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: 811-5754
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Colonial High Income Municipal Trust
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(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
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-772-3698
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Date of fiscal year end: 11/30/05
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Date of reporting period: 05/31/05
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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. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
COLONIAL HIGH INCOME MUNICIPAL TRUST SEMIANNUAL REPORT
MAY 31, 2005
[cover photo of domed building]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
PRESIDENT'S MESSAGE
Dear Shareholder:
In 2004, Colonial Funds became part of Columbia Management, the asset management
division of Bank of America, one of the largest, most respected financial
institutions in the United States. As a direct result of this merger, a number
of changes are in the works that we believe offer significant potential benefits
for our shareholders. First, some funds may be merged in order to eliminate
redundancies, others may be liquidated and fund management teams will be aligned
to maximize performance potential. You will receive more detailed information
about these changes if your fund is affected and you may be asked to vote on
certain fund changes. In this matter, your timely response will enable us to
implement the changes in 2005.
As a result of these changes, we believe we will offer shareholders an even
stronger lineup of investment options. What will not change as we enter this
next phase of consolidation is our commitment to the highest standards of
performance and our dedication to superior service. Change for the good has
another name: it's called improvement. It helps move us forward, and we believe
that it represents progress for all our shareholders in their quest for
long-term financial success.
In the pages that follow, you'll find a detailed report from the fund's manager
on key factors that influenced your fund's performance. We hope that you will
read the manager reports carefully and discuss any questions you might have with
your financial advisor.
As always, we thank you for choosing Colonial Funds. We appreciate your
continued confidence. And, we look forward to helping you keep your long-term
financial goals on target in the years to come.
Sincerely,
/s/ Christopher L. Wilson
Christopher L. Wilson
President, Columbia Funds
Christopher L. Wilson is Head of Mutual Funds for Columbia Management, President
of Columbia Funds, President & CEO of Nations Funds and President of Galaxy
Funds, responsible for the day-to-day delivery of mutual fund services to the
firm's investors. With the exception of distribution, Chris oversees all aspects
of the mutual fund services operation, including treasury, investment accounting
and shareholder and broker services. Chris joined Bank of America in August
2004.
The views expressed in the President's Message and Portfolio Manager's Report
reflect the current views of the respective parties. These views are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict so actual outcomes and results may
differ significantly from the views expressed. These views are subject to change
at any time based upon economic, market or other conditions and the respective
parties disclaim any responsibility to update such views. These views may not be
relied on as investment advice and, because investment decisions for a Colonial
trust are based on numerous factors, may not be relied on as an indication of
trading intent on behalf of any particular Colonial trust. References to
specific company securities should not be construed as a recommendation or
investment advice.
PORTFOLIO MANAGER'S REPORT
For the six-month period ended May 31, 2005, Colonial High Income Municipal
Trust generated a total return of 1.27%, based on its market price. The trust
returned 6.28%, based on investment at net asset value. That was in line with
the average return of its peer group, the Lipper High Yield Municipal Debt Funds
Category, which was 6.38%.1 A customized peer group consisting of nine leveraged
closed-end high-yield municipal funds generated an average return of 6.77%. The
trust benefited from strong demand for high-yield bonds, which outstripped
supply as investors reached for yield in an environment of low interest rates.
Lower quality, higher-yielding issues did particularly well. We believe the
trust had less exposure than its customized peer group to the airline and
tobacco sectors, which accounted for its slight shortfall against their average
return.
GAINS CAME FROM LONGER-MATURITY BIAS
Although short-term interest rates rose during the period, long-term yields fell
and long-term bond prices rose. As a result, the trust benefited from having a
sizable stake in longer-maturity issues and downplaying weaker-performing
shorter-maturity bonds. In particular, zero coupon municipal bonds, or "zeros,"
did well as long-term interest rates declined. However, Treasury futures
contracts, which were used to reduce the duration of the trust, declined in
value, offsetting some of the gains from the trust's bonds. Zeros are long-term
bonds that carry no coupon and are bought at a steep discount to face value.
Added gains came from specific credits, including nursing home bonds issued by
Washington County in Pennsylvania and Metropolitan Government in Nashville,
Tennessee (0.4% and 0.4% of total investments, respectively)2.
The trust's diversified approach meant that it had modest holdings in the
top-performing but volatile air transportation and tobacco sectors. Tobacco
bonds are issued by individual states, cities and counties. These bonds are
secured by revenues from a financial settlement with tobacco companies related
to past and future tobacco-related health costs. The sector benefited from
strong demand and positive litigation news during the period. Among airlines, US
Airways bonds (0.2% of total investments) were standouts.
SHIFT TOWARD HIGHER QUALITY
The difference in yield between lower quality and higher quality bonds narrowed
during the period, giving us an opportunity to buy higher quality bonds without
sacrificing much yield. We trimmed some BBB-rated hospital bonds and replaced
them with AA-rated housing bonds that had a nice yield advantage over AAA-rated
issues with only slightly lower yield than the hospital bonds.
----------------
1 Lipper Inc., a widely respected data provider in the industry, calculates
an average total return (assuming reinvestment of distributions) for mutual
funds with investment objectives similar to those of the fund. Lipper makes
no adjustment for the effect of sales loads.
2 Holdings are disclosed as of May 31, 2005, and are subject to change.
(Sidebar)
PRICE PER SHARE AS OF 05/31/05 ($)
Net asset value 6.54
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Market price 6.27
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6-MONTH (CUMULATIVE) TOTAL
RETURN AS OF 05/31/05 (%)
Net asset value 6.28
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Market price 1.27
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Lipper High Yield Municipal
Debt Funds Category
average 6.38
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All results shown assume
reinvestment of distributions.
DISTRIBUTIONS DECLARED
PER COMMON SHARE
12/01/04 - 05/31/05 ($)
0.25
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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 05/31/05 (%)
Hospitals 11.8
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Local general obligations 9.4
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Refunded/escrowed 8.5
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Continuing care retirement 7.3
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Multi-Family 7.1
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QUALITY BREAKDOWN
AS OF 05/31/05 (%)
AAA 26.1
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AA 3.0
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A 11.2
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BBB 23.3
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BB 3.9
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B 0.7
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CCC 0.2
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Non-rated 30.1
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Cash equivalents 1.5
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Sector and quality breakdowns are calculated as a percentage of total
investments. Ratings shown in the quality breakdown represent the rating
assigned to a particular bond by one of the following nationally-recognized
rating agencies: Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., Moody's Investors Service, Inc. or Fitch Ratings Ltd.
The majority of the bonds that are non-rated are considered by the advisor to be
of non-investment grade quality.
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.
1
PORTFOLIO MANAGER'S REPORT (CONTINUED)
DECLINE IN DIVIDEND, BUT CONTINUED BENEFIT FROM LEVERAGE
The trust's dividend yield dropped as long-term rates fell and short-term
interest rates rose. The trust earned some of its income through leverage, which
comes from preferred shares that allow the trust to borrow against its
underlying investments. We invested the proceeds from the preferred shares in
longer maturity bonds, and then paid out to preferred shareholders a short-term
rate that is influenced by the federal funds rate--the overnight rate at which
banks lend each other money. As the fed funds rate climbed, the payout rate to
preferred shareholders also rose, reducing the income available to the common
shareholders. However, leverage continued to give the trust an income advantage
over its non-leveraged peers.
POSITIVE OUTLOOK
With interest rates at relatively low levels, we expect demand for high-yield
municipals to remain strong. We believe that, although the yield differential
between higher-rated and lower-rated bonds is already narrow, it could narrow
further and help high-yield relative returns. In this environment, our plan is
to continue looking for opportunities to upgrade credit quality without
sacrificing much yield. In addition, even if long-term interest rates head
higher, we think that the increases are unlikely to be dramatic.
/s/ Maureen G. Newman
Maureen G. Newman has been the portfolio manager of Colonial High Income
Municipal Trust since August 1998. Ms. Newman has managed various other
municipal funds for Columbia Management Advisors, Inc. or its predecessors or
affiliate organizations since May 1996.
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Investing in fixed-income securities may involve certain risks, including the
credit quality of individual issuers, possible prepayments, market or economic
developments and yield and share price fluctuations due to changes in interest
rates. When interest rates go up, bond prices typically drop, and vice versa.
Investing in high-yield or "junk bonds" offers the potential for higher income
than investments in investment-grade bonds but they also have a higher degree of
risk. Changes in economic conditions or other circumstances may adversely affect
a high-yield bond issuer's ability to make timely principal and interest
payments.
Tax-exempt investing offers current tax-exempt income, but it also involves
special risks. The value of the trust will be affected by interest rate changes
and
the creditworthiness of issues held in the trust. Interest income from certain
tax-exempt bonds may be subject to certain state and local taxes and, if
applicable, the alternative minimum tax. Capital gains are not exempt from
income taxes.
2
INVESTMENT PORTFOLIO
May 31, 2005 (Unaudited)
MUNICIPAL BONDS - 152.4% PAR ($) VALUE ($)
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EDUCATION - 4.9%
EDUCATION - 3.6%
CA Educational Facilities Authority,
Loyola Marymount University,
Series 2001,
Insured: MBIA
(a) 10/01/19 2,025,000 1,083,658
CA Public Works Board,
UCLA,
Series 2002 A,
Insured: FSA
5.375% 10/01/15 1,010,000 1,119,444
MA Development Finance Agency,
Western New England College,
Series 2002,
6.125% 12/01/32 300,000 320,166
MI Southfield Economic Development
Corp., Lawrence University,
Series 1998 A,
5.400% 02/01/18 1,000,000 1,023,640
NC Capital Facilities Finance Authority,
Meredith College,
Series 2001,
Insured: AMBAC
5.125% 06/01/16 1,000,000 1,080,680
PA Higher Education Facilities Authority,
Philadelphia University,
Series 2004 A,
5.125% 06/01/25 600,000 605,382
VT Educational & Health Buildings
Finance Agency, Norwich University,
Series 1998,
5.500% 07/01/21 1,500,000 1,555,755
WV University,
Series 2000 A,
Insured: AMBAC
(a) 04/01/19 1,000,000 547,680
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Education Total 7,336,405
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PREP SCHOOL - 1.3%
CA Statewide Communities Development
Authority, Crossroads School of
Arts & Sciences, Series 1998,
6.000% 08/01/28 (b) 1,250,000 1,311,600
IL Development Finance Authority,
Latin School of Chicago,
Series 1998,
5.650% 08/01/28 230,000 236,410
MA Industrial Finance Agency:
Cambridge Friends School,
Series 1998,
5.800% 09/01/28 1,000,000 989,830
St. John's High School,
Series 1998,
5.350% 06/01/28 150,000 153,876
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Prep School Total 2,691,716
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EDUCATION TOTAL 10,028,121
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PAR ($) VALUE ($)
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HEALTH CARE - 41.0%
CONTINUING CARE RETIREMENT - 11.5%
CA Association of Bay Area Governments
Finance Authority for
Nonprofit Corps., Eskaton
Gold River Lodge,
Series 1998:
6.375% 11/15/15 660,000 694,597
6.375% 11/15/28 550,000 566,049
CA La Verne, Brethren Hillcrest Homes,
Series 2003 B,
6.625% 02/15/25 690,000 764,692
CA Statewide Community Development
Authority, Eskaton Village - Grass Valley,
Series 2000,
8.250% 11/15/31(b) 990,000 1,096,752
CT Development Authority,
The Elim Park Baptist, Inc. Project,
Series 2003,
5.850% 12/01/33 660,000 704,959
FL Capital Projects Finance Authority,
Glenridge on Palmer Ranch,
Series 2002 A,
8.000% 06/01/32 750,000 829,980
FL Lee County Industrial Development
Authority, Shell Point Village Project,
Series 1999 A,
5.500% 11/15/29 600,000 612,744
GA Fulton County,
Canterbury Court Project,
Series 2004 A,
6.125% 02/15/34 750,000 760,928
GA Savannah Economic Development
Authority, Marshes of Skidaway,
Series 2003 A,
7.400% 01/01/34 465,000 495,458
IL Health Facilities Authority:
Lutheran Senior Ministries,
Series 2001,
7.375% 08/15/31 900,000 964,260
Washington & Jane Smith Community,
Series 2003 A,
7.000% 11/15/32 725,000 745,445
KS Manhattan,
Meadowlark Hills Retirement Home,
Series 1999 A,
6.375% 05/15/20 650,000 676,104
MA Boston Industrial Development
Financing Authority,
Springhouse, Inc.,
Series 1998,
5.875% 07/01/20 255,000 259,893
MA Development Finance Agency,
Loomis Communities:
Series 1999 A,
5.625% 07/01/15 400,000 403,108
Series 2002 A,
6.900% 03/01/32 100,000 107,983
See Accompanying Notes to Financial Statements.
