UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4992
Colonial Municipal Income Trust
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
James R. Bordewick, Jr., Esq.
Columbia Management Advisors, LLC
One Financial Center
Boston, MA 02111
--------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-426-3750
Date of fiscal year end: November 30, 2006
Date of reporting period: May 31, 2006
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
Item 1. Reports to Stockholders
[PHOTO]
COLONIAL MUNICIPAL INCOME TRUST
Semiannual Report
May 31, 2006
[LOGO] Not FDIC Insured May Lose Value
No Bank Guarantee
+
[GRAPHIC]
Dear Shareholder:
The US stock and bond markets delivered positive, but modest, returns during
the six month period ended May 31, 2006. After a weak fourth quarter, economic
growth turned sharply higher in 2006 and job growth was steady, although
somewhat slower at the end of the period. Confident consumers continued to pump
dollars into US retail markets, despite higher energy prices, which boosted
inflation. The housing market continued to cool as mortgage rates moved higher,
but housing-market indicators--such as housing starts, sales of existing homes,
and house prices--remained strong by historical measures.
In this environment, the US fixed income markets faced the challenge of rising
interest rates, especially within the short-and intermediate-maturity ranges
and was generally flat for the period. The Federal Reserve Board, in an effort
to balance economic growth and the forces of inflation, raised short-term
interest rates by one full percentage point during the reporting period. The
yield on the 10-year US Treasury note, a bellwether for the bond market, moved
up from 4.5% to 5.1%. Lower quality bonds did better than higher quality bonds.
In fact, high-yield bonds did better than either stocks or investment-grade
bonds. A strong economy favored corporate high-yield bonds, as default rates
remained low and corporate profits surprised investors with
better-than-expected results. However, that trend showed signs of shifting near
the end of the six-month period. The municipal sector generated respectable
gains as economic growth helped buoy revenues and stabilize budgets in many
states and municipalities. Within the municipal market, high-yield also
outperformed high-grade bonds for the period.
In the pages that follow, your fund's manager discusses key factors that
influenced performance during this six-month reporting period. We urge you to
read this report carefully and to discuss any questions you might have with
your financial advisor.
As always, we thank you for choosing Colonial Funds. We look forward to
continuing to help you build toward your financial goals.
Sincerely,
/s/ Christopher L. Wilson
Christopher L. Wilson
President, Columbia Funds
The views expressed in the President's Message 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.
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[GRAPHIC]
Price per share as of 05/31/06 ($)
Market price 5.72
--------------------
Net asset value 5.80
--------------------
6-month (cumulative) total return as of 05/31/06 (%)
Market price 10.12
---------------------------------
Net asset value 3.89
---------------------------------
Lipper High Yield Municipal
Debt Funds Category average 4.41
---------------------------------
Performance is historical, assumes reinvestment of all dividends and capital
gains, and does not guarantee future results. Investment return and principal
value fluctuate with changing market conditions so that, when sold, shares may
be worth more or less than their original cost. Current performance may be
lower or higher than the performance data quoted. Please call 800-730-6001 for
the Trust's most recent performance.
Total return based on net asset value reflects changes in the trust's net asset
value during each period. Total return based on market value reflects changes
in market value. These figures will differ depending on the level of any
discount from or premium to during the period.
Distributions declared per common share 12/01/05 - 05/31/06 ($)
0.18
--------
A portion of the trust's income may be subject to the alternative minimum tax.
The trust may at times purchase tax exempt securities at a discount from their
original issue price. Some or all of this discount may be included in the
trust's ordinary income, and any market discount is taxable when distributed.
Top 5 sectors as of 05/31/06 (%)
Hospitals 10.6
-------------------------------
Congregate care retirement 10.4
-------------------------------
Refunded/escrowed 7.4
-------------------------------
Local general obligation 6.2
-------------------------------
Multi-family 6.0
-------------------------------
Quality breakdown as of 05/31/06 (%)
AAA 28.7
---------------------
AA 2.6
---------------------
A 6.4
---------------------
BBB 23.3
---------------------
BB 3.7
---------------------
B 1.9
---------------------
CCC 0.3
---------------------
Non-rated 32.5
---------------------
Cash equivalents 0.6
---------------------
Sector and quality breakdowns are calculated as a percentage of total
investments. Ratings shown in the quality breakdown represent the rating
assigned to a particular bond by one of the following nationally recognized
rating agencies: Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., Moody's Investors Service, Inc. or Fitch Ratings, Ltd. Ratings are
relative and subjective and are not absolute standards of quality. The fund'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.
[GRAPHIC]
PORTFOLIO MANAGER'S REPORT
Summary
.. For the six-month period ended May 31, 2006, Colonial Municipal Income Trust
generated a total return of 10.12%, based on its market price. During this
period, the trust returned 3.89%, based on investment at net asset value.
That was less than the 4.41% average return of the Lipper High Yield
Municipal Debt Funds Category,/1/ and slightly behind the 4.30% average
return of a customized Lipper peer group that consists of nine leveraged
closed-end high-yield municipal funds. The trust's dividend yield declined
as rising short-term interest rates cut into some of the income that the
trust derived from leverage. 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.
.. The trust benefited from security selection across a variety of sectors. Top
performers included Courthouse Commons, a multi-family housing bond, and US
Airways, Inc. bonds, which emerged from bankruptcy protection. The trust
also benefited from an above-average stake in zero coupon municipal bonds.
In addition, a slightly longer duration (a measure of interest-rate
sensitivity) also helped as long-term municipal yields dropped slightly. By
contrast, the trust lost some ground because it had more exposure than its
customized peer group to higher quality issues and because it had less
exposure than its peers to the top-performing but volatile airline sector.
.. We believe the trust's emphasis on higher quality bonds could be a positive
factor if the yield difference between higher and lower quality bonds
widens. The trust's duration remains slightly longer than its peers because
we do not expect long-term interest rates to move much higher. If the
Federal Reserve Board remains vigilant on inflation, it could benefit
long-term bonds.
Portfolio Management
Maureen G. Newman has been the portfolio manager of Colonial Municipal Income
Trust since August 1998.
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.
Performance data quoted represents past performance and current performance may
be lower or higher. Past performance is no guarantee of future results.
-----------
/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.
1
[GRAPHIC]
PORTFOLIO MANAGER'S REPORT (continued)
[GRAPHIC]
Investing in fixed-income securities may involve certain risks, including the
credit quality of individual issuers, possible prepayments, market or economic
developments and yield and share price fluctuations due to changes in interest
rates. When interest rates go up, bond prices typically drop, and vice versa.
Investing in high-yield or "junk" bonds offers the potential for higher income
than investments in investment-grade bonds but they also have a higher degree
of risk. Changes in economic conditions or other circumstances may adversely
affect a high-yield bond issuer's ability to make timely principal and interest
payments.
