolitan Airport Commission,
Northwest Airlines, Inc.:
Series 2001 A, AMT,
7.000% 04/01/25 325,000 286,965
Series 2001 B, AMT,
6.500% 04/01/25 250,000 239,055
NC Charlotte Special Facilities Revenue,
Douglas International Airport,
US Airways, Inc.:
Series 1998, AMT,
5.600% 07/01/27 250,000 133,750
Series 2000, AMT,
7.750% 02/01/28 500,000 357,365
NJ Economic Development Authority,
Continental Airlines, Inc.
Project, Series 2003, AMT,
9.000% 06/01/33 1,250,000 1,292,750
NY New York City Industrial
Development, JFK International
Airport Project, American Airlines,
Inc., Series 2002 B, AMT,
8.500% 08/01/28 500,000 379,025
PA Philadelphia Authority for
Industrial Development, Aero
Philadelphia LLC,
Series 1999, AMT,
5.250% 01/01/09 350,000 327,415
TX Houston Industrial Development,
Air Cargo, Perot Development,
Series 2002, AMT,
6.000% 03/01/23 541,150 539,131
WA Seattle, Northwest Airlines,
Inc., Series 2000, AMT,
7.250% 04/01/30 425,000 377,914
-----------
Air Transportation Total 6,673,169
-----------
AIRPORTS - 2.7%
PA Philadelphia Airport Authority for
Industrial Development,
Series 1998 A, AMT,
5.125% 07/01/28 6,750,000 6,606,157
-----------
Airports Total 6,606,157
-----------
TOLL FACILITIES - 2.3%
CA San Joaquin Hills Transportation
Corridor Agency, Series 1993 A,
(a) 01/15/15 3,000,000 1,808,130
CO Northwest Parkway Public
Highway Authority, Series 2001 D,
7.125% 06/15/41 1,000,000 1,036,210
See notes to investment portfolio.
11
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2004 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TRANSPORTATION (CONTINUED)
TOLL FACILITIES (CONTINUED)
CO Public Highway Authority,
Arapahoe County, E-470, Series 2000 B:
(a) 09/01/18 3,000,000 1,453,170
(a) 09/01/35 8,750,000 854,787
NY Triborough Bridge & Tunnel
Authority, Series 2002,
5.500% 11/15/20 375,000 416,884
-----------
Toll Facilities Total 5,569,181
-----------
TRANSPORTATION - 0.3%
NV Department of Business &
Industry, Las Vegas Monorail
Project, Series 2000,
7.375% 01/01/40 750,000 733,733
-----------
Transportation Total 733,733
-----------
TRANSPORTATION TOTAL 19,582,240
-----------
-----------------------------------------------------------
UTILITY - 18.3%
INDEPENDENT POWER PRODUCERS - 2.6%
MI Midland County Economic
Development Corp.,
Series 2000, AMT,
6.875% 07/23/09 1,000,000 1,031,750
NY Port Authority of New York &
New Jersey, KIAC Partners,
Series 1996 IV, AMT,
6.750% 10/01/11 2,000,000 2,057,540
PA Carbon City Industrial
Development, Panther Creek
Partners Project, Series 2000, AMT,
6.650% 05/01/10 140,000 149,848
PA Economic Development Finance
Authority, Colver Project,
Series 1994 D, AMT,
7.150% 12/01/18 1,500,000 1,546,965
PR Commonwealth of Puerto Rico
Industrial, Educational, Medical &
Environmental Cogeneration
Facilities, AES Project,
Series 2000, AMT,
6.625% 06/01/26 320,000 331,581
VA Pittsylvania County Industrial
Development Authority, Multi-trade
of Pittsylvania, Series 1994 A, AMT:
7.450% 01/01/09 1,000,000 939,170
7.550% 01/01/19 250,000 225,167
-----------
Independent Power Producers Total 6,282,021
-----------
INVESTOR OWNED - 4.7%
AZ Maricopa County Pollution
Control, El Paso Electric Co.,
Series 2002 A,
6.250% 05/01/37 500,000 517,745
PAR ($) VALUE ($)
-----------------------------------------------------------
AZ Pima Industrial Development
Authority, Tucson Electric
Power Co., Series 1997 A, AMT,
6.100% 09/01/25 750,000 704,700
CA Chula Vista Industrial
Development Revenue, San
Diego Gas & Electric Co.,
Series 1996 B, AMT,
5.500% 12/01/21 (g) 475,000 481,669
CT Development Authority,
Connecticut Light & Power Co.,
Series 1993 B, AMT,
5.950% 09/01/28 100,000 103,800
FL Polk County Industrial
Development Authority, Tampa
Electric Co. Project,
Series 1996, AMT,
5.850% 12/01/30 800,000 778,896
IL Bryant Pollution Control Revenue,
Central Illinois Light Co.,
Series 1993,
5.900% 08/01/23 1,000,000 1,001,140
IN Petersburg Pollution Control
Revenue, Indianapolis Power &
Light Project, Series 1995,
6.625% 12/01/24 750,000 766,793
LA Calcasieu Parish Industrial
Development Board, Entergy Gulf
States, Inc., Series 1999,
5.450% 07/01/10 500,000 510,955
LA West Feliciana Parish, Entergy
Gulf States, Inc., Series 1999 B,
6.600% 09/01/28 500,000 511,165
MS Business Finance Corp., Systems
Energy Resources Project, Series 1998,
5.875% 04/01/22 1,500,000 1,504,500
MT Forsyth Pollution Control,
Portland General, Series 1998,
5.200% 05/01/33 225,000 233,804
NV Clark County, Industrial
Development Revenue, Nevada
Power Co., Series 1997 A, AMT,
5.900% 11/01/32 3,000,000 2,584,320
OH Air Quality Development
Authority, Pollution Control Revenue,
Cleveland Electric, Series 2002 A,
6.000% 12/01/13 650,000 665,633
TX Brazos River Authority Pollution
Control Revenue, TXU Electric Co.:
Series 2001 C, AMT,
5.750% 05/01/36 275,000 288,049
Series 2003 C, AMT,
6.750% 10/01/38 775,000 813,200
-----------
Investor Owned Total 11,466,369
-----------
See notes to investment portfolio.
