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
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(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: November 30, 2005
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Date of reporting period: November 30, 2005
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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. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
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COLONIAL HIGH INCOME MUNICIPAL TRUST ANNUAL REPORT
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NOVEMBER 30, 2005
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Not FDIC | May Lose Value
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Insured | No Bank Guarantee
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President's Message
The views expressed in the President's Letter and Portfolio Manager's Report
reflect 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 Fund
are based on numerous factors, may not be relied on as an indication of trading
intent on behalf of any particular Colonial Fund. References to specific company
securities should not be construed as a recommendation or investment advice.
Dear Shareholder:
The US financial markets withstood a host of unfavorable factors to deliver a
year of positive investment returns. Record energy prices took a significant
bite out of household budgets and raised operating costs for industry. Higher
short-term interest rates made borrowing more expensive. Two catastrophic
hurricanes exacted an enormous personal toll from Americans living in the Gulf
Coast: the storms claimed lives, disrupted energy flows and dealt a sharp blow
to local job markets. Yet, the US economy moved ahead at a healthy pace during
the 12-month period that began December 1, 2004 and ended November 30, 2005
FIXED INCOME MARKETS DELIVERED MODEST GAINS
In this environment, the US fixed income markets delivered positive but modest
returns. Short-term interest rates rose steadily as the Federal Reserve Board
raised a key intrabank lending rate. Longer-term rates remained low during most
of the year. However, the yield on the 10-year US Treasury note, a bellwether
for the bond market edged up to 4.5% by the end of this reporting period. In
this environment, most domestic bond market sectors delivered low single-digit
returns. Generally, high-yield bonds continued to perform well despite a setback
in the spring, when bonds of certain high profile companies were downgraded.
However, municipal bonds generally performed better than high yield bonds--even
before accounting for their tax-exempt status--as state revenues increased and
budgets stabilized.
In the pages that follow, your trust's manager discusses key factors that
influenced performance. We urge you to read this report carefully and discuss
any questions you might have with your financial advisor.
As always, we thank you for choosing Colonial Funds.
Sincerely,
/s/ Christopher L. Wilson
Christopher L. Wilson
President, Columbia Funds
Christopher L. Wilson is Head of Mutual Funds for Columbia Management and
President of Columbia 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.
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PORTFOLIO MANAGER'S REPORT
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For the 12-month period ended November 30, 2005, Colonial High Income Municipal
Trust generated a total return of 7.18%, based on its market price. The trust
returned 8.63%, based on investment at net asset value, which was higher than
the 8.35% average return of the Lipper High Yield Municipal Debt Funds
Category. 1 The trust also outperformed a customized peer group consisting of
nine leveraged closed-end high-yield municipal funds. The group generated an
average return of 7.88%. A combination of factors aided relative performance:
attractive income, positioning that made the trust less sensitive to interest
rate changes than competing funds and positive returns from specific sectors. In
addition, our decision to avoid bonds with significant credit and price
deterioration, which were owned by several other funds in the Lipper universe,
enhanced the trust's relative return.
BIGGEST GAINS FROM HIGH-YIELD SECTOR
Municipal bonds did well during the year, benefiting as improved economic growth
bolstered revenues. The biggest gains came from lower-quality bonds with higher
yields. High-yield bonds also gained as the yield difference between lower
quality and higher quality issues narrowed, especially during the first half of
the period. However, the narrow yield differential meant there were fewer
attractive lower quality investment opportunities available by period end.
SOURCES OF POSITIVE PERFORMANCE
Among the biggest contributors to performance were investments in the airline
sector. Bonds issued by US Airways, Inc. (0.3% of total investments) 2 benefited
after the company came out of bankruptcy and merged with America West Airlines,
Inc. (which was not in the portfolio). In addition, the trust owned bonds issued
by Continental Airlines, Inc. and American Airlines, Inc. (0.4% and 0.4% of
total investments, respectively), both of which performed well. Elsewhere, the
credit quality of bonds issued by a Roseville, Minnesota, assisted living
facility (0.4% of total investments) improved dramatically. In addition to these
favorable contributions from individual sectors and securities, during the
second half of the period, the trust benefited by positioning itself to be less
sensitive than either of its peer groups to interest rate changes.
DISAPPOINTING RETURNS FROM SPECIFIC CREDITS
The trust experienced several disappointments from individual securities. For
example, Northwest Airlines, Inc. (0.3% of total investments) filed for
bankruptcy protection in September, which caused their bonds to decline in
value. Capital Trust Agency in Florida called (or redeemed before the due date)
bonds that they had issued on behalf of the Seminole tribe to build hotels on
tribal land. These bonds were called at 108 due to a preliminary finding by the
IRS that called into question the tax-exempt status of the bonds. This resulted
in a loss of some of the premium at which they were priced in the trust. In
addition, the price of bonds issued by a nursing home in Gary, Indiana (0.1% of
total investments), declined as the issuer's credit quality deteriorated.
(Sidebar)
PRICE PER SHARE AS OF 11/30/05 ($)
Market price 6.42
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Net asset value 6.47
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1-YEAR TOTAL RETURN AS OF 11/30/05 (%)*
Market price 7.18
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Net asset value 8.63
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Lipper High Yield Municipal
Debt Funds Category average 8.35
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All results shown assume reinvestment of distributions.
DISTRIBUTIONS DECLARED PER COMMON SHARE
12/01/04 - 11/30/05 ($)
0.46
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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 11/30/05 (%)
Hospitals 11.9
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Multi-family 9.0
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Continuing care retirement 8.6
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Refunded/Escrowed 8.0
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Local general obligations 7.1
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QUALITY BREAKDOWN AS OF 11/30/05 (%)
AAA 22.1
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AA 4.1
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A 11.6
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BBB 23.7
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BB 4.1
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B 1.0
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CCC 0.3
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Non-rated 31.6
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Cash equivalents 1.5
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Sector and quality breakdowns are calculated as a percentage of total
investments and net assets, respectively. Ratings shown in the quality
breakdowns 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. Ratings are relative and subjective and are not absolute standards
of quality. The trust's credit quality does not remove market risk. 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 these quality breakdowns in the
future.
_________________
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 November 30, 2005, and are subject to change.
* See page 26 for long term total returns based on market price.
| 1
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PORTFOLIO MANAGER'S REPORT (CONTINUED)
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THE TRUST'S DIVIDEND YIELD DECLINED
The trust's dividend yield declined over the 12-month reporting period, as
rising short-term interest rates eroded some of the income that the trust
derived from leverage. The trust's leverage comes from its preferred shares,
which were issued in 1999 to allow the trust to borrow against its underlying
investments. We invest the proceeds from the preferred shares in longer
maturity, higher-yielding bonds, and then pay out to preferred shareholders a
short-term rate influenced by the federal funds rate. The federal funds rate is
the rate banks charge each other for overnight loans. As the federal funds rate
climbed, the payout rate to preferred shareholders rose, reducing the income
available to the common shareholders. However, we believe that the trust's
leverage continued to give the common shareholders a higher dividend payment
than would have been available without it.
LOOKING AHEAD
The Federal Reserve Board (the Fed) may be nearing the end of its interest
rate hikes, but we believe it will raise the federal funds rates several more
times in 2006. However, the Fed's vigilant stance on inflation may keep
long-term rates from rising. Since yields on long-term bonds are currently only
slightly higher than short-term yields, we also believe a drop in long-term
yields is unlikely. Although the yield differential between high and low quality
issues has narrowed substantially, we believe demand has the potential to remain
strong for high-yield securities, which should help the sector.
/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, LLC or its predecessors or
affiliate organizations since May 1996.
SHARES OF CLOSED-END FUNDS FREQUENTLY TRADE AT A DISCOUNT TO NET ASSET VALUE.
THE PRICE OF THE TRUST'S SHARES IS DETERMINED BY A NUMBER OF FACTORS, SEVERAL OF
WHICH ARE BEYOND THE CONTROL OF THE TRUST. THEREFORE, THE TRUST CANNOT PREDICT
WHETHER ITS SHARES WILL TRADE AT, BELOW OR ABOVE NET ASSET VALUE.
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 also has 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 |
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INVESTMENT PORTFOLIO
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November 30, 2005
MUNICIPAL BONDS - 152.3% PAR ($) VALUE ($)
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EDUCATION - 5.0%
EDUCATION - 3.4%
CA Educational Facilities Authority,
Loyola Marymount University,
Series 2001,
Insured: MBIA
(a) 10/01/19 2,025,000 1,074,930
CA Public Works Board,
UCLA, Series 2002 A,
Insured: FSA
5.375% 10/01/15 1,010,000 1,092,295
MI Southfield Economic
Development Corp.,
Lawrence University,
Series 1998 A,
5.400% 02/01/18 1,000,000 1,023,580
NC Capital Facilities
Finance Authority,
Meredith College,
Series 2001,
Insured: AMBAC
5.125% 06/01/16 1,000,000 1,058,350
PA Higher Education
Facilities Authority,
Philadelphia University,
Series 2004 A,
5.125% 06/01/25 600,000 598,896
VT Educational & Health
Buildings Finance Agency,
Norwich University,
Series 1998,
5.500% 07/01/21 1,500,000 1,542,135
WV University,
Series 2000 A,
Insured: AMBAC
(a)04/01/19 1,000,000 543,830
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Education Total 6,934,016
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PREP SCHOOL - 1.6%
CA Statewide Communities
Development Authority,
Crossroads School of Arts & Sciences,
Series 1998,
6.000% 08/01/28(b) 1,240,000 1,283,152
IL Development Finance Authority,
Latin School of Chicago,
Series 1998,
5.650% 08/01/28 230,000 234,043
MA Industrial Finance Agency:
Cambridge Friends School,
Series 1998,
5.800% 09/01/28 1,000,000 972,830
St. John's High School,
Series 1998,
5.350% 06/01/28 150,000 154,256
PAR ($) VALUE ($)
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MI Summit Academy North,
Series 2005,
5.500% 11/01/35 500,000 483,745
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Prep School Total 3,128,026
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EDUCATION TOTAL 10,062,042
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HEALTH CARE - 42.4%
CONTINUING CARE RETIREMENT - 13.5%
CA Association of Bay Area Goverments,
Finance Authority for Nonprofit Corps.,
Eskaton Gold River Lodge,
Series 1998:
6.375% 11/15/15 620,000 661,546
6.375% 11/15/28 550,000 579,425
CA La Verne,
Brethren Hillcrest Homes,
Series 2003 B,
6.625% 02/15/25 690,000 751,010
CA Statewide Community
Development Authority,
Eskaton Village - Grass Valley,
Series 2000,
8.250% 11/15/31(b) 985,000 1,114,813
CO Health Facilities Authority,
Covenant Retirement Communities, Inc.,
Series 2005,
5.000% 12/01/35 1,400,000 1,350,482
CT Development Authority,
The Elim Park Baptist, Inc. Project,
Series 2003,
5.850% 12/01/33 660,000 691,574
FL Capital Projects Finance Authority,
Glenridge on Palmer Ranch,
Series 2002 A,
8.000% 06/01/32 750,000 831,990
FL Lee County Industrial Development
Authority, Shell Point Village Project,
Series 1999 A,
5.500% 11/15/29 600,000 604,524
GA Fulton County Residential Care
Facilities Authority,
Canterbury Court Project,
Series 2004 A,
6.125% 02/15/34 750,000 757,237
GA Savannah Economic Development
Authority, Marshes of Skidaway,
Series 2003 A,
7.400% 01/01/34 465,000 489,110
See Accompanying Notes to Financial Statements. | 3
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INVESTMENT PORTFOLIO (CONTINUED)
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November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
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HEALTH CARE (CONTINUED)
CONTINUING CARE RETIREMENT (CONTINUED)
IL Health Facilities Authority:
Lutheran Senior Ministries,
Series 2001,
7.375% 08/15/31 900,000 953,631
Washington & Jane Smith Community,
Series 2003 A,
7.000% 11/15/32 725,000 759,104
KS Manhattan,
Meadowlark Hills Retirement Home,
Series 1999 A,
6.375% 05/15/20 650,000 670,722
MA Boston Industrial Development
Financing Authority,
Springhouse, Inc.,
Series 1998,
5.875% 07/01/20 255,000 257,963
MA Development Finance Agency,
Loomis Communities:
Series 1999 A,
5.625% 07/01/15 400,000 404,684
Series 2002 A,
6.900% 03/01/32 100,000 108,142
MD Westminster Economic
Development Authority,
Carroll Lutheran Village, Inc.,
Series 2004 A:
5.875% 05/01/21 500,000 513,915
6.250% 05/01/34 250,000 258,273
NC Medical Care Commission,
United Methodist Retirement Homes, Inc.
Series 2005 C,
5.500% 10/01/32 600,000 604,848
NH Higher Educational & Health
Facilities Authority,
Rivermead at Peterborough,
Series 1998:
5.625% 07/01/18 500,000 502,025
5.750% 07/01/28 500,000 500,315
NJ Economic Development Authority:
Lions Gate,
Series 2005 A:
5.750% 01/01/25 205,000 208,686
5.875% 01/01/37 830,000 840,823
Seabrook Village, Inc.,
Series 2000 A,
8.250% 11/15/30 925,000 1,025,409
Winchester Gardens,
Series 2004 A,
5.750% 11/01/24 750,000 783,457
PA Delaware County Authority,
Dunwoody Village,
Series 2003 A,
5.375% 04/01/17 600,000 630,924
PAR ($) VALUE ($)
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PA Lancaster Industrial
Development Authority,
Garden Spot Village,
Series 2000 A,
7.625% 05/01/31 500,000 539,040
PA Montgomery County Industrial
Development Authority,
Whitemarsh Continuing Care
Retirement Community,
Series 2005:
6.125% 02/01/28 250,000 261,025
6.250% 02/01/35 750,000 784,245
TN Johnson City Health &
Educational Facilities Authority,
Appalachian Christian Village Project,
Series 2004 A,
6.250% 02/15/32 250,000 251,945
TN Metropolitan Government
Nashville & Davidson County,
Blakeford at Green Hills,
Series 1998,
5.650% 07/01/24 600,000 591,678
TN Shelby County Health,
Educational & Housing Facilities Board,
Germantown Village,
Series 2003 A,
7.250% 12/01/34 450,000 471,357
TX Abilene Health Facilities
Development Corp.,
Sears Methodist Retirement Center:
Series 1998 A,
5.900% 11/15/25 1,000,000 1,007,690
Series 2003 A,
7.000% 11/15/33 500,000 537,680
TX Houston Health Facilities
Development Corp.,
Buckingham Senior Living
Community, Inc.,
Series 2004 A,
7.125% 02/15/34 500,000 543,525
VA Virginia Beach Development Authority,
Westminster-Canterbury of Hampton,
Series 2005:
5.250% 11/01/26 250,000 252,873
5.375% 11/01/32 300,000 303,027
VA Winchester Industrial
Development Authority,
Westminster-Canterbury,
Series 2005 A,
5.300% 01/01/35 750,000 751,365
4 | See Accompanying Notes to Financial Statements.