Tax-exempt investing offers current tax-exempt income, but it also involves
special risks. The value of the trust will be affected by interest rate changes
and the creditworthiness of issues held in the fund. 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
May 31, 2006 (Unaudited)
MUNICIPAL BONDS - 152.5% PAR ($) VALUE ($)
-----------------------------------------------------------
EDUCATION - 5.5%
EDUCATION - 4.7%
MI Southfield Economic Development
Corp., Lawrence University,
Series 1998 A,
5.400% 02/01/18 750,000 763,148
PA Higher Education Facilities
Authority, Philadelphia University,
Series 2004 A,
5.125% 06/01/25 570,000 576,150
VT Educational & Health Buildings
Finance Agency, Norwich University,
Series 1998,
5.500% 07/01/21 1,000,000 1,020,940
WV Higher Education Policy
Commission, Series 2004 B,
Insured: FGIC
5.000% 04/01/34 4,745,000 4,858,975
WV University, Series 2000 A,
Insured: AMBAC
(a) 04/01/25 750,000 301,380
---------
Education Total 7,520,593
---------
PREP SCHOOL - 0.8%
CA Statewide Communities Development
Authority, Crossroads School for Arts
& Sciences, Series 1998,
6.000% 08/01/28(b) 1,070,000 1,106,466
MI Summit Academy North,
Series 2005,
5.500% 11/01/35 250,000 230,892
---------
Prep School Total 1,337,358
---------
EDUCATION TOTAL 8,857,951
---------
-----------------------------------------------------------
HEALTH CARE - 42.5%
CONTINUING CARE RETIREMENT - 16.2%
CA La Verne, Brethren Hillcrest
Homes, Series 2003 B,
6.625% 02/15/25 525,000 568,370
CO Health Facilities Authority,
Covenant Retirement
Communities, Inc., Series 2005,
5.000% 12/01/35 1,100,000 1,078,385
CT Development Authority, Elim Park
Baptist, Inc., Series 2003,
5.850% 12/01/33 430,000 449,509
FL Capital Projects Finance Authority,
Glenridge on Palmer Ranch,
Series 2002 A,
8.000% 06/01/32 500,000 551,860
FL Lee County Industrial Development
Authority, Shell Point Village
Project, Series 1999 A,
5.500% 11/15/29 400,000 402,044
PAR ($) VALUE ($)
--------------------------------------------------------
GA Fulton County Residential Care
Facilities Authority, Canterbury
Court, Series 2004 A,
6.125% 02/15/26 500,000 520,420
GA Savannah Economic Development
Authority, Marshes of Skidaway,
Series 2003 A,
7.400% 01/01/34 350,000 369,247
IL Finance Authority, Washington &
Jane Smith Community,
Series 2005 A,
6.250% 11/15/35 1,000,000 1,032,030
IL Health Facilities Authority:
Lutheran Senior Ministries,
Series 2001,
7.375% 08/15/31 650,000 706,088
Washington & Jane Smith
Community, Series 2003 A,
7.000% 11/15/32 525,000 562,952
IN Health & Educational Facilities
Financing Authority, Baptist Homes
of Indiana, Inc., Series 2005,
5.250% 11/15/35 750,000 747,862
KS Manhattan, Meadowlark Hills
Retirement Home, Series 1999 A,
6.375% 05/15/20 250,000 256,693
MA Boston Industrial Development
Financing Authority,
Springhouse, Inc., Series 1998,
5.875% 07/01/20 235,000 236,725
MA Development Finance Agency,
Loomis Communities:
Series 1999 A,
5.625% 07/01/15 250,000 254,928
Series 2002 A,
6.900% 03/01/32 125,000 135,533
MD Westminster Economic
Development Authority, Carroll
Lutheran Village, Inc.,
Series 2004 A,
6.250% 05/01/34 500,000 513,460
MO Cole County Industrial
Development Authority, Lutheran
Senior Services, Series 2004,
5.500% 02/01/35 750,000 772,087
NC Medical Care Commission, United
Methodist Retirement Home, Inc.
Series 2005 C,
5.250% 10/01/24 500,000 502,010
NH Higher Educational & Health
Facilities Authority, Rivermead at
Peterborough, Series 1998,
5.750% 07/01/28 1,100,000 1,101,903
See Accompanying Notes to Financial Statements.
3
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
----------------------------------------------------------
HEALTH CARE (CONTINUED)
CONTINUING CARE RETIREMENT (CONTINUED)
NJ Economic Development Authority:
Cranes Mill, Series 2005 A,
5.100% 06/01/27 325,000 317,951
Lions Gate, Series 2005 A:
5.750% 01/01/25 400,000 407,388
5.875% 01/01/37 300,000 305,547
Seabrook Village, Inc.,
Series 2000 A,
8.250% 11/15/30 700,000 774,914
Winchester Gardens, Series 2004 A,
5.750% 11/01/24 500,000 526,955
PA Bucks County Industrial
Development Authority, Ann's
Choice, Inc., Series 2005 A:
6.125% 01/01/25 500,000 510,410
6.250% 01/01/35 250,000 255,088
PA Chartiers Valley Industrial &
Commercial Development Authority:
Asbury Health Center, Series 1999,
6.375% 12/01/24 1,000,000 1,028,660
Friendship Village of South Hills,
Series 2003 A,
5.750% 08/15/20 1,000,000 1,015,210
PA Delaware County Authority,
Dunwoody Village, Series 2003 A,
5.375% 04/01/17 400,000 417,808
PA Montgomery County Industrial
Development Authority,
Whitemarsh Continuing Care
Retirement Community,
Series 2005:
6.125% 02/01/28 150,000 157,371
6.250% 02/01/35 600,000 631,434
PA Westmoreland County Industrial
Development Authority, Redstone
Highlands, Series 2005 A:
5.750% 01/01/26 1,250,000 1,262,312
5.875% 01/01/32 600,000 603,930
TN Johnson City Health &
Educational Facilities Authority,
Appalachian Christian Village,
Series 2004 A,
6.250% 02/15/32 250,000 256,455
TN Metropolitan Government
Nashville & Davidson County,
Blakeford at Green Hills,
Series 1998,
5.650% 07/01/24 575,000 562,062
TN Shelby County Health
Educational & Housing Facilities
Board:
Germantown Village,
Series 2003 A,
7.250% 12/01/34 300,000 318,444
PAR ($) VALUE ($)
-------------------------------------------------------------
Trezevant Manor,
Series 2006 A:
5.625% 09/01/26 500,000 494,230
5.750% 09/01/37 400,000 396,948
TX Abilene Health Facilities
Development Corp., Sears Methodist
Retirement Center:
Series 1998 A,
5.900% 11/15/25 750,000 755,670
Series 2003 A,
7.000% 11/15/33 200,000 214,314
TX Houston Health Facilities
Development Corp., Buckingham
Senior Living Community, Inc.,
Series 2004 A,
7.000% 02/15/26 500,000 547,540
TX Tarrant County Cultural Education
Facilities, Northwest Senior
Housing-Edgemere, Series 2006 A,
6.000% 11/15/36 500,000 519,280
VA Virginia Beach Development
Authority, Westminster-Canterbury
of Hampton, Series 2005,
5.250% 11/01/26 450,000 452,174
WI Health & Educational Facilities
Authority:
Clement Manor, Series 1998,
5.750% 08/15/24 1,000,000 1,003,320
Eastcastle Place, Inc., Series 2004,
6.125% 12/01/34 300,000 302,652
Three Pillars Senior Living
Communities, Series 2003,
5.750% 08/15/26 500,000 510,405
United Lutheran Program for the
Aging, Series 1998,
5.700% 03/01/28 750,000 748,072
----------
Continuing Care Retirement Total 26,058,650
----------
HEALTH SERVICES - 2.8%
CO Health Facilities Authority
National Jewish Medical & Research
Center, Series 1998:
5.375% 01/01/16 1,500,000 1,515,240
5.375% 01/01/23 340,000 340,476
MA Development Finance Agency,
Boston Biomedical Research
Institute, Series 1999,
5.650% 02/01/19 620,000 641,675
MA Health & Educational Facilities
Authority, Civic Investments, Inc.,
Series 2002 A,
9.000% 12/15/15 750,000 902,813
See Accompanying Notes to Financial Statements.