12
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2004 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
UTILITY (CONTINUED)
JOINT POWER AUTHORITY - 0.2%
NC Eastern Municipal Power Agency,
Series 2003 F,
5.500% 01/01/16 430,000 449,427
-----------
Joint Power Authority Total 449,427
-----------
MUNICIPAL ELECTRIC - 4.8%
CA Department of Water Resources,
Power Supply Revenue Bonds,
Series 2002 A,
5.500% 05/01/14 2,000,000 2,202,260
NY Long Island Power Authority,
Series 2003,
5.000% 04/01/10 1,000,000 1,081,600
TX Austin Utilities System,
Series 1994:
(a) 05/15/17 6,600,000 3,461,766
(a) 05/15/18 5,000,000 2,468,200
WA Seattle Light & Power,
Series 2001,
5.500% 03/01/17 2,250,000 2,405,385
-----------
Municipal Electric Total 11,619,211
-----------
WATER & SEWER - 6.0%
CA Castaic Lake Water Agency,
Series 1999 A:
(a) 08/01/25 10,445,000 3,170,789
(a) 08/01/26 10,445,000 2,958,651
MA Water Resource Authority,
Series 1997 D,
5.000% 08/01/24 (h) 6,000,000 6,024,900
MS V Lakes Utility District,
Series 1994,
8.250% 07/15/24 500,000 477,470
TX Houston Water & Sewer System,
Series 1991 C,
(a) 12/01/12 3,000,000 2,068,800
-----------
Water & Sewer Total 14,700,610
-----------
UTILITY TOTAL 44,517,638
-----------
TOTAL MUNICIPAL BONDS
(cost of $242,352,747) 235,879,408
-----------
MUNICIPAL PREFERRED STOCKS - 0.6% SHARES
-----------------------------------------------------------
HOUSING - 0.6%
MULTI-FAMILY - 0.6%
Charter Mac Equity Issuer Trust:
Series A-4, AMT,
6.000% 04/30/19 (e) 1,000,000 1,006,880
AMT,
7.600% 11/30/10 (e) 500,000 567,055
-----------
TOTAL MUNICIPAL PREFERRED STOCKS
(cost of $1,500,000) 1,573,935
-----------
SHORT-TERM OBLIGATIONS - 1.4% PAR ($) VALUE ($)
-----------------------------------------------------------
VARIABLE RATE DEMAND NOTES (i) - 1.4%
CO Denver Healthcare & Hospital
Authority, Healthcare Revenue,
Series 2001 B,
1.140% 12/01/31 100,000 100,000
IL Health Care Facilities Authority,
OSF Healthcare System,
Series 2002,
1.100% 11/15/27 1,100,000 1,100,000
IN Health Facility Financing Authority,
Golden Years Homestead, Inc.,
Series 2002 A,
1.090% 06/01/25 200,000 200,000
MN Brooklyn Center,
Brookdale Corp II Project,
Series 2001,
1.140% 12/01/14 100,000 100,000
MN State Higher Educational
Facility Authority, Olaf College,
Series 5-M1,
1.090% 10/01/32 200,000 200,000
MO State Development Finance
Board, Lease Revenue,
Series 2003,
1.140% 06/01/33 400,000 400,000
MO State Health & Educational
Facilities Authority, Washington
University, Series 1996 C,
1.090% 09/01/30 100,000 100,000
NY New York, Series A-7,
1.070% 08/01/21 900,000 900,000
WY Uinta County Pollution Control
Revenue, Chevron U.S.A.
Inc. Project:
Series 1992,
1.080% 12/01/22 100,000 100,000
Series 1993,
1.080% 08/15/20 200,000 200,000
-----------
TOTAL SHORT-TERM OBLIGATIONS
(cost of $3,400,000) 3,400,000
-----------
TOTAL INVESTMENTS - 98.9%
(cost of $247,252,747) (j) 240,853,343
-----------
OTHER ASSETS & LIABILITIES, NET - 1.1% 2,575,620
-----------------------------------------------------------
NET ASSETS* - 100.0% 243,428,963
-----------
See notes to investment portfolio.
13
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2004 (Unaudited)
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
* Net assets represent both Common Shares and Auction Preferred Shares.