3
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH CARE (CONTINUED)
CONTINUING CARE RETIREMENT (CONTINUED)
MD Westminster Economic
Development Authority,
Carroll Lutheran Village, Inc.,
Series 2004 A:
5.875% 05/01/21 500,000 520,015
6.250% 05/01/34 250,000 261,353
NH Higher Educational & Health
Facilities Authority,
Rivermead at Peterborough,
Series 1998:
5.625% 07/01/18 500,000 503,885
5.750% 07/01/28 500,000 498,940
NJ Economic Development Authority:
Seabrook Village, Inc.,
Series 2000 A,
8.250% 11/15/30 925,000 1,034,483
Winchester Gardens,
Series 2004 A,
5.750% 11/01/24 750,000 799,342
PA Delaware County Authority,
Dunwoody Village,
Series 2003 A,
5.375% 04/01/17 600,000 640,830
PA Lancaster Industrial
Development Authority,
Garden Spot Village,
Series 2000 A,
7.625% 05/01/31 500,000 545,925
PA Montgomery County Industrial
Development Authority,
Whitemarsh Continuing Care
Retirement Community,
Series 2005,
6.250% 02/01/35 750,000 786,907
TN Johnson City Health & Educational
Facilities Authority, Appalachian
Christian Village Project,
Series 2004 A,
6.250% 02/15/32 250,000 254,605
TN Metropolitan Government, Nashville
& Davidson County,
Blakeford at Green Hills,
Series 1998,
5.650% 07/01/24 600,000 600,042
TN Shelby County Health, Educational
& Housing Facilities Board,
Germantown Village,
Series 2003 A,
7.250% 12/01/34 450,000 474,543
PAR ($) VALUE ($)
-----------------------------------------------------------
TX Abilene Health Facilities
Development Corp,
Sears Methodist Retirement Center:
Series 1998 A,
5.900% 11/15/25 1,000,000 992,760
Series 2003 A,
7.000% 11/15/33 500,000 531,055
TX Houston Health Facilities
Development Corp., Buckingham
Senior Living Community, Inc.,
Series 2004 A,
7.125% 02/15/34 500,000 531,325
VA Winchester Industrial Development
Authority, Westminster Canterbury,
Series 2005 A
5.300% 01/01/35 (c) 750,000 756,188
WI Health & Educational
Facilities Authority:
Attic Angel Obligated Group,
Series 1998,
5.750% 11/15/27 1,000,000 965,650
Clement Manor,
Series 1998,
5.750% 08/15/24 1,300,000 1,304,160
Eastcastle Place, Inc.,
Series 2004,
6.125% 12/01/34 350,000 351,820
Three Pillars Senior Living
Communities, Series 2003,
5.750% 08/15/26 500,000 521,525
United Lutheran Program for
the Aging, Inc.,
Series 1998,
5.700% 03/01/28 1,000,000 973,750
------------
Continuing Care Retirement Total 23,532,055
------------
HEALTH SERVICES - 1.7%
CO Health Facilities Authority,
National Jewish Medical
& Research Center:
Series 1998,
5.375% 01/01/23 330,000 334,729
Series 1998 B,
5.375% 01/01/29 750,000 756,015
MA Development Finance Agency,
Boston Biomedical Research Institute,
Series 1999:
5.650% 02/01/19 200,000 199,042
5.750% 02/01/29 450,000 460,071
MA Health & Educational Facilities
Authority, Civic Investments, Inc.,
Series 2002 A,
9.000% 12/15/15 1,000,000 1,154,280
See Accompanying Notes to Financial Statements.
4
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH CARE (CONTINUED)
HEALTH SERVICES (CONTINUED)
MN Minneapolis & St. Paul Housing &
Redevelopment Authority,
Healthpartners Project,
Series 2003
6.000% 12/01/21 500,000 556,260
------------
Health Services Total 3,460,397
------------
HOSPITALS - 18.8%
AR Conway Health Facilities Board,
Conway Regional Medical Center:
Series 1999 A,
6.400% 08/01/29 425,000 460,301
Series 1999 B,
6.400% 08/01/29 1,000,000 1,083,060
CA Rancho Mirage Joint Powers
Financing Authority,
Eisenhower Medical Center,
Series 2004,
5.625% 07/01/29 1,000,000 1,068,850
CA State Health Facilities Financing
Authority, Cedars-Sinai Medical Center,
Series 1999 A,
6.125% 12/01/30 750,000 818,407
CA Turlock Health Facilities Authority,
Emanuel Medical Center, Inc.,
Series 2004,
5.375% 10/15/34 1,500,000 1,563,585
CO Health Facilities Authority:
Parkview Medical Center, Inc.,
Series 2001,
6.600% 09/01/25 300,000 333,585
Vail Valley Medical Center Project,
Series 2004,
5.000% 01/15/20 750,000 779,580
FL Orange County Health Facilities
Authority, Orlando Regional
Healthcare System,
Series 2002,
5.750% 12/01/32 200,000 215,106
FL South Lake County Hospital District,
South Lake Hospital, Inc.,
Series 2003,
6.375% 10/01/34 500,000 541,670
FL Tampa,
H. Lee Moffitt Cancer Center,
Series 1999 A,
5.750% 07/01/29 2,000,000 2,099,360
FL West Orange Healthcare District,
Series 2001 A,
5.650% 02/01/22 525,000 558,243
GA Coffee County Hospital Authority,
Coffee Regional Medical Center, Inc.,
Series 2004,
5.000% 12/01/26 600,000 615,984
PAR ($) VALUE ($)
-----------------------------------------------------------
IL Health Facilities Authority,
Thorek Hospital & Medical Center,
Series 1998,
5.250% 08/15/18 600,000 616,542
IL Southwestern Development Authority,
Anderson Hospital,
Series 1999,
5.500% 08/15/20 225,000 234,155
IN Health Facility Financing Authority,
Community Foundation of Northwest
Indiana, Inc.,
Series 2004 A,
6.000% 03/01/34 575,000 616,492
LA Public Facilities Authority,
Touro Infirmary,
Series 1999 A,
5.625% 08/15/29 350,000 364,833
MA Health & Educational
Facilities Authority:
Jordan Hospital,
Series 2003 E,
6.750% 10/01/33 500,000 553,605
Milford-Whitinsville Regional Hospital,
Series 2002 D,
6.350% 07/15/32 1,000,000 1,070,150
MD Health & Higher Educational
Facilities Authority,
Adventist Healthcare,
Series 2003 A:
5.000% 01/01/16 400,000 414,960
5.750% 01/01/25 600,000 647,580
MI Dickinson County,
Series 1999,
5.700% 11/01/18 750,000 774,105
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1998 A,
5.375% 07/01/20 450,000 452,858
MN St. Paul Housing & Redevelopment
Authority, HealthEast, Inc.,
Series 2001 A,
5.700% 11/01/15 1,000,000 1,005,570
MN Washington County Housing &
Redevelopment Authority,
HealthEast, Inc.,
Series 1998,
5.250% 11/15/12 1,300,000 1,304,043
NC Medical Care Commission,
Stanly Memorial Hospital,
Series 1999,
6.375% 10/01/29 1,915,000 2,063,757
NH Higher Education & Health Facilities
Authority,
Catholic Medical Center,
Series 2002,
6.125% 07/01/32 400,000 430,356
See Accompanying Notes to Financial Statements.
5
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH CARE (CONTINUED)
HOSPITALS (CONTINUED)
Littleton Hospital
Association, Inc.,
Series 1998 A,
6.000% 05/01/28 625,000 637,500
Series 1998 B,
5.900% 05/01/28 780,000 792,277
NJ Health Care Facilities Authority,
Capital Health Systems, Inc.,
Series 2003 A,
5.750% 07/01/23 650,000 705,900
NV Henderson Healthcare Facilities
Authority, Catholic Healthcare West,
Series 1998,
5.375% 07/01/26 500,000 514,835
NY Dormitory Authority,
North Shore - Long Island Jewish
Medical Center,
Series 2003,
5.500% 05/01/33 300,000 320,544
OH Belmont County,
East Ohio Regional Hospital,
Series 1998,
5.700% 01/01/13 900,000 854,631
OH Highland County Joint Township
Hospital District,
Series 1999,
6.750% 12/01/29 935,000 935,570
OH Lakewood Hospital Improvement
District, Lakewood Hospital Association,
Series 2003,
5.500% 02/15/14 600,000 652,710
OH Miami County Hospital Facilities
Authority, Upper Valley Medical
Center, Inc.,
Series 1996 A,
6.375% 05/15/26 1,000,000 1,037,250
OH Sandusky County,
Memorial Hospital,
Series 1998,
5.150% 01/01/10 250,000 257,278
PA Allegheny County Hospital
Development Authority,
Ohio Valley General Hospital,
Series 1998 A,
5.450% 01/01/28 1,000,000 1,020,970
SC Jobs-Economic Development Authority,
Bon Secours Health Systems, Inc.,
Series 2002 A,
5.500% 11/15/23 1,750,000 1,855,210
SC Lexington County Health Services
District, Lexington Medical
Center Project,
Refunding,
Series 2003,
5.500% 11/01/23 750,000 802,035
PAR ($) VALUE ($)
-----------------------------------------------------------
SD Health & Educational Facilities
Authority, Sioux Valley Hospitals &
Health Systems,
Series 2004 A,
5.250% 11/01/34 800,000 845,232
TX Comal County Health Facilities
Development Authority,
McKenna Memorial,
Series 2002 A,
6.250% 02/01/32 500,000 539,685
TX Tyler Health Facilities Development
Corp., Mother Frances Hospital,
Series 2001,
6.000% 07/01/31 1,000,000 1,068,510
VA Prince William County Industrial
Development Authority,
Potomac Hospital Corp.,
Series 2003,
5.200% 10/01/30 650,000 680,713
VT Educational & Health Buildings
Finance Agency,
Brattleboro Memorial Hospital,
Series 1998,
5.375% 03/01/28 1,075,000 1,079,805
WA Health Care Facilities Authority,
Kadlec Medical Center,
Series 2001,
Insured: RAD
5.875% 12/01/21 600,000 656,598
WI Health & Educational
Facilities Authority:
Aurora Health Care, Inc.,
Series 2003,
6.400% 04/15/33 525,000 585,758
Fort HealthCare, Inc., Project,
Series 2004,
5.750% 05/01/29 1,000,000 1,061,280
Wheaton Franciscan Services,
Series 2002,
5.750% 08/15/30 600,000 643,590
------------
Hospitals Total 38,234,618
------------
INTERMEDIATE CARE FACILITIES - 0.6%
IL Development Facilities Finance
Authority, Hoosier Care, Inc.,
Series 1999 A,
7.125% 06/01/34 1,190,000 1,055,708
IN Health Facilities Financing Authority,
Hoosier Care, Inc.,
Series 1999 A,
7.125% 06/01/34 150,000 133,073
------------
Intermediate Care Facilities 1,188,781
------------
NURSING HOMES - 8.4%
AK Juneau, St. Ann's Care Center, Inc.,
Series 1999,
6.875% 12/01/25 1,250,000 1,276,687
See Accompanying Notes to Financial Statements.