4
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
----------------------------------------------------------
HEALTH CARE (CONTINUED)
HEALTH SERVICES (CONTINUED)
MN Minneapolis & St. Paul
Housing & Redevelopment
Authority, Healthpartners
Obligation Group, Series 2003,
5.625% 12/01/22 200,000 210,058
WI Health & Educational Facilities
Authority, Blood Center
Southeastern Wisconsin, Series 2004,
5.750% 06/01/34 750,000 794,625
---------
Health Services Total 4,404,887
---------
HOSPITALS - 16.4%
AR Conway Health Facilities Board,
Conway Regional Medical Center:
Series 1999 A,
6.400% 08/01/29 350,000 371,119
Series 1999 B,
6.400% 08/01/29 850,000 901,289
AR Washington County, Regional
Medical Center, Series 2005 B,
5.000% 02/01/30 600,000 590,148
CA Rancho Mirage Joint Powers
Financing Authority, Eisenhower
Medical Center, Series 2004,
5.625% 07/01/29 750,000 793,852
CA Turlock, Emanuel Medical Center,
Inc., Series 2004,
5.375% 10/15/34 1,000,000 1,021,010
CO Health Facilities Authority:
Parkview Medical Center,
Series 2004,
5.000% 09/01/25 550,000 550,721
Vail Valley Medical Center,
Series 2004,
5.000% 01/15/20 500,000 509,405
FL South Lake County Hospital
District, South Lake Hospital, Inc.,
Series 2003,
6.375% 10/01/34 250,000 270,850
FL West Orange Healthcare District,
Series 2001 A,
5.650% 02/01/22 400,000 416,184
IL Health Facilities Authority, Thorek
Hospital & Medical Center,
Series 1998,
5.375% 08/15/28 500,000 505,200
IL Southwestern Development
Authority, Anderson Hospital,
Series 1999:
5.375% 08/15/15 500,000 512,780
5.500% 08/15/20 550,000 562,699
PAR ($) VALUE ($)
-------------------------------------------------------------
IN Health Facility Financing Authority,
Community Foundation of
Northwest Indiana, Inc.,
Series 2004 A,
6.000% 03/01/34 425,000 445,893
KS Salina Hospital Revenue, Salina
Regional Health Center, Inc.,
Series 2005 A,
4.625% 10/01/31 400,000 381,320
LA Public Facilities Authority, Touro
Infirmary, Series 1999 A:
5.500% 08/15/19 250,000 242,405
5.625% 08/15/29 525,000 504,903
MA Health & Educational Facilities
Authority:
Jordan Hospital,
Series 2003 E,
6.750% 10/01/33 250,000 270,033
Milford Whitinsville Regional
Hospital:
Series 1998 C,
5.250% 07/15/18 500,000 496,165
Series 2002 D,
6.350% 07/15/32 250,000 262,335
MD Health & Higher Educational
Facilities Authority, Adventist
Healthcare, Series 2003 A:
5.000% 01/01/16 365,000 370,738
5.750% 01/01/25 400,000 421,300
MI Dickinson County, Series 1999,
5.700% 11/01/18 770,000 789,327
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1998 A,
5.375% 07/01/20 460,000 452,842
MN St. Paul Housing &
Redevelopment Authority,
HealthEast, Inc., Series 2001 A,
5.700% 11/01/15 2,000,000 2,061,540
MO Saline County Industrial
Development Authority, John
Fitzgibbon Memorial Hospital,
Series 2005,
5.625% 12/01/35 985,000 978,597
NH Higher Educational & Health
Facilities Authority:
Catholic Medical Center,
Series 2002,
6.125% 07/01/32 200,000 212,986
Littleton Hospital Association, Inc.:
Series 1998 A:
5.900% 05/01/18 500,000 509,725
6.000% 05/01/28 625,000 638,231
Series 1998 B,
5.900% 05/01/28 675,000 685,516
See Accompanying Notes to Financial Statements.
5
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
---------------------------------------------------------
HEALTH CARE (CONTINUED)
HOSPITALS (CONTINUED)
NJ Health Care Facilities Financing
Authority, Capital Health Systems,
Inc., Series 2003 A,
5.750% 07/01/23 500,000 526,835
NV Henderson, St. Rose Dominican
Hospital, Series 1998 A,
5.375% 07/01/26 385,000 392,103
NY Dormitory Authority:
Mt. Sinai - NYU Medical Center:
Series 2000,
5.500% 07/01/26 175,000 177,452
Series 2000 C,
5.500% 07/01/26 575,000 583,056
North Shore - Long Island Jewish
Medical Center, Series 2003,
5.500% 05/01/33 200,000 210,516
OH Highland County Joint Township,
Hospital District, Series 1999,
6.750% 12/01/29 695,000 705,620
OH Lakewood, Lakewood Hospital
Association, Series 2003,
5.500% 02/15/14 400,000 421,580
OH Miami County Hospital Facilities
Authority, Upper Valley Medical
Center, Inc., Series 1996 A,
6.250% 05/15/16 665,000 679,158
OH Sandusky, County Memorial
Hospital, Series 1998,
5.150% 01/01/08 270,000 270,883
PA Allegheny County Hospital
Development Authority, Ohio Valley
General Hospital, Series 1998 A,
5.450% 01/01/28 1,050,000 1,061,298
SC Lexington County Health Services
District Revenue, Lexington Medical
Center Project, Refunding,
Series 2003,
5.500% 11/01/23 750,000 779,655
SD Health & Educational Facilities
Authority, Sioux Valley Hospital &
Health System, Series 2004 A,
5.250% 11/01/34 525,000 538,361
TX Tyler Health Facilities
Development Corp., Mother Frances
Hospital, Series 2001,
6.000% 07/01/31 750,000 784,485
VA Prince William County Industrial
Development Authority, Potomac
Hospital Corp., Series 2003,
5.200% 10/01/30 350,000 360,889
PAR ($) VALUE ($)
------------------------------------------------------------
VT Educational & Health Buildings
Finance Agency, Brattleboro
Memorial Hospital, Series 1998,
5.375% 03/01/28 500,000 491,150
WI Health & Educational Facilities
Authority:
Aurora Health Care, Inc.,
Series 2003,
6.400% 04/15/33 350,000 382,687
Fort Healthcare, Inc.,
Series 2004,
6.100% 05/01/34 750,000 813,607
Wheaton Franciscan Services,
Series 2002,
5.750% 08/15/30 450,000 473,963
----------
Hospitals Total 26,382,411
----------
INTERMEDIATE CARE FACILITIES - 0.6%
IN Health Facilities Financing
Authority, Hoosier Care, Inc.,
Series 1999 A,
7.125% 06/01/34 1,040,000 1,006,179
----------
Intermediate Care Facilities Total 1,006,179
----------
NURSING HOMES - 6.5%
AK Juneau, St. Ann's Care Center, Inc.,
Series 1999,
6.875% 12/01/25 975,000 965,835
CO Health Facilities Authority:
American Housing Foundation I,
Inc., Series 2003 A,
8.500% 12/01/31 535,000 554,939
Evangelical Lutheran Good
Samaritan Foundation, Series 2005,
5.000% 06/01/35 250,000 248,598
Volunteers of America Care
Facilities:
Series 1998 A:
5.450% 07/01/08 145,000 144,962
5.750% 07/01/20 700,000 706,174
Series 1999 A,
6.000% 07/01/29 350,000 348,733
IA Finance Authority, Care Initiatives:
Series 1996,
9.250% 07/01/25 960,000 1,134,557
Series 1998 B:
5.750% 07/01/18 550,000 540,612
5.750% 07/01/28 1,475,000 1,345,731
IN Gary Industrial Economic
Development West Side Health Care
Center, Series 1987 A,
11.500% 10/01/17(c) 2,230,000 602,100
IN Michigan City Health Facilities
Authority, Metro Health Foundation,
Inc. Project, Series 1993,
11.000% 11/01/22(d) 3,346,355 37,646
See Accompanying Notes to Financial Statements.