(a) Zero coupon bond.
(b) Denotes a restricted security, which is subject to restrictions on
resale under federal securities laws. At May 31, 2004, these securities
amounted to $1,947,630, which represents 0.8% of net assets.
ACQUISITION ACQUISITION
SECURITY DATE COST
--------------------------------------------------------------
CA Statewide Community Development
Authority:
Crossroads School for
Arts & Sciences, Series 1998:
6.000% 08/01/28 08/21/98 $ 410,000
6.000% 08/01/28 08/31/98 700,000
Eskaton Village - Grass Valley,
Series 2000,
8.250% 11/15/31 09/08/00 750,000
----------
$1,860,000
----------
(c) The issuer is in default of certain debt covenants. Income is
not being fully accrued. As of May 31, 2004, the value of these securities
amounted to $2,612,327, which represents 1.1% of net assets.
(d) The issuer has filed for bankruptcy protection under Chapter 11. Income is
not being accrued. As of May 31, 2004, the value of these securities
amounted to $982,934, which represents 0.4% of net assets.
(e) Security exempt from registration pursuant to Rule 144A under
the Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At May
31, 2004, these securities amounted $3,958,589, which represents 1.6% of net
assets.
(f) 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
principal and interest.
(g) Security purchased on a delayed delivery basis.
(h) A portion of the security with a market value of $2,171,976 pledged as
collateral for open futures contracts.
(i) Variable rate demand note. These securities are payable upon demand and are
secured by letters of credit or other credit support agreements from banks.
The interest rates change periodically and the interest rates shown reflect
the rates as of May 31, 2004.
(j) Cost for federal income tax purposes is $247,089,705.
At May 31, 2004, the Trust held the following open short futures contracts:
UNREALIZED
AGGREGATE EXPIRATION APPRECIATION
TYPE VALUE FACE VALUE DATE (DEPRECIATION)
-----------------------------------------------------------------------------
10-Year U.S.
Treasury Note $29,145,594 $29,126,758 Sept-2004 $ (18,836)
U.S. Long Bond 26,919,375 28,242,160 Jun-2004 1,322,785
----------
$1,303,949
----------
ACRONYM NAME
-----------------------------------------------------------
AMT Alternative Minimum Tax
See notes to financial statements.
14
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2004 (Unaudited)
ASSETS:
Investments, at cost $247,252,747
------------
Investments, at value $240,853,343
Cash 91,290
Receivable for:
Investments sold 32,971
Interest 3,796,306
Futures variation margin 287,750
Deferred Trustees' compensation plan 11,389
Other assets 36,232
------------
Total Assets 245,109,281
------------
LIABILITIES:
Payable for:
Investments purchased on
a delayed delivery basis 475,000
Distributions--common shares 969,516
Distributions--preferred shares 27,418
Preferred shares remarketing commissions 5,559
Investment advisory fee 133,264
Pricing and bookkeeping fees 16,063
Custody fee 2,943
Audit fee 27,555
Transfer agent fee 11,611
Deferred Trustees' fees 11,389
------------
Total Liabilities 1,680,318
------------
Auction Preferred Shares (3,600 shares issued and
outstanding at $25,000 per share) $ 90,000,000
------------
COMPOSITION OF NET ASSETS
APPLICABLE TO COMMON SHARES:
Paid-in capital--common shares $207,841,868
Undistributed net investment income 630,117
Accumulated net realized loss (49,947,567)
Net unrealized appreciation (depreciation) on:
Investments (6,399,404)
Futures contracts 1,303,949
------------
Net assets at value applicable to 27,719,719
common shares of beneficial
interest outstanding $153,428,963
============
Net asset value per common share $ 5.54
============
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 2004 (Unaudited)
INVESTMENT INCOME:
Interest $ 7,231,669
Dividends 21,727
------------
Total Investment Income 7,253,396
------------
EXPENSES:
Investment advisory fee 812,564
Transfer agent fee 34,511
Pricing and bookkeeping fees 62,788
Trustees' fees 5,041
Preferred shares remarketing commissions 112,937
Custody fee 8,617
Other expenses 83,721
------------
Total Expenses 1,120,179
Custody earnings credit (280)
------------
Net Expenses 1,119,899
------------
Net Investment Income 6,133,497
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FUTURES CONTRACTS:
Net realized loss on:
Investments (1,081,708)
Futures contracts (2,173,718)
------------
Net realized loss (3,255,426)
------------
Net change in unrealized appreciation/
depreciation on:
Investments (6,567,728)
Futures contracts 1,211,341
------------
Net change in unrealized
appreciation/depreciation (5,356,387)
------------
Net Loss (8,611,813)
------------
Net Decrease in Net Assets from Operations (2,478,316)
------------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (448,647)
------------
Net Decrease in Net Assets from Operations
Applicable to Common Shares $ (2,926,963)
------------
See notes to financial statements.