6
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH CARE (CONTINUED)
NURSING HOMES (CONTINUED)
CO Health Facilities Authority:
American Housing Foundation I, Inc.,
Series 2003 A,
8.500% 12/01/31 465,000 492,998
Pioneer Health Care, Series 1989,
10.500% 05/01/19 1,790,000 1,403,879
Volunteers of America Care Facilities:
Series 1999 A,
5.450% 07/01/08 200,000 199,056
Series 1998 A:
5.750% 07/01/20 865,000 842,363
6.000% 07/01/29 350,000 341,695
IA Finance Authority,
Care Initiatives Project,
Series 1996,
9.250% 07/01/25 965,000 1,174,511
Series 1998 B:
5.750% 07/01/18 550,000 551,238
5.750% 07/01/28 1,475,000 1,385,172
IN Gary Industrial Economic
Development Authority,
West Side Health Care Center,
Series 1987 A,
11.500% 10/01/17 (d) 1,330,000 399,040
IN Michigan City Health Facilities
Authority, Metro Health Foundation,
Inc. Project,
Series 1993,
11.000% 11/01/22 (e) 2,447,822 149,317
MA Development Finance Agency:
Alliance Health Care Facilities,
Series 1999,
7.100% 07/01/32 1,285,000 1,295,537
Woodlawn Manor, Inc.:
Series 2000 A,
7.750% 12/01/27 1,509,135 829,556
Series 2000 B,
10.250% 06/01/27 (d)(g) 475,907 71,386
MN Sartell,
Foundation for Healthcare,
Series 1999 A,
6.625% 09/01/29 1,145,000 1,186,048
PA Chester County Industrial
Development Authority,
Pennsylvania Nursing Home,
Series 2002,
8.500% 05/01/32 1,585,000 1,589,200
PA Washington County Industrial
Development Authority,
AHF Project,
Series 2003,
7.750% 01/01/29 1,211,000 1,243,152
PAR ($) VALUE ($)
-----------------------------------------------------------
TN Metropolitan Government Nashville
& Davidson County AHF Project,
Series 2003,
7.750% 01/01/29 1,141,000 1,171,294
TX Kirbyville Health Facilities
Development Corp,
Heartway III Project,
Series 1997 A,
10.000% 03/20/18 (d) 668,626 200,655
WA Kitsap County Consolidated
Housing Authority, Martha & Mary
Health Services,
Series 1996,
Insured: GNMA
7.100% 02/20/36 1,000,000 1,148,330
WI Health & Educational Facilities
Authority, Metro Health Foundation, Inc.,
Series 1993,
11.000% 11/01/22 (e) 2,201,942 134,318
------------
Nursing Homes Total 17,085,432
------------
HEALTH CARE TOTAL 83,501,283
------------
-----------------------------------------------------------
HOUSING - 13.2%
ASSISTED LIVING / SENIOR - 4.4%
DE Kent County, Heritage at Dover,
Series 1999, AMT,
7.625% 01/01/30 1,665,000 1,537,078
GA Columbus Housing Authority,
The Gardens at Calvary,
Series 1999,
7.000% 11/15/19 485,000 444,978
IL Development Finance Authority,
Care Institute, Inc.,
Series 1995,
8.250% 06/01/25 1,220,000 1,268,959
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23(d) 1,740,000 1,132,044
NC Medical Care Commission,
DePaul Community Facilities Project,
Series 1999,
7.625% 11/01/29 1,445,000 1,513,825
NY Huntington Housing Authority,
Gurwin Jewish Senior Center:
Series 1999 A,
5.875% 05/01/19 700,000 690,032
6.000% 05/01/29 775,000 761,414
TX Bell County Health Facility
Development Corp.,
Care Institute, Inc.,
Series 1994,
9.000% 11/01/24 1,670,000 1,583,995
------------
Assisted Living / Senior Total 8,932,325
------------
See Accompanying Notes to Financial Statements.
7
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HOUSING (CONTINUED)
MULTI-FAMILY - 8.1 %
DC Housing Finance Agency,
Henson Ridge,
Series 2004 E, AMT,
Insured: FHA
5.100% 06/01/37 1,000,000 1,026,760
DE Wilmington,
Electra Arms Senior Association Project,
Series 1998, AMT,
6.250% 06/01/28 925,000 797,387
FL Broward County Housing Finance
Authority, Chaves Lake Apartment
Project, Series 2000 A, AMT,
7.500% 07/01/40 750,000 757,905
FL Clay County Housing Finance
Authority, Madison Commons
Apartments, Series 2000 A, AMT,
7.450% 07/01/40 730,000 739,920
MA Housing Finance Agency:
Series 2005 B,
5.000% 12/01/28 500,000 504,895
Series 2005,
5.000% 06/01/30 500,000 507,970
MN Lakeville,
Southfork Apartments Project:
Series 1989 A,
9.875% 02/01/20 2,570,000 2,569,923
Series 1989 B,
(a) 02/01/20 903,000 238,112
MN Robbinsdale Economic
Development Authority,
Broadway Court,
Series 1999 A,
6.875% 01/01/26 500,000 467,005
MN Washington County Housing
& Redevelopment Authority,
Cottages of Aspen,
Series 1992, AMT,
9.250% 06/01/22 970,000 993,319
MN White Bear Lake,
Birch Lake Townhome Project:
Series 1989 A, AMT,
10.250% 07/15/19 2,200,000 2,202,552
Series 1989 B, AMT,
(a) 07/15/19 690,000 278,063
NC Medical Care Commission,
ARC Projects,
Series 2004 A,
5.800% 10/01/34 500,000 508,820
Resolution Trust Corp.,
Pass-Through Certificates,
Series 1993 A,
8.500% 12/01/16 (f) 546,075 541,466
PAR ($) VALUE ($)
-----------------------------------------------------------
TN Chattanooga Tennessee Health
Educational and Housing Facility
Board, Cdfi Phase I LLC
Project, Senior A,
6.000% 10/01/35 400,000 405,616
TN Franklin Industrial Development
Board, Landings Apartment Project,
Series 1996 B,
8.750% 04/01/27 825,000 845,262
TX Affordable Housing Corp.,
NHT/GTEX Project,
Series 2001 C,
10.000% 10/01/31 (d)(g) 870,000 8,700
TX Department of Housing &
Community Affairs,
Pebble Brooks Apartments,
Series 1998, AMT,
Guarantor: FNMA
5.500% 12/01/18 1,000,000 1,045,770
TX El Paso County Housing Finance
Corp., American Village Communities:
Series 2000 C,
8.000% 12/01/32 380,000 392,726
Series 2000 D,
10.000% 12/01/32 410,000 427,704
VA Alexandria Redevelopment &
Housing Authority, Courthouse
Commons Apartments,
Series 1990 A, AMT,
10.000% 01/01/21 1,500,000 1,244,115
------------
Multi-Family Total 16,503,990
------------
SINGLE FAMILY - 0.7%
WI Housing & Economic Development
Authority, Series 2005 C,
4.875% 03/01/36 (c) 1,500,000 1,516,815
------------
Single Family Total 1,516,815
------------
HOUSING TOTAL 26,953,130
------------
-----------------------------------------------------------
INDUSTRIALS - 7.3%
FOOD PRODUCTS - 1.7%
GA Cartersville Development Authority,
Anheuser Busch Project, Inc.,
Series 2002, AMT,
5.950% 02/01/32 1,000,000 1,074,540
LA Southern Louisiana Port Commission,
Cargill, Inc. Project,
5.850% 04/01/17 1,000,000 1,049,030
MI Strategic Fund,
Michigan Sugar Co.,
Sebewaing Project,
6.250% 11/01/15 1,250,000 1,260,475
------------
Food Products Total 3,384,045
------------
See Accompanying Notes to Financial Statements.
8
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
INDUSTRIALS (CONTINUED)
FOREST PRODUCTS & PAPER - 2.8%
AL Camden Industrial Development
Board, Weyerhaeuser Co.,
Series 2003 B, AMT,
6.375% 12/01/24 550,000 602,448
AL Courtland Industrial Development
Board, International Paper Co.,
Series 2003 B, AMT,
6.250% 08/01/25 1,000,000 1,080,450
AL Phenix City Industrial Development
Board, Meadwestvaco Corp.,
Series 2002 A, AMT,
6.350% 05/15/35 550,000 595,232
AR Camden Environmental Improvement
Authority, International Paper Co.,
Series 2004 A, AMT,
5.000% 11/01/18 250,000 254,028
GA Rockdale County Development
Authority, Visy Paper, Inc.,
Series 1993, AMT,
7.500% 01/01/26 1,800,000 1,824,498
MS Lowndes County,
Weyerhaeuser Project,
Series 1992 B,
6.700% 04/01/22 850,000 1,034,084
VA Bedford County Industrial
Development Authority,
Nekoosa Packaging Corp.,
Series 1998, AMT,
5.600% 12/01/25 400,000 402,388
------------
Forest Products & Paper Total 5,793,128
------------
MANUFACTURING - 0.9%
IL Will-Kankakee Regional Development
Authority, Flanders Corp., Precisionaire
Project, Series 1997, AMT,
6.500% 12/15/17 780,000 796,528
TX Trinity River Authority,
Texas Instruments Project,
Series 1996, AMT,
6.200% 03/01/20 1,000,000 1,033,560
------------
Manufacturing Total 1,830,088
------------
METALS & MINING - 0.7%
NV Department of Business & Industry,
Wheeling-Pittsburgh Steel Corp.,
Series 1999 A, AMT,
8.000% 09/01/14 (f) 893,387 916,964
VA Greensville County Industrial
Development Authority,
Wheeling-Pittsburgh Steel Corp.,
Series 1999 A, AMT,
7.000% 04/01/14 465,000 451,575
------------
Metals & Mining Total 1,368,539
------------
PAR ($) VALUE ($)
-----------------------------------------------------------
OIL & GAS - 1.2%
NJ Middlesex County Pollution
Control Authority,
Amerada Hess Corp.,
Series 2004,
6.050% 09/15/34 285,000 304,739
TX Gulf Coast Industrial Development
Authority, Citgo Petroleum,
Series 1998, AMT,
8.000% 04/01/28 500,000 567,830
VI Public Finance Authority,
Hovensa Refinery:
Series 2003, AMT,
6.125% 07/01/22 525,000 577,122
Series 2004, AMT,
5.875% 07/01/22 600,000 649,074
VI Virgin Islands Government,
Hovensa Coker Project,
Series 2002, AMT,
6.500% 07/01/21 (b) 375,000 426,458
------------
Oil & Gas Total 2,525,223
------------
INDUSTRIALS TOTAL 14,901,023
------------
-----------------------------------------------------------
OTHER - 18.6%
OTHER - 0.7%
NY Convention Center Operating Corp.,
Yale Building Project,
Series 2003,
(a) 06/01/08 1,700,000 1,476,637
------------
Other Total 1,476,637
------------
POOL/BOND BANK - 0.4%
MI Municipal Bond Authority,
Local Government Loan Project,
Series 2001 A,
Insured: AMBAC
5.375% 11/01/17 750,000 829,125
------------
Pool / Bond Bank Total 829,125
------------
REFUNDED/ESCROWED (h) - 13.5%
CO Denver City & County Airport:
Pre-refunded 03/03/2005,
Series 1992 C, AMT,
6.125% 11/15/25 2,840,000 2,846,021
Escrowed to Maturity,
Series 1992 C, AMT,
6.125% 11/15/25 2,280,000 2,782,353
CO E-470 Public Highway Authority,
Series 2000 B,
Pre-refunded 09/01/10,
(a) 09/01/35 8,750,000 1,112,563
CT Development Authority,
New Haven Residuals LP,
Series 1996, AMT,
Escrowed to Maturity,
8.250% 12/01/06 345,000 363,716
See Accompanying Notes to Financial Statements.