6
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
---------------------------------------------------------
HEALTH CARE (CONTINUED)
NURSING HOMES (CONTINUED)
KY Kentucky Economic Development
Finance Authority, Series 2003,
6.500% 01/01/29 395,000 399,412
MA Development Finance Agency:
AHF/Alliance Health Care
Facilities, Series 1999 A,
7.100% 07/01/32 1,120,000 1,134,202
AHF/Woodlawn Manor, Inc.:
Series 2000 A,
7.350% 12/01/27(c) 364,000 163,800
Series 2000 B,
1.250% 06/01/27(c) 113,186 5,659
MA Industrial Finance Agency, First
Mortgage GF/Massachusetts, Inc.,
Series 1994 A,
8.300% 07/01/23 855,000 837,438
MI Cheboygan County Economic
Development Corp., Metro Health
Foundation, Series 1993,
11.000% 11/01/22(d) 1,814,584 20,414
MN Carlton, Inter-Faith Social
Services, Inc., Series 2000,
7.500% 04/01/19 250,000 262,665
MN Sartell, Foundation for Health
Care, Series 1999 A,
6.625% 09/01/29 1,025,000 1,042,917
----------
Nursing Homes Total 10,496,394
----------
HEALTH CARE TOTAL 68,348,521
----------
---------------------------------------------------------
HOUSING - 18.1%
ASSISTED LIVING/SENIOR - 4.8%
DE Kent County, Heritage at Dover,
Series 1999, AMT,
7.625% 01/01/30 1,180,000 1,061,540
GA Columbus Housing Authority, The
Gardens at Calvary, Series 1999,
7.000% 11/15/19 480,000 464,971
IL Development Finance Authority,
Care Institute, Inc., Series 1995,
8.250% 06/01/25 1,380,000 1,413,865
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 1,630,000 1,371,792
NC Medical Care Commission,
DePaul Community Facilities,
Series 1999,
7.625% 11/01/29 960,000 1,001,818
NY Huntington Housing Authority,
Gurwin Jewish Senior Center,
Series 1999 A:
5.875% 05/01/19 420,000 427,967
6.000% 05/01/29 650,000 664,105
PAR ($) VALUE ($)
--------------------------------------------------------
TX Bell County Health Facility
Development Corp.,
Care Institute, Inc., Series 1994,
9.000% 11/01/24 1,355,000 1,322,886
---------
Assisted Living/Senior Total 7,728,944
---------
MULTI-FAMILY - 9.4%
DC Housing Finance Agency, Henson
Ridge, Series 2004 E, AMT,
Insured: FHA
5.100% 06/01/37 655,000 660,712
DE Wilmington, Electra Arms Senior
Association Project,
Series 1998, AMT,
6.250% 06/01/28 910,000 874,091
FL Broward County Housing Finance
Authority, Chaves Lake Apartment
Project, Series 2000 A, AMT,
7.500% 07/01/40 500,000 514,885
FL Capital Trust Agency, Atlantic
Housing Foundation, Inc.,
Series 2005 C,
5.875% 01/01/28 660,000 655,571
FL Clay County Housing Finance
Authority, Madison Commons
Apartments, Series 2000 A, AMT,
7.450% 07/01/40 500,000 514,160
MA Housing Finance Agency:
Series 2004 A, AMT, Insured: FSA
5.250% 07/01/25 2,000,000 2,053,420
Series 2005 E, AMT,
5.000% 12/01/28 500,000 501,375
MN Minneapolis Student Housing
Riverton Community Housing, Inc.,
Series 2006 A,
5.700% 08/01/40 500,000 483,370
MN Washington County Housing &
Redevelopment Authority, Cottages
of Aspen, Series 1992, AMT,
9.250% 06/01/22 950,000 971,689
MN White Bear Lake, Birch Lake
Townhome:
Series 1989 A, AMT,
10.250% 07/15/19 1,770,000 1,681,500
Series 1989 B,
(a) 07/15/19 624,000 180,960
NC Medical Care Commission ARC
Projects, Series 2004 A,
5.800% 10/01/34 800,000 842,328
NM Mortgage Finance Authority
Series 2005 E, AMT, Insured: FHA
4.800% 09/01/40 1,000,000 961,120
NY New York City Housing
Development Corp.,
Series 2005 F-1,
4.650% 11/01/25 750,000 749,018
See Accompanying Notes to Financial Statements.
7
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
---------------------------------------------------------
HOUSING (CONTINUED)
MULTI-FAMILY (CONTINUED)
OH Montgomery County,
Series 2005, AMT,
Insured: FHLMC
4.950% 11/01/35 250,000 248,260
Resolution Trust Corp., Pass-Through
Certificates, Series 1993 A,
8.500% 12/01/16(e) 455,481 443,370
TN Franklin Industrial Development
Board, Landings Apartment Project,
Series 1996 B,
8.750% 04/01/27 670,000 678,355
TX El Paso County Housing Finance
Corp., American Village
Communities:
Series 2000 C,
8.000% 12/01/32 295,000 302,177
Series 2000 D,
10.000% 12/01/32 300,000 307,842
VA Alexandria Redevelopment &
Housing Authority, Courthouse
Commons Apartments,
Series 1990 A, AMT,
10.000% 01/01/21 1,000,000 1,000,000
WA Seattle Housing Authority, High
Rise Rehabilitation Phase I LP,
Series 2005, AMT, Insured: FSA
5.000% 11/01/25 500,000 502,215
----------
Multi-Family Total 15,126,418
----------
SINGLE-FAMILY - 3.9%
KY Kentucky County,
Series 1987 A, AMT,
Insured: MBIA
9.000% 09/01/16 5,000 5,013
MA Housing Finance Agency:
Series 2005 118, AMT,
4.850% 12/01/35 1,160,000 1,122,196
Series 2005 B,
5.000% 06/01/30 500,000 510,575
ME Housing Authority,
Series 2005 D-2, AMT,
4.800% 11/15/36 500,000 489,100
MN Minneapolis/St. Paul Housing
Finance Board, Series 2006, AMT,
5.000% 12/01/38(f) 750,000 749,280
ND Housing Finance Agency,
Series 2006 A, AMT,
4.850% 07/01/21(f) 500,000 504,255
OK Housing Finance Agency,
Series 2006 C, AMT,
4.900% 09/01/21(f) 1,000,000 1,011,650
PAR ($) VALUE ($)
---------------------------------------------------------
PA Pittsburgh Urban Redevelopment
Authority, Series 2006 C,
Insured: GNMA
4.800% 04/01/28 1,000,000 985,300
WI Housing & Economic Development
Authority, Series 2005 C, AMT,
4.875% 03/01/36 985,000 966,265
----------
Single-Family Total 6,343,634
----------
HOUSING TOTAL 29,198,996
----------
---------------------------------------------------------
INDUSTRIALS - 7.8%
FOOD PRODUCTS - 1.6%
GA Cartersville Development
Authority, Anheuser Busch Project,
Inc., Series 2002, AMT,
5.950% 02/01/32 1,000,000 1,074,330
LA Southern Louisiana Port
Commission, Cargill, Inc.,
Series 1997,
5.850% 04/01/17 500,000 510,015
MI Strategic Fund, Imperial Holly
Corp., Series 1998 A,
6.250% 11/01/15 1,000,000 1,020,160
----------
Food Products Total 2,604,505
----------
FOREST PRODUCTS & PAPER - 2.3%
AL Camden Industrial Development
Board, Weyerhaeuser Co.,
Series 2003 B, AMT,
6.375% 12/01/24 400,000 434,440
AL Courtland Industrial Development
Board, Champion International
Corp., Series 1999, AMT,
6.000% 08/01/29 1,000,000 1,036,240
AL Phenix City Industrial
Development Board, Meadwestvaco
Corp., Series 2002 A, AMT,
6.350% 05/15/35 400,000 427,760
GA Rockdale County Development
Authority, Visy Paper, Inc.,
Series 1993, AMT,
7.500% 01/01/26 800,000 800,376
MS Lowndes County, Weyerhaeuser
Co. Project, Series 1992 B,
6.700% 04/01/22 595,000 700,374
VA Bedford County Industrial
Development Authority, Nekoosa
Packaging Corp., Series 1998, AMT,
5.600% 12/01/25 400,000 394,324
----------
Forest Products & Paper Total 3,793,514
----------
See Accompanying Notes to Financial Statements.