15
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
MAY 31, NOVEMBER 30,
INCREASE (DECREASE) IN NET ASSETS: 2004 2003
-------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 6,133,497 $ 13,061,245
Net realized loss on investments and futures contracts (3,255,426) (6,018,896)
Net change in unrealized appreciation/depreciation on investments and futures contracts (5,356,387) 6,503,690
----------- ------------
Net Increase (Decrease) from Operations (2,478,316) 13,546,039
----------- ------------
LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS:
From net investment income (448,647) (886,846)
----------- ------------
Increase (Decrease) in Net Assets from Operations Applicable to Common Shares (2,926,963) 12,659,193
----------- ------------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (5,818,993) (11,897,663)
----------- ------------
SHARE TRANSACTIONS:
Distributions reinvested 181,019 188,292
----------- ------------
Total Increase (Decrease) in Net Assets Applicable to Common Shares (8,564,937) 949,822
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of period 161,993,900 161,044,078
----------- ------------
End of period (including undistributed net investment income
of $630,117 and $764,260, respectively) $153,428,963 $161,993,900
----------- ------------
NUMBER OF TRUST SHARES:
Common Shares:
Issued for distributions reinvested 31,152 32,387
Outstanding at:
Beginning of period 27,688,567 27,656,180
----------- ------------
End of period 27,719,719 27,688,567
----------- ------------
Preferred Shares:
Outstanding at end of period 3,600 3,600
----------- ------------
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS
May 31, 2004 (Unaudited)
NOTE 1. ORGANIZATION
Colonial Municipal Income Trust (the "Trust") is a Massachusetts business trust
registered under the Investment Company Act of 1940 (the "Act"), as amended, as
a non-diversified, closed-end management investment company.
INVESTMENT GOAL
The Trust seeks to provide high current income, generally exempt from federal
income taxes, by investing primarily in medium and lower quality bonds and notes
issued by or on behalf of state and local government units whose interest is
exempt from ordinary federal income tax, other than the possible incidence of
any alternative minimum tax. The Trust's secondary goal is to seek total return.
TRUST SHARES
The Trust may issue an unlimited number of common shares. On July 20, 1999, the
Trust issued 3,600 Auction Preferred Shares ("APS").
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Trust in the preparation of its financial statements.
SECURITY VALUATION
Debt securities generally are valued by a pricing service approved by the
Trust's Board of Trustees, based upon market transactions for normal,
institutional-size trading units of similar securities. The services may use
various pricing techniques which take into account appropriate factors such as
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other data, as well as broker quotes. Debt securities for which quotations
are readily available are valued at an over-the-counter or exchange bid
quotation. Certain debt securities, which tend to be more thinly traded and of
lesser quality, are priced based on fundamental analysis of the financial
condition of the issuer and the estimated value of any collateral. Valuations
developed through pricing techniques may vary from the actual amounts realized
upon sale of the securities, and the potential variation may be greater for
those securities valued using fundamental analysis.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
Restricted securities and investments for which market quotations are not
readily available, or quotations which management believes are not appropriate,
are valued at fair value as determined in good faith under consistently applied
procedures established by and under the general supervision of the Board of
Trustees.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
FUTURES CONTRACTS
The Trust may invest in municipal and U.S. Treasury futures contracts. The Trust
may 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 involves
certain risks, which include: (1) imperfect correlation between the price
movement of the instruments and the underlying securities, (2) inability to
close out positions due to differing trading hours, or the temporary absence of
a liquid market, for either the instrument or the underlying securities, or (3)
an inaccurate prediction by Columbia Management Advisors, Inc. of the future
direction of interest rates. Any of these risks may involve amounts exceeding
the variation margin recorded on the Trust's Statement of Assets and Liabilities
at any given time.
Upon entering into a futures contract, the Trust deposits cash or securities
with the broker in an amount sufficient to meet the initial margin requirement.
Subsequent payments are made or received by the Trust equal to the daily change
in the contract value and are recorded as variation margin payable or receivable
and offset in unrealized gains or losses. The Trust also identifies portfolio
securities as segregated with the custodian in a separate account in an amount
equal to the futures contract. The Trust recognizes a realized gain or loss when
the contract is closed or expires.
OPTIONS
The Trust may write call and put options on futures it owns or in which it may
invest. Writing put options tends to increase the Trust's exposure to the
underlying instrument. Writing call options tends to decrease the Trust's
exposure to the underlying instrument. When the Trust writes a call or put
option, an amount equal to the premium received is recorded as a liability and
subsequently marked-to-market to reflect the current value of the option
written. Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised or
closed are added to the proceeds or offset against the amounts paid on the
underlying future transaction to determine the realized gain or
17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2004 (Unaudited)
loss. The Trust as a writer of an option has no control over whether the
underlying future may be sold (call) or purchased (put) and as a result bears
the market risk of an unfavorable change in the price of the future underlying
the written option. There is the risk the Trust may not be able to enter into a
closing transaction because of an illiquid market.
The Trust may also purchase put and call options. Purchasing call options tends
to increase the Trust's exposure to the underlying instrument. Purchasing put
options tends to decrease the Trust's exposure to the underlying instrument. The
Trust pays a premium, which is included in the Trust's Statement of Assets and
Liabilities as an investment and subsequently marked-to-market to reflect the
current value of the option. The risk associated with purchasing put and call
options is limited to the premium paid. Premiums paid for purchasing options
which expire are treated as realized losses. Premiums paid for purchasing
options which are exercised or closed are added to the amounts paid or offset
against the proceeds on the underlying future transaction to determine the
realized gain or loss. The Trust's custodian will set aside cash or liquid
portfolio securities equal to the amount of the written options contract
commitment in a separate account.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from registration. In
some cases, the issuer of restricted securities has agreed to register such
securities for resale at the issuer's expense either upon demand by the Trust or
in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Board of Trustees. The Trust will not
incur any registration costs upon such resale.