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INVESTMENT PORTFOLIO (CONTINUED)
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November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
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HEALTH CARE (CONTINUED)
CONTINUING CARE RETIREMENT (CONTINUED)
WI Health & Educational Facilities Authority:
Attic Angel Obligated Group,
Series 1998,
5.750% 11/15/27 1,000,000 997,460
Clement Manor,
Series 1998,
5.750% 08/15/24 1,300,000 1,292,200
Eastcastle Place, Inc.,
Series 2004,
6.125% 12/01/34 350,000 354,631
Three Pillars Senior Living Communities,
Series 2003,
5.750% 08/15/26 500,000 511,820
United Lutheran Program for the Aging,
Series 1998,
5.700% 03/01/28 1,000,000 994,900
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Continuing Care Retirement Total 27,301,093
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HEALTH SERVICES - 1.8%
CO Health Facilities Authority,
National Jewish Medical & Research Center:
Series 1998 B,
5.375% 01/01/29 750,000 750,915
Series 1998,
5.375% 01/01/23 330,000 331,785
MA Development Finance Agency,
Boston Biomedical Research Institute,
Series 1999:
5.650% 02/01/19 200,000 205,430
5.750% 02/01/29 450,000 466,416
MA Health & Educational
Facilities Authority,
Civic Investments, Inc.,
Series 2002 A,
9.000% 12/15/15 1,000,000 1,215,500
MN Minneapolis & St. Paul
Housing & Redevelopment Authority,
Healthpartners Project,
Series 2003,
6.000% 12/01/21 500,000 544,330
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Health Services Total 3,514,376
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HOSPITALS - 18.8%
AR Conway Health Facilities Board,
Conway Regional Medical Center:
Series 1999 A,
6.400% 08/01/29 425,000 453,433
Series 1999 B,
6.400% 08/01/29 1,000,000 1,066,900
AR Washington County,
Washington Regional Medical Center,
Series 2005 B,
5.000% 02/01/30 750,000 740,625
PAR ($) VALUE ($)
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CA Rancho Mirage Joint Powers
Financing Authority,
Eisenhower Medical Center,
Series 2004,
5.625% 07/01/29 1,000,000 1,041,020
CA Turlock,
Emanuel Medical Center, Inc.,
Series 2004,
5.375% 10/15/34 1,500,000 1,513,380
CO Health Facilities Authority:
Evangelical Lutheran Good
Samaritan Foundation,
Series 2005,
5.000% 06/01/35 375,000 374,768
Parkview Medical Center, Inc.,
Series 2001,
6.600% 09/01/25 300,000 328,539
Vail Valley Medical Center Project,
Series 2004,
5.000% 01/15/20 750,000 765,382
FL Orange County Health
Facilities Authority,
Orlando Regional Healthcare System,
Series 2002,
5.750% 12/01/32 200,000 210,822
FL South Lake County Hospital District,
South Lake Hospital, Inc.,
Series 2003,
6.375% 10/01/34 500,000 536,245
FL Tampa,
H. Lee Moffitt Cancer Center,
Series 1999 A,
5.750% 07/01/29 2,000,000 2,072,000
FL West Orange Healthcare District,
Series 2001 A,
5.650% 02/01/22 525,000 550,662
IL Health Facilities Authority,
Thorek Hospital & Medical Center,
Series 1998,
5.250% 08/15/18 600,000 609,144
IL Southwestern Development Authority,
Anderson Hospital,
Series 1999,
5.500% 08/15/20 225,000 231,622
IN Health Facility Financing Authority,
Community Foundation of
Northwest Indiana, Inc.,
Series 2004 A,
6.000% 03/01/34 575,000 604,124
LA Public Facilities Authority,
Touro Infirmary,
Series 1999 A,
5.625% 08/15/29 450,000 435,938
See Accompanying Notes to Financial Statements. | 5
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INVESTMENT PORTFOLIO (CONTINUED)
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November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
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HEALTH CARE (CONTINUED)
HOSPITALS (CONTINUED)
MA Health & Educational
Facilities Authority:
Jordan Hospital,
Series 2003 E,
6.750% 10/01/33 500,000 542,615
Milford-Whitinsville Regional Hospital,
Series 2002 D,
6.350% 07/15/32 1,000,000 1,052,790
MD Health & Higher Educational
Facilities Authority,
Adventist Healthcare,
Series 2003 A:
5.000% 01/01/16 400,000 406,900
5.750% 01/01/25 600,000 629,598
MI Dickinson County,
Series 1999,
5.700% 11/01/18 750,000 763,852
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1998 A,
5.375% 07/01/20 450,000 451,607
MN St. Paul Housing &
Redevelopment Authority,
HealthEast, Inc.,
Series 2001 A,
5.700% 11/01/15 1,000,000 1,030,220
MN Washington County Housing &
Redevelopment Authority,
HealthEast, Inc.,
Series 1998,
5.250% 11/15/12 1,300,000 1,330,745
NC Medical Care Commission,
Stanly Memorial Hospital,
Series 1999,
6.375% 10/01/29 1,915,000 2,031,202
NH Higher Educational & Health
Facilities Authority:
Catholic Medical Center,
Series 2002,
6.125% 07/01/32 400,000 422,668
Littleton Hospital Association, Inc.:
Series 1998 A,
6.000% 05/01/28 625,000 640,638
Series 1998 B,
5.900% 05/01/28 780,000 794,648
NJ Health Care Facilities Authority,
Capital Health Systems, Inc.,
Series 2003 A,
5.750% 07/01/23 650,000 691,821
NV Henderson,
Catholic Healthcare West,
Series 1998,
5.375% 07/01/26 500,000 510,945
PAR ($) VALUE ($)
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NY Dormitory Authority:
Mount Sinai Hospital New York
University Center,
Series 2000,
5.500% 07/01/26 400,000 405,312
Series 2000 C,
5.500% 07/01/26 850,000 861,330
North Shore - Long Island Jewish
Medical Center,
Series 2003,
5.500% 05/01/33 300,000 313,671
OH Highland County Joint Township
Hospital District,
Series 1999,
6.750% 12/01/29 935,000 953,793
OH Lakewood Hospital Improvement,
Lakewood Hospital Association,
Series 2003,
5.500% 02/15/14 600,000 641,646
OH Miami County Hospital
Facilities Authority,
Upper Valley Medical Center, Inc.,
Series 1996 A,
6.375% 05/15/26 1,000,000 1,026,990
OH Sandusky County
Memorial Hospital,
Series 1998,
5.150% 01/01/10 250,000 253,293
PA Allegheny County Hospital
Development Authority,
Ohio Valley General Hospital,
Series 1998 A,
5.450% 01/01/28 1,000,000 1,012,940
SC Jobs-Economic Development
Authority,
Bon Secours Health Systems, Inc.,
Series 2002 A,
5.500% 11/15/23 1,750,000 1,832,232
SC Lexington County Health
Services District,
Lexington Medical Center Project,
Refunding,
Series 2003,
5.500% 11/01/23 750,000 787,747
SD Health & Educational
Facilities Authority,
Sioux Valley Hospital &
Health System,
Series 2004 A,
5.250% 11/01/34 800,000 822,680
TX Comal County Health Facilities
Development Authority,
McKenna Memorial,
Series 2002 A,
6.250% 02/01/32 500,000 530,120
6 | See Accompanying Notes to Financial Statements.
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INVESTMENT PORTFOLIO (CONTINUED)
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November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
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HEALTH CARE (CONTINUED)
HOSPITALS (CONTINUED)
TX Tyler Health Facilities Development Corp.,
Mother Frances Hospital,
Series 2001,
6.000% 07/01/31 1,000,000 1,049,760
VA Prince William County
Industrial Development Authority,
Potomac Hospital Corp.,
Series 2003,
5.200% 10/01/30 650,000 671,080
VT Educational & Health
Buildings Finance Agency,
Brattleboro Memorial Hospital,
Series 1998,
5.375% 03/01/28 1,075,000 1,064,583
WA Health Care Facilities Authority,
Kadlec Medical Center,
Series 2001,
Insured: RAD
5.875% 12/01/21 600,000 642,408
WI Health & Educational
Facilities Authority:
Aurora Health Care, Inc.,
Series 2003,
6.400% 04/15/33 525,000 572,266
Fort HealthCare, Inc., Project,
Series 2004,
5.750% 05/01/29 1,000,000 1,040,520
Wheaton Franciscan Services,
Series 2002,
5.750% 08/15/30 600,000 634,338
-----------
Hospitals Total 37,951,562
-----------
INTERMEDIATE CARE FACILITIES - 0.6%
IL Development Finance Authority,
Hoosier Care, Inc.,
Series 1999 A,
7.125% 06/01/34 1,185,000 1,086,029
IN Health Facilities Financing Authority,
Hoosier Care, Inc.,
Series 1999 A,
7.125% 06/01/34 150,000 137,472
-----------
Intermediate Care Facilities Total 1,223,501
-----------
NURSING HOMES - 7.7%
AK Juneau,
St. Ann's Care Center, Inc.,
Series 1999,
6.875% 12/01/25 1,250,000 1,218,500
CO Health Facilities Authority:
American Housing Foundation I, Inc.,
Series 2003 A,
8.500% 12/01/31 465,000 485,255
Pioneer Health Care,
Series 1989,
10.500% 05/01/19 1,790,000 1,437,889
PAR ($) VALUE ($)
-------------------------------------------------------------------------------
Volunteers of America Care Facilities,
Series 1998 A:
5.450% 07/01/08 120,000 120,200
5.750% 07/01/20 865,000 878,226
Series 1999 A,
6.000% 07/01/29 350,000 351,260
IA Finance Authority
Care Initiatives:
Series 1996,
9.250% 07/01/25 950,000 1,133,692
Series 1998 B:
5.750% 07/01/18 550,000 544,715
5.750% 07/01/28 1,475,000 1,355,909
IN Gary,
West Side Health Care Center,
Series 1987 A,
11.500% 10/01/17(c) 1,330,000 399,000
IN Michigan City Health
Facilities Authority,
Metro Health Foundation,
Inc. Project,
Series 1993,
11.000% 11/01/22(d) 2,294,190 229
MA Development Finance Agency:
Alliance Health Care Facilities,
Series 1999 A,
7.100% 07/01/32 1,270,000 1,283,576
AHF/Woodlawn Manor, Inc.:
Series 2000 A,
7.750% 12/01/27 1,509,135 815,778
Series 2000 B,
10.250% 06/01/27(c) 475,907 23,795
MN Sartell,
Foundation for Healthcare,
Series 1999 A,
6.625% 09/01/29 1,145,000 1,172,961
PA Chester County Industrial
Development Authority,
Pennsylvania Nursing Home,
Series 2002,
8.500% 05/01/32 1,585,000 1,649,494
PA Washington County Industrial
Development Authority,
AHF Project,
Series 2003,
7.750% 01/01/29 1,211,000 1,257,418
TN Metropolitan Government
Nashville & Davidson County
Health & Education Facility Board,
AHF Project,
Series 2003,
7.750% 01/01/29 1,141,000 1,184,735
TX Kirbyville Health Facilities
Development Corp.,
Heartway III Project,
Series 1997 A,
10.000% 03/20/18(c) 668,626 200,588
See Accompanying Notes to Financial Statements. | 7
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
NURSING HOMES (CONTINUED)
WI Health & Educational Facilities Authority,
Metro Health Foundation, Inc.,
Series 1993,
11.000% 11/01/22(d) 2,063,727 206
-----------
Nursing Homes Total 15,513,426
-----------
HEALTH CARE TOTAL 85,503,958
-----------
--------------------------------------------------------------------------------
HOUSING - 17.6%
ASSISTED LIVING / SENIOR - 4.5%
DE Kent County,
Heritage at Dover,
Series 1999, AMT,
7.625% 01/01/30 1,665,000 1,510,804
GA Columbus Housing Authority,
The Gardens at Calvary,
Series 1999,
7.000% 11/15/19 480,000 459,029
IL Development Finance Authority,
Care Institute, Inc.,
Series 1995,
8.250% 06/01/25 1,195,000 1,233,061
MN Roseville,
Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 1,740,000 1,432,020
NC Medical Care Commission,
DePaul Community Facilities,
Series 1999,
7.625% 11/01/29 1,425,000 1,491,077
NY Huntington Housing Authority,
Gurwin Jewish Senior Center,
Series 1999 A:
5.875% 05/01/19 700,000 694,036
6.000% 05/01/29 775,000 763,414
TX Bell County Health Facility
Development Corp.,
Care Institute, Inc.,
Series 1994,
9.000% 11/01/24 1,625,000 1,545,846
-----------
Assisted Living / Senior Total 9,129,287
-----------
MULTI - FAMILY - 11.0%
DC Housing Finance Agency,
Henson Ridge,
Series 2004 E, AMT,
Insured: FHA
5.100% 06/01/37 1,000,000 1,010,930
DE Wilmington,
Electra Arms Senior Association Project,
Series 1998, AMT,
6.250% 06/01/28 910,000 772,517
FL Broward County Housing Finance Authority,
Chaves Lake Apartment Project,
Series 2000 A, AMT,
7.500% 07/01/40 750,000 751,665
PAR ($) VALUE ($)
--------------------------------------------------------------------------------
FL Clay County Housing Finance Authority,
Madison Commons Apartments,
Series 2000 A, AMT,
7.450% 07/01/40 720,000 723,643
MA Housing Finance Agency:
Series 2004 A, AMT,
Insured: FSA
5.250% 07/01/25 3,000,000 3,067,620
Series 2005 B,
5.000% 06/01/30 500,000 511,115
Series 2005 E, AMT,
5.000% 12/01/28 500,000 500,000
MN Lakeville,
Southfork Apartments Project:
Series 1989 A,
9.875% 02/01/20 2,570,000 2,569,358
Series 1989 B,
(a) 02/01/20 903,000 238,112
MN Robbinsdale Economic
Development Authority,
Broadway Court,
Series 1999 A,
6.875% 01/01/26 500,000 510,155
MN Washington County Housing &
Redevelopment Authority,
Cottages of Aspen,
Series 1992, AMT,
9.250% 06/01/22 960,000 982,330
MN White Bear Lake,
Birch Lake Townhome Project:
Series 1989 A, AMT,
10.250% 07/15/19 2,200,000 2,090,000
Series 1989 B, AMT,
(a) 07/15/19 690,000 217,378
NC Medical Care Commission,
ARC Projects,
Series 2004 A,
5.800% 10/01/34 500,000 512,380
NM Mortgage Finance Authority,
Series 2005 E, AMT,
Insured: FHA
4.800% 09/01/40 1,495,000 1,442,735
NY New York City Housing
Development Corp.,
Series 2005 F-1,
4.650% 11/01/25 1,000,000 1,019,890
OH Montgomery County,
Series 2005, AMT,
Insured: FHLMC
4.950% 11/01/35 500,000 500,370
Resolution Trust Corp.,
Pass-Through Certificates,
Series 1993 A,
8.500% 12/01/16(e) 546,075 535,535
8 | See Accompanying Notes to Financial Statements.