9
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
OTHER (CONTINUED)
REFUNDED/ESCROWED (h) (CONTINUED)
GA Forsyth County Hospital Authority,
Georgia Baptist Health Care System,
Series 1998,
Escrowed to Maturity,
6.000% 10/01/08 625,000 655,650
ID Health Facilities Authority,
IHC Hospitals, Inc., Series 1992,
Escrowed to Maturity,
6.650% 02/15/21 1,750,000 2,307,183
IL Health Facilities Authority,
Swedish American Hospital,
Series 2000,
Pre-refunded 05/15/10
6.875% 11/15/30 500,000 588,505
IL University of Illinois, Series 2001 A,
Pre-refunded 08/15/11,
Insured: AMBAC
5.500% 08/15/17 685,000 770,748
NC Lincoln County, Lincoln County
Hospital, Series 1991,
Escrowed to Maturity,
9.000% 05/01/07 130,000 140,057
NY New York City:
Pre-refunded 08/01/06
Series 1997 A,
7.000% 08/01/07 40,000 42,492
Pre-refunded 08/01/07
Series H,
6.000% 08/01/17 25,000 26,883
PA Delaware County Authority, Mercy
Health Corp., Southeastern
Pennsylvania Obligated Group,
Pre-refunded 12/15/08,
Series 1996:
6.000% 12/15/16 1,400,000 1,482,208
6.000% 12/15/26 1,000,000 1,054,840
PR Commonwealth of Puerto Rico
Public Finance Corp.,
Escrowed to Maturity,
Series 2002 E,
6.000% 08/01/26 155,000 196,907
TN Shelby County Health, Education &
Housing Facilities Board,
Open Arms Development Centers:
Series 1992 A,
Pre-refunded 08/01/07,
9.750% 08/01/19 805,000 942,228
Series 1992 C,
Pre-refunded 08/01/07,
9.750% 08/01/19 785,000 914,925
TX Board of Regents, University of Texas,
Series 2001 B,
Escrowed to Maturity,
5.375% 08/15/18 650,000 725,673
PAR ($) VALUE ($)
-----------------------------------------------------------
TX San Antonio Independent School
District, Series 1997,
Insured: PSFG
Escrowed to Maturity,
5.000% 08/15/27 9,000,000 9,561,420
WV Hospital Finance Authority,
Charleston Area Medical Center,
Series 2000 A,
Pre-refunded 09/01/10
6.750% 09/01/30 805,000 949,715
------------
Refunded/Escrowed Total 27,464,087
------------
TOBACCO - 4.0%
CA Golden State Tobacco
Securitization Corp.:
Series 2003 A-1,
6.250% 06/01/33 1,800,000 1,906,722
Series 2003 B,
5.500% 06/01/43 750,000 804,082
California Tobacco Settlement Revenue,
Enhanced Asset Backed, Series B,
Insured: AMBAC
5.000% 06/01/43 3,500,000 3,626,000
NJ Tobacco Settlement Financing Corp.,
Series 2003,
6.750% 06/01/39 1,500,000 1,632,180
WA Tobacco Settlement Authority,
Series 2002,
6.625% 06/01/32 250,000 263,543
------------
Tobacco Total 8,232,527
------------
OTHER TOTAL 38,002,376
------------
-----------------------------------------------------------
OTHER REVENUE - 4.0%
HOTELS - 1.1%
NJ Middlesex County Improvement
Authority, Heldrich Associates LLC,
Series 2005 B,
6.250% 01/01/37 1,250,000 1,246,800
PA Philadelphia Authority for Industrial
Development, Doubletree Project,
Series 1997 A,
6.500% 10/01/27 1,000,000 1,038,380
------------
Hotels Total 2,285,180
------------
RECREATION - 2.6%
CA Agua Caliente, Band of Cahuilla
Indians Revenue, Series 2003,
5.600% 07/01/13 1,000,000 1,020,450
CA Cabazon Band Mission Indians,
Series 2004:
8.375% 10/01/15 (f) 275,000 284,350
8.750% 10/01/19 (f) 970,000 998,625
CT Mashantucket Western Pequot Tribe,
Series 1999 B,
(a) 09/01/16 (f) 1,000,000 567,230
CT Mohegan Tribe Gaming Authority,
Series 2001,
6.250% 01/01/31 (f) 275,000 298,251
See Accompanying Notes to Financial Statements.
10
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
OTHER REVENUE (CONTINUED)
RECREATION (CONTINUED)
FL Capital Trust Agency,
Seminole Tribe Convention Center,
Series 2002 A,
10.000% 10/01/33 (f) 1,350,000 1,499,337
NM Red River Sports Facility,
Red River Ski Area Project,
Series 1998,
6.450% 06/01/07 595,000 600,629
------------
Recreation Total 5,268,872
------------
RETAIL - 0.3%
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 09/01/11 630,000 631,909
------------
Retail Total 631,909
------------
OTHER REVENUE TOTAL 8,185,961
------------
-----------------------------------------------------------
RESOURCE RECOVERY - 2.4%
DISPOSAL - 0.8%
CA Pollution Control Financing Authority,
Republic Services,
Series 2002 C, AMT,
5.250% 06/01/23 500,000 526,255
MA Industrial Finance
Agency, Peabody Monofill
Associates, Inc. Project,
Series 1995,
9.000% 09/01/05 240,000 241,358
UT Carbon County,
Laidlaw Environmental:
Series 1995 A, AMT,
7.500% 02/01/10 250,000 255,700
Series 1997 A, AMT,
7.450% 07/01/17 500,000 518,800
------------
Disposal Total 1,542,113
------------
RESOURCE RECOVERY - 1.6%
MA Development Finance Agency,
Ogden Haverhill Associates,
Series 1999 A, AMT,
6.700% 12/01/14 250,000 267,900
MA Industrial Finance Agency,
Ogden Haverhill Associates,
Series 1998 A, AMT:
5.500% 12/01/13 500,000 511,115
5.600% 12/01/19 500,000 508,725
PA Delaware County Industrial
Development Authority,
American REF-Fuel Co.,
Series 1997 A,
6.200% 07/01/19 2,000,000 2,086,340
------------
Resource Recovery Total 3,374,080
------------
RESOURCE RECOVERY TOTAL 4,916,193
------------
PAR ($) VALUE ($)
-----------------------------------------------------------
TAX-BACKED - 35.0%
LOCAL APPROPRIATED - 1.4%
CA Compton, Civic Center &
Capital Improvements,
Series 1997 A,
5.500% 09/01/15 1,000,000 1,045,710
SC Dorchester County School
District No. 2,
Series 2004,
5.250% 12/01/29 650,000 684,782
SC Laurens County School
District No. 55,
Series 2005,
5.250% 12/01/30 (c) 1,050,000 1,087,737
------------
Local Appropriated Total 2,818,229
------------
LOCAL GENERAL OBLIGATIONS - 14.9%
CA East Side Union High School District,
Series 2003 B,
Insured: MBIA
5.100% 02/01/20 1,000,000 1,133,020
CA Fresno Unified School District,
Series 2002 A,
Insured: MBIA
6.000% 02/01/18 2,000,000 2,427,740
CA Los Angeles Unified School District,
Series 2002,
Insured: MBIA
5.750% 07/01/16 700,000 829,479
CA Montebello Unified School District,
Series 2001:
Insured: FSA
(a) 08/01/21 1,435,000 691,196
(a) 08/01/23 1,505,000 651,770
IL Chicago Board of Education,
Series 1997 A,
Insured: AMBAC
5.250% 12/01/30 (j) 12,470,000 13,193,260
IL Cook County GO,
Series 1997 A,
Insured: MBIA
5.625% 11/15/22 4,200,000 4,469,262
NY New York City:
Series 1997 A,
7.000% 08/01/07 960,000 1,016,333
Series 1997 H,
6.000% 08/01/17 1,375,000 1,463,564
TX Dallas County Flood Control District,
Series 2002,
7.250% 04/01/32 1,000,000 1,044,070
TX Irving Independent School District,
Series 1997,
Insured: PSFG
(a) 02/15/18 1,000,000 578,390
See Accompanying Notes to Financial Statements.
11
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TAX-BACKED (CONTINUED)
LOCAL GENERAL OBLIGATIONS (CONTINUED)
WA Clark County School District No. 37,
Series 2001 C,
Insured: FGIC
(a) 12/01/18 5,000,000 2,796,800
------------
Local General Obligations Total 30,294,884
------------
SPECIAL NON-PROPERTY TAX - 5.4%
CA San Diego Redevelopment Agency,
Series 2001,
Insured: FSA
(a) 09/01/19 1,910,000 997,631
(a) 09/01/22 1,910,000 870,139
FL Northern Palm Beach County
Improvement District,
Series 1999,
Insured: MBIA
6.000% 08/01/29 750,000 825,487
IL Metropolitan Pier & Exposition
Authority, McCormick Place Expansion
Project, Series 1993 A,
Insured: FGIC
(a) 06/15/16 10,000,000 6,368,200
NJ Economic Development Authority,
Cigarette Tax,
Series 2004:
5.500% 06/15/31 150,000 157,961
5.750% 06/15/29 1,000,000 1,080,400
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series 2003 AA,
5.500% 07/01/18 500,000 592,090
------------
Special Non-Property Tax Total 10,891,908
------------
SPECIAL PROPERTY TAX - 7.9%
CA Carson Improvement Bond Act 1915
Series 1992,
7.375% 09/02/22 35,000 37,529
CA Huntington Beach Community
Facilities District, Grand Coast Resort,
Series 2001-1,
6.450% 09/01/31 750,000 790,545
CA Lincoln Community Facilities
District No. 2003-1
Series 2004,
5.900% 09/01/24 500,000 512,700
CA Oakdale Public Financing Authority,
Central City Redevelopment Project,
Series 2004,
5.375% 06/01/33 1,375,000 1,408,000
PAR ($) VALUE ($)
-----------------------------------------------------------
CA Orange County Community
Facilities District, Ladera Ranch,
Series 1999 A,
6.700% 08/15/29 500,000 573,355
CA Orange County Improvement
Bond Act 1915, Phase IV, No. 01-1-B,
Series 2003,
5.750% 09/02/33 500,000 515,375
CA Placer Unified High School District,
Series 2000 A,
Insured: FGIC
(a) 08/01/19 1,700,000 918,153
CA Redwood City Community Facilities
District No.1,
Series 2003 B,
5.950% 09/01/28 600,000 628,578
CA Riverside County Public Financing
Authority, Series 1997 A
5.500% 10/01/22 650,000 672,438
CA Temecula Valley Unified School
District No. 1,
Series 2003,
6.125% 09/01/33 400,000 411,020
FL Celebration Community Development
District, Series 2003 A,
6.400% 05/01/34 990,000 1,058,211
FL Colonial Country Club Community
Development District,
Series 2003,
6.400% 05/01/33 730,000 780,297
FL Double Branch Community
Development District,
Series 2002 A,
6.700% 05/01/34 690,000 753,156
FL Heritage Palms Community
Development District,
Series 1999 A,
6.250% 11/01/07 175,000 175,422
FL Islands at Doral Southwest
Community Development District,
Series 2003,
6.375% 05/01/35 380,000 405,240
FL Lexington Oaks Community
Development District:
Series 1998 A,
6.125% 05/01/19 345,000 351,469
Series 2000 A,
7.200% 05/01/30 280,000 293,818
Series 2002 A,
6.700% 05/01/33 250,000 267,985
FL Orlando, Conroy Road
Interchange Project,
Series 1998 A:
5.500% 05/01/10 155,000 160,538
5.800% 05/01/26 300,000 307,995
See Accompanying Notes to Financial Statements.
12
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TAX-BACKED (CONTINUED)
SPECIAL PROPERTY TAX (CONTINUED)
FL Seven Oaks Community
Development District:
Series 2004 A,
5.875% 05/01/35 295,000 300,413
Series 2004 B,
5.000% 05/01/09 1,000,000 1,009,280
FL Stoneybrook Community
Development District:
Series 1998 A,
6.100% 05/01/19 295,000 300,614
Series 1998 B,
5.700% 05/01/08 25,000 25,386
FL Westchester Community
Development District No. 1,
Series 2003,
6.125% 05/01/35 425,000 446,403
IL Chicago,
Pilsen Redevelopment,
Series 2004 B,
6.750% 06/01/22 450,000 473,193
IL Lincolnshire Special Services
Area No. 1, Sedgebrook Project,
Series 2004,
Insured: Ambac
6.250% 03/01/34 500,000 529,835
MI Pontiac Finance Authority,
Development Area No. 3,
Series 2002,
6.375% 06/01/31 550,000 568,628
MI Taylor Tax Increment Finance
Authority, Series 2001,
Insured: FSA
5.375% 05/01/17 1,220,000 1,341,048
------------
Special Property Tax Total 16,016,624
------------
STATE APPROPRIATED - 2.1%
CA Public Works Board
Department of Mental Health,
Coalinga State Hospital,
Series 2004 A,
5.500% 06/01/19 1,000,000 1,118,050
NY Urban Development Corp.
University Facilities Grants,
Series 1995,
5.875% 01/01/21 1,000,000 1,202,880
PR Commonwealth of Puerto Rico
Public Finance Corp.