DELAYED DELIVERY SECURITIES
The Trust may trade securities on other than normal settlement terms, including
securities purchased or sold on a "when-issued" basis. 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. The Trust identifies cash or
liquid portfolio securities as segregated with the custodian in an amount equal
to the delayed delivery commitment.
INCOME RECOGNITION
Interest income is recorded on the accrual basis. Premium and discount are
amortized and accreted, respectively, on all debt securities.
FEDERAL INCOME TAX STATUS
The Trust intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, as amended, and will distribute
substantially all of its taxable or tax-exempt income, if any, for its tax year,
and as such will not be subject to federal income taxes. In addition, the Trust
intends to distribute in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, such that
the Trust should not be subject to federal excise tax. Therefore, no federal
income or excise tax provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to common shareholders are recorded on ex-date. Distributions to
Auction Preferred shareholders are recorded daily and payable at the end of each
dividend period. Each dividend payment period for the APS is generally seven
days. The applicable dividend rate for the APS on May 31, 2004 was 1.07%. For
the six months ended May 31, 2004, the Trust declared dividends to Auction
Preferred shareholders amounting to $448,647, representing an average APS
dividend rate of 0.99%.
NOTE 3. FEDERAL TAX INFORMATION
The tax character of distributions paid during the year ended November 30, 2003
was as follows:
Distributions paid from:
Tax-Exempt Income $12,778,538
Ordinary Income* 5,971
Long-Term Capital Gains --
* For tax purposes short-term capital gains distributions, if any, are
considered ordinary income distributions.
Unrealized appreciation and depreciation at May 31, 2004, based on cost of
investments for federal income tax purposes was:
Unrealized appreciation $ 10,329,357
Unrealized depreciation (16,565,719)
------------
Net unrealized depreciation $ (6,236,362)
------------
The following capital loss carryforwards, determined as of November 30, 2003,
may be available to reduce taxable income arising from future net realized gains
on investments, if any, to the extent permitted by the Internal Revenue Code:
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------- -----------------------
2004 $ 4,074
2005 7,196,783
2007 3,490,821
2008 13,036,764
2009 3,114,307
2010 7,684,792
2011 4,393,912
-------------
$38,921,453
-------------
Expired capital loss carryforwards are recorded as a reduction of paid-in
capital.
18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2004 (Unaudited)
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the
Trust. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary
of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004,
FleetBoston, including the Trust's investment advisor, was acquired by Bank of
America Corporation ("BOA"). The acquisition did not change the way the Trust is
managed, the investment personnel assigned to manage the Trust or the fees paid
by the Trust.
INVESTMENT ADVISORY FEE
Columbia provides administrative and other services to the Trust in addition to
investment advisory services. Columbia receives a monthly investment advisory
fee at the annual rate of 0.65% of the Trust's average weekly net assets,
including assets applicable to the APS.
PRICING AND BOOKKEEPING FEES
Columbia is responsible for providing pricing and bookkeeping services to the
Trust under a pricing and bookkeeping agreement. Under a separate agreement (the
"Outsourcing Agreement"), Columbia has delegated those functions to State Street
Corporation ("State Street"). As a result, Columbia pays the total fees received
to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Trust, Columbia receives
from the Trust an annual flat fee of $10,000 paid monthly, and in any month that
the Trust's average weekly net assets, including assets applicable to APS,
exceed $50 million, an additional monthly fee. The additional fee rate is
calculated by taking into account the fees payable to State Street under the
Outsourcing Agreement. This rate is applied to the average weekly net assets,
including assets applicable to APS, of the Trust for that month. The Trust also
pays additional fees for pricing services based on the number of securities held
by the Trust. For the six months ended May 31, 2004, the Trust's annualized
effective pricing and bookkeeping fee rate was 0.050%.
CUSTODY CREDITS
The Trust has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. The Trust could have invested a portion of the
assets utilized in connection with the expense offset arrangement in an
income-producing asset if it had not entered into such an agreement.
FEES PAID TO OFFICERS AND TRUSTEES
The Trust pays no compensation to its officers, all of whom are employees of
Columbia or its affiliates.
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.
OTHER
Columbia provides certain services to the Trust related to Sarbanes-Oxley
compliance. For the six months ended May 31, 2004, the Trust paid $769 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the six months ended May 31, 2004, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $14,850,998 and
$17,839,823, respectively.
NOTE 6. PREFERRED SHARES
The Trust currently has outstanding 3,600 APS. The APS 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).
Under the Act, the Trust is required to maintain asset coverage of at least 200%
with respect to the APS as of the last business day of each month in which any
APS are outstanding. Additionally, the Trust is required to meet more stringent
asset coverage requirements under the terms of the APS Agreement and in
accordance with the guidelines prescribed by the APS' rating agencies. Should
these requirements not be met, or should dividends accrued on the APS not be
paid, the Trust may be restricted in its ability to declare dividends to common
shareholders or may be required to redeem certain APS. At May 31, 2004, there
were no such restrictions on the Trust.
NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
GEOGRAPHIC CONCENTRATION
The Trust has greater than 5% of its total investments at May 31, 2004 invested
in debt obligations issued by the states of California, Illinois, Massachusetts,
New York, Pennsylvania, Texas and Washington and their respective political
subdivisions, agencies and public authorities. The Trust is more susceptible to
economic and political factors adversely affecting issuers of the specific
state's municipal securities than are municipal bond funds that are not
concentrated to the same extent in these issuers.
HIGH-YIELD SECURITIES
Investing in high-yield securities may involve greater credit risk and
considerations not typically associated with investing in U.S. Government bonds
and other higher quality fixed income securities. These securities are
non-investment grade securities, often referred to as "junk bonds." Economic
downturns may disrupt the high yield market and impair the ability of issuers to
repay principal and interest. Also, an increase in interest rates would likely
have an adverse impact on the value of such
19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2004 (Unaudited)
obligations. Moreover, high-yield securities may be less liquid to the extent
there is no established secondary market.
INDUSTRY FOCUS
The Trust may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
ISSUER FOCUS
As a non-diversified fund, the Trust may invest a greater percentage of its
total assets in the securities of fewer issuers than a diversified fund. The
Trust may, therefore, have a greater risk of loss from a few issuers than a
similar fund that invests more broadly.
LEGAL PROCEEDINGS
Columbia and Columbia Funds Distributor, Inc. ("CFDI"), and certain of their
affiliates (collectively, "the Columbia Group") have received information
requests and subpoenas from various regulatory and law enforcement authorities
in connection with their investigations of late trading and market timing in
mutual funds, as well as other industry wide issues. The Columbia Group has not
uncovered any instances where Columbia or CFDI were knowingly involved in late
trading of mutual fund shares.
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against Columbia and CFDI, alleging that they had violated certain
provisions of the federal securities laws in connection with trading activity in
mutual fund shares. Also on February 24, 2004, the New York Attorney General
("NYAG") filed a civil complaint in New York Supreme Court, County of New York
against Columbia and CFDI alleging that Columbia and CFDI had violated certain
New York anti-fraud statutes. If either Columbia or CFDI is unsuccessful in its
defense of these proceedings, it could be barred from serving as an investment
advisor or distributor for any investment company registered under the
Investment Company Act of 1940, as amended (a "registered investment company").
Such results could prevent Columbia, CFDI or any company that is an affiliated
person of Columbia and CFDI from serving as an investment advisor or distributor
for any registered investment company, including your fund. Your fund has been
informed by Columbia and CFDI that, if these results occur, they will seek
exemptive relief from the SEC to permit them to continue to serve as your fund's
investment advisor and distributor. There is no assurance that such exemptive
relief will be granted. On March 15, 2004, Columbia and CFDI entered into
agreements in principle with the SEC Division of Enforcement and NYAG in
settlement of the charges. Under the agreements, Columbia and CFDI agreed, among
other things, to the following conditions: payment of $70 million in
disgorgement; payment of $70 million in civil penalties; an order requiring
Columbia and CFDI to cease and desist from violations of the antifraud
provisions and other provisions of the federal securities laws; governance
changes designed to maintain the independence of the mutual fund boards of
trustees and ensure compliance with securities laws and their fiduciary duties;
and retention of an independent consultant to review Columbia's and CFDI's
compliance policies and procedures. The agreement requires the final approval of
the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to
reduce mutual fund fees by $80 million over a five-year period.
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the funds.
In connection with the events described in detail above, various parties have
filed suit against certain funds, their Boards and/or FleetBoston (and
affiliated entities). These suits and certain regulatory investigations are
ongoing. Accordingly, an estimate of the financial impact of this litigation on
any fund, if any, cannot currently be made.
20
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise noted):
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, -----------------------------------------------------------------
2004 2003 2002 2001 2000 1999
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.85 $ 5.82 $ 6.12 $ 6.05 $ 6.51 $ 7.57
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.22(a) 0.47(a) 0.50(a)(b) 0.53(a) 0.55(c) 0.46
Net realized and unrealized gain (loss)
on investments and futures contracts (0.30) 0.02 (0.33)(b) 0.03 (0.44) (0.97)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations (0.08) 0.49 0.17 0.56 0.11 (0.51)
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (0.02) (0.03) (0.05) (0.10) (0.14) (0.04)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations
Applicable to Common Shareholders (0.10) 0.46 0.12 0.46 (0.03) (0.55)
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO
COMMON SHAREHOLDERS:
From net investment income (0.21) (0.43) (0.42) (0.39) (0.43) (0.42)
In excess of net investment income -- -- -- -- -- (0.04)
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions Declared to
Common Shareholders (0.21) (0.43) (0.42) (0.39) (0.43) (0.46)
---------- ---------- ---------- ---------- ---------- ----------
LESS SHARE TRANSACTIONS:
Commission and offering costs--
preferred shares -- -- -- -- --(d) (0.05)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 5.54 $ 5.85 $ 5.82 $ 6.12 $ 6.05 $ 6.51
---------- ---------- ---------- ---------- ---------- ----------
Market price per share--
common shares $ 5.20 $ 5.65 $ 5.67 $ 5.65 $ 5.38 $ 5.75
---------- ---------- ---------- ---------- ---------- ----------
Total return-- based on market value
-- common shares (e) (4.48)%(f) 7.35% 7.87% 12.05% 0.84% (24.33)%
---------- ---------- ---------- ---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (g)(h) 1.40%(i) 1.39% 1.37% 1.45% 1.33% 1.08%
Net investment income before
preferred stock dividend (g)(h) 7.65%(i) 8.17% 8.28%(b) 8.55% 8.88% 7.00%
Net investment income after preferred
stock dividend (g)(h) 7.09%(i) 7.61% 7.47%(b) 6.94% 6.68% 6.36%
Portfolio turnover rate 6%(f) 15% 27% 12% 12% 20%
Net assets, end of period (000's)--
common shares $ 153,429 $ 161,994 $ 161,044 $ 169,080 $ 167,265 $ 180,082
(a)Per share data was calculated using average shares outstanding during the
period.