8
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
----------------------------------------------------------
INDUSTRIALS (CONTINUED)
MANUFACTURING - 0.5%
IL Will-Kankakee Regional
Development Authority, Flanders
Corp., Precisionaire Project,
Series 1997, AMT,
6.500% 12/15/17 745,000 749,202
----------
Manufacturing Total 749,202
----------
METALS & MINING - 0.5%
NV Department of Business &
Industry, Wheeling-Pittsburgh Steel
Corp., Series 1999 A, AMT,
8.000% 09/01/14 205,000 210,517
VA Greensville County Industrial
Development Authority,
Wheeling-Pittsburgh Steel Corp.,
Series 1999 A, AMT,
7.000% 04/01/14 545,000 533,724
----------
Metals & Mining Total 744,241
----------
OIL & GAS - 2.9%
NJ Middlesex County Pollution
Control Authority, Amerada Hess
Corp., Series 2004,
6.050% 09/15/34 115,000 123,970
NV Clark County Industrial
Development Authority, Southwest
Gas Corp., Series 2005 A, AMT,
Insured: AMBAC
4.850% 10/01/35 3,000,000 2,930,940
TX Gulf Coast Industrial Development
Authority, Citgo Petroleum,
Series 1998, AMT,
8.000% 04/01/28 375,000 422,572
VI Virgin Islands Public Finance
Authority, Hovensa LLC:
Series 2003, AMT,
6.125% 07/01/22 425,000 465,936
Series 2004, AMT,
5.875% 07/01/22 400,000 433,808
VI Virgin Islands, Hovensa LLC,
Series 2002, AMT,
6.500% 07/01/21 250,000 280,625
----------
Oil & Gas Total 4,657,851
----------
INDUSTRIALS TOTAL 12,549,313
----------
----------------------------------------------------------
OTHER - 15.9%
OTHER - 0.8%
NY Convention Center Operating
Corp., Yale Building Project,
Series 2003,
(a) 06/01/08 1,000,000 927,140
PAR ($) VALUE ($)
----------------------------------------------------------
PR Commonwealth of Puerto Rico
Government Development Bank,
Series 2006 B,
5.000% 12/01/15 400,000 413,852
---------
Other Total 1,340,992
---------
POOL/BOND BANK - 0.8%
MI Municipal Bond Authority, Local
Government Loan, Series 2001 A,
Insured: AMBAC
5.375% 11/01/17 550,000 588,225
OH Summit County Port Authority,
Twinsburg Township, Series 2005 D,
5.125% 05/15/25 655,000 653,016
---------
Pool/Bond Bank Total 1,241,241
---------
REFUNDED/ESCROWED(G) - 11.5%
CA Golden State Tobacco
Securitization Corp., Series 2003 B,
Pre-refunded 06/01/13,
5.500% 06/01/43 500,000 549,335
CA Orange County Community
Facilities District, Ladera Ranch,
Series 1999 A,
Pre-refunded 08/15/09,
6.500% 08/15/21 1,000,000 1,099,440
CA Statewide Communities
Development Authority, Eskaton
Village - Grass Valley, Series 2000,
Pre-refunded 11/15/10,
8.250% 11/15/31 725,000 853,223
CO E-470 Public Highway Authority,
Series 2000 B, Pre-refunded
09/01/10, Insured: MBIA
(a) 09/01/35 8,750,000 1,128,925
CT Development Authority,
Sewer Sludge Disposal Facilities
New Haven Residuals LP,
Series 1996, AMT,
Escrowed to Maturity,
8.250% 12/01/06 240,000 245,299
FL Northern Palm Beach County
Improvement District, Series 1999,
Pre-refunded 08/01/09,
Insured: MBIA
5.900% 08/01/19 500,000 537,025
FL Orange County Health Facilities
Authority, Orlando Regional
Healthcare System, Series 2002,
Pre-refunded 12/01/12,
5.750% 12/01/32 150,000 165,554
See Accompanying Notes to Financial Statements.