Series 2002 E,
6.000% 08/01/26 1,645,000 2,020,504
------------
State Appropriated Total 4,341,434
------------
STATE GENERAL OBLIGATIONS - 3.3%
CA, Series 2003,
5.250% 02/01/23 380,000 430,924
PAR ($) VALUE ($)
-----------------------------------------------------------
DC District of Columbia,
Series 1999 A,
Insured: FSA
5.375% 06/01/18 1,700,000 1,842,086
TX, Series 1999 ABC,
5.500% 08/01/35 4,200,000 4,502,610
------------
State General Obligations Total 6,775,620
------------
TAX-BACKED TOTAL 71,138,699
------------
-----------------------------------------------------------
TRANSPORTATION - 7.1%
AIR TRANSPORTATION - 3.9%
CA Los Angeles Regional Airport,
LAXfuel Corp.,
Series 2001, AMT,
Insured: AMBAC
5.250% 01/01/23 750,000 781,282
CO Denver City & County Airport,
United Air Lines, Inc.,
Series 1992 A, AMT
6.875% 10/01/32 (e) 1,000,000 859,980
FL Capital Trust Agency
Air Cargo - Orlando Project,
Series 2003, AMT,
6.750% 01/01/32 500,000 502,215
IN Indianapolis Airport Authority,
Fed Ex Corp.,
Series 2004, AMT,
5.100% 01/15/17 250,000 265,638
MN Minneapolis & St. Paul Metropolitan
Airports Commission,
Northwest Airlines, Inc.:
Series 2001 A, AMT,
7.000% 04/01/25 1,050,000 983,220
Series 2005, AMT
7.375% 04/01/25 250,000 245,885
NC Charlotte/Douglas International
Airport U.S. Airways, Inc.:
Series 1998, AMT,
5.600% 07/01/27 (i) 250,000 150,158
Series 2000, AMT,
7.750% 02/01/28 (i) 750,000 528,375
NJ Economic Development Authority,
Continental Airlines, Inc.:
Series 1999, AMT,
6.250% 09/15/29 250,000 210,593
Series 2003, AMT,
9.000% 06/01/33 750,000 772,020
TX Alliance Airport Authority,
American Airlines Project,
Series 1990, AMT,
7.500% 12/01/29 850,000 702,499
Federal Express Corp. Project,
Series 1996, AMT,
6.375% 04/01/21 1,000,000 1,045,880
See Accompanying Notes to Financial Statements.
13
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TRANSPORTATION (CONTINUED)
AIR TRANSPORTATION (CONTINUED)
TX Houston Industrial Development Corp.
United Parcel Services,
Series 2002, AMT,
6.000% 03/01/23 725,000 759,437
------------
Air Transportation Total 7,807,182
------------
AIRPORTS - 0.1%
GA Augusta Airport Revenue,
Series 2005 C, AMT,
5.450% 01/01/31 250,000 256,747
------------
Airports Total 256,747
------------
TOLL FACILITIES - 2.6%
CO E-470 Public Highway Authority,
Series 2000 B,
Insured: MBIA
(a) 09/01/18 3,000,000 1,689,660
CO Northwest Parkway Public Highway
Authority, Series 2001 D,
7.125% 06/15/41 1,250,000 1,351,850
VA Richmond Metropolitan Authority,
Series 1998,
Insured: FGIC
5.250% 07/15/22 2,000,000 2,307,680
------------
Toll Facilities Total 5,349,190
------------
TRANSPORTATION - 0.5%
NV Department of Business & Industry,
Las Vegas Monorail Project,
Series 2000,
7.375% 01/01/40 1,000,000 1,049,110
------------
Transportation Total 1,049,110
------------
TRANSPORTATION TOTAL 14,462,229
------------
-----------------------------------------------------------
UTILITIES - 18.9%
INDEPENDENT POWER PRODUCERS - 4.1%
MI Midland County Economic
Development Corp,
Series 2000 A, AMT,
6.875% 07/23/09 1,250,000 1,311,237
NY Port Authority of New York
& New Jersey, KIAC Partners,
Series 1996 IV, AMT,
6.750% 10/01/11 2,000,000 2,116,020
NY Suffolk County Industrial
Development Authority,
Nissequogue Cogeneration
Partners Facilities,
Series 1998, AMT,
5.500% 01/01/23 550,000 545,534
PA Carbon City Industrial Development
Authority, Panther Creek
Partners Project,
Series 2000, AMT,
6.650% 05/01/10 250,000 271,258
PAR ($) VALUE ($)
-----------------------------------------------------------
PA Economic Development Finance
Authority:
Colver Project,
Series 1994 D, AMT,
7.125% 12/01/15 1,500,000 1,560,750
Northampton Generating,
Series 1994 A, AMT,
6.500% 01/01/13 1,000,000 1,007,860
PR Commonwealth of Puerto Rico,
Industrial, Tourist, Educational,
Medical & Environmental Authority,
AES Project,
Series 2000, AMT,
6.625% 06/01/26 645,000 700,670
VA Pittsylvania County Industrial
Development Authority,
Multi-trade of Pittsylvania,
Series 1994 A, AMT,
7.450% 01/01/09 900,000 926,415
------------
Independent Power Producers Total 8,439,744
------------
INVESTOR OWNED - 10.4%
AZ Maricopa County Pollution Control,
El Paso Electric Co.,
Series 2002 A,
6.250% 05/01/37 1,000,000 1,005,670
AZ Pima County Industrial Development
Authority, Tucson Electric Power Co.,
Series 1997 A, AMT,
6.100% 09/01/25 750,000 750,802
CA Chula Vista Industrial Development
Authority, San Diego Gas & Electric,
Series 1996, AMT,
5.500% 12/01/21 625,000 675,388
FL Polk County Industrial Development
Authority, Tampa Electric Co. Project,
Series 1996, AMT,
5.850% 12/01/30 1,200,000 1,230,060
IL Bryant, Central Illinois Light Co.,
Series 1993,
5.900% 08/01/23 2,650,000 2,704,060
IN Petersburg, Indianapolis Power &
Light Co., Series 1995,
6.625% 12/01/24 1,000,000 1,018,130
LA Calcasieu Parish Industrial
Development Board,
Entergy Gulf States, Inc.,
Series 1999,
5.450% 07/01/10 500,000 506,060
LA West Feliciana Parish,
Entergy Gulf States, Inc.,
Series 1999 B,
6.600% 09/01/28 500,000 506,765
See Accompanying Notes to Financial Statements.
14
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
UTILITIES (CONTINUED)
INVESTOR OWNED (CONTINUED)
MS Business Finance Corp.
Systems Energy Resources Project,
Series 1998,
5.875% 04/01/22 2,000,000 2,033,580
MT Forsyth, Portland General,
Series 1998 A,
5.200% 05/01/33 300,000 315,153
NV Clark County Industrial Development
Authority, Nevada Power Co.,
Series 1995 B, AMT,
5.900% 10/01/30 1,250,000 1,250,650
OH Air Quality Development Authority,
Cleveland Electric Illuminating
Company, Series 2002 A,
6.000% 12/01/13 900,000 956,439
PA Economic Development Financing
Authority, Reliant Energy, Inc.,
Series 2001 A, AMT,
6.750% 12/01/36 600,000 644,010
TX Brazos River Authority,
TXU Energy Co. LLC:
Series 2001 C, AMT,
5.750% 05/01/36 280,000 300,112
Series 2003 C, AMT,
6.750% 10/01/38 645,000 720,233
VA Chesterfield County Industrial
Development Authority,
Virginia Electric & Power Co.,
Series 1987 B,
5.875% 06/01/17 250,000 275,173
WV Pleasant County,
Western Pennsylvania Power Co.,
Series 1999 E, AMT,
Insured: AMBAC
5.500% 04/01/29 4,750,000 5,062,360
WY Campbell County,
Black Hills Power, Inc.,
Series 2004,
5.350% 10/01/24 1,250,000 1,288,062
------------
Investor Owned Total 21,242,707
------------
JOINT POWER AUTHORITY - 0.4%
NC Eastern Municipal Power Agency,
Series 1999 D,
6.700% 01/01/19 500,000 560,530
Series 2003 F,
5.500% 01/01/16 285,000 308,262
------------
Joint Power Authority Total 868,792
------------
MUNICIPAL ELECTRIC - 3.2%
PR Commonwealth of Puerto Rico
Electric Power Authority,
Series 1998 II,
Insured: FSA
5.125% 07/01/26 2,000,000 2,152,900
PAR ($) VALUE ($)
-----------------------------------------------------------
WA Chelan County Public Utility
District No. 1, Columbia
River Rock Hydroelectric,
Series 1997,
Insured: MBIA
(a) 06/01/14 5,000,000 3,459,950
WA Seattle Light & Power,
Series 2001,
Insured: FSA
5.500% 03/01/17 750,000 824,355
------------
Municipal Electric Total 6,437,205
------------
WATER & SEWER - 0.8%
MO Water & Sewer, Lee's Summit,
Series 2002,
Insured: AMBAC
5.250% 07/01/15 500,000 547,845
MS V Lakes Utility District,
Series 1994,
8.250% 07/15/24 500,000 505,175
NH Industrial Development Authority,
Pennichuck Water Works, Inc.,
Series 1988, AMT,
7.500% 07/01/18 440,000 509,701
------------
Water & Sewer Total 1,562,721
------------
UTILITIES TOTAL 38,551,169
------------
TOTAL MUNICIPAL BONDS
(cost of $304,897,357) 310,640,184
------------
MUNICIPAL PREFERRED STOCKS - 3.3% SHARES
-----------------------------------------------------------
HOUSING - 3.3%
MULTI - FAMILY - 3.3%
Charter Municipal Mortgage
Acceptance Corp.,
AMT,
6.300% 04/30/19 1,000,000 1,078,440
6.625% 06/30/09 (f) 2,000,000 2,194,460
GMAC Municipal Mortgage Trust,
AMT,
5.600% 10/31/39 (f) 1,000,000 1,039,340
MuniMae Trust,
AMT,
7.750% 06/30/50 (f) 2,000,000 2,308,780
------------
Multi - Family Total 6,621,020
------------
HOUSING TOTAL 6,621,020
------------
TOTAL MUNICIPAL PREFERRED STOCKS
(cost of $6,000,000) 6,621,020
------------
INVESTMENT COMPANY - 0.0%
------------
Dreyfus Tax-Exempt Cash
Management Fund 65 65
------------
TOTAL INVESTMENT COMPANY
(cost of $65) 65
------------
See Accompanying Notes to Financial Statements.
15
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
SHORT-TERM OBLIGATION - 3.1% PAR ($) VALUE ($)
-----------------------------------------------------------
VARIABLE RATE DEMAND NOTES (k) - 3.1%
FL Orange County School Board
Certificates of Participation,
Series 2002 B,
2.000% 08/01/27 700,000 700,000
FL Pinellas County Health Facilities
Authority, Pooled Hospital
Loan Program, Series 1985,
LOC: Wachovia Bank N.A.
2.000% 12/01/15 300,000 300,000
IA Woodbury County Educational Facility,
Siouxland Medical Educational
Foundation, Series 1996,
2.690% 11/01/16 100,000 100,000
IN State Educational Facilities Authority,
DePaul University,
LOC: Northern Trust Company
2.000% 07/01/32 500,000 500,000
MN Cohasset, Minnesota Power
& Light Co., Series 1997 B,
LOC: ABN Amro Bank N.V.
2.000% 06/01/13 500,000 500,000
MO Health & Educational Facilities
Authority, Washington University,
Series 1996 D,
2.000% 09/01/30 300,000 300,000
MO Development Finance Board,
St. Louis Convention Center,
Series 2000 C,
2.050% 12/01/20 100,000 100,000
MS Jackson County, Chevron U.S.A., Inc,
Project, Series 1992:
2.000% 12/01/16 200,000 200,000
2.000% 06/01/23 200,000 200,000
NE Nebraska Educational Finance
Authority, Creighton University Project,
Insured: AMBAC
LOC: U.S. Bank Na
2.000% 03/01/33 400,000 400,000
NY Jay Street Development Corp.,
Series 2005 A,
2.460% 05/01/22 300,000 300,000
WI Health & Educational Facilities
Authority, ProHealth Care, Inc.,
Series 2001 B,
2.000% 08/15/30 500,000 500,000
WY Uinta County, Chevron
U.S.A., Inc., Project,
Series 1997,
2.000% 04/01/10 1,000,000 1,000,000
Series 1993,
2.000% 08/15/20 1,300,000 1,300,000
------------
VARIABLE RATE DEMAND NOTES TOTAL 6,400,000
------------
VALUE ($)
-----------------------------------------------------------
TOTAL SHORT-TERM OBLIGATION
(cost of $6,400,000) 6,400,000
------------
TOTAL INVESTMENTS - 158.8%
(cost of $317,297,422)(l) 323,661,269
AUCTION PREFERRED SHARES PLUS
CUMULATIVE UNPAID DISTRIBUTIONS - (58.9)% (120,057,898)
OTHER ASSETS & LIABILITIES, NET - 0.1% 273,888
-----------------------------------------------------------
NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS - 100.0% 203,877,259
============
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) Denotes a restricted security, which is subject to restrictions on resale
under federal securities laws . At May 31, 2005, these securities amounted
to $2,834,810, which represents 1.4% of net assets.