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------------------------------
HOUSING (CONTINUED)
MULTI - FAMILY (CONTINUED)
TN Chattanooga Health, Educational &
Housing Facility Board,
CDFI Phase I LLC,
Series 2005 B,
6.000% 10/01/35 400,000 395,576
TN Franklin Industrial Development Board,
Landings Apartment Project,
Series 1996 B,
8.750% 04/01/27 800,000 813,936
TX Affordable Housing Corp.,
NHT/GTEX Project,
Series 2001 C,
10.000% 10/01/31(c)(f) 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 1,037,100
TX El Paso County Housing Finance Corp.,
American Village Communities:
Series 2000 C,
8.000% 12/01/32 380,000 391,035
Series 2000 D,
10.000% 12/01/32 410,000 422,386
VA Alexandria Redevelopment & Housing Authority,
Courthouse Commons Apartments,
Series 1990 A, AMT,
10.000% 01/01/21 1,500,000 1,221,480
-----------
Multi - Family Total 22,245,946
-----------
SINGLE - FAMILY - 2.1%
MA Housing Finance Agency,
Series 2005 118, AMT,
4.850% 12/01/35 1,750,000 1,704,115
ME Housing Authority,
Series 2005 D-2, AMT,
4.800% 11/15/36 1,000,000 981,470
WI Housing & Economic
Development Authority,
Series 2005 C, AMT,
4.875% 03/01/36 1,500,000 1,463,265
-----------
Single - Family Total 4,148,850
-----------
HOUSING TOTAL 35,524,083
-----------
-------------------------------------------------------------------------------
INDUSTRIALS - 8.2%
FOOD PRODUCTS - 1.7%
GA Cartersville Development Authority,
Anheuser Busch Project, Inc.,
Series 2002, AMT,
5.950% 02/01/32 1,000,000 1,052,690
LA Southern Louisiana Port Commission,
Cargill, Inc. Project,
Series 1997,
5.850% 04/01/17 1,000,000 1,028,090
PAR ($) VALUE ($)
--------------------------------------------------------------------------------
MI Strategic Fund,
Michigan Sugar Co.,
Series 1998 A,
6.250% 11/01/15 1,250,000 1,249,912
-----------
Food Products Total 3,330,692
-----------
FOREST PRODUCTS & PAPER - 2.8%
AL Camden Industrial Development Board,
Weyerhaeuser Co.,
Series 2003 B, AMT,
6.375% 12/01/24 550,000 599,186
AL Courtland Industrial Development Board,
International Paper Co.,
Series 2003 B, AMT,
6.250% 08/01/25 1,000,000 1,061,080
AL Phenix City Industrial
Development Board,
Meadwestvaco Corp.,
Series 2002 A, AMT,
6.350% 05/15/35 550,000 590,288
AR Camden Environmental
Improvement Authority,
International Paper Co.,
Series 2004 A, AMT,
5.000% 11/01/18 250,000 246,483
GA Rockdale County Development
Authority, Visy Paper, Inc.,
Series 1993, AMT,
7.500% 01/01/26 1,800,000 1,803,222
MS Lowndes County,
Weyerhaeuser Co. Project,
Series 1992 B,
6.700% 04/01/22 850,000 1,012,800
VA Bedford County Industrial
Development Authority,
Nekoosa Packaging Corp.,
Series 1998, AMT,
5.600% 12/01/25 400,000 376,956
-----------
Forest Products & Paper Total 5,690,015
-----------
MANUFACTURING - 0.9%
IL Will-Kankakee Regional
Development Authority,
Flanders Corp., Precisionaire Project,
Series 1997, AMT,
6.500% 12/15/17 780,000 789,009
TX Trinity River Authority,
Texas Instruments Project,
Series 1996, AMT,
6.200% 03/01/20 1,000,000 1,023,620
-----------
Manufacturing Total 1,812,629
-----------
METALS & MINING - 0.6%
NV Department of Business & Industry,
Wheeling-Pittsburgh Steel Corp.,
Series 1999 A, AMT,
8.000% 09/01/14(e) 835,000 824,003
See Accompanying Notes to Financial Statements. | 9
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------------------------------
INDUSTRIALS (CONTINUED)
METALS & MINING (CONTINUED)
VA Greensville County Industrial
Development Authority,
Wheeling-Pittsburgh Steel Corp.,
Series 1999 A, AMT,
7.000% 04/01/14 465,000 428,735
-----------
Metals & Mining Total 1,252,738
-----------
OIL & GAS - 2.2%
NJ Middlesex County Pollution Authority,
Amerada Hess Corp.,
Series 2004,
6.050% 09/15/34 285,000 300,134
NV Clark County Industrial
Development Authority,
Southwest Gas Corp.,
Series 2005 A, AMT,
Insured: AMBAC
4.850% 10/01/35 1,880,000 1,856,801
TX Gulf Coast Industrial
Development Authority,
Citgo Petroleum,
Series 1998, AMT,
8.000% 04/01/28 500,000 562,040
VI Virgin Islands Public
Finance Authority,
Hovensa LLC:
Series 2003, AMT,
6.125% 07/01/22 525,000 573,531
Series 2004, AMT,
5.875% 07/01/22 600,000 645,576
VI Virgin Islands,
Hovensa LLC,
Series 2002, AMT,
6.500% 07/01/21(b) 375,000 422,842
-----------
Oil & Gas Total 4,360,924
-----------
INDUSTRIALS TOTAL 16,446,998
-----------
-------------------------------------------------------------------------------
OTHER - 15.3%
POOL / BOND BANK - 0.8%
MI Municipal Bond Authority,
Local Government Loan Project,
Series 2001 A,
Insured: AMBAC
5.375% 11/01/17 750,000 812,070
OH Cleveland - Cuyahoga County
Port Authority,
Columbia National Group, Inc.,
Series 2005 D, AMT,
5.000% 05/15/20 820,000 814,227
-----------
Pool / Bond Bank Total 1,626,297
-----------
PAR ($) VALUE ($)
--------------------------------------------------------------------------------
REFUNDED / ESCROWED (g) - 12.6%
CA Golden State Tobacco Securitization Corp.,
Series 2003 B:
Pre-refunded 06/01/13,
5.500% 06/01/43 750,000 830,130
Insured: AMBAC
5.000% 06/01/43 3,500,000 3,760,820
CA Orange County Community
Facilities District,
Ladera Ranch,
Series 1999 A,
Pre-refunded 08/15/09,
6.700% 08/15/29 500,000 566,375
CA Riverside County Public
Financing Authority,
Series 1997 A,
Pre-refunded 10/01/06,
5.500% 10/01/22 185,000 191,998
CO Denver City & County Airport,
Series 1992 C, AMT,
Escrowed to Maturity:
6.125% 11/15/25 2,280,000 2,678,065
Unrefunded,
6.125% 11/15/25 2,840,000 2,844,771
CO E-470 Public Highway Authority,
Series 2000 B,
Pre-refunded 09/01/10,
(a) 09/01/35 8,750,000 1,109,850
CT Development Authority, Sewer
Sludge Disposal Facilities,
New Haven Residuals LP,
Series 1996, AMT,
Escrowed to Maturity,
8.250% 12/01/06 345,000 354,598
FL Northern Palm Beach County
Improvement District,
Series 1999,
Pre-refunded 08/01/09,
Insured: MBIA
6.000% 08/01/29 750,000 821,497
GA Forsyth County Hospital Authority,
Georgia Baptist Health Care System,
Series 1998,
Escrowed to Maturity,
6.000% 10/01/08 480,000 499,781
ID Health Facilities Authority,
IHC Hospitals, Inc.,
Series 1992,
Escrowed to Maturity,
6.650% 02/15/21 1,750,000 2,215,412
IL Health Facilities Authority,
Swedish American Hospital,
Series 2000,
Pre-refunded 05/15/10,
6.875% 11/15/30 500,000 563,890
10 | See Accompanying Notes to Financial Statements.
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------------------------------
OTHER (CONTINUED)
REFUNDED / ESCROWED (g) (CONTINUED)
IL University of Illinois,
Series 2001 A,
Pre-refunded 08/15/11,
Insured: AMBAC
5.500% 08/15/17 685,000 749,726
MA Development Finance Agency,
Western New England College,
Series 2002,
Pre-refunded 12/01/12,
6.125% 12/01/32 300,000 343,503
NC Lincoln County,
Lincoln County Hospital,
Series 1991,
Escrowed to Maturity,
9.000% 05/01/07 130,000 136,057
NY Convention Center Operating Corp.,
Yale Building Project,
Series 2003,
(a) 06/01/08 1,700,000 1,558,968
NY New York City:
Series 1997 A,
Pre-refunded 08/01/06,
7.000% 08/01/07 40,000 41,596
Series 1997 H,
Pre-refunded 08/01/07,
6.000% 08/01/17 25,000 26,322
PA Delaware County Authority,
Mercy Health Corp.,
Series 1996,
Escrowed to Maturity:
6.000% 12/15/16 1,400,000 1,457,330
6.000% 12/15/26 1,000,000 1,038,330
PR Commonwealth of Puerto Rico,
Public Finance Corp.,
Series 2002 E,
Escrowed to Maturity,
6.000% 08/01/26 155,000 188,666
TN Shelby County Health, Educational
& Housing Facilities Board,
Open Arms Development Centers:
Series 1992 A,
Pre-refunded 08/01/07,
9.750% 08/01/19 780,000 887,102
Series 1992 C,
Pre-refunded 08/01/12,
9.750% 08/01/19 760,000 864,356
TX Board of Regents,
University of Texas,
Series 2001 B,
Escrowed to Maturity,
5.375% 08/15/18 650,000 702,747
PAR ($) VALUE ($)
--------------------------------------------------------------------------------
WV Hospital Finance Authority,
Charleston Area Medical Center,
Series 2000 A,
Pre-refunded 09/01/10,
6.750% 09/01/30 805,000 920,461
-----------
Refunded / Escrowed Total 25,352,351
-----------
TOBACCO - 1.9%
CA Golden State Tobacco Securitization Corp.,
Series 2003 A-1,
6.250% 06/01/33 1,800,000 1,953,378
NJ Tobacco Settlement Financing Corp.,
Series 2003,
6.750% 06/01/39 1,500,000 1,673,670
WA Tobacco Settlement Authority,
Series 2002,
6.625% 06/01/32 250,000 268,528
-----------
Tobacco Total 3,895,576
-----------
OTHER TOTAL 30,874,224
-----------
-------------------------------------------------------------------------------
OTHER REVENUE - 3.7%
HOTELS - 1.1%
NJ Middlesex County Improvement
Authority, Heldrich Associates LLC,
Series 2005 B,
6.250% 01/01/37 1,250,000 1,231,612
PA Philadelphia Authority for
Industrial Development,
Doubletree Project,
Series 1997 A,
6.500% 10/01/27 1,000,000 1,044,790
-----------
Hotels Total 2,276,402
-----------
RECREATION - 1.8%
CA Agua Caliente Band of Cahuilla Indians,
Series 2003,
5.600% 07/01/13 1,000,000 1,038,090
CA Cabazon Band Mission Indians,
Series 2004:
8.375% 10/01/15(e) 260,000 265,317
8.750% 10/01/19(e) 970,000 989,779
CT Mashantucket Western Pequot,
Series 1999 B,
(a) 09/01/16(e) 1,000,000 560,740
CT Mohegan Tribe Gaming Authority,
Series 2001,
6.250% 01/01/31(e) 275,000 291,167
NM Red River Sports Facility,
Red River Ski Area Project,
Series 1998,
6.450% 06/01/07 400,000 401,396
-----------
Recreation Total 3,546,489
-----------
See Accompanying Notes to Financial Statements. | 11
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------------------------------
OTHER REVENUE (CONTINUED)
RETAIL - 0.8%
NY New York City Industrial Development Agency,
IAC/Interactive Corp.,
Series 2005,
5.000% 09/01/35 1,000,000 993,030
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 09/01/11 605,000 602,622
-----------
Retail Total 1,595,652
-----------
OTHER REVENUE TOTAL 7,418,543
-----------
--------------------------------------------------------------------------------
RESOURCE RECOVERY - 2.3%
DISPOSAL - 0.6%
CA Pollution Control Financing Authority,
Republic Services Project,
Series 2002 C, AMT,
5.250% 06/01/23 500,000 522,670
UT Carbon County,
Laidlaw Environmental:
Series 1995 A, AMT,
7.500% 02/01/10 250,000 256,345
Series 1997 A, AMT,
7.450% 07/01/17 500,000 530,345
-----------
Disposal Total 1,309,360
-----------
RESOURCE RECOVERY - 1.7%
MA Development Finance Agency,
Ogden Haverhill Associates,
Series 1999 A, AMT,
6.700% 12/01/14 250,000 268,923
MA Industrial Finance Agency,
Ogden Haverhill Associates,
Series 1998 A, AMT:
5.500% 12/01/13 500,000 508,800
5.600% 12/01/19 500,000 509,900
PA Delaware County Industrial
Development Authority,
American REF-Fuel Co.,
Series 1997 A,
6.200% 07/01/19 2,000,000 2,083,920
-----------
Resource Recovery Total 3,371,543
-----------
RESOURCE RECOVERY TOTAL 4,680,903
-----------
-------------------------------------------------------------------------------
TAX - BACKED - 31.8%
LOCAL APPROPRIATED - 1.6%
CA Compton,
Civic Center & Capital Improvements,
Series 1997 A,
5.500% 09/01/15 1,000,000 1,036,770
SC Dorchester County School District No. 2,
Series 2004,
5.250% 12/01/29 650,000 665,451
SC Laurens County School District No. 55,
Series 2005,
5.250% 12/01/30 1,050,000 1,067,986
PAR ($) VALUE ($)
--------------------------------------------------------------------------------
SC Newberry County School District,
Series 2005,
5.000% 12/01/30 500,000 498,585
-----------
Local Appropriated Total 3,268,792
-----------
LOCAL GENERAL OBLIGATIONS - 11.2%
CA East Side Union High School District,
Series 2003 B,
Insured: MBIA
5.100% 02/01/20 1,000,000 1,091,960
CA Fresno Unified School District,
Series 2002 A,
Insured: MBIA
6.000% 02/01/18 2,000,000 2,348,500
CA Los Angeles Unified School District,
Series 2002 E,
Insured: MBIA
5.750% 07/01/16 700,000 800,947
CA Montebello Unified School District,
Series 2001:
Insured: FSA
(a) 08/01/21 1,435,000 690,321
(a) 08/01/23 1,505,000 647,255
CO Castle Oaks Metropolitan District,
Series 2005,
6.125% 12/01/35 500,000 492,595
IL Chicago Board of Education,
Series 1997 A,
Insured: AMBAC
5.250% 12/01/30(h) 8,000,000 8,377,440
NJ Bergen County Improvement Authority,
Series 2005,
5.000% 11/15/24 1,210,000 1,317,376
NY New York City:
Series 1997 A,
7.000% 08/01/07 960,000 996,259
Series 1997 H,
6.000% 08/01/17 1,375,000 1,440,876
TX Dallas County Flood Control District,
Series 2002,
7.250% 04/01/32 1,000,000 1,062,660
TX Irving Independent School District,
Series 1997,
Insured: PSFG
(a) 02/15/18 1,000,000 574,220
WA Clark County School District No. 37,
Series 2001 C,
Insured: FGIC
(a) 12/01/18 5,000,000 2,743,400
-----------
Local General Obligations Total 22,583,809
-----------
SPECIAL NON - PROPERTY TAX - 5.1%
CA San Diego Redevelopment Agency,
Series 2001:
Insured: FSA
(a) 09/01/19 1,910,000 1,005,519
(a) 09/01/22 1,910,000 862,843
12 | See Accompanying Notes to Financial Statements.