9
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-------------------------------------------------------------
OTHER - (CONTINUED)
REFUNDED/ESCROWED(G) - (CONTINUED)
GA Forsyth County Hospital
Authority, Georgia Baptist Health
Care System, Series 1998,
Escrowed to Maturity,
6.000% 10/01/08 480,000 492,518
ID Health Facilities Authority, IHC
Hospitals, Inc., Series 1992,
Escrowed to Maturity,
6.650% 02/15/21 2,750,000 3,419,295
IL Health Facilities Authority, Swedish
American Hospital, Series 2000,
Pre-refunded 05/15/10,
6.875% 11/15/30 500,000 554,035
IL Metropolitan Pier & Exposition
Authority, McCormick Place
Expansion, Series 1993 A, Escrowed
to Maturity, Insured: FGIC
(a) 06/15/14 1,010,000 715,979
IL University of Illinois, Series 2001 A,
Pre-refunded 08/15/11,
Insured: AMBAC
5.500% 08/15/17 600,000 648,462
MA Development Finance Agency,
Western New England College,
Series 2002, Pre-refunded 12/01/12,
6.125% 12/01/32 200,000 226,558
NC Lincoln County, Lincoln County
Hospital, Series 1991,
Escrowed to Maturity,
9.000% 05/01/07 75,000 78,455
NV Henderson, St. Rose Dominican
Hospital, Series 1998 A,
Pre-refunded 07/01/08,
5.375% 07/01/26 115,000 119,116
NY New York, Series 1998 H,
Escrowed to Maturity,
Insured: MBIA
5.125% 08/01/25 185,000 192,426
PA Delaware County Authority,
Mercy Health Corp., Series 1996,
Escrowed to Maturity:
6.000% 12/15/16 1,400,000 1,445,220
6.000% 12/15/26 500,000 516,120
PA Lancaster Industrial
Development Authority, Garden
Spot Village, Series 2000 A,
Pre-refunded 05/01/10,
7.625% 05/01/31 325,000 372,769
PA Philadelphia Authority for
Industrial Development,
Doubletree Project, Series 1997 A,
Pre-refunded 02/01/07,
6.500% 10/01/27 2,000,000 2,075,260
PAR ($) VALUE ($)
------------------------------------------------------------
PR Commonwealth of Puerto Rico
Public Finance Corp., Series 2002 E,
Escrowed to Maturity,
6.000% 08/01/26 80,000 97,228
TN Shelby County Health, Educational
& Housing Facilities Board, Open
Arms Development Centers:
Series 1992 A,
Pre-refunded 08/01/07,
9.750% 08/01/19 435,000 481,993
Series 1992 C,
Pre-refunded 08/01/12,
9.750% 08/01/19 440,000 487,533
TX Board of Regents, University of
Texas, Series 2001 B,
Escrowed to Maturity,
5.375% 08/15/18 350,000 375,025
WI Health & Educational Facilities
Authority, Attic Angel Obligated
Group, Series 1998,
Pre-refunded 11/17/08,
5.750% 11/15/27 875,000 931,770
WV Hospital Finance Authority,
Charleston Area Medical Center,
Series 2000 A,
Pre-refunded 09/01/10,
6.750% 09/01/30 605,000 679,875
----------
Refunded/Escrowed Total 18,488,438
----------
TOBACCO - 2.8%
CA County Tobacco Securitization
Agency, Series 2006,
(a) 06/01/46 3,500,000 256,060
CA Golden State Tobacco
Securitization Corp.,
Series 2003 A-1,
6.250% 06/01/33 1,600,000 1,731,616
CA Tobacco Securitization Authority,
Series 2006,
(a) 06/01/46 6,000,000 513,300
NJ Tobacco Settlement Financing
Corp., Series 2003,
6.750% 06/01/39 1,000,000 1,114,780
NY Nassau County Tobacco Settlement
Corp., Series 2006,
(a) 06/01/60 10,000,000 326,400
WA Tobacco Settlement Authority,
Series 2002,
6.625% 06/01/32 500,000 545,125
----------
Tobacco Total 4,487,281
----------
OTHER TOTAL 25,557,952
----------
------------------------------------------------------------
See Accompanying Notes to Financial Statements.
10
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
---------------------------------------------------------
OTHER REVENUE - 3.9%
HOTELS - 0.6%
NJ Middlesex County Improvement
Authority, Heldrich Associates LLC,
Series 2005 B,
6.250% 01/01/37 1,000,000 1,013,340
---------
Hotels Total 1,013,340
---------
RECREATION - 1.8%
CA Agua Caliente Band of Cahuilla
Indians, Series 2003,
5.600% 07/01/13 775,000 803,349
CA Cabazon Band Mission Indians,
Series 2004:
8.375% 10/01/15(e) 205,000 207,554
8.750% 10/01/19(e) 720,000 731,794
CT Mashantucket Western Pequot,
Series 1999 B,
(a) 09/01/18(e) 1,100,000 558,723
CT Mohegan Tribe Gaming Authority,
Series 2001,
6.250% 01/01/31(e) 200,000 211,444
NM Red River Sports Facility, Red
River Ski Area, Series 1998,
6.450% 06/01/07 350,000 350,357
---------
Recreation Total 2,863,221
---------
RETAIL - 1.5%
LA Beauregard Parish, Office Max,
Series 2002,
6.800% 02/01/27 1,000,000 1,087,800
NY New York City Industrial
Development Agency,
IAC/Interactive Corp., Series 2005,
5.000% 09/01/35 750,000 752,145
OH Lake County, North Madison
Properties, Series 1993,
8.819% 09/01/11 545,000 553,028
---------
Retail Total 2,392,973
---------
OTHER REVENUE TOTAL 6,269,534
---------
---------------------------------------------------------
RESOURCE RECOVERY - 2.1%
DISPOSAL - 0.8%
CA Pollution Control Financing
Authority, Republic Services,
Series 2002 C, AMT,
5.250% 06/01/23 500,000 519,260
UT Carbon County, Laidlaw
Environmental:
Series 1995 A, AMT,
7.500% 02/01/10 250,000 253,360
Series 1997 A, AMT,
7.450% 07/01/17 500,000 523,435
---------
Disposal Total 1,296,055
---------
PAR ($) VALUE ($)
--------------------------------------------------------
RESOURCE RECOVERY - 1.3%
MA Industrial Finance Agency, Ogden
Haverhill Associates,
Series 1998 A, AMT,
5.500% 12/01/13 1,000,000 1,037,850
PA Delaware County Industrial
Development Authority, American
REF-Fuel Co., Series 1997 A,
6.200% 07/01/19 1,000,000 1,042,580
---------
Resource Recovery Total 2,080,430
---------
RESOURCE RECOVERY TOTAL 3,376,485
---------
--------------------------------------------------------
TAX-BACKED - 28.0%
LOCAL APPROPRIATED - 1.6%
CA Compton Civic Center & Capital
Improvements, Series 1997 A,
5.500% 09/01/15 1,000,000 1,034,460
SC Dorchester County School District
No. 2, Series 2004,
5.250% 12/01/29 500,000 513,480
SC Laurens County School District
No. 55, Series 2005,
5.250% 12/01/30 700,000 714,224
SC Newberry County School District,
Series 2005,
5.000% 12/01/30 400,000 398,320
---------
Local Appropriated Total 2,660,484
---------
LOCAL GENERAL OBLIGATIONS - 9.6%
CA East Side Union High School
District, Series 2003 B,
Insured: MBIA
5.100% 02/01/20 750,000 811,477
CA Fresno Unified School District,
Series 2002 A, Insured: MBIA
6.000% 02/01/18 1,245,000 1,448,694
CA Los Angeles Unified School
District, Series 2002 E,
Insured: MBIA
5.750% 07/01/16 600,000 681,600
CA Vallejo City Unified School
District, Series 2002 A,
Insured: MBIA
5.900% 08/01/25 1,000,000 1,168,690
CO Northwest Metropolitan
District No. 3, Series 2005,
6.250% 12/01/35 500,000 521,670
LA Greystone Community
Development Livingston Parish,
Series 2005,
7.148% 08/01/36 812,734 726,197
LA New Orleans, Series 1991,
Insured: AMBAC
(a) 09/01/15 4,000,000 2,578,640
See Accompanying Notes to Financial Statements.