Additional information on these restricted securities is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
--------------------------------------------------------------
CA Statewide Community
Development Authority:
Crossroads School for Arts
& Sciences,
Series 1998,
6.000% 08/01/28 08/31/98 $1,250,000
Eskaton Village - Grass Valley,
Series 2000,
8.250% 11/15/31 09/08/00 990,000
Virgin Islands Government,
Hovensa Coker Project,
Series 2002, AMT,
6.500% 07/01/21 11/15/02 375,000
-------------
$2,615,000
-------------
(c) Security purchased on a delayed delivery basis.
(d) The issuer is in default of certain debt covenants. Income is not being
fully accrued. As of May 31, 2005, the value of these securities amounted to
$1,811,825 which represents 0.9% of net assets.
(e) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is not being accrued. As of May
31, 2005, the value of these securities amounted to $1,143,615 which
represents 0.6% of net assets.
(f) 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, 2005,
these securities amounted to $10,648,803, which represents 5.2% of net
assets.
(g) Represents fair value as determined in good faith under procedures approved
by the Board of Trustees.
(h) 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.
(i) The issuer had filed for bankruptcy protection under Chapter 11. Income is
being accrued. As of May 31, 2005, the value of these securities amounted to
$678,533, which represents 0.3% of net assets.
See Accompanying Notes to Financial Statements.
16
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2005 (Unaudited)
NOTES TO INVESTMENT PORTFOLIO (CONTINUED):
--------------------------------------------------------------------------------
(j) A portion of this security with a market value of $3,184,580 is pledged as
collateral for open futures contracts.
(k) Variable rate demand notes. The 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, 2005.
(l) Cost for federal income tax purposes is $316,981,385.
At May 31, 2005, the Trust held the following open short futures contracts:
AGGREGATE EXPIRATION UNREALIZED
TYPE CONTRACTS VALUE FACE VALUE DATE DEPRECIATION
---------------------------------------------------------------------
U.S. Treasury
Bond 220 $25,836,250 $25,563,477 Sept-2005 $(272,773)
U.S. Treasury
Notes 269 30,468,453 30,351,387 Sept-2005 $(117,066)
---------
$(389,839)
---------
ACRONYM NAME
----------------------------------------------------------------
AMBAC Ambac Assurance Corp.
AMT Alternative Minimum Tax
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Administration
FNMA Federal National Mortgage Association
FSA Financial Security Assurance Inc.
GNMA Government National Mortgage Co.
GO General Obligation
LOC Letter of Credit/Line of Credit
MBIA MBIA Insurance Corp.
PSFG Permanent School Fund Guaranteed
RAD Radian Asset Assurance, Inc.
At May 31, 2005, the composition of the Trust by revenue source is as
follows:
% OF
HOLDINGS BY REVENUE SOURCE NET ASSETS
---------------------------------------------------------------
Health Care 41.0
Tax-Backed 35.0
Utilities 18.9
Other 18.6
Housing 16.5
Industrial 7.3
Transportation 7.1
Education 4.9
Other Revenue 4.0
Short-Term Obligations 3.1
Resource recovery 2.4
Other Asset & Liabilities, Net 0.1
Auction Preferred Shares (58.9)
-----
100.0
-----
See Accompanying Notes to Financial Statements.
17
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2005 (Unaudited)
ASSETS:
Investments, at cost $317,297,422
------------
Investments, at value $323,661,269
Cash 7,729
Interest receivable 5,280,580
Deferred Trustees' compensation plan 18,521
------------
Total Assets 328,968,099
------------
LIABILITIES:
Payable for:
Investments purchased on a
delayed delivery basis 3,331,477
Futures variation margin 358,313
Distributions-- common shares 1,059,749
Distributions-- preferred shares 57,898
Investment advisory fee 204,025
Pricing and bookkeeping fees 15,948
Custody fee 1,935
Preferred shares remarketing commissions 5,349
Deferred Trustees' fees 18,521
Other liabilities 37,625
------------
Total Liabilities 5,090,840
------------
AUCTION PREFERRED SHARES (4,800 shares
issued and outstanding at
$25,000 per share) $120,000,000
------------
COMPOSITION OF NET ASSETS APPLICABLE
TO COMMON SHARES:
Paid-in capital -- common shares $260,651,192
Undistributed net investment income 395,740
Accumulated net realized loss (63,143,681)
Net unrealized appreciation (depreciation) on:
Investments 6,363,847
Futures contracts (389,839)
------------
Net assets at value applicable to 31,169,023
common shares of beneficial interest
outstanding $203,877,259
------------
Net asset value per common share $ 6.54
============
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 2005 (Unaudited)
INVESTMENT INCOME:
Interest $ 9,879,493
Dividends 1,119
------------
Total Investment Income 9,880,612
------------
EXPENSES:
Investment advisory fee 1,205,511
Pricing and bookkeeping fees 77,731
Trustees' fees 7,206
Preferred shares remarketing commissions 149,709
Custody fee 10,415
Other expenses 117,885
------------
Total Expenses 1,568,457
Custody earnings credit (814)
------------
Net Expenses 1,567,643
------------
Net Investment Income 8,312,969
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FUTURES CONTRACTS:
Net realized gain (loss) on:
Investments 1,560,049
Futures contracts (2,872,153)
------------
Net realized loss (1,312,104)
------------
Net change in unrealized appreciation/depreciation on:
Investments 6,849,926
Futures contracts (356,509)
------------
Net change in unrealized
appreciation/depreciation 6,493,417
------------
Net Gain 5,181,313
------------
Net Increase in Net Assets from Operations 13,494,282
------------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (1,190,032)
------------
Net Increase in Net Assets from
Operations Applicable to Common Shares $ 12,304,250
------------
See Accompanying Notes to Financial Statements.
18
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
INCREASE (DECREASE) IN NET ASSETS: 2005 2004
---------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 8,312,969 $ 16,152,482
Net realized loss on investments and futures contracts (1,312,104) (4,056,721)
Net change in unrealized appreciation/depreciation
on investments and futures contracts 6,493,417 (1,477,080)
------------ ------------
Net Increase from Operations 13,494,282 10,618,681
------------ ------------
LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS:
From net investment income (1,190,032) (1,308,975)
------------ ------------
Increase in Net Assets from Operations Applicable to Common Shares 12,304,250 9,309,706
------------ ------------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (7,635,616) (14,944,635)
------------ ------------
SHARE TRANSACTIONS:
Distributions reinvested 110,420 226,803
------------ ------------
Total Increase (Decrease) in Net Assets Applicable to Common Shares 4,779,054 (5,408,126)
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of period 199,098,205 204,506,331
------------ ------------
End of period (including overdistributed net investment income
of $395,740 and $908,419, respectively) $203,877,259 $199,098,205
============ ============
NUMBER OF TRUST SHARES:
Common Shares:
Issued for distributions reinvested 16,963 34,786
Outstanding at:
Beginning of period 31,152,060 31,117,274
------------ ------------
End of period 31,169,023 31,152,060
------------ ------------
Preferred Shares:
Outstanding at End of Period 4,800 4,800
------------ ------------
See Accompanying Notes to Financial Statements.
19
NOTES TO FINANCIAL STATEMENTS
May 31, 2005 (Unaudited)
NOTE 1. ORGANIZATION
Colonial High Income Municipal Trust (the "Trust") is a Massachusetts business
trust registered under the Investment Company Act of 1940 (the "Act"), as
amended, as a diversified, closed-end management investment company.
INVESTMENT GOAL
The Trust seeks to provide high current income, generally exempt from federal
income taxes. The Trust's secondary goal is to seek total return.
TRUST SHARES
The Trust may issue an unlimited number of common shares. On August 26, 1999,
the Trust issued 4,800 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 pricing services 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.
Investments in other investment companies are valued at net asset value.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
Investments for which market quotations are not readily available, or have
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
will invest in these instruments to hedge against the effects of changes in the
value of portfolio securities due to anticipated changes in interest rates
and/or market conditions, for duration management, or when the transactions are
economically appropriate to the reduction of risk inherent in the management of
the Trust and not for trading purposes. The use of futures contracts 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 in 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 receivable or payable
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.
20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2005 (Unaudited)
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. Corporate actions
and dividend income are recorded on the ex-date.
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 tax exempt or taxable 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 the 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, 2005, was 2.76%
for Series T and 2.71% for Series W. For the six months ended May 31, 2005, the
Trust declared dividends to Auction Preferred shareholders amounting to
$1,190,032, representing an annualized average dividend rate of 1.98% per APS.
NOTE 3. FEDERAL TAX INFORMATION
The tax character of distributions paid during the year ended November 30, 2004
was as follows:
NOVEMBER 30, 2004
----------------
Distributions paid from:
Tax-Exempt Income $16,226,738
Ordinary Income 26,872
Long-Term Capital Gains --
Unrealized appreciation and depreciation at May 31, 2005, based on cost of
investments for federal income tax purposes was:
Unrealized appreciation $24,032,932
Unrealized depreciation (17,353,048)
-----------
Net unrealized appreciation $ 6,679,884
-----------
The following capital loss carryforwards, determined as of November 30, 2004,
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
--------------------------------------------------
2005 $ 5,926,653
2007 3,941,668
2008 14,340,573
2009 4,198,716
2010 12,980,738
2011 4,761,736
2012 4,055,363
-----------
$50,205,447
-----------
Capital loss carryforwards of $2,815,387 expired during the year ended November
30, 2004 for the Trust. Expired capital loss carryforwards are recorded as a
reduction of paid-in capital.
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
INVESTMENT ADVISORY FEE
Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned
subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to
the Trust and provides administrative and other services to the Trust. Columbia
receives a monthly investment advisory fee at the annual rate of 0.75% of the
Trust's average weekly net assets, including assets applicable to the APS.
21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2005 (Unaudited)
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, 2005, the Trust's annualized
effective pricing and bookkeeping fee rate, inclusive of out-of-pocket expenses,
was 0.048% of the Trust's average weekly net assets, including assets applicable
to APS. CUSTODY CREDITS The Trust has an agreement with its custodian bank under
which custody fees may be reduced by balance credits. These credits are recorded
as a reduction of total expenses on the Statement of Operations. 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
With the exception of one officer, all officers of the Trust are employees of
Columbia or its affiliates and receive no compensation from the Trust. The Board
of Trustees appointed a Chief Compliance Officer to the Trust in accordance with
federal securities regulations. The Trust, along with other affiliated funds,
will pay its pro-rata share of the expenses associated with the Office of the
Chief Compliance Officer. The Trust's fee for the Office of the Chief Compliance
Officer will not exceed $15,000 per year.
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, 2005, the
Trust paid $850 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, 2005, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $18,150,066 and
$21,939,604 respectively.
NOTE 6. PREFERRED SHARES
The Trust currently has outstanding 4,800 APS (2,400 shares each of Series T and
W). 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, 2005, there
were no such restrictions on the Trust.
NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
CONCENTRATION OF CREDIT RISK
The Trust holds investments that are insured by private insurers who guarantee
the payment of principal and interest in the event of default or that are
supported by a letter of credit. Each of the Trust's insurers is rated AAA by
Moody's Investor Services Inc., except for Radian Asset Assurance, Inc., which
is rated AA by Standard and Poor's. At May 31, 2005, private insurers who insure
greater than 5% of the total investments of the Trust were as follows:
% OF TOTAL
INSURER INVESTMENTS
---------------------------------------------------------
Ambac Assurance Corp. 8.5%
22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2005 (Unaudited)
GEOGRAPHIC CONCENTRATION
The Trust has greater than 5% of its total investments at May 31, 2005 invested
in debt obligations issued by the states of California, Colorado, Florida,
Illinois, Massachusetts, Minnesota and Texas 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 obligations. Moreover, high-yield
securities may be less liquid to the extent that there is no established
secondary market.
INDUSTRY FOCUS
The Trust may focus its investments in certain industries, subjecting it to
greater risk than a trust that is more diversified.
LEGAL PROCEEDINGS
On February 9, 2005, Columbia and Columbia Funds Distributor, Inc.
(collectively, the "Columbia Group") entered into an Assurance of Discontinuance
with the New York Attorney General ("NYAG") (the "NYAG Settlement") and
consented to the entry of a cease-and-desist order by the Securities and
Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG
Settlement are referred to collectively as the "Settlements". The Settlements
contain substantially the same terms and conditions as outlined in the
agreements in principle which Columbia Group entered into with the SEC and NYAG
in March 2004.
Under the terms of the SEC Order, the Columbia Group has agreed among other
things, to: pay $70 million in disgorgement and $70 million in civil money
penalties; cease and desist from violations of the antifraud provisions and
certain other provisions of the federal securities laws; maintain certain
compliance and ethics oversight structures; retain an independent consultant to
review the Columbia Group's applicable supervisory, compliance, control and
other policies and procedures; and retain an independent distribution consultant
(see below). The Columbia Funds have also undertaken to implement certain
governance measures designed to maintain the independence of their boards of
trustees. The NYAG Settlement also, among other things, requires Columbia and
its affiliates, Banc of America Capital Management, LLC and BACAP Distributors,
LLC to reduce certain Columbia Funds, Nations Funds and other mutual funds
management fees collectively by $32 million per year for five years, for a
projected total of $160 million in management fee reductions.
Pursuant to the procedures set forth in the SEC order, the $140 million in
settlement amounts described above will be distributed in accordance with a
distribution plan to be developed by an independent distribution consultant, who
is acceptable to the SEC staff and the Columbia Funds' independent trustees. The
distribution plan must be based on a methodology developed in consultation with
the Columbia Group and the Trust's independent trustees and not unacceptable to
the staff of the SEC. At this time, the distribution plan is still under
development. As such, any gain to the fund or its shareholders can not currently
be determined.
As a result of these matters or any adverse publicity or other developments
resulting from them, the market price of fund shares could decline.
A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A
copy of the NYAG Settlement is available as part of the Bank of America
Corporation Form 8-K filing on February 10, 2005. In connection with events
described in detail above, various parties have filed suit against certain
funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and
its affiliated entities and/or Bank of America Corporation and its affiliated
entities. More than 300 cases including those filed against entities
unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and
its affiliated entities and/or Bank of America Corporation and its affiliated
entities have been transferred to the Federal District Court in Maryland and
consolidated in a multi-district proceeding (the "MDL").
The derivative cases purportedly brought on behalf of the Columbia Funds in the
MDL have been consolidated under the lead case. The fund derivative plaintiffs
allege that the funds were harmed by market timing and late trading activity and
seek, among other things, removal of the trustees of the Columbia Funds, removal
of the Columbia Group, disgorgement of all management fees and monetary damages.
On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts
state court alleging that the conduct, including market timing, entitles Class B
23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2005 (Unaudited)
shareholders in certain Columbia funds to an exemption from contingent deferred
sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has
been removed to federal court in Massachusetts and the federal Judicial Panel
has conditionally ordered its transfer to the MDL.
The MDL is ongoing. Accordingly, an estimate of the financial impact of this
litigation on any fund, if any, can not currently be made.
On January 11, 2005, a putative class action lawsuit was filed in federal
district court in Massachusetts against, among others, the Trustees of the
Columbia Funds and Columbia. The lawsuit alleges that defendants violated common
law duties to fund shareholders as well as sections of the Investment Company
Act of 1940, by failing to ensure that the Trust and other affiliated funds
participated in securities class action settlements for which the funds were
eligible. Specifically, plaintiffs allege that defendants failed to submit proof
of claims in connection with settlements of securities class action lawsuits
filed against companies in which the funds held positions.
In 2004, certain Columbia funds, advisers and affiliated entities were named as
defendants in certain purported shareholder class and derivative actions making
claims, including claims under the Investment Company and the Investment
Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees
and expenses paid by the funds are excessive and that the advisers and their
affiliates inappropriately used fund assets to distribute the funds and for
other improper purpose. On March 2, 2005, the actions were consolidated in the
Massachusetts federal court as In re Columbia Entities Litigation. The
plaintiffs filed a consolidated amended complaint on June 9, 2005.
The Trust and the other defendants to these actions, including Columbia and
various of its affiliates, certain other mutual funds advised by Columbia and
its affiliates, and various directors of such funds, have denied these
allegations and are contesting the plaintiffs' claims. These proceedings are
ongoing, however, based on currently available information, Columbia believes
that these lawsuits are without merit, that the likelihood they will have a
material adverse impact on any fund is remote, and that the lawsuits are not
likely to materially affect its ability to provide investment management
services to its clients, including the Trust.
24
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise stated):
(UNAUDITED)
SIX MONTHS PERIOD YEAR
ENDED YEAR ENDED NOVEMBER 30, ENDED ENDED
MAY 31, ---------------------------------------------------------- NOVEMBER 30, DECEMBER 31,
2005 2004 2003 2002 2001 2000 1999 (a) 1998
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 6.39 $ 6.57 $ 6.52 $ 6.93 $ 6.92 $ 7.49 $ 8.49 $ 8.56
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.27(b) 0.52(b) 0.54(b) 0.57(b)(c) 0.61(b) 0.62(d) 0.46 0.52
Net realized and unrealized gain
(loss) on investments and
futures contracts 0.17 (0.18) 0.04 (0.42)(c) (0.04) (0.54) (0.92) (0.07)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from Investment
Operations 0.44 0.34 0.58 0.15 0.57 0.08 (0.46) 0.45
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (0.04) (0.04) (0.04) (0.06) (0.12) (0.16) (0.04) --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from Investment
Operations Applicable
to Common Shareholders 0.40 0.30 0.54 0.09 0.45 (0.08) (0.50) 0.45
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO
COMMON SHAREHOLDERS:
From net investment income (0.25) (0.48) (0.49) (0.50) (0.44) (0.48) (0.45) (0.52)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
LESS SHARE TRANSACTIONS:
Commissions and offering costs--
preferred shares -- -- -- -- -- (0.01) (0.05) --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 6.54 $ 6.39 $ 6.57 $ 6.52 $ 6.93 $ 6.92 $ 7.49 $ 8.49
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Market price per share--
common shares $ 6.27 $ 6.43 $ 6.45 $ 6.26 $ 6.38 $ 5.75 $ 6.13 $ 8.31
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total return-- based on market
value-- common shares (e) 1.27%(f) 7.44% 11.17% 5.81% 18.56% 1.05% (21.72)%(f) 2.47%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (g)(h) 1.55%(i) 1.58% 1.54% 1.49% 1.59% 1.60% 1.13%(i) 0.93%
Net investment income before
preferred stock dividend (g)(h) 8.24%(i) 8.04% 8.30% 8.36%(c) 8.67% 8.63% 6.18%(i) 6.02%
Net investment income after
preferred stock dividend (g)(h) 7.06%(i) 7.39% 7.72% 7.53%(c) 7.00% 6.37% 5.67%(i) 6.02%
Portfolio turnover rate 6%(f) 13% 14% 15% 15% 10% 16%(f) 29%
Net assets, end of
period (000's)--
common shares $ 203,877 $ 199,098 $ 204,506 $ 202,765 $ 215,348 $ 214,975 $ 232,540 $ 263,705
(a) The Trust changed its fiscal year end from December 31 to November 30.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) 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 8.31% to 8.36% and increase the ratio of
net investment income (adjusted for dividend payments to preferred
shareholders) from 7.48% to 7.53%. 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.
(d) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(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.
25
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise stated):
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.34 $ 8.55 $ 7.96 $ 8.67
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.55 0.56 0.60 0.62
Net realized and unrealized gain (loss) on investments and futures contracts 0.22 (0.19) 0.58 (0.72)
----------- ----------- ----------- -----------
Total from Investment Operations Applicable to Common Shareholders 0.77 0.37 1.18 (0.10)
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (0.55) (0.58) (0.59) (0.61)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 8.56 $ 8.34 $ 8.55 $ 7.96
=========== =========== =========== ===========
Market price per share--common shares $ 8.63 $ 8.25 $ 7.38 $ 6.88
=========== =========== =========== ===========
Total return--based on market value--common shares (a) 11.60% 20.09% 15.65% (9.83)%
=========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (b) 0.96% 1.00% 1.06% 1.03%
Net investment income (b) 6.54% 6.74% 7.15% 7.44%
Portfolio turnover rate 17% 15% 23% 20%
Net assets, end of period (000's)-- common shares $ 265,190 $ 257,768 $ 264,467 $ 245,967
(a)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(b)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
ASSET COVERAGE REQUIREMENTS
INVOLUNTARY
ASSET LIQUIDATING AVERAGE
TOTAL AMOUNT COVERAGE PREFERENCE MARKET VALUE
OUTSTANDING PER SHARE* PER SHARE PER SHARE
----------------------------------------------------------------------------------------------------------------------------------
05/31/05** $120,000,000 $67,474 $25,012 $25,000
11/30/04 120,000,000 66,479 25,008 25,000
11/30/03 120,000,000 67,605 25,003 25,000
11/30/02 120,000,000 67,243 25,002 25,000
11/30/01 120,000,000 69,864 25,004 25,000
11/30/00 120,000,000 69,786 25,009 25,000
11/30/99 *** 120,000,000 73,466 25,021 25,000
* Calculated by subtracting the Trust's total liabilities from the Trust's
total assets and dividing the amount by the number of APS outstanding.
** Unaudited.
*** On August 26, 1999, the Trust began offering Auction Preferred Shares.
26
SHAREHOLDER MEETING RESULTS
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On May 25, 2005, 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, 2005, the record date for
the Meeting, the Trust had 31,169,020 shares outstanding. The votes cast were as
follows:
PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD
----------------------------------------------------------------------------
Richard W. Lowry 26,244,243 674,546
John J. Neuhauser 26,243,595 675,194
Patrick J. Simpson 26,263,401 655,388
Richard L. Woolworth 26,238,806 679,983
On March 10, 2005, the record date of the Meeting, the Trust had 4,800 preferred
shares outstanding. The votes cast were as follows:
PROPOSAL 2.
ELECTION OF TRUSTEES: FOR WITHHELD
-----------------------------------------------------------------------------
Douglas A. Hacker 4,782 10
Richard W. Lowry 4,782 10
John J. Neuhauser 4,782 10
Patrick J. Simpson 4,782 10
Thomas E. Stitzel 4,782 10
Richard L. Woolworth 4,782 10
27
DIVIDEND REINVESTMENT PLAN
COLONIAL HIGH INCOME MUNICIPAL TRUST
Shareholders may elect to have all distributions of dividends and capital gains
automatically reinvested by Computershare (the "Plan Agent"), as agent under the
Trust's Dividend Reinvestment 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 or 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. In
circumstances in which the net asset value of Trust shares is more than 5% below
their market price, participants in the Plan will be issued shares through the
Plan at a price exceeding net asset value.
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. A shareholder's
notice of election to participate in or withdraw from the Plan must be received
by the Plan Agent before the record date for a dividend in order to be given
effect with respect to that dividend.
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.
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 Plan
participants. All correspondence concerning the Plan should be directed to
Computershare by mail at P.O. Box 43010, Providence, RI 02940-3010, or by phone
at 1-800-730-6001.
28
BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENT
Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") requires
that the Board of Trustees/Directors (the "Board") of the Columbia Funds (the
"Funds"), including a majority of the Trustees and Directors (collectively, the
"Trustees") who are not "interested persons" of the Trusts, as defined in the
1940 Act (the "Independent Trustees"), annually review and approve the terms of
the Funds' investment advisory agreements. At a meeting held on October 13,
2004, the Board reviewed and approved the management contracts ("Advisory
Agreement") with Columbia Management Advisors, Inc. ("CMA") for the Fund.