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------------------------------
TAX - BACKED (CONTINUED)
SPECIAL NON - PROPERTY TAX (CONTINUED)
IL Metropolitan Pier & Exposition Authority,
McCormick Place Expansion Project,
Series 1993 A,
Insured: FGIC
(a) 06/15/16 10,000,000 6,269,100
KS Wyandotte County Unified Government,
Series 2005,
5.000% 12/01/20 325,000 333,860
NJ Economic Development Authority,
Cigarette Tax,
Series 2004:
5.500% 06/15/31 150,000 153,900
5.750% 06/15/29 1,000,000 1,048,060
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series 2003 AA,
Insured: MBIA
5.500% 07/01/18 500,000 567,745
-----------
Special Non - Property Tax Total 10,241,027
-----------
SPECIAL PROPERTY TAX - 8.7%
CA Carson Improvement Bond Act 1915,
Series 1992,
7.375% 09/02/22 35,000 36,453
CA Huntington Beach Community
Facilities District,
Grand Coast Resort,
Series 2001-1,
6.450% 09/01/31 750,000 778,072
CA Lincoln Community Facilities
District No. 2003-1,
Series 2004,
5.900% 09/01/24 500,000 531,145
CA Oakdale Public Financing Authority,
Central City Redevelopment Project,
Series 2004,
5.375% 06/01/33 1,375,000 1,380,115
CA Orange County Improvement
Bond Act 1915,
Phase IV, No. 01-1-B,
Series 2003,
5.750% 09/02/33 500,000 509,955
CA Placer Unified High School District,
Series 2000 A,
Insured: FGIC
(a) 08/01/19 1,700,000 904,485
CA Redwood City,
Community Facilities District No. 1,
Series 2003 B,
5.950% 09/01/28 600,000 619,062
CA Riverside County Public
Financing Authority,
Series 1997 A,
5.500% 10/01/22 465,000 478,597
PAR ($) VALUE ($)
--------------------------------------------------------------------------------
CA Temecula Valley Unified School
District No. 1,
Series 2003,
6.125% 09/01/33 400,000 410,732
FL Celebration Community
Development District,
Series 2003 A,
6.400% 05/01/34 990,000 1,041,341
FL Colonial Country Club Community
Development District,
Series 2003,
6.400% 05/01/33 730,000 767,858
FL Double Branch Community
Development District,
Series 2002 A,
6.700% 05/01/34 690,000 741,350
FL Heritage Palms Community
Development District,
Series 1999 A,
6.250% 11/01/07 40,000 39,836
FL Islands at Doral Southwest
Community Development District,
Series 2003,
6.375% 05/01/35 380,000 398,814
FL Lexington Oaks Community
Development District:
Series 1998 A,
6.125% 05/01/19 345,000 348,878
Series 2000 A,
7.200% 05/01/30 280,000 290,948
Series 2002 A,
6.700% 05/01/33 250,000 264,135
FL Orlando,
Conroy Road Interchange Project,
Series 1998 A:
5.500% 05/01/10 155,000 158,311
5.800% 05/01/26 300,000 304,821
FL Seven Oaks Community
Development District:
Series 2004 A,
5.875% 05/01/35 295,000 296,531
Series 2004 B,
5.000% 05/01/09 980,000 978,863
FL Stoneybrook Community
Development District:
Series 1998 A,
6.100% 05/01/19 295,000 298,372
Series 1998 B,
5.700% 05/01/08 25,000 25,115
FL Westchester Community Development
District No. 1,
Series 2003,
6.125% 05/01/35 425,000 439,573
GA Atlanta,
Eastside Project,
Series 2005 A, AMT,
5.625% 01/01/16 600,000 610,080
See Accompanying Notes to Financial Statements. | 13
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------------------------------
TAX - BACKED (CONTINUED)
SPECIAL PROPERTY TAX (CONTINUED)
IL Chicago,
Pilsen Redevelopment,
Series 2004 B,
6.750% 06/01/22 450,000 465,917
IL Lincolnshire Special Services Area No. 1,
Sedgebrook Project,
Series 2004,
6.250% 03/01/34 500,000 521,785
IL Plano Special Service Area No. 4,
Series 2005 5-B,
6.000% 03/01/35 2,000,000 1,962,280
MI Pontiac Finance Authority,
Development Area No. 3,
Series 2002,
6.375% 06/01/31 550,000 587,174
MI Taylor Tax Increment Finance Authority,
Series 2001,
Insured: FSA
5.375% 05/01/17 1,220,000 1,308,950
-----------
Special Property Tax Total 17,499,548
-----------
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 1,078,060
NY Urban Development Corp.,
University Facilities Grants,
Series 1995,
5.875% 01/01/21 1,000,000 1,162,530
PR Commonwealth of Puerto Rico
Public Finance Corp.,
Series 2002 E,
6.000% 08/01/26 1,645,000 1,928,105
-----------
State Appropriated Total 4,168,695
-----------
STATE GENERAL OBLIGATIONS - 3.1%
CA State,
Series 2003,
5.250% 02/01/23 380,000 415,245
PR Commonwealth of Puerto Rico,
Public Improvement,
Series 2003 A,
5.000% 07/01/27 1,500,000 1,499,940
TX State,
Series 1999 ABC,
5.500% 08/01/35 4,200,000 4,434,780
-----------
State General Obligations Total 6,349,965
-----------
TAX - BACKED TOTAL 64,111,836
-----------
-------------------------------------------------------------------------------
TRANSPORTATION - 7.9%
AIR TRANSPORTATION - 4.7%
CA Los Angeles Regional Airport
LAXfuel Corp.,
Series 2001, AMT,
Insured: AMBAC
5.250% 01/01/23 750,000 767,197
PAR ($) VALUE ($)
--------------------------------------------------------------------------------
CO Denver City & County Airport,
United Air Lines, Inc.,
Series 1992 A, AMT,
6.875% 10/01/32(d) 1,000,000 913,800
FL Capital Trust Agency,
Air Cargo-Orlando Project,
Series 2003, AMT,
6.750% 01/01/32 500,000 504,455
IN Indianapolis Airport Authority,
FedEx Corp.,
Series 2004, AMT,
5.100% 01/15/17 250,000 258,355
MN Minneapolis & St. Paul
Metropolitan Airports Commission,
Northwest Airlines, Inc.:
Series 2001 A, AMT,
7.000% 04/01/25(i) 1,050,000 659,306
Series 2005, AMT,
7.375% 04/01/25(i) 250,000 160,095
NC Charlotte/Douglas
International Airport,
US Airways, Inc.:
Series 1998, AMT,
5.600% 07/01/27 250,000 166,783
Series 2000, AMT,
7.750% 02/01/28 750,000 658,313
NJ Economic Development Authority,
Continental Airlines, Inc.:
Series 1999, AMT:
6.250% 09/15/19 180,000 155,671
6.250% 09/15/29 485,000 400,615
Series 2003, AMT,
9.000% 06/01/33 750,000 782,317
NY New York City Industrial
Development Agency:
American Airlines, Inc.,
Series 2005, AMT,
7.750% 08/01/31 500,000 481,750
Terminal One Group-JFK
International Airport,
Series 2005, AMT,
5.500% 01/01/21(j) 750,000 789,105
TX Alliance Airport Authority,
Fed Ex Corp.,
Series 1996, AMT,
6.375% 04/01/21 1,000,000 1,028,070
TX Dallas-Fort Worth International
Airport, American Airlines, Inc.,
Series 2000 A, AMT,
9.000% 05/01/29 1,000,000 936,120
TX Houston Industrial
Development Corp.,
United Parcel Service,
Series 2002, AMT,
6.000% 03/01/23 725,000 747,192
-----------
Air Transportation Total 9,409,144
-----------
14 | See Accompanying Notes to Financial Statements.
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
AIRPORTS - 0.1%
GA Augusta Airport,
Series 2005 C, AMT,
5.450% 01/01/31 250,000 252,485
-----------
Airports Total 252,485
-----------
TOLL FACILITIES - 2.6%
CO E-470 Public Highway Authority,
Series 2000 B,
Insured: MBIA
(a) 09/01/18 3,000,000 1,665,120
CO Northwest Parkway Public
Highway Authority,
Series 2001 D,
7.125% 06/15/41 1,250,000 1,335,087
VA Richmond Metropolitan Authority,
Series 1998,
Insured: FGIC
5.250% 07/15/22 2,000,000 2,223,920
-----------
Toll Facilities Total 5,224,127
-----------
TRANSPORTATION - 0.5%
NV Department of Business & Industry,
Las Vegas Monorail Project,
Series 2000,
7.375% 01/01/40 1,000,000 1,036,700
-----------
Transportation Total 1,036,700
-----------
TRANSPORTATION TOTAL 15,922,456
-----------
--------------------------------------------------------------------------------
UTILITIES - 18.1%
INDEPENDENT POWER PRODUCERS - 2.9%
MI Midland County Economic
Development Corp.,
Series 2000 A, AMT,
6.875% 07/23/09 1,250,000 1,239,262
NY Port Authority of New York &
New Jersey, KIAC Partners,
Series 1996 IV, AMT,
6.750% 10/01/11 2,000,000 2,085,780
NY Suffolk County Industrial
Development Authority,
Nissequogue Cogeneration
Partners Facilities,
Series 1998, AMT,
5.500% 01/01/23 550,000 539,825
PA Carbon City Industrial
Development Authority,
Panther Creek Partners Project,
Series 2000, AMT,
6.650% 05/01/10 250,000 267,553
PA Economic Development
Financing Authority,
Northampton Generating,
Series 1994 A, AMT,
6.500% 01/01/13 1,000,000 1,002,140
PAR ($) VALUE ($)
--------------------------------------------------------------------------------
PR Commonwealth of Puerto Rico
Industrial, Tourist, Educational,
Medical & Environmental
Cogeneration Facilities,
AES Project,
Series 2000, AMT,
6.625% 06/01/26 645,000 693,033
-----------
Independent Power Producers Total 5,827,593
-----------
INVESTOR OWNED - 10.4%
AZ Pima County Industrial
Development Authority,
Tucson Electric Power Co.,
Series 1997 A, AMT,
6.100% 09/01/25 750,000 750,473
CA Chula Vista Industrial
Development Authority,
San Diego Gas & Electric,
Series 1996 B, AMT,
5.500% 12/01/21 625,000 658,656
FL Polk County Industrial
Development Authority,
Tampa Electric Co. Project,
Series 1996, AMT,
5.850% 12/01/30 1,200,000 1,235,268
IL Bryant,
Central Illinois Light Co.,
Series 1993,
5.900% 08/01/23 2,650,000 2,665,794
IN Petersburg,
Indianapolis Power & Light Co.,
Series 1995,
6.625% 12/01/24 1,000,000 1,011,450
LA Calcasieu Parish Industrial
Development Board,
Entergy Gulf States, Inc.,
Series 1999,
5.450% 07/01/10 500,000 503,090
LA West Feliciana Parish,
Entergy Gulf States, Inc.,
Series 1999 B,
6.600% 09/01/28 500,000 505,010
MS Business Finance Corp.,
Systems Energy Resources Project,
Series 1998,
5.875% 04/01/22 2,000,000 2,024,800
MT Forsyth,
Portland General,
Series 1998 A,
5.200% 05/01/33 300,000 310,158
NV Clark County Industrial
Development Authority,
Nevada Power Co.,
Series 1995 B, AMT,
5.900% 10/01/30 1,250,000 1,250,312
See Accompanying Notes to Financial Statements. | 15
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------------------------------
UTILITIES (CONTINUED)
INVESTOR OWNED (CONTINUED)
OH Air Quality Development Authority,
Cleveland Electric Illuminating Co.,
Series 2002 A,
6.000% 12/01/13 900,000 941,868
PA Economic Development Financing
Authority, Reliant Energy, Inc.,
Series 2001 A, AMT,
6.750% 12/01/36 600,000 639,174
TX Brazos River Authority,
TXU Energy Co., LLC:
Series 2001 C, AMT,
5.750% 05/01/36 280,000 297,492
Series 2003 C, AMT,
6.750% 10/01/38 645,000 713,151
VA Chesterfield County Industrial
Development Authority,
Virginia Electric & Power Co.,
Series 1987 B,
5.875% 06/01/17 250,000 267,378
VA Pittsylvania County Industrial
Development Authority,
Virginia Electric & Power Co.,
Series 1994 A, AMT,
7.450% 01/01/09 900,000 926,613
WV Pleasant County,
Western Pennsylvania Power Co.,
Series 1999 E, AMT,
Insured: AMBAC
5.500% 04/01/29 4,750,000 4,967,312
WY Campbell County,
Black Hills Power, Inc.,
Series 2004,
5.350% 10/01/24 1,250,000 1,283,637
-----------
Investor Owned Total 20,951,636
-----------
JOINT POWER AUTHORITY - 0.4%
NC Eastern Municipal Power Agency:
Series 1999 D,
6.700% 01/01/19 500,000 549,495
Series 2003 F,
5.500% 01/01/16 285,000 304,970
-----------
Joint Power Authority Total 854,465
-----------
MUNICIPAL ELECTRIC - 3.1%
PR Commonwealth of Puerto Rico
Electric Power Authority,
Series 1998 II,
Insured: FSA
5.125% 07/01/26 2,000,000 2,103,660
WA Chelan County Public Utility
District No. 1,
Columbia River Rock Hydroelectric,
Series 1997,
Insured: MBIA
(a) 06/01/14 5,000,000 3,421,150
PAR ($) VALUE ($)
--------------------------------------------------------------------------------
WA Seattle Light & Power,
Series 2001,
Insured: FSA
5.500% 03/01/17 750,000 805,717
-----------
Municipal Electric Total 6,330,527
-----------
WATER & SEWER - 1.3%
LA New Orleans Sewage Service,
Refunding,
Series 2005,
3.000% 07/26/06 1,250,000 1,206,588
MO Water & Sewer,
Lee's Summit,
Series 2002,
Insured: AMBAC
5.250% 07/01/15 500,000 537,075
MS V Lakes Utility District,
Series 1994,
8.250% 07/15/24 480,000 438,758
NH Industrial Development Authority,
Pennichuck Water Works, Inc.,
Series 1988, AMT,
7.500% 07/01/18 405,000 460,453
-----------
Water & Sewer Total 2,642,874
-----------
UTILITIES TOTAL 36,607,095
-----------
TOTAL MUNICIPAL BONDS
(cost of $308,740,278) 307,152,138
-----------
MUNICIPAL PREFERRED STOCKS - 3.2% SHARES
-------------------------------------------------------------------------------
HOUSING - 3.2%
MULTI - FAMILY - 3.2%
Charter Mac Equity Issuer Trust, AMT:
6.300% 04/30/19 1,000,000 1,079,500
6.625% 06/30/09(e) 2,000,000 2,132,580
GMAC Municipal Mortgage
Trust, AMT,
5.600% 10/31/39(e) 1,000,000 1,010,630
MuniMae Trust, AMT,
7.750% 06/30/50(e) 2,000,000 2,248,800
-----------
Multi - Family Total 6,471,510
-----------
HOUSING TOTAL 6,471,510
-----------
TOTAL MUNICIPAL PREFERRED STOCKS
(cost of $6,000,000) 6,471,510
-----------
INVESTMENT COMPANY - 0.0%
-------------------------------------------------------------------------------
Dreyfus Tax-Exempt Cash
Management Fund 862 862
-----------
TOTAL INVESTMENT COMPANY
(cost of $862) 862
-----------
16 | See Accompanying Notes to Financial Statements.
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
SHORT-TERM OBLIGATIONS - 2.4% PAR ($) VALUE ($)
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (k) - 2.4%
FL Pinellas County Health Facility Authority,
Pooled Hospital Loan Program,
Series 1985,
LOC: Wachovia Bank N.A.
3.000% 12/01/15 200,000 200,000
IL Health Facilities Authority,
OSF Healthcare Systems,
Series 2002,
LOC: Fifth Third Bank
3.000% 11/15/27 1,600,000 1,600,000
MS Jackson County Pollution
Control Revenue,
Chevron Corp.,
Series 1993,
3.000% 06/01/23 1,900,000 1,900,000
NY New York City Municipal
Water Finance Authority,
Series 1993 C,
Insured: FGIC
2.940% 06/15/23 1,200,000 1,200,000
------------
VARIABLE RATE DEMAND NOTES TOTAL 4,900,000
------------
TOTAL SHORT-TERM OBLIGATIONS
(cost of $4,900,000) 4,900,000
------------
TOTAL INVESTMENTS - 157.9%
(cost of $319,641,140)(l) 318,524,510
AUCTION PREFERRED SHARES PLUS
CUMULATIVE UNPAID DISTRIBUTIONS - (59.5)% (120,042,984)
OTHER ASSETS & LIABILITIES, NET - 1.6% 3,184,432
------------
NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS - 100.0% 201,665,958
============
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) Denotes a restricted security, which is subject to restrictions on resale
under federal securities laws or in transactions exempt from registration.