11
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TAX-BACKED - (CONTINUED)
LOCAL GENERAL OBLIGATIONS - (CONTINUED)
NJ Bergen County Improvement
Authority, Series 2005,
5.000% 11/15/24 1,000,000 1,077,900
NY New York, Series 1998 H,
Insured: MBIA
5.125% 08/01/25 4,815,000 4,964,217
TX Dallas County Flood Control
District, Series 2002,
7.250% 04/01/32 750,000 790,448
TX Irving Independent School District,
Series 1997 A, Insured: PSFG
(a) 02/15/16 1,000,000 646,690
----------
Local General Obligations Total 15,416,223
----------
SPECIAL NON-PROPERTY TAX - 6.5%
CA San Diego Redevelopment Agency,
Series 2001, Insured: FSA
(a) 09/01/18 1,015,000 575,424
IL Bolingbrook Sales Tax Revenue,
Series 2005,
(h) 01/01/24
(6.250% 01/01/08) 500,000 448,685
IL Metropolitan Pier & Exposition
Authority, McCormick Place
Expansion:
Series 1994 A, Insured: MBIA
(a) 06/15/15 3,000,000 2,019,090
Series 1996 A, Insured: MBIA
(a) 12/15/13 5,000,000 3,642,000
Series 2002 A, Insured: FGIC
(a) 06/15/14 3,990,000 2,828,471
KS Wyandotte County, Series 2005,
5.000% 12/01/20 225,000 230,299
NJ Economic Development Authority,
Cigarette Tax, Series 2004:
5.500% 06/15/31 120,000 124,572
5.750% 06/15/29 500,000 530,675
----------
Special Non-Property Tax Total 10,399,216
----------
SPECIAL PROPERTY TAX - 8.8%
CA Huntington Beach Community
Facilities District, Grand Coast
Resort, Series 2001-1,
6.450% 09/01/31 500,000 533,445
CA Lincoln Community Facilities
District No. 2003-1, Series 2004,
5.550% 09/01/18 500,000 518,105
CA Oakdale Public Financing
Authority, Central City
Redevelopment Project, Series 2004,
5.375% 06/01/33 1,125,000 1,154,408
PAR ($) VALUE ($)
----------------------------------------------------------
CA Orange County Improvement Bond
Act 1915, Phase IV, No. 01-1-B,
Series 2003,
5.750% 09/02/33 500,000 509,770
CA Redwood City Community
Facilities District No. 1,
Series 2003 B,
6.000% 09/01/33 300,000 308,259
CA Temecula Valley Unified School
District No. 1, Series 2003,
6.125% 09/01/33 355,000 362,579
CA Yorba Linda Redevelopment
Agency, Series 1998 A,
Insured: MBIA
(a) 09/01/24 1,325,000 546,708
FL Celebration Community
Development District, Series 2003 A,
6.400% 05/01/34 730,000 765,018
FL Colonial Country Club Community
Development District, Series 2003,
6.400% 05/01/33 485,000 512,650
FL Double Branch Community
Development District, Series 2002 A,
6.700% 05/01/34 490,000 528,156
FL Islands at Doral Southwest
Community Development District,
Series 2003,
6.375% 05/01/35 245,000 256,206
FL Lexington Oaks Community
Development District, Series 1998 A,
6.125% 05/01/19 685,000 689,412
FL Orlando, Conroy Road Interchange,
Series 1998 A:
5.500% 05/01/10 85,000 86,276
5.800% 05/01/26 300,000 304,368
FL Seven Oaks Community
Development District, Series 2004 B,
5.000% 05/01/09 790,000 789,305
FL Stoneybrook Community
Development District:
Series 1998 A,
6.100% 05/01/19 215,000 216,411
Series 1998 B,
5.700% 05/01/08 25,000 25,016
FL West Villages Improvement
District, Series 2006,
5.500% 05/01/37 500,000 501,975
FL Westchester Community
Development District No.1,
Series 2003,
6.125% 05/01/35 275,000 287,529
FL Westridge Community
Development District, Series 2005,
5.800% 05/01/37 1,000,000 994,580
See Accompanying Notes to Financial Statements.
12
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
TAX-BACKED - (CONTINUED)
SPECIAL PROPERTY TAX- (CONTINUED)
GA Atlanta, Eastside Project,
Series 2005 B,
5.400% 01/01/20 500,000 506,250
IL Chicago, Pilsen Redevelopment,
Series 2004 B,
6.750% 06/01/22 310,000 318,658
IL Lincolnshire Special Services
Area No. 1, Sedgebrook Project,
Series 2004,
6.250% 03/01/34 250,000 258,725
IL Plano Special Service Area No.4,
Series 2005 5-B,
6.000% 03/01/35 1,500,000 1,454,100
IN City of Portage, Series 2006,
5.000% 01/15/27 260,000 253,422
MI Pontiac Tax Increment Finance
Authority, Development Area No. 3,
Series 2002,
6.375% 06/01/31 450,000 480,141
MI Taylor Tax Increment Finance
Authority, Series 2001, Insured: FSA
5.375% 05/01/17 1,000,000 1,061,840
----------
Special Property Tax Total 14,223,312
----------
STATE APPROPRIATED - 1.2%
MI Building Authority, Series 2001 I,
5.000% 10/15/24 1,000,000 1,030,360
PR Commonwealth of Puerto Rico
Public Finance Corp., Series 2002 E,
6.000% 08/01/26 820,000 935,776
----------
State Appropriated Total 1,966,136
----------
STATE GENERAL OBLIGATIONS - 0.3%
CA State, Series 2003,
5.250% 02/01/23 380,000 412,676
----------
State General Obligations Total 412,676
----------
TAX-BACKED TOTAL 45,078,047
----------
-----------------------------------------------------------
TRANSPORTATION - 12.9%
AIR TRANSPORTATION - 4.4%
CA Los Angeles Regional Airport,
LAXfuel Corp., Series 2001, AMT,
Insured: AMBAC
5.250% 01/01/23 500,000 510,640
CO Denver City & County Airport,
United Air Lines, Inc.,
Series 1992 A, AMT,
6.875% 10/01/32(d) 645,000 665,085
FL Capital Trust Agency, Air Cargo-
Orlando, Series 2003, AMT,
6.750% 01/01/32 350,000 372,288
PAR ($) VALUE ($)
---------------------------------------------------------
IN Indianapolis Airport Authority,
FedEx Corp., Series 2004, AMT,
5.100% 01/15/17 500,000 514,775
NC Charlotte/Douglas International
Airport, US Airways, Inc.:
Series 1998, AMT,
5.600% 07/01/27 250,000 231,407
Series 2000, AMT,
7.750% 02/01/28 500,000 526,765
NJ Economic Development Authority,
Continental Airlines, Inc.,
Series 2003, AMT,
9.000% 06/01/33 1,250,000 1,360,637
NY New York City Industrial
Development Agency, Terminal One
Group-JFK International Airport,
Series 2005, AMT,
5.500% 01/01/21 500,000 528,975
NY New York City Industrial
Development Authority, JFK
International Airport, American
Airlines, Inc., Series 2002 B, AMT,
8.500% 08/01/28 500,000 559,410
PA Philadelphia Authority for
Industrial Development Aero
Philadelphia, Series 1999, AMT,
5.250% 01/01/09 220,000 220,568
TX Alliance Airport Authority, Inc.,
Federal Express Corp.,
Series 2006, AMT,
4.850% 04/01/21 250,000 246,835
TX Dallas-Fort Worth International
Airport, American Airlines, Inc.,
Series 2000 A, AMT,
9.000% 05/01/29 750,000 803,100
TX Houston Industrial Development
Corp., United Parcel Service,
Series 2002, AMT,
6.000% 03/01/23 510,000 528,095
---------
Air Transportation Total 7,068,580
---------
AIRPORTS - 2.0%
GA Augusta Airport,
Series 2005 B, AMT,
5.350% 01/01/28 215,000 216,430
TX Dallas Fort Worth International
Airport, Series 2004 B, AMT,
Insured: FSA
5.000% 11/01/25 3,000,000 3,041,010
---------
Airports Total 3,257,440
---------
See Accompanying Notes to Financial Statements.