(b)Effective December 1, 2001, the Trust adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began accreting
market discount on all debt securities. The effect of this change, for the
year ended November 30, 2002 was to increase the ratio of net investment
income to average net assets from 8.24% to 8.28% and increase the ratio of
net investment income (adjusted for dividend payments to preferred
shareholders) from 7.43% to 7.47%. The impact to net investment income and
net realized and unrealized loss per share was less than $0.01. Per share
data and ratios for periods prior to November 30, 2002 have not been restated
to reflect this change in presentation.
(c)The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(d)Rounds to less than $0.01 per share.
(e)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(f)Not annualized.
(g)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h)Ratios reflect average net assets available to common shares only.
(i)Annualized.
21
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise noted):
YEAR ENDED NOVEMBER 30,
------------------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.41 $ 7.41 $ 7.48 $ 7.15 $ 7.83
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.47 0.51 0.51 0.55 0.61
Net realized and unrealized gain (loss) on investments
and futures contracts 0.18 --(a) (0.07) 0.33 (0.71)
---------- ---------- ---------- ---------- ----------
Total Income from Investment Operations 0.65 0.51 0.44 0.88 (0.10)
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (0.48) (0.51) (0.51) (0.55) (0.58)
In excess of net investment income (0.01) -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Distributions Declared to Common Shareholders (0.49) (0.51) (0.51) (0.55) (0.58)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 7.57 $ 7.41 $ 7.41 $ 7.48 $ 7.15
---------- ---------- ---------- ---------- ----------
Market price per share-- common shares $ 8.13 $ 7.56 $ 7.25 $ 6.75 $ 6.75
---------- ---------- ---------- ---------- ----------
Total return-- based on market value-- common shares (b) 14.57% 11.67% 15.36% 8.04% (10.06)%
---------- ---------- ---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA:
Expenses (c) 0.82% 0.86% 0.91% 0.98% 0.90%
Net investment income (c) 6.20% 6.83% 6.87% 7.47% 8.12%
Portfolio turnover rate 34% 15% 22% 24% 24%
Net assets, end of period (000's)--common shares $ 208,931 $ 203,533 $ 202,793 $ 204,666 $ 195,444
(a)Rounds to less than $0.01 per share.
(b)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(c)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
ASSET COVERAGE REQUIREMENTS
INVOLUNTARY AVERAGE
ASSET LIQUIDATING MARKET
TOTAL AMOUNT COVERAGE PREFERENCE VALUE
OUTSTANDING PER SHARE PER SHARE PER SHARE
--------------------------------------------------------------------------------------------------------------------------------
05/31/04 * $90,000,000 $67,619 $25,008 $25,000
11/30/03 90,000,000 69,998 25,006 25,000
11/30/02 90,000,000 69,734 25,001 25,000
11/30/01 90,000,000 71,967 25,007 25,000
11/30/00 90,000,000 71,462 25,011 25,000
11/30/99 ** 90,000,000 50,023 25,006 25,000
* Unaudited.
** On July 20, 1999, the Trust began offering Auction Preferred Shares.
22
SHAREHOLDER MEETING RESULTS
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On May 26, 2004, the Annual Meeting of Shareholders of the Trust was held to
conduct a vote for or against the approval of the following Items listed on the
Trust's Proxy Statement for said Meeting. On March 10, 2004, the record date for
the Meeting, the Trust had 27,698,885 common shares outstanding. The votes cast
were as follows:
PROPOSAL 1:
ELECTION OF TRUSTEES: FOR WITHHELD
-----------------------------------------------------------------------------
Richard W. Lowry 22,183,860 558,812
John J. Neuhauser 22,211,431 531,241
Patrick J. Simpson 22,213,447 529,225
Thomas C. Theobald 22,202,745 539,927
Richard L. Woolworth 22,219,066 523,606
On March 10, 2004, the record date for the Meeting, the Trust had 3,600
preferred shares outstanding. The votes cast were as follows:
PROPOSAL 2:
ELECTION OF TRUSTEES: FOR WITHHELD
-----------------------------------------------------------------------------
Douglas A. Hacker 3,146 23
Richard W. Lowry 3,146 23
John J. Neuhauser 3,146 23
Patrick J. Simpson 3,146 23
Thomas E. Stitzel 3,146 23
Thomas C. Theobald 3,146 23
Richard L. Woolworth 3,146 23
23
DIVIDEND REINVESTMENT PLAN
COLONIAL MUNICIPAL INCOME TRUST
Shareholders may elect to have all distributions of dividends and capital gains
automatically reinvested by EquiServe Trust Company, N.A. (the "Plan Agent"), as
agent under the Trust's Dividend Reinvestment and Cash Purchase Plan (the
"Plan"). Pursuant to the Plan, the provisions of which are described below,
shareholders not making such an election will receive all such amounts in cash
paid by check mailed directly to the shareholder by the Plan Agent, as the
dividend paying agent.