At November 30, 2005, the value of these securities amounted to
$2,820,807, 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 $ 1,240,000
Eskaton Village - Grass Valley,
Series 2000,
8.250% 11/15/31 09/08/00 985,000
Virgin Islands Government
Refinery Facilities,
Hovensa Coker Project,
Series 2002, AMT,
6.500% 07/01/21 11/15/02 375,000
-----------
$ 2,600,000
-----------
(c) The issuer is in default of certain debt covenants. Income is not being
accrued. At November 30, 2005, the value of these securities amounted to
$632,083, which represents 0.3% of net assets.
(d) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is not being accrued. At
November 30, 2005, the value of these securities amounted to $914,235,
which represents 0.5% of net assets.
(e) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
November 30, 2005, these securities, which did not include any illiquid
securities except for the following, amounted to $8,858,551, which
represents 4.4% of net assets.
ACQUISITION
SECURITY DATE PAR COST VALUE
--------------------------------------------------------------------------------
Resolution Trust Corp.,
Pass-Through
Certificates,
Series 1993 A,
8.500% 12/01/16 08/27/93 $546,075 $556,951 $535,535
(f) Represents fair value as determined in good faith under procedures
approved by the Board of Trustees.
(g) 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.
(h) A portion of this security with a market value of $3,152,012, is pledged
as collateral for open futures contracts.
(i) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is being accrued. At November
30, 2005, the value of these securities amounted to $819,401, which
represents 0.4% of net assets.
(j) Security purchased on a delayed delivery basis.
(k) Variable rate demand notes. These securities are payable upon demand and
are secured by letters of credit or other credit support agreements from
banks. The interest rates change periodically and the interest rates shown
reflect the rates at November 30, 2005.
(l) Cost for federal income tax purposes is $319,410,410.
See Accompanying Notes to Financial Statements. | 17
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
NOTES TO INVESTMENT PORTFOLIO (CONTINUED):
--------------------------------------------------------------------------------
At November 30, 2005, the Trust held the following open short futures
contracts:
UNREALIZED
NUMBER OF AGGREGATE EXPIRATION APPRECIATION
TYPE CONTRACTS VALUE FACE VALUE DATE (DEPRECIATION)
--------------------------------------------------------------------------------
U.S. Treasury
Bonds 215 $23,334,219 $23,322,958 Mar-06 $ (11,261)
U.S. Treasury
Notes 153 17,140,781 17,159,065 Mar-06 18,284
-----------
$ 7,023
-----------
ACRONYM NAME
---------------------------------------------------------------
AMBAC Ambac Assurance Corp.
AMT Alternative Minimum Tax
FGIC Financial Guaranty Insurance Co.
FHLMC Federal Home Loan Mortgage Corp.
FHA Federal Housing Administration
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
LOC Letter of Credit
MBIA MBIA Insurance Corp.
RAD Radian Asset Assurance, Inc.
PSFG Permanent School Fund Guaranteed
At November 30, 2005, the composition of the Trust by revenue source is as
follows:
% OF
HOLDINGS BY REVENUE SOURCE (UNAUDITED) NET ASSETS
-----------------------------------------------------------------------------
Health Care 42.4%
Tax-Backed 31.8
Housing 20.8
Utilities 18.1
Other 15.3
Industrials 8.2
Transportation 7.9
Education 5.0
Other Revenue 3.7
Resource Recovery 2.3
Investment Company 0.0*
Short-Term Obligations 2.4
Auction Preferred Shares (59.5)
Other Assets & Liabilities, Net 1.6
------
100.0%
------
* Rounds to less than 0.1%.
18 | See Accompanying Notes to Financial Statements.
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
November 30, 2005
ASSETS:
Investments, at cost $ 319,641,140
--------------
Investments, at value $ 318,524,510
Cash 63,500
Receivable for:
Interest 5,273,153
Futures variation margin 53,452
Deferred Trustees' compensation plan 22,839
--------------
Total Assets 323,937,454
--------------
LIABILITIES:
Payable for:
Investments purchased on a delayed
delivery basis 784,185
Distributions -- common shares 1,153,256
Distributions -- preferred shares 42,984
Investment advisory fee 196,414
Pricing and bookkeeping fees 11,667
Trustees' fees 1,982
Custody fee 1,005
Transfer agent fee 4,968
Preferred shares remarketing commissions 3,291
Chief compliance officer expenses 1,256
Deferred Trustees' fees 22,839
Other liabilities 47,649
--------------
Total Liabilities 2,271,496
--------------
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 $ 256,168,720
Undistributed net investment income 572,831
Accumulated net realized loss (53,965,986)
Net unrealized appreciation (depreciation) on:
Investments (1,116,630)
Futures contracts 7,023
--------------
Net assets at value applicable to 31,169,023
common shares of beneficial
interest outstanding $ 201,665,958
==============
Net asset value per common share $ 6.47
==============
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the Year Ended November 30, 2005
INVESTMENT INCOME:
Interest $ 19,756,757
Dividends 2,234
--------------
Total Investment Income 19,758,991
--------------
EXPENSES:
Investment advisory fee 2,423,713
Transfer agent fee 56,484
Pricing and bookkeeping fees 164,919
Trustees' fees 17,360
Preferred shares remarketing commissions 300,291
Custody fee 22,303
Chief compliance officer expenses 5,750
Other expenses 165,925
--------------
Total Expenses 3,156,745
Custody earnings credit (1,947)
--------------
Net Expenses 3,154,798
--------------
Net Investment Income 16,604,193
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES CONTRACTS:
Net realized gain (loss) on:
Investments 4,574,591
Futures contracts (1,227,932)
--------------
Net realized gain 3,346,659
--------------
Net change in unrealized
appreciation (depreciation) on:
Investments (630,551)
Futures contracts 40,353
--------------
Net change in unrealized
appreciation (depreciation) (590,198)
--------------
Net Gain 2,756,461
--------------
Net Increase in Net Assets from Operations 19,360,654
--------------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (2,628,702)
--------------
Net Increase in Net Assets from
Operations Applicable to Common Shares $ 16,731,952
--------------
See Accompanying Notes to Financial Statements. | 19
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
--------------------------------
INCREASE (DECREASE) IN NET ASSETS: 2005 2004
--------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 16,604,193 $ 16,152,482
Net realized gain (loss) on investments and futures contracts 3,346,659 (4,056,721)
Net change in unrealized appreciation (depreciation)
on investments and futures contracts (590,198) (1,477,080)
------------- -------------
Net Increase from Operations 19,360,654 10,618,681
------------- -------------
LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS:
From net investment income (2,628,702) (1,308,975)
------------- -------------
Increase in Net Assets from Operations Applicable to Common Shares 16,731,952 9,309,706
------------- -------------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income: (14,274,618) (14,944,635)
------------- -------------
SHARE TRANSACTIONS:
Distributions reinvested 110,419 226,803
------------- -------------
Total Increase (Decrease) in Net Assets Applicable to Common Shares 2,567,753 (5,408,126)
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of period 199,098,205 204,506,331
------------- -------------
End of period (including undistributed net investment income
of $572,831 and $908,419, respectively) $ 201,665,958 $ 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
------------- -------------
20 | See Accompanying Notes to Financial Statements.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
November 30, 2005
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 open-end 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. If a
security is valued at "fair value", such value is likely to be different from
the last quoted market price for the security.
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, LLC 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.
| 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
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 November 30, 2005 was
2.95% for Series T and 2.95% for Series W. For the year ended November 30, 2005,
the Trust declared dividends to Auction Preferred shareholders amounting to
$2,628,702 representing an average dividend rate of 2.21% per APS.
NOTE 3. FEDERAL TAX INFORMATION
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to the Trust's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the year ended November 30, 2005, permanent book and tax basis differences
resulting primarily from differing treatments for expired capital loss
carryforwards, paydown reclassifications, discount accretion/premium
amortization on debt securities and market discount reclassifications were
identified and reclassified among the components of the Trust's net assets as
follows:
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT INCOME NET REALIZED LOSS PAID-IN CAPITAL
--------------------- ----------------- ---------------
$(36,461) $4,518,932 $(4,482,471)
Net investment income and net realized gains (losses), as disclosed on the
Statement of Operations, and net assets were not affected by this
reclassification.
The tax character of distributions paid during the years ended November 30, 2005
and November 30, 2004 was as follows:
NOVEMBER 30, NOVEMBER 30,
2005 2004
----------------- ---------------
Distributions paid from:
Tax-Exempt Income $16,903,320 $16,226,738
Ordinary Income -- 26,872
Long-Term Capital Gains -- --
As of November 30, 2005, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED
TAX-EXEMPT ORDINARY LONG-TERM NET UNREALIZED
INCOME INCOME CAPITAL GAINS DEPRECIATION*
------------- ------------- ------------- --------------
$2,584,637 $115,714 $-- $(885,900)
* The differences between book-basis and tax-basis net unrealized
depreciation are primarily due to discount accretion/premium amortization
on debt securities.
22 |
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
Unrealized appreciation and depreciation at November 30, 2005, based on cost of
investments for federal income tax purposes, was:
Unrealized appreciation $ 17,191,744
Unrealized depreciation (18,077,644)
------------
Net unrealized depreciation $ (885,900)
------------
The following capital loss carryforwards 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
---------- ------------
2007 $ 3,941,668
2008 14,340,573
2009 4,198,716
2010 12,980,738
2011 4,761,736
2012 4,055,363
============
$ 44,278,794
============
Capital loss carryforwards of $1,444,131 were utilized and $4,482,522 expired
during the year ended November 30, 2005 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, LLC ("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. Prior to
September 30, 2005, Columbia Management Advisors, Inc. was the investment
advisor to the Trust under the same fee structure. On September 30, 2005,
Columbia Management Advisors, Inc. merged into Banc of America Capital
Management, LLC. At that time, the investment advisor was then renamed Columbia
Management Advisors, LLC. 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.
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, the total fees payable under the
pricing and bookkeeping agreement are paid to State Street.
Under its pricing and bookkeeping agreement with the Trust, Columbia receives an
annual fee of $38,000 paid monthly plus an additional monthly fee based on the
level of average weekly net assets for the month; provided that during any
12-month period, the aggregate fee shall not exceed $140,000.
Prior to November 1, 2005, Columbia received from the Trust an annual fee of
$10,000 paid monthly, and in any month that the Trust's average weekly net
assets exceeded $50 million, an additional monthly fee, calculated by taking
into account the fees payable to State Street under the Outsourcing Agreement.
The Trust also reimburses Columbia and State Street for out-of pocket expenses
and charges, including fees payable to third parties for pricing the Trust's
portfolio securities and direct internal costs incurred by Columbia in
connection with providing Trust accounting oversight and monitoring and certain
other services. For the year ended November 30, 2005, the Trust's effective
pricing and bookkeeping rate, inclusive of out-of-pocket expenses, was 0.051%.
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
All officers of the Trust, with the exception of the Trust's Chief Compliance
Officer, are employees of Columbia or its affiliates and receive no compensation
from the Trust. The Board of Trustees has appointed a Chief Compliance Officer
to the Trust in accordance with federal securities regulations. The Trust, along
with other affiliated funds, pays its pro-rata share of the expenses associated
with the Chief Compliance Officer. The Trust's expenses for 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 year ended November 30, 2005, the Trust paid $1,700 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
| 23
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
NOTE 5. PORTFOLIO INFORMATION
For the year ended November 30, 2005, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $48,110,946 and
$52,022,337, 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 November 30, 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 Aa3. At November 30, 2005, no private insurer had greater than 5% of
the total investments of the Trust.
GEOGRAPHIC CONCENTRATION
The Trust has greater than 5% of its total investments at November 30, 2005
invested in debt obligations issued by the states of California, Colorado,
Florida, Illinois, Massachusetts 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 Management Advisors, Inc. (which has since merged
into Banc of America Capital Management, LLC (now named Columbia Management
Advisors, LLC)) ("Columbia") and Columbia Funds Distributor, Inc. (which has
been renamed Columbia Management Distributors, Inc.) (the "Distributor")
(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 voluntarily 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 to reduce certain Columbia Funds (including the
former 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.
24 |
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
November 30, 2005
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 funds' 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 funds or their shareholders cannot
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 the 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 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 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, the 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
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 transferred the CDSC Lawsuit to the MDL.
The MDL is ongoing. Accordingly, an estimate of the financial impact of this
litigation on any fund, if any, cannot currently be made.
In 2004, certain Columbia Funds, the Trustees of the 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 purposes. 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. On November 30, 2005, the judge dismissed all claims
by plaintiffs and ordered that the case be closed. The plaintiffs filed a notice
of appeal on December 30, 2005.
| 25
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise stated):
PERIOD
YEAR ENDED NOVEMBER 30, ENDED
----------------------------------------------------------------------- NOVEMBER 30,
2005 2004 2003 2002 2001 2000 1999 (a)
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.39 $ 6.57 $ 6.52 $ 6.93 $ 6.92 $ 7.49 $ 8.49
-------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.53(b) 0.52(b) 0.54(b) 0.57(b)(c) 0.61(b) 0.62(d) 0.46
Net realized and unrealized gain
(loss) on investments and
futures contracts 0.09 (0.18) 0.04 (0.42)(c) (0.04) (0.54) (0.92)
-------- -------- -------- -------- -------- -------- --------
Total from Investment
Operations 0.62 0.34 0.58 0.15 0.57 0.08 (0.46)
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (0.08) (0.04) (0.04) (0.06) (0.12) (0.16) (0.04)
-------- -------- -------- -------- -------- -------- --------
Total from Investment
Operations Applicable
to Common Shareholders 0.54 0.30 0.54 0.09 0.45 (0.08) (0.50)
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO
COMMON SHAREHOLDERS:
From net investment income (0.46) (0.48) (0.49) (0.50) (0.44) (0.48) (0.45)
-------- -------- -------- -------- -------- -------- --------
LESS SHARE TRANSACTIONS:
Commissions and offering costs --
preferred shares -- -- -- -- -- (0.01) (0.05)
-------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 6.47 $ 6.39 $ 6.57 $ 6.52 $ 6.93 $ 6.92 $ 7.49
======== ======== ======== ======== ======== ======== ========
Market price per share --
common shares $ 6.42 $ 6.43 $ 6.45 $ 6.26 $ 6.38 $ 5.75 $ 6.13
======== ======== ======== ======== ======== ======== ========
Total return -- based on market
value -- common shares (e) 7.18% 7.44% 11.17% 5.81% 18.56% 1.05% (21.72)%(f)
======== ======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (g)(h) 1.55% 1.58% 1.54% 1.49% 1.59% 1.60% 1.13%(i)
Net investment income before
preferred stock dividend (g)(h) 8.17% 8.04% 8.30% 8.36%(c) 8.67% 8.63% 6.18%(i)
Net investment income after
preferred stock dividend (g)(h) 6.88% 7.39% 7.72% 7.53%(c) 7.00% 6.37% 5.67%(i)
Portfolio turnover rate 15% 13% 14% 15% 15% 10% 16%(f)
Net assets, end of period (000's) --
common shares $201,666 $199,098 $204,506 $202,765 $215,348 $214,975 $232,540
(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 had an impact of less than
0.01%.
(h) Ratios reflect average net assets available to common shares only.