At meetings held on September 23, 2004 and October 12, 2004, the Advisory Fees
and Expenses Committee (the "Committee") of the Board considered the factors
described below relating to the selection of CMA and the approval of the
Advisory Agreement. At a meeting held on October 13, 2004, the Board, including
the Independent Trustees (who were advised by their independent legal counsel),
considered these factors and reached the conclusions described below.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board considered information regarding the nature, extent and quality of
services that CMA provides to the Fund under the Advisory Agreement. CMA
provided the most recent investment adviser registration form ("Form ADV") and
code of ethics for CMA to the Board. The Board reviewed information on the
status of Securities and Exchange Commission ("SEC") and New York Attorney
General ("NYAG") proceedings against CMA and certain of its affiliates,
including the agreement in principle entered into with the SEC and the NYAG on
March 15, 2004 to settle civil complaints filed by the SEC and the NYAG relating
to trading activity in mutual fund shares.1
The Board evaluated the ability of CMA, including its resources, reputation and
other attributes, to attract and retain highly qualified research, advisory and
supervisory investment professionals. The Board considered information regarding
CMA's compensation program for its personnel involved in the management of the
Fund.
Based on these considerations and other factors, including those referenced
below, the Board concluded that they were generally satisfied with the nature,
extent and quality of the investment advisory services provided to the Fund by
CMA.
FUND PERFORMANCE AND EXPENSES
CMA provided the Board with relative performance and expense information for the
Fund in a report prepared by Lipper Inc. ("Lipper") an independent provider of
investment company data. The Board considered the total return performance
information, which included the ranking of the Fund within a performance
universe made up of funds with the same Lipper investment classification and
objective (the "Performance Universe") by total return for one-year, three-year,
five-year, ten-year or life of fund periods, as applicable. They also considered
the Fund's performance in comparison to the performance results of a group (the
"Performance Peer Group") of funds selected by Lipper based on similarities in
fund type (e.g. open-end), investment classification and objective, asset size,
load type and 12b-1/service fees and other expense features, and to the
performance results of the Fund's benchmark index. The Board reviewed a
description of Lipper's methodology for selecting the mutual funds in the Fund's
Performance Peer Group and Performance Universe.
The Board considered statistical information regarding the Fund's total expenses
and certain components thereof, including management fees (both actual
management fees based on expenses for advisory and administrative fees including
any reductions for fee waivers and expense reimbursements as well as contractual
management fees that are computed for a hypothetical level of assets), actual
non-management expenses, and fee waivers/caps and expense reimbursements. They
also considered comparisons of these expenses to the expense information for
funds within a group (the "Expense Peer Group") selected by Lipper based on
similarities in fund type (e.g. open-end), investment classification and
objective, asset size, load type and 12b-1/service fees and other expense
features (but which, unlike the Performance Peer Group,may include funds with
several different investment classifications and objectives) and an expense
universe ("Expense Universe") selected by Lipper based on the criteria for
determining the Expense Peer Group other than asset size. The expense
information in the Lipper report took into account all existing fee waivers and
expense reimbursements as well as all voluntary advisory fee reductions
applicable to certain Funds that were being proposed by management in order to
reduce the aggregate advisory fees received from mutual funds advised by CMA and
Banc of America Capital Management, LLC ("BACAP") by $32 million per year for
five years as contemplated by the agreement in principle with the NYAG.
The Committee also considered the projected impact on expenses of these Funds
resulting from the overall cost reductions that management anticipated would
result from the proposed shift to a common group of service providers for
transfer agency, fund accounting and custody services for mutual funds advised
by Bank of America affiliates.
The Board also considered information in the Lipper report that ranked each Fund
based on (i) each Fund's one-year performance and actual management fees, (ii)
each Fund's one-year performance and total expenses and (iii) each Fund's 3-year
performance and total expenses. Based on these comparisons and expense and
performance rankings of the Fund in the Lipper Report, CMA determined an overall
score for the Fund. The Committee and the Board also considered projected
savings to the Fund that would result from certain modifications in soft dollar
arrangements.
The Committee also considered more detailed information relating to certain
Funds, including the Fund that were
---------------
1 On February 9, 2005, CMA and its affiliate, Columbia Funds Distributor,
Inc., entered into settlement agreements with the SEC and the NYAG that
contain substantially the terms outlined in the agreements in principle.
29
BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED)
highlighted for additional review based upon the fact that they ranked poorly in
terms of overall expense or management fees, maintained poor performance or
demonstrated a combination of below average to poor performance while
maintaining below average or poor expense rankings. At its September 23, 2004
meeting, the Committee discussed these Funds with management and in executive
session. The Committee requested additional information from management
regarding the cause(s) of the below-average relative performance of these Funds,
any remedial actions management recommended to improve performance and the
general standards for review of portfolio manager performance. At its October
12, 2004 meeting, the Committee considered additional information provided by
management regarding these Funds. The Fund was identified for further review
based on poor relative rankings for total expenses and actual management fees
and poor relative three-year relative performance against total expenses.
Management noted that the Fund's first quintile yield ranking as of August 31,
2004 within its Lipper performance group. Management also noted the Fund's other
expenses included in the total expense ratio were expected to improve due to
projected lower fund accounting expenses. The Board also considered management's
proposal to merge or liquidate some of these Funds.
Based on these considerations and other factors, the Board concluded that the
overall performance and expense results supported by the approval of the
Advisory Agreements for each Fund.
INVESTMENT ADVISORY FEE RATES
The Board reviewed and considered the proposed contractual investment advisory
fee rates (the "Advisory Agreement Rates") payable by the Funds to CMA for
investment advisory services. In addition, the Board reviewed and considered the
existing and proposed fee waiver and reimbursement arrangements applicable to
the Advisory Agreement Rates and considered the Advisory Agreement Rates after
taking the fee waivers and reimbursements into account (the "Net Advisory
Rates"). At previous meetings, the Committee had separately considered
management's proposal to reduce annual investment advisory fees for certain
Funds under the NYAG agreement in principle and the impact of these reductions
on each affected Fund. Additionally, the Board considered information comparing
the Advisory Agreement Rates and Net Advisory Rates (both on a stand-alone basis
and on a combined basis with the Funds' administration fee rates) with those of
the other funds in the Expense Peer Group. The Board concluded that the Advisory
Agreement Rates and Net Advisory Rates represented reasonable compensation to
CMA, in light of the nature, extent and quality of the services provided to the
Funds, the fees paid and expenses borne by comparable funds and the costs that
CMA incurs in providing these services to the Funds.
PROFITABILITY
The Board considered a detailed profitability analysis of CMA based on 2003
financial statements, adjusted to take into account advisory fee reductions
implemented in November 2003 and proposed reductions under the NYAG proposed
settlement. The Board concluded that, in light of the costs of providing
investment management and other services to the Funds, the profits and other
ancillary benefits that CMA and its affiliates received for providing these
services to the Funds were not unreasonable.
ECONOMIES OF SCALE
In evaluating potential economies of scale, the Board considered CMA's proposal
to implement a standardized breakpoint schedule for combined advisory and
administrative fees for the majority of the funds of the same general asset type
within the Columbia Funds complex (other than index and closed-end funds). The
Board noted that the standardization of the breakpoints would not result in a
fee increase for any Fund. The Board concluded that any actual or potential
economies of scale are, or will be, shared fairly with Fund shareholders,
including most particularly through Advisory Agreement Rate breakpoints at
current and reasonably foreseeable asset levels.
INFORMATION ABOUT SERVICES TO OTHER CLIENTS
In evaluating the proposed fee reductions under the NYAG agreement in principle,
the Board considered information regarding the advisory fee rates charged by
BACAP for the Nations Funds. Members of the Committee and the Board had also
separately reviewed advisory fee rates for variable insurance product funds
advised by CMA. This information assisted the Board in assessing the
reasonableness of fees paid under the Advisory Agreements in light of the
nature, extent and quality of services provided under those agreements.
OTHER BENEFITS TO CMA
The Board considered information regarding potential "fall-out" or ancillary
benefits received by CMA and its affiliates as a result of their relationship
with the Funds. These benefits could include benefits directly attributable to
the relationship of CMA with the Funds (such as soft dollar credits) and
benefits potentially derived from an increase in the business of CMA as a result
of their relationship with the Funds (such as the ability to market to
shareholders other financial products offered by CMA and its affiliates).
OTHER FACTORS AND BROADER REVIEW
The Board reviews detailed materials provided by CMA annually as part of the
approval process under Section 15(c) of the 1940 Act. The Board also regularly
reviews and assesses the quality of the services that the Funds receive
throughout the year. In this regard, the Board reviews information provided by
CMA at their regular meetings, including, among other things, a detailed
portfolio review, and detailed fund performance reports. In addition, the Board
interviews the heads of each investment area at each regular meeting of the
Board and selected portfolio managers of the Funds at various times throughout
the year. After considering the above-described factors and based on the
deliberations and their evaluation of the information provided to them, the
Board concluded that re-approval of the Advisory Agreements for each of the
Funds was in the best interest of the Funds and their shareholders. Accordingly,
the Board unanimously approved the Advisory Agreements.
30
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TRANSFER AGENT
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial High Income Municipal Trust is:
Computershare
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 trust's proxy voting policies and procedures is available
(i) at www.columbiamanagement.com; (ii) on the Securities and Exchange
Commission's website at www.sec.gov, and (iii) without charge, upon request, by
calling 800-730-6001. Information regarding how the trust voted proxies relating
to portfolio securities during the 12-month period ended June 30, 2004 is
available from the SEC's website. Information regarding how the trust voted
proxies relating to portfolio securities is also available at
www.columbiamanagement.com.
The trust files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The trust's Form N-Q
is available on the SEC's website at www.sec.gov and may be reviewed and copied
at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Annual Certifications -- As required, on June 13, 2005, the trust submitted to
the New York Stock Exchange ("NYSE") the annual certification of the trust's
Chief Executive Officer certifying that he is not aware of any violation of the
NYSE's Corporate Governance listing standards. The trust also has included the
certifications of the trust's Chief Executive Officer and Chief Financial
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to
the trust's Form N-CSR filed with the Securities and Exchange Commission for the
annual period.
This report has been prepared for shareholders of Colonial High Income Municipal
Trust.
COLONIAL HIGH INCOME MUNICIPAL TRUST SEMIANNUAL REPORT
SHC-44/87066-0605 (07/05) 05/6542
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.
ITEM 6. SCHEDULE OF INVESTMENTS
The registrant's "Schedule I - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form
N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Registrant Purchases of Equity Securities*
(a) (b) (c) (d)
Total Number of Maximum Number of
Shares Purchased as Shares that May Yet
Period Total Number Average Price Part of Publicly Be Purchased Under
of Shares Purchased Paid Per Share Announced Plans or Programs the Plans or Programs
-------------------------------------------------------------------------------------------------------------------------------
12/01/04 through 12/31/04 0 $0.00 0 N/A
01/01/05 through 01/31/05 11,438 $6.61 11,438 N/A
02/01/05 through 02/28/05 0 $0.00 0 N/A
03/01/05 through 03/31/05 8,502 $6.45 8,502 N/A
04/01/05 through 04/30/05 8,284 $6.28 8,284 N/A
05/01/05 through 05/31/05 7,930 $6.49 7,930 N/A
-------------------------------------------------------------------------------------------------------------------------------
Total 36,154 $6.47 36,154 N/A
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* Includes shares purchased by the Dividend Reinvestment Agent pursuant to
the Registrant's Dividend Reinvestment Plan.
ITEM 10. 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 directors, since those
procedures were last disclosed in response to the requirements of Item
7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officers, based on their evaluation of the registrant's disclosure
controls and procedures as of a date within 90 days of the filing of
this report, have 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 second
fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 12. 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.
(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 High Income Municipal Trust
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By (Signature and Title) /S/ Christopher L. Wilson
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Christopher L. Wilson, President
Date July 28, 2005
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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/ Christopher L. Wilson
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Christopher L. Wilson, President
Date July 28, 2005
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By (Signature and Title) /S/ J. Kevin Connaughton
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J. Kevin Connaughton, Treasurer
Date July 28, 2005
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