If the Trustees of the Trust declare a dividend or determine to make a capital
gain distribution payable either in shares of the Trust or in cash, as
shareholders may have elected, non-participants in the Plan will receive cash
and participants in the Plan will receive the equivalent in shares of the Trust.
If the market price of the shares on the payment date for the dividend or
distribution is equal to or exceeds their net asset value, participants will be
issued shares of the Trust at the higher of net asset value of 95% of the market
price. If the net asset value exceeds the market price of Trust shares at such
time, or if the Trust declares a dividend or other distribution payable only in
cash, the Plan Agent will, as agent for Plan participants, buy Trust shares in
the open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts. If, before the Plan Agent has completed its purchases,
the market price exceeds the net asset value of the Trust's shares, the average
per share purchase price paid by the Plan Agent may exceed the net asset value
of the Trust's shares, resulting in the acquisition of fewer shares than if the
dividend or distribution had been paid in shares issued by the Trust.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent. When a participant withdraws from the Plan or upon termination of
the Plan as provided below, certificates for whole shares credited to the
participant's account under the Plan will be issued and a cash payment will be
made for any fraction of a share credited to such account.
Participants in the Plan have the option of making additional cash payments to
the Plan Agent semi-annually, for investment in the Trust's shares. Such
payments may be made in any amount from $100 to $500. State Street 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.
In the case of shareholders such as banks, brokers or nominees holding shares
for others who are the beneficial owners of those shares, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time to
time by the shareholder of record as representing the total amount registered in
such shareholder's name and held for the account of beneficial owners who are to
participate in the Plan.
There is no charge to Plan participants for reinvesting dividends or
distributions. The Plan Agent's fees for the handling of the reinvestment of
dividends and distributions will be paid by the Trust. There will be no
brokerage charges with respect to shares issued directly by the Trust as a
result of dividends or distributions payable either in stock or in cash.
However, each participant will pay a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases in connection
with the reinvestment of dividends or distributions as well as from voluntary
cash payments. Brokerage charges for purchasing small amounts of stock for
individual accounts under the voluntary cash purchase provisions of the Plan are
expected to be less than the usual brokerage charges for individual transactions
of comparable size, because the Plan Agent will be purchasing shares for all
participants in blocks and charging to cash purchase Plan participants a pro
rated portion of the lower commissions usually obtainable on such block
purchases.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income tax that may be payable on such dividends or
distributions.
The Plan may be amended or terminated on 30 days' written notice to the Plan
participants. All correspondence concerning the Plan should be directed to
EquiServe by mail at P.O. Box 403011, Providence, RI 02940-3011, or by phone at
1-800-426-5523.
24
TRANSFER AGENT
--------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Municipal Income Trust is:
EquiServe
P.O. Box 43010
Providence, RI 02940-3010
The trust mails one shareholder report to each shareholder address. Shareholders
can order additional reports by calling 800-730-6001. In addition,
representatives at that number can provide shareholders information about the
trust.
Financial advisors who want additional information about the trust may speak to
a representative at 800-426-3750.
A description of the policies and procedures that the trust uses to determine
how to vote proxies relating to its portfolio securities is available (i)
without charge, upon request, by calling 800-730-6001 and (ii) on the Securities
and Exchange Commission's website at http://www.sec.gov.
This report has been prepared for shareholders of Colonial Municipal Income
Trust.
COLONIAL MUNICIPAL INCOME TRUST SEMIANNUAL REPORT
101-03/056S-0504 (07/04) 04/1532
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable at this time.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable at this time.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have not been any material changes to the procedures by which shareholders
may recommend nominees to the registrant's Board of Trustees/Directors since
those procedures were last disclosed in response to Item 7(d)(2)(ii)(G) of
Schedule 14A.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer, based on his evaluation of the registrant's disclosure
controls and procedures as of a date within 90 days of the filing of
this report, has concluded that such controls and procedures are
adequately designed to ensure that information required to be
disclosed by the registrant in Form N-CSR is accumulated and
communicated to the registrant's management, including the principal
executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not
applicable at this time.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable at this time.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Colonial Municipal Income Trust
------------------------------------------------------------------
By (Signature and Title) /s/ J. Kevin Connaughton
------------------------------------------------------
J. Kevin Connaughton, President and Treasurer
Date August 3, 2004
--------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ J. Kevin Connaughton
------------------------------------------------------
J. Kevin Connaughton, President and Treasurer
Date August 3, 2004
--------------------------------------------------------------------------