(i) Annualized.
26 |
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise stated):
YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.56 $ 8.34 $ 8.55 $ 7.96
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.52 0.55 0.56 0.60
Net realized and unrealized gain (loss) on investments and futures contracts (0.07) 0.22 (0.19) 0.58
-------- -------- -------- --------
Total from Investment Operations Applicable to Common Shareholders 0.45 0.77 0.37 1.18
-------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (0.52) (0.55) (0.58) (0.59)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 8.49 $ 8.56 $ 8.34 $ 8.55
======== ======== ======== ========
Market price per share -- common shares $ 8.31 $ 8.63 $ 8.25 $ 7.38
======== ======== ======== ========
Total return -- based on market value -- common shares (a) 2.47% 11.60% 20.09% 15.65%
======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (b) 0.93% 0.96% 1.00% 1.06%
Net investment income (b) 6.02% 6.54% 6.74% 7.15%
Portfolio turnover rate 29% 17% 15% 23%
Net assets, end of period (000's) - common shares $263,705 $265,190 $257,768 $264,467
(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 had an impact of less than
0.01%.
| 27
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ASSET COVERAGE REQUIREMENTS
--------------------------------------------------------------------------------
INVOLUNTARY
ASSET LIQUIDATING AVERAGE
TOTAL AMOUNT COVERAGE PREFERENCE MARKET VALUE
OUTSTANDING PER SHARE* PER SHARE PER SHARE
--------------------------------------------------------------------------------
11/30/05 $120,000,000 $67,014 $25,009 $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.
** On August 26, 1999, the Trust began offering Auction Preferred Shares.
28 |
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE TRUSTEES AND THE SHAREHOLDERS OF COLONIAL HIGH INCOME MUNICIPAL TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial High Income Municipal
Trust (the "Trust") at November 30, 2005, and the results of its operations, the
changes in its net assets and its financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
November 30, 2005 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 24, 2006
| 29
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UNAUDITED INFORMATION
--------------------------------------------------------------------------------
FEDERAL INCOME TAX INFOMATION
100.00% of distributions from net investment income will be treated as exempt
income for federal income tax purposes.
For the calendar year ended December 31, 2005, 16.03% of distributions from net
investment income is subject to the alternative minimum tax.
30 |
--------------------------------------------------------------------------------
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.
| 31
--------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
The Trustees/Directors serve terms of indefinite duration. The names, addresses
and ages of the Trustees/Directors and officers of the Funds in the Columbia
Funds Complex, the year each was first elected or appointed to office, their
principal business occupations during at least the last five years, the number
of portfolios overseen by each Trustee/Director and other directorships they
hold are shown below. Each officer listed below serves as an officer of each
Fund in the Columbia Funds Complex.
NAME, ADDRESS AND AGE,
POSITION WITH FUNDS,
YEAR FIRST ELECTED OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS
APPOINTED TO OFFICE (1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
-------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES Executive Vice President-Strategy of United Airlines (airline) since December, 2002
DOUGLAS A. HACKER (Age 50) (formerly President of UAL Loyalty Services (airline) from September, 2001 to
c/o Columbia Management December, 2002; Executive Vice President and Chief Financial Officer of United
Advisors, LLC Airlines from July, 1999 to September, 2001; Senior Vice President-Finance from March,
One Financial Center 1993 to July, 1999). Oversees 83, Nash Finch Company (food distributor)
Boston, MA 02111
Trustee (since 1996)
JANET LANGFORD KELLY (Age 48) Partner, Zelle, Hofmann, Voelbel, Mason & Gette LLP (law firm) since March, 2005;
c/o Columbia Management Adjunct Professor of Law, Northwestern University, since September, 2004 (formerly
Advisors, LLC Chief Administrative Officer and Senior Vice President, Kmart Holding Corporation
One Financial Center (consumer goods) from September, 2003 to March, 2004; Executive Vice
Boston, MA 02111 President-Corporate Development and Administration, General Counsel and Secretary,
Trustee (since 1996) Kellogg Company (food manufacturer), from September, 1999 to August, 2003; Senior Vice
President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged,
consumer-products manufacturer) from January, 1995 to September, 1999). Oversees 83,
None
RICHARD W. LOWRY (Age 69) Private Investor since August, 1987 (formerly Chairman and Chief Executive Officer,
c/o Columbia Management U.S. Plywood Corporation (building products manufacturer)). Oversees 89 (3), None
Advisors, LLC
One Financial Center
Boston, MA 02111
Trustee (since 1995)
CHARLES R. NELSON (Age 62) Professor of Economics, University of Washington, since January, 1976; Ford and Louisa
c/o Columbia Management Van Voorhis Professor of Political Economy, University of Washington, since September,
Advisors, LLC 1993 (formerly Director, Institute for Economic Research, University of Washington
One Financial Center from September, 2001 to June, 2003); Adjunct Professor of Statistics, University of
Boston, MA 02111 Washington, since September, 1980; Associate Editor, Journal of Money Credit and
Trustee (since 1981) Banking, since September, 1993; consultant on econometric and statistical matters.
Oversees 83, None
JOHN J. NEUHAUSER (Age 63) Academic Vice President and Dean of Faculties since August, 1999, Boston College
c/o Columbia Management (formerly Dean, Boston College School of Management from September, 1977 to August,
Advisors, LLC 1999). Oversees 89 (3), Saucony, Inc. (athletic footwear)
One Financial Center
Boston, MA 02111
Trustee (since 1985)
32 |
--------------------------------------------------------------------------------
TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
NAME, ADDRESS AND AGE,
POSITION WITH FUNDS,
YEAR FIRST ELECTED OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS
APPOINTED TO OFFICE (1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
-------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES (continued) Partner, Perkins Coie LLP (law firm). Oversees 83, None
PATRICK J. SIMPSON (Age 61)
c/o Columbia Management
Advisors, LLC
One Financial Center
Boston, MA 02111
Trustee (since 2000)
THOMAS E. STITZEL (Age 69) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999,
c/o Columbia Management College of Business, Boise State University); Chartered Financial Analyst. Oversees
Advisors, LLC 83, None
One Financial Center
Boston, MA 02111
Trustee (since 1998)
THOMAS C. THEOBALD (Age 68) Partner and Senior Advisor, Chicago Growth Partners (private equity investing) since
c/o Columbia Management September, 2004 (formerly Managing Director, William Blair Capital Partners (private
Advisors, LLC equity investing) from September, 1994 to September, 2004). Oversees 83, Anixter
One Financial Center International (network support equipment distributor); Ventas, Inc. (real estate
Boston, MA 02111 investment trust); Jones Lang LaSalle (real estate management services) and Ambac
Trustee and Chairman of the Financial Group (financial guaranty insurance)
Board (4) (since 1996)
ANNE-LEE VERVILLE (Age 60) Retired since 1997 (formerly General Manager, Global Education Industry, IBM
c/o Columbia Management Corporation (computer and technology) from 1994 to 1997). Oversees 83, Chairman of the
Advisors, LLC Board of Directors, Enesco Group, Inc. (designer, importer and distributor of giftware
One Financial Center and collectibles)
Boston, MA 02111
Trustee (since 1998)
RICHARD L. WOOLWORTH (Age 64) Retired since December, 2003 (formerly Chairman and Chief Executive Officer, The
c/o Columbia Management Regence Group (regional health insurer); Chairman and Chief Executive Officer,
Advisors, LLC BlueCross BlueShield of Oregon; Certified Public Accountant, Arthur Young & Company).
One Financial Center Oversees 83, Northwest Natural Gas Co. (natural gas service provider)
Boston, MA 02111
Trustee (since 1991)
INTERESTED TRUSTEE Partner, Park Avenue Equity Partners (private equity) since February, 1999 (formerly
WILLIAM E. MAYER (2) (Age 65) Partner, Development Capital LLC from November 1996, to February, 1999). Oversees
c/o Columbia Management 89 (3), Lee Enterprises (print media), WR Hambrecht + Co. (financial service provider);
Advisors, LLC Reader's Digest (publishing); OPENFIELD Solutions (retail industry technology
One Financial Center provider)
Boston, MA 02111
Trustee (since 1994)
(1) In December 2000, the boards of each of the former Liberty Funds and
former Stein Roe Funds were combined into one board of trustees
responsible for the oversight of both fund groups (collectively, the
"Liberty Board"). In October 2003, the trustees on the Liberty Board were
elected to the boards of the Columbia Funds (the "Columbia Board") and of
the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that
election, Patrick J. Simpson and Richard L. Woolworth, who had been
directors on the Columbia Board and trustees on the CMG Funds Board, were
appointed to serve as trustees of the Liberty Board. The date shown is the
earliest date on which a trustee/director was elected or appointed to the
board of a Fund in the Columbia Funds Complex.
(2) Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co.
(3) Messrs. Lowry, Neuhauser and Mayer also serve as directors/trustees of the
Liberty All-Star Funds, currently consisting of 2 funds, which are advised
by an affiliate of the Advisor.
(4) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
The Statement of Additional Information includes additional information about
the Trustees of the Funds and is available, without charge, upon request by
calling 800-426-3750.
| 33
--------------------------------------------------------------------------------
TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
NAME, ADDRESS AND AGE,
POSITION WITH COLUMBIA FUNDS,
YEAR FIRST ELECTED OR
APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
-------------------------------------------------------------------------------------------------------------------------
OFFICERS Head of Mutual Funds since August, 2004 and Managing Director of the Advisor since
CHRISTOPHER L. WILSON (Age 48) September, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe Funds
One Financial Center since October, 2004; President and Chief Executive Officer of the Nations Funds since
Boston, MA 02111 January, 2005; President of the Galaxy Funds since April, 2005; Director of Bank of
President (since 2004) America Global Liquidity Funds, PLC since May, 2005; Director of Banc of America
Capital Management (Ireland), Limited since May, 2005; Director of FIM Funding, Inc.
since January, 2005; Senior Vice President of Columbia Management Distributors, Inc.
since January, 2005; Director of Columbia Management Services, Inc. since January,
2005 (formerly Senior Vice President of Columbia Management from January, 2005 to
August, 2005; Senior Vice President of BACAP Distributors LLC from January, 2005 to
July, 2005; President and Chief Executive Officer, CDC IXIS Asset Management Services,
Inc. from September, 1998 to August, 2004).
J. KEVIN CONNAUGHTON (Age 41) Treasurer of the Columbia Funds since October, 2003 and of the Liberty Funds, Stein
One Financial Center Roe Funds and All-Star Funds since December, 2000; Managing Director of the Advisor
Boston, MA 02111 since September, 2005 (formerly Vice President of Columbia Management from April, 2003
Treasurer (since 2000) to August, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe Funds
from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the
Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of
the Galaxy Funds from September, 2002 to November, 2005 (formerly Treasurer from
December, 2002 to December, 2004 and President from February, 2004 to December, 2004
of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial
Management Associates, Inc. from February, 1998 to October, 2000).
MARY JOAN HOENE (Age 56) Senior Vice President and Chief Compliance Officer of the Columbia Funds, Liberty
100 Federal Street Funds, Stein Roe Funds and All-Star Funds since August, 2004; Chief Compliance Officer
Boston, MA 02110 of the Columbia Management Multi-Strategy Hedge Fund, LLC since August 2004; Chief
Senior Vice President and Chief Compliance Officer of the BACAP Alternative Multi-Strategy Hedge Fund LLC since
Compliance Officer (since 2004) October 2004 (formerly Partner, Carter, Ledyard & Milburn LLP from January, 2001 to
August, 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999 to December,
2000; Vice President and Counsel, Equitable Life Assurance Society of the United
States from April, 1998 to November, 1999).
MICHAEL G. CLARKE (Age 36) Chief Accounting Officer of the Columbia Funds, Liberty Funds, Stein Roe Funds and
One Financial Center All-Star Funds since October, 2004; Managing Director of the Advisor since September,
Boston, MA 02111 2005 (formerly Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and
Chief Accounting Officer All-Star Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to
(since 2004) May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and
Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty
Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001;
Audit Manager, Deloitte & Touche LLP from May, 1997 to August, 1999).
JEFFREY R. COLEMAN (Age 36) Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds
One Financial Center since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services,
Boston, MA 02111 Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from
Controller (since 2004) February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset
Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August,
2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August,
2000).
R. SCOTT HENDERSON (Age 46) Secretary of the Columbia Funds, Liberty Funds and Stein Roe Funds since December,
One Financial Center 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004;
Boston, MA 02111 Executive Director and General Counsel, Massachusetts Pension Reserves Investment
Secretary (since 2004) Management Board from September, 1997 to March, 2001).
34 |
--------------------------------------------------------------------------------
BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
--------------------------------------------------------------------------------
The Advisory Fees and Expenses Committee of the Board of Trustees meets one or
more times annually, usually in late summer, to review the advisory agreements
(collectively, the "Agreements") of the funds for which the Trustees serve as
trustees or directors (each a "fund") and determine whether to recommend that
the full Board approve the continuation of the Agreements for an additional
one-year period. After the Committee has made its recommendation, the full
Board, including the Independent Trustees, determines whether to approve the
continuation of the Agreements. In addition, the Board, including the
Independent Trustees, considers matters bearing on the Agreements at most of its
other meetings throughout the year and meets regularly with the heads of each
investment area within Columbia. The Trustees also meet with selected fund
portfolio managers at various times throughout the year. The Trustees receive
and review all materials that they, their legal counsel or Columbia, the funds'
investment adviser, believe to be reasonably necessary for the Trustees to
evaluate the Agreements and determine whether to approve the continuation of the
Agreements. Those materials generally include, among other items, (i)
information on the investment performance of each fund relative to the
performance of peer groups of mutual funds and the fund's performance
benchmarks, (ii) information on each fund's advisory fees and other expenses,
including information comparing the fund's expenses to those of peer groups of
mutual funds and information about any applicable expense caps and fee
"breakpoints," (iii) sales and redemption data, (iv) information about the
profitability of the Agreements to Columbia, and potential "fall-out" or
ancillary benefits that Columbia and its affiliates may receive as a result of
their relationships with the funds and (v) information obtained through
Columbia's response to a questionnaire prepared at the request of the Trustees
by counsel to the funds and independent legal counsel to the Independent
Trustees. The Trustees also consider other information such as (vi) Columbia's
financial results and financial condition, (vii) each fund's investment
objective and strategies and the size, education and experience of Columbia's
investment staffs and their use of technology, external research and trading
cost measurement tools, (viii) the allocation of the funds' brokerage, if any,
including allocations to brokers affiliated with Columbia and the use of "soft"
commission dollars to pay fund expenses and to pay for research products and
services, (ix) Columbia's resources devoted to, and its record of compliance
with, the funds' investment policies and restrictions, policies on personal
securities transactions and other compliance policies, (x) Columbia's response
to various legal and regulatory proceedings since 2003 and (xi) the economic
outlook generally and for the mutual fund industry in particular. In addition,
the Trustees confer with their independent fee consultant and review materials
relating to the Agreements that the independent fee consultant provides.
Throughout the process, the Trustees have the opportunity to ask questions of
and request additional materials from Columbia and to consult independent legal
counsel to the Independent Trustees.
The Board of Trustees most recently approved the continuation of the Agreements
at its October, 2005 meeting, following meetings of the Advisory Fees and
Expenses Committee held in August, September, and October, 2005. In considering
whether to approve the continuation of the Agreements, the Trustees, including
the Independent Trustees, did not identify any single factor as determinative,
and each weighed various factors as he or she deemed appropriate. The Trustees
considered the following matters in connection with their approval of the
continuation of the Agreements: THE NATURE, EXTENT AND QUALITY OF THE SERVICES
PROVIDED TO THE FUNDS UNDER THE AGREEMENTS. The Trustees considered the nature,
extent and quality of the services provided by Columbia and its affiliates to
the funds and the resources dedicated to the funds by Columbia and its
affiliates. Among other things, the Trustees considered (i) Columbia's ability,
including its resources, compensation programs for personnel involved in fund
management, reputation and other attributes, to attract and retain highly
qualified research, advisory and supervisory investment professionals; (ii) the
portfolio management services provided by those investment professionals; and
(iii) the trade execution services provided on behalf of the funds. For each
fund, the Trustees also considered the benefits to shareholders of investing in
a mutual fund that is part of a family of funds offering exposure to a variety
of asset classes and investment disciplines and providing for a variety of fund
and shareholder services. After reviewing those and related factors, the
Trustees concluded, within the context of their overall conclusions regarding
each of the Agreements, that the nature, extent and quality of services provided
supported the continuation of the Agreements. INVESTMENT PERFORMANCE OF THE
FUNDS AND COLUMBIA. The Trustees reviewed information about the performance of
each fund over various time periods, including information prepared by an
independent third party that compared the performance of each fund to the
performance of peer groups of mutual funds and performance benchmarks. The
Trustees also reviewed a description of the third party's methodology for
identifying each fund's peer group for purposes of performance and expense
comparisons. The Trustees also considered additional information that the
| 35
Advisory Fees and Expenses Committee requested from Columbia relating to funds
that presented relatively weaker performance and/or relatively higher expenses.
In the case of each fund that had performance that lagged that of a relevant
peer group for certain (although not necessarily all) periods, the Trustees
concluded that other factors relevant to performance were sufficient, in light
of other considerations, to warrant continuation of the fund's Agreements. Those
factors varied from fund to fund, but included one or more of the following: (i)
that the fund's performance, although lagging in certain recent periods, was
stronger over the longer term; (ii) that the underperformance was attributable,
to a significant extent, to investment decisions that were reasonable and
consistent with the fund's investment strategy and policies and that the fund
was performing as expected, given market conditions and the fund's investment
strategy; (iii) that the fund's performance was competitive when compared to
other relevant performance benchmarks or peer groups; (iv) that Columbia had
taken or was taking steps designed to help improve the fund's investment
performance, including, but not limited to, replacing portfolio managers or
modifying investment strategies; (v) that the fund's advisory fee had recently
been, or was proposed to be, reduced, with the goal of helping the fund's net
return to shareholders become more competitive; and (vi) that other fund
expenses, such as transfer agency or fund accounting fees, have recently been
reduced, with the goal of helping the fund's net return to shareholders become
more competitive. The Trustees also considered Columbia's performance and
reputation generally, the funds' performance as a fund family generally, and
Columbia's historical responsiveness to Trustee concerns about performance and
Columbia's willingness to take steps intended to improve performance. After
reviewing those and related factors, the Trustees concluded, within the context
of their overall conclusions regarding each of the Agreements, that the
performance of each fund and Columbia was sufficient, in light of other
considerations, to warrant the continuation of the Agreements. THE COSTS OF THE
SERVICES PROVIDED AND PROFITS REALIZED BY COLUMBIA AND ITS AFFILIATES FROM THEIR
RELATIONSHIPS WITH THE FUNDS. The Trustees considered the fees charged to the
funds for advisory services as well as the total expense levels of the funds.
That information included comparisons (provided both by management and by an
independent third party) of the funds' advisory fees and total expense levels to
those of their peer groups and information about the advisory fees charged by
Columbia to comparable accounts. In considering the fees charged to comparable
accounts, the Trustees took into account, among other things, management's
representations about the differences between managing mutual funds as compared
to other types of accounts, including the additional resources required to
effectively manage mutual funds and distribute mutual fund shares. In evaluating
each fund's advisory fees, the Trustees also took into account the demands,
complexity and quality of the investment management of the fund. The Trustees
considered reductions in advisory fee rates, implementation of advisory fee
breakpoints, institution of advisory fee waivers, and changes to expense caps,
which benefited a number of the funds. Furthermore, the Trustees considered the
projected impact on expenses resulting from the overall cost reductions that
management anticipated would result from the 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 Trustees also noted
management's stated justification for the fees charged to the funds, which
included information about the performance of the funds, the services provided
to the funds and management's view as to why it was appropriate that some funds
bear advisory fees or total expenses greater than their peer group medians. The
Trustees also considered the compensation directly or indirectly received by
Columbia and its affiliates from their relationships with the funds. The
Trustees reviewed information provided by management as to the profitability to
Columbia and its affiliates of their relationships with the funds, and
information about the allocation of expenses used to calculate profitability.
When reviewing profitability, the Trustees also considered court cases in which
adviser profitability was an issue in whole or in part, the performance of the
relevant funds, the expense levels of the funds, and whether Columbia had
implemented breakpoints and/or expense caps with respect to the funds.
After reviewing those and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
advisory fees charged to each of the funds were fair and reasonable, and that
the costs of the advisory services generally, and the related profitability to
Columbia and its affiliates of their relationships with the funds, supported the
continuation of the Agreements.
ECONOMIES OF SCALE. The Trustees considered the existence of any economies of
scale in the provision of services by Columbia to each fund and whether those
economies were shared with the fund through breakpoints in the investment
advisory fees or other means, such as expense waivers. The Trustees noted that
many of the funds benefited from breakpoints, expense caps, or both. In
36 |
considering those issues, the Trustees also took note of the costs of the
services provided (both on an absolute and a relative basis) and the
profitability to Columbia and its affiliates of their relationships with the
funds, as discussed above. After reviewing those and related factors, the
Trustees concluded, within the context of their overall conclusions regarding
each of the Agreements, that the extent to which economies of scale were shared
with the funds supported the continuation of the Agreements.
OTHER FACTORS. The Trustees also considered other factors, which included but
were not limited to the following:
o the extent to which each fund had operated in accordance with its
investment objective and its record of compliance with its investment
restrictions, and the compliance programs of the funds and Columbia. They
also considered the compliance-related resources that Columbia and its
affiliates were providing to the funds.
o the nature, quality, cost and extent of administrative and shareholder
services performed by Columbia and its affiliates, both under the
Agreements and under separate agreements for the provision of transfer
agency and administrative services.
o so-called "fall-out benefits" to Columbia, such as the engagement of its
affiliates to provide distribution, brokerage and transfer agency services
to the funds, and the benefits of research made available to Columbia by
reason of brokerage commissions generated by the funds' securities
transactions, as well as possible conflicts of interest associated with
those fall-out and other benefits, and the reporting, disclosure and other
processes in place to disclose and monitor those possible conflicts of
interest.
o the draft report provided by the independent fee consultant, which
included information about and analysis of the funds' fees, expenses and
performance.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel and the independent fee consultant, the Trustees, including
the Independent Trustees, approved the continuance of each of the Agreements
through November 30, 2006.
| 37
--------------------------------------------------------------------------------
SUMMARY OF MANAGEMENT FEE EVALUATION BY INDEPENDENT FEE CONSULTANT
--------------------------------------------------------------------------------
PREPARED PURSUANT TO THE FEBRUARY 9, 2005
ASSURANCE OF DISCONTINUANCE
BETWEEN THE OFFICE OF
ATTORNEY GENERAL OF NEW YORK STATE AND
COLUMBIA MANAGEMENT ADVISORS, INC. AND
COLUMBIA FUNDS DISTRIBUTOR, INC.
OCTOBER 11, 2005
I. OVERVIEW
Columbia Management Advisors, Inc. ("CMA") and Columbia Funds Distributors, Inc.
("CFD") (CFD together with CMA referred to herein as Columbia Management Group
or "CMG1"), entered into an agreement with the New York Attorney General's
Office in the form of an Assurance of Discontinuance (the "AOD"). The AOD
stipulated that CMA would be permitted to manage or advise the Columbia Funds
only if the Independent Members (as such term is defined in the AOD) of the
Columbia Funds' Board of Trustees/Directors (collectively the "Trustees")
appointed a Senior Officer or an Independent Fee Consultant ("IFC") who, among
other things, is to manage the process by which management fees are negotiated.
On May 15, 2005, the Independent Members of the Board appointed me as the IFC
for the Columbia Funds. This report is the annual written evaluation of the
Columbia Funds for 2005 that I have prepared in my capacity as IFC, as required
by the AOD.
A. DUTIES OF THE INDEPENDENT FEE CONSULTANT
As part of the AOD, the Independent Members of the Columbia Funds' Board of
Trustees/Directors agreed to retain an independent fee consultant who was to
participate in the management fee negotiation process. The IFC is charged with
"... duties and responsibilities [that] include managing the process by which
proposed management fees (including, but not limited to, advisory fees) to be
charged the Columbia Fund[s] are negotiated so that they are negotiated in a
manner which is at arms length and reasonable and consistent with this Assurance
of Discontinuance." However, the IFC does not replace the Trustees in their role
of negotiating management and other fees with CMG and its affiliates. In
particular, the AOD states that "Columbia Advisors may manage or advise a
Columbia Fund only if the reasonableness of the proposed management fees is
determined by the Board of Trustees of the Columbia Fund using ... an annual
independent written evaluation prepared by or under the direction of the ...
Independent Fee Consultant...." This report, pursuant to the AOD, constitutes
the "annual independent written evaluation prepared by or under the direction of
the... Independent Fee Consultant."
The AOD requires the IFC report to consider at least the following:
a) Management fees (including any components thereof) charged by other mutual
fund companies for like services;
b) Management fees (including any components thereof) charged to institutional
and other clients of CMA for like services;
c) Costs to CMA and its affiliates of supplying services pursuant to the
management fee agreements, excluding any intra-corporate profit;
d) Profit margins of CMA and its affiliates from supplying such services;
e) Possible economies of scale as the CMA fund grows larger; and
f) The nature and quality of CMA services, including Columbia Funds'
performance.
This report is designed to assist the Board in evaluating the 2005 contract
renewal for Columbia Funds. In addition, this report points out areas where the
Board may deem additional information and analysis to be appropriate over time.
B. SOURCES OF INFORMATION USED IN MY EVALUATION
I have requested data from CMG and various third party industry data sources or
independent research companies that work in the mutual fund arena. The following
list generally describes the types of information I requested.
1. I collected data on performance, management fees, and expense ratios of both
Columbia Funds and comparable non-Columbia Funds. The sources of this
information were CMG, Lipper Inc. ("Lipper") and Morningstar Inc.
("Morningstar"). While Lipper and Morningstar each selected a different group of
peer funds it deemed appropriate against which to measure the relative
performance and fees of Columbia Funds, I conducted an independent review of the
appropriateness of each peer group.
2. I reviewed data on CMG's expense and profitability that I obtained from CMA
directly.
3. I have reviewed data on the organizational structure of CMG in general.
4. I collected information on profitability from Strategic Insight Mutual Fund
Research and Consulting, LLC ("Strategic Insight"). I used this third-party
independent research as an additional method to gauge the accuracy of the data
collected in (2) above.
1 Prior to the date of this report, CMA merged into an affiliated entity,
Banc of America Capital Management, LLC ("BACAP"), and BACAP then changed
its name to Columbia Management Advisors, LLC which carries on the
business of CMA, and CFD changed its name to Columbia Management
Distributors, Inc.
38 |
5. I conducted interviews with various CMG staff, including members of the
senior management team, legal staff, heads of affiliates, portfolio managers,
and financial personnel.
6. I reviewed current 2005 Section 15(c) material provided to the Board and
material presented to the Board in the 2004 fee and performance evaluation.
7. I have reviewed various academic research papers, industry publications, and
other available literature dealing with mutual fund operations, profitability,
and other issues. In addition, I have reviewed SEC releases and studies of
mutual fund expenses.
8. I have reviewed documents pertaining to recent mutual fund litigation in
general and publicly available information about litigation where CMG has been
involved.
In addition, I have engaged NERA Economic Consulting ("NERA") and independent
consultant Dr. John Rea to assist me in data management and analysis. Both NERA
and Dr. Rea have extensive experience in the mutual fund industry through
consulting, government positions, or industry trade groups that provide unique
insights and special knowledge pertaining to my independent analysis of fees,
performance, and profitability. I have also retained Shearman & Sterling LLP as
outside counsel to advise me in connection with my review.
C. QUALIFICATIONS AND INDEPENDENCE
I am the Walter H. Carpenter Chair and Professor of Finance at Babson College.
Before this I was the Chief Economist of the U.S. Securities and Exchange
Commission. I have no material relationship with Bank of America or CMG aside
from acting as IFC, and am aware of no relationship with any of their
affiliates. [Resume omitted]
II. EVALUATION OF THE GENERAL PROCESS USED TO NEGOTIATE THE ADVISORY CONTRACT
A. GENERAL CONSIDERATIONS
My analysis considered all factors and information I reviewed on the finances
and operations of Columbia Funds. I gave each factor an appropriate weight in my
overall findings, and no single factor was in itself the sole criterion for a
finding or conclusion. My objective was to assess all of the information
provided and conduct a robust evaluation of Columbia Funds' operations, fees,
and performance.
My analysis and thought processes will and, I believe, should, differ in certain
ways from the processes used by Trustees in their evaluation of the management
agreements. In particular, because of my technical and quantitative background,
I may use techniques and data that Trustees have not previously felt would be
useful. I view this supplemental analysis as appropriate because my role is to
assist Trustees in their decisions, and to the extent that I bring new ideas or
analysis to the evaluation, I believe this improves the process by which
management fees for the Columbia Funds may be negotiated in accordance with the
AOD.
Finally, as part of my role as IFC, I have, from time to time, sent to Trustees
additional papers and reports produced by third parties that I felt had bearing
on the fee negotiation process. I viewed these materials as educational in
nature and felt they would aid Trustees in placing their work in context.
B. CMG MANAGEMENT INTERVIEWS
As a starting point of my analysis, I have met with members of CMG staff to gain
an understanding of the organizational structure and personnel involved in
running the Columbia fund family.
I have had general discussions and have received information about the
management structure of CMG. My conversations with management have been
informative. In addition, I have participated in Board meetings where Trustees
and management have discussed issues relating to management agreements and
performance of Columbia Funds. When I felt it was appropriate, I added my
opinions on particular matters, such as fund performance or fee levels, to the
discussion.
C. TRUSTEES' FEE AND PERFORMANCE EVALUATION PROCESS
After making initial requests for information, members of the Trustees of the
Columbia Funds met in advance of the October Section 15(c) contract approval
meeting to review certain fee, performance and other data for the Columbia Funds
and to ask questions and make requests of management. Trustees have developed a
process to evaluate the fee and expense levels and performance of Columbia
Funds. This process is used to highlight those funds that have been performing
poorly, may have had higher management fees or expense ratios, or both.
The process involves providing instructions to Lipper to prepare specific data
analyses tailored to the Trustees review framework. These instructions include
highlighting funds that hit one or more fee performance "screens." The six
screens the Trustees use are as follows:
a. 5th Lipper quintile in actual management fee;
b. 5th Lipper quintile in total expense ratio;
c. Three or more 5th Lipper quintile rankings in the 1-, 3-, 5- or 10-year
performance rankings;
d. Sum of the Lipper Quintile Rank (1-year performance) and the Lipper Quintile
Rank (actual management fee) totals a number equal to or higher than 8;
e. Sum of the Lipper Quintile Rank (1-year performance) and the Lipper Quintile
Rank (total expense ratio) totals a number equal to or higher than 8; and
| 39
f. Sum of the Lipper Quintile Rank (3-year performance) and the Lipper Quintile
Rank (total expense ratio) totals a number equal to or higher than 8.
If a fund hits one or more of these screens, it is highlighted for additional
review by the Trustees. This method is only used as an aid for Trustees to
highlight funds and is not the sole test of whether the Board will determine to
take particular actions concerning fees or performance. Funds that have not been
flagged by this screen also may be singled out for fee and performance reasons,
and the Trustees may determine not to take action with respect to the fees or
performance of funds that have been flagged by the screen. These screens
contribute to the basis for discussions on Trustees' views on the Columbia
Funds.
III. FINDINGS
My findings based on my work as IFC are as follows:
1. The Trustees have the relevant information necessary to form an opinion on
the reasonableness of fees and evaluate the performance of the Columbia Funds.
The process the Trustees used in preparing to reach their determination has been
open and informative. In my view, the 2005 process by which the management fees
of the Columbia Funds have been negotiated thus far has been, to the extent
practicable, at arm's length and reasonable and consistent with the AOD.
2. Columbia Funds demonstrated a range of performance relative to their peers. I
find that across the fund complex, 54.26 percent of Columbia Funds have
performance higher than the median of their respective Lipper performance
universe, and 42.55 percent of Columbia Funds have performance higher than the
median of their respective Lipper performance group. In addition, Lipper
performance universe and group comparison showed that Columbia Funds were
distributed roughly evenly across these quintiles. The Trustees have worked with
management to address issues of funds that have demonstrated consistent or
significant underperformance.
3. Columbia Funds demonstrate a range of management fees and expense ratios
relative to their peers. I find that across the fund complex, 58.51 percent of
Columbia Funds have expenses below the median of their Lipper expense universe,
and 53.19 percent of Columbia Funds have expenses below the median of their
Lipper expense group. In addition, Lipper expense universe and group comparisons
show that Columbia Funds are distributed roughly evenly across these quintiles.
The Trustees have taken steps to limit shareholder expenses for certain funds
having management fees significantly above their peers, often though the use of
fee waivers to which CMG has agreed. Consolidation of various funds and fund
families managed by CMG has resulted in substantial savings in non-advisory
expenses.
4. Profitability to CMG of the individual funds ranges widely, but the overall
profitability to CMG of its relationship with the Columbia Funds appears to fall
within a reasonable range. The method of cost allocation to funds is addressed
in the material provided by CMG to the Trustees, but additional information may
be necessary to make a judgment on fund level profitability. My review of
profitability and cost allocation is ongoing, and I plan to continue to develop
my views with regard to fund level profitability.
5. Columbia Funds have instituted fee schedules with breakpoints designed to
enable investors to benefit from fund economies of scale, although 71% of the
funds have not yet reached their first breakpoint. My analysis of the
appropriateness of the breakpoint levels, which I expect will take into account
the cost and profitability of the individual funds, is ongoing.
My work is ongoing and my views may develop over time in light of new
information and analysis.
Respectfully submitted,
Erik R. Sirri
40 |
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 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.
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COLONIAL HIGH INCOME MUNICIPAL TRUST ANNUAL REPORT
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SHC-42/92900-1105(01/06)05/9246
ITEM 2. CODE OF ETHICS.
(a) The registrant has, as of the end of the period covered by this report,
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless
of whether these individuals are employed by the registrant or a third
party.
(b) During the period covered by this report, there were not any amendments to
a provision of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, there were not any waivers or
implicit waivers to a provision of the code of ethics adopted in 2(a)
above.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas
E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members
of the registrant's Board of Trustees and Audit Committee, each qualify as an
audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr.
Woolworth are each independent trustees, as defined in paragraph (a)(2) of this
item's instructions and collectively constitute the entire Audit Committee.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Aggregate Audit Fees billed by the principal accountant for professional
services rendered during the fiscal years ended November 30, 2005 and November
30, 2004 are approximately as follows:
2005 2004
$29,000 $26,700
Audit Fees include amounts related to the audit of the registrant's annual
financial statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Aggregate Audit-Related Fees billed by the principal accountant for
professional services rendered during the fiscal years ended November 30, 2005
and November 30, 2004 are approximately as follows:
2005 2004
$8,400 $7,100
Audit-Related Fees include amounts for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported in Audit Fees
above. In both fiscal years 2005 and 2004, Audit-Related Fees include certain
agreed-upon procedures performed for semi-annual shareholder reports and a
rating agency review.
(c) Aggregate Tax Fees billed by the principal accountant for professional
services rendered during the fiscal years ended November 30, 2005 and November
30, 2004 are approximately as follows:
2005 2004
$3,100 $3,100
Tax Fees in both fiscal years 2005 and 2004 consist primarily of the review of
annual tax returns. Tax fees include amounts for professional services by the
principal accountant for tax compliance, tax advice and tax planning.
(d) Aggregate All Other Fees billed by the principal accountant for professional
services rendered during the fiscal years ended November 30, 2005 and November
30, 2004 are approximately as follows:
2005 2004
$0 $0
All Other Fees include amounts for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) above.
None of the amounts described in paragraphs (a) through (d) above were approved
pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
I. GENERAL OVERVIEW
The Audit Committee of the registrant has adopted a formal policy (the "Policy")
which sets forth the procedures and the conditions pursuant to which the Audit
Committee will pre-approve (i) all audit and non-audit (including audit related,
tax and all other) services provided by the registrant's independent auditor to
the registrant and individual funds
(collectively "Fund Services"), and (ii) all non-audit services provided by the
registrant's independent auditor to the funds' adviser or a control affiliate of
the adviser, that relate directly to the funds' operations and financial
reporting (collectively "Fund-related Adviser Services"). A "control affiliate"
is an entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the funds, and the term "adviser" is
deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio
management and is sub-contracted or overseen by another investment adviser. The
adviser and control affiliates are collectively referred to as "Adviser
Entities."
The Audit Committee uses a combination of specific (on a case-by-case basis as
potential services are contemplated) and general (pre-determined list of
permitted services) pre-approvals. Unless a type of service has received general
pre-approval, it will require specific pre-approval by the Audit Committee if it
is to be provided by the independent auditor.
The Policy does not delegate the Audit Committee's responsibilities to
pre-approve services performed by the independent auditor to management.
II. GENERAL PROCEDURES
On an annual basis, the Fund Treasurer and/or Director of Trustee Administration
shall submit to the Audit Committee a schedule of the types of Fund Services and
Fund-related Adviser Services that are subject to general pre-approval.
These schedules will provide a description of each type of service that is
subject to general pre-approval and, where possible, will provide estimated fees
for each instance of providing each service. This general pre-approval and
related fees (where provided) will generally cover a one-year period (for
example, from June 1 through May 31 of the following year). The Audit Committee
will review and approve the types of services and review the projected fees for
the next one-year period and may add to, or subtract from, the list of general
pre-approved services from time to time, based on subsequent determinations.
This approval acknowledges that the Audit Committee is in agreement with the
specific types of services that the independent auditor will be permitted to
perform. The fee amounts will be updated to the extent necessary at other
regularly scheduled meetings of the Audit Committee.
In addition to the fees for each individual service, the Audit Committee has the
authority to implement a fee cap on the aggregate amount of non-audit services
provided to an individual fund.
If, subsequent to general pre-approval, a fund, its investment adviser or a
control affiliate determines that it would like to engage the independent
auditor to perform a service that requires pre-approval and that is not included
in the general pre-approval list, the specific pre-approval procedure shall be
as follows:
o A brief written request shall be prepared by management detailing the
proposed engagement with explanation as to why the work is proposed to be
performed by the independent auditor;
o The request should be addressed to the Audit Committee with copies to the
Fund Treasurer and/or Director of Trustee Administration;
o The Fund Treasurer and/or Director of Trustee Administration will arrange
for a discussion of the service to be included on the agenda for the next
regularly scheduled Audit Committee meeting, when the Committee will
discuss the proposed engagement and approve or deny the request.
o If the timing of the project is critical and the project needs to commence
before the next regularly scheduled meeting, the Chairperson of the Audit
Committee may approve or deny the request on behalf of the Audit Committee,
or, in the Chairperson's discretion, determine to call a special meeting of
the Audit Committee for the purpose of considering the proposal. Should the
Chairperson of the Audit Committee be unavailable, any other member of the
Audit Committee may serve as an alternate for the purpose of approving or
denying the request. Discussion with the Chairperson (or alternate, if
necessary) will be arranged by the Fund Treasurer and/or Director of
Trustee Administration. The independent auditor will not commence any such
project unless and until specific approval has been given.
III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES
The Audit Committee recognizes that there are cases where services proposed to
be provided by the independent auditor to the adviser or control affiliates are
not Fund-related Adviser Services within the meaning of the Policy, but
nonetheless may be relevant to the Audit Committee's ongoing evaluation of the
auditor's independence and objectivity with respect to its audit services to the
funds. As a result, in all cases where an Adviser Entity engages the independent
auditor to provide audit or non-audit services that are not Fund Services or
Fund-related Adviser Services, were not subject to pre-approval by the Audit
Committee, and the projected fees for any such engagement (or the aggregate of
all such engagements during the period covered by the Policy) exceeds a
pre-determined threshold established by the Audit Committee; the independent
auditor, Fund Treasurer and/or Director of Trustee Administration will notify
the Audit Committee not later than its next meeting. Such notification shall
include a general description of the services provided, the entity that is to be
the recipient of such services, the timing of the engagement, the entity's
reasons for selecting the independent auditor, and the projected fees. Such
information will allow the Audit Committee to consider whether non-audit
services provided to the adviser and Adviser Entities, which were not subject to
Audit Committee pre-approval, are compatible with maintaining the auditor's
independence with respect to the Funds.
IV. REPORTING TO THE AUDIT COMMITTEE
The Fund Treasurer or Director of Trustee Administration shall report to the
Audit Committee at each of its regular meetings regarding all Fund Services or
Fund-related Adviser Services initiated since the last such report was rendered,
including:
o A general description of the services, and
o Actual billed and projected fees, and
o The means by which such Fund Services or Fund-related Adviser Services
were pre-approved by the Audit Committee.
In addition, the independent auditor shall report to the Audit Committee
annually, and no more than 90 days prior to the filing of audit reports with the
SEC, all non-audit services provided to entities in the funds' "investment
company complex," as defined by SEC rules, that did not require pre-approval
under the Policy.
V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE
The Policy may be amended from time to time by the Audit Committee. Prompt
notice of any amendments will be provided to the independent auditor, Fund
Treasurer and Director of Trustee Administration. The Policy shall be reviewed
and approved at least annually by the Audit Committee.
*****
(e)(2) The percentage of services described in paragraphs (b) through (d) of
this Item approved pursuant to the "de minimis" exception under paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years ended
November 30, 2005 and November 30, 2004 was zero.
(f) Not applicable.
(g) All non-audit fees billed by the registrant's accountant for services
rendered to the registrant for the fiscal years ended November 30, 2005 and
November 30, 2004 are disclosed in (b) through (d) of this Item.
During the fiscal years ended November 30, 2005 and November 30, 2004, there
were no Audit-Related Fees, Tax Fees or All Other Fees that were approved for
services to the investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser) and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant under
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
The percentage of Audit-Related Fees, Tax Fees and All Other Fees required to be
approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were
approved under the "de minimis" exception during both fiscal years ended
November 30, 2005 and November 30, 2004 was zero.
(h) The registrant's Audit Committee of the Board of Directors has considered
whether the provision of non-audit services that were rendered to the
registrant's adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X, is compatible with maintaining the principal accountant's
independence. The Audit Committee determined that the provision of such services
is compatible with maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C.
78c(a)(58)(A)). Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and
Richard L. Woolworth are each independent trustees and collectively constitute
the entire Audit Committee.
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.
The Fund has delegated to Columbia Management Advisors, LLC (the "Advisor") the
responsibility to vote proxies relating to portfolio securities held by the
Fund. In deciding to delegate this responsibility to the Advisor, the Board of
Trustees of the Trust reviewed and approved the policies and procedures adopted
by the Advisor. These included the procedures that the Advisor follows when a
vote presents a conflict between the interests of the Fund and its shareholders
and the Advisor, its affiliates, its other clients or other persons.
The Advisor's policy is to vote all proxies for Fund securities in a manner
considered by the Advisor to be in the best interest of the Fund and its
shareholders without regard to any benefit to the Advisor, its affiliates, its
other clients or other persons. The Advisor examines each proposal and votes
against the proposal, if, in its judgment, approval or adoption of the proposal
would be expected to impact adversely the current or potential market value of
the issuer's securities. The Advisor also examines each proposal and votes the
proxies against the proposal, if, in its judgment, the proposal would be
expected to affect adversely the best interest of the Fund. The Advisor
determines the best interest of the Fund in light of the potential economic
return on the Fund's investment.
The Advisor addresses potential material conflicts of interest by having
predetermined voting guidelines. For those proposals that require special
consideration or in instances where special circumstances may require varying
from the predetermined guideline, the Advisor's Proxy Committee determines the
vote in the best interest of the Fund, without consideration of any benefit to
the Advisor, its affiliates, its other clients or other persons. The Advisor's
Proxy Committee is composed of representatives of the Advisor's equity
investments, equity research, compliance, legal and fund administration
functions. In addition to the responsibilities described above, the Proxy
Committee has the responsibility to review, on a semi-annual basis, the
Advisor's proxy voting policies to ensure consistency with internal and
regulatory agency policies and to develop additional predetermined voting
guidelines to assist in the review of proxy proposals.
The Proxy Committee may vary from a predetermined guideline if it determines
that voting on the proposal according to the predetermined guideline would be
expected to impact adversely the current or potential market value of the
issuer's securities or to affect adversely the best interest of the client.
References to the best interest of a client refer to the interest of the client
in terms of the potential economic return on the client's investment. In
determining the vote on any proposal, the Proxy Committee does not consider any
benefit other than benefits to the owner of the securities to be voted. A member
of the Proxy Committee is prohibited from voting on any proposal for which he or
she has a conflict of interest by reason of a direct relationship with the
issuer or other party affected by a given proposal. Persons making
recommendations to the Proxy Committee or its members are required to disclose
to the Committee any relationship with a party making a proposal or other matter
known to the person that would create a potential conflict of interest.
The Advisor has retained Institutional Shareholder Services ("ISS"), a third
party vendor, to implement its proxy voting process. ISS provides proxy
analysis, record keeping services and vote disclosure services.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not yet 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 Publically Be Purchased Under
of Shares Paid Per Share Announced Plans the Plans or Programs
--------------------------------------------------------------------------------------------------------------------------
06/01/05 through 06/30/05 7,364 $6.27 7,364 N/A
07/01/05 through 07/31/05 6,994 $6.34 6,994 N/A
08/01/05 through 08/31/05 6,969 $6.41 6,969 N/A
09/01/05 through 09/30/05 6,924 $6.47 6,924 N/A
10/01/05 through 10/31/05 7,623 $6.40 7,623 N/A
11/01/05 through 11/30/05 7,716 $6.38 7,716 N/A
--------------------------------------------------------------------------------------------------------------------------
Total 43,590 $6.38 43,590 N/A
--------------------------------------------------------------------------------------------------------------------------
* 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 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, has concluded that such controls and procedures are
adequately designed to ensure that information required to be
disclosed by the registrant in Form N-CSR is accumulated and
communicated to the registrant's management, including the principal
executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's 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
attached hereto as Exhibit 99.CODE ETH.
(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 January 25, 2006
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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 January 25, 2006
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By (Signature and Title) /S/ J. Kevin Connaughton
------------------------------------------------------
J. Kevin Connaughton, Treasurer
Date January 25, 2006
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