13
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------
TRANSPORTATION - (CONTINUED)
TOLL FACILITIES - 3.2%
CA San Joaquin Hills Transportation
Corridor Agency, Series 1997 A,
Insured: MBIA
(a) 01/15/15 3,000,000 2,062,890
CO E-470 Public Highway Authority,
Series 2000 B, Insured: MBIA
(a) 09/01/18 3,000,000 1,694,670
CO Northwest Parkway Public
Highway Authority,
Series 2001 D,
7.125% 06/15/41 1,000,000 921,320
PR Commonwealth of Puerto Rico
Highway & Transportation
Authority, Series 2003 AA,
Insured: MBIA
5.500% 07/01/18 375,000 417,424
----------
Toll Facilities Total 5,096,304
----------
TRANSPORTATION - 3.3%
NV Department of Business &
Industry, Las Vegas Monorail
Project, Series 2000,
7.375% 01/01/40 750,000 768,840
NY Port Authority of New York &
New Jersey, Series 2004, AMT,
Insured: FSA
5.125% 07/15/30(i) 4,450,000 4,582,254
----------
Transportation Total 5,351,094
----------
TRANSPORTATION TOTAL 20,773,418
----------
--------------------------------------------------------
UTILITIES - 15.8%
INDEPENDENT POWER PRODUCERS - 1.9%
NY Port Authority of New York &
New Jersey, KIAC Partners,
Series 1996 IV, AMT,
6.750% 10/01/11 2,000,000 2,037,000
NY Suffolk County Industrial
Development Authority,
Nissequogue Cogeneration Partners
Facilities, Series 1998, AMT,
5.500% 01/01/23 550,000 506,396
PA Carbon City Industrial
Development Authority, Panther
Creek Partners Project,
Series 2000, AMT,
6.650% 05/01/10 115,000 121,554
PAR ($) VALUE ($)
----------------------------------------------------------
PR Commonwealth of Puerto Rico
Industrial, Tourist, Educational,
Medical & Environmental
Cogeneration Facilities, AES
Project, Series 2000, AMT,
6.625% 06/01/26 320,000 348,950
---------
Independent Power Producers Total 3,013,900
---------
INVESTOR OWNED - 7.9%
AZ Pima County Industrial
Development Authority, Tucson
Electric Power Co.,
Series 1997 A, AMT,
6.100% 09/01/25 750,000 752,205
CA Chula Vista Industrial
Development Authority, San Diego
Gas & Electric Co.,
Series 1996 B, AMT,
5.500% 12/01/21 475,000 506,260
FL Polk County Industrial
Development Authority, Tampa
Electric Co., Series 1996, AMT,
5.850% 12/01/30 800,000 815,648
IL Bryant, Central Illinois Light Co.,
Series 1993,
5.900% 08/01/23 1,000,000 1,005,680
IN Petersburg, Indianapolis Power &
Light Co., Series 1995,
6.625% 12/01/24 750,000 765,630
LA Calcasieu Parish Industrial
Development Board, Entergy Gulf
States, Inc., Series 1999,
5.450% 07/01/10 500,000 506,260
LA West Feliciana Parish, Entergy
Gulf States, Inc., Series 1999 B,
6.600% 09/01/28 500,000 502,655
MS Business Finance Corp., Systems
Energy Resources, Series 1998,
5.875% 04/01/22 1,500,000 1,509,180
MT Forsyth:
Northwestern Corp., Series 2006,
Insured: AMBAC
4.650% 08/01/23 1,000,000 1,000,580
Portland General, Series 1998 A,
5.200% 05/01/33 225,000 231,563
NV Clark County Industrial
Development Authority, Nevada
Power Co., Series 1997 A, AMT,
5.900% 11/01/32 1,500,000 1,499,925
OH Air Quality Development
Authority, Cleveland Electric
Illuminating Co., Series 2002 A,
6.000% 12/01/13 650,000 673,393
See Accompanying Notes to Financial Statements.
14
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------
UTILITIES - (CONTINUED)
INVESTOR OWNED - (CONTINUED)
PA Economic Development Financing
Authority, Reliant Energy, Inc.,
Series 2001 A, AMT,
6.750% 12/01/36 400,000 428,116
TX Brazos River Authority, TXU
Energy Co., LLC:
Series 2001 C, AMT,
5.750% 05/01/36 220,000 232,668
Series 2003 C, AMT,
6.750% 10/01/38 555,000 623,171
VA Pittsylvania County Industrial
Development Authority, Virginia
Electric & Power Co.,
Series 1994 A, AMT,
7.450% 01/01/09 600,000 607,386
WY Campbell County, Black Hills
Power, Inc., Series 2004,
5.350% 10/01/24 1,000,000 1,029,610
-----------
Investor Owned Total 12,689,930
-----------
JOINT POWER AUTHORITY - 0.3%
NC Eastern Municipal Power Agency,
Series 2003 F,
5.500% 01/01/16 430,000 456,006
-----------
Joint Power Authority Total 456,006
-----------
MUNICIPAL ELECTRIC - 2.8%
CA Department of Water Resources,
Series 2002 A, Insured: AMBAC
5.500% 05/01/14 2,000,000 2,186,460
WA Seattle Light & Power,
Series 2001, Insured: FSA
5.500% 03/01/17 2,250,000 2,391,233
-----------
Municipal Electric Total 4,577,693
-----------
WATER & SEWER - 2.9%
MA Water Resources Authority,
Series 1997 D, Insured: MBIA
5.000% 08/01/24 2,000,000 2,059,780
MS V Lakes Utility District,
Series 1994,
8.250% 07/15/24(j) 485,000 383,572
TX Houston Water & Sewer System,
Series 1991 C, Insured: AMBAC
(a) 12/01/12 3,000,000 2,294,850
-----------
Water & Sewer Total 4,738,202
-----------
UTILITIES TOTAL 25,475,731
-----------
TOTAL MUNICIPAL BONDS
(cost of $245,190,678) 245,485,948
-----------
SHARES VALUE ($)
------------------------------------------------------
MUNICIPAL PREFERRED STOCKS - 2.0%
------------------------------------------------------
HOUSING - 2.0%
MULTI-FAMILY - 2.0%
Charter Mac Equity Issuer Trust,
AMT:
6.000% 04/30/19(e) 1,000,000 1,071,960
Series 2000,
7.600% 11/30/10(e) 500,000 554,115
GMAC Municipal Mortgage Trust,
AMT,
5.600% 10/31/39(e) 500,000 509,970
MuniMae Trust, AMT,
5.800% 06/30/49(e) 1,000,000 1,013,020
---------
Multi-Family Total 3,149,065
---------
HOUSING TOTAL 3,149,065
---------
TOTAL MUNICIPAL PREFERRED STOCKS
(cost of $3,000,000) 3,149,065
---------
INVESTMENT COMPANY - 0.0%
------------------------------------------------------
Dreyfus Tax-Exempt Cash
Management Fund 3,912 3,912
---------
TOTAL INVESTMENT COMPANY
(cost of $3,912) 3,912
---------
SHORT-TERM OBLIGATIONS - 1.0% PAR ($)
------------------------------------------------------
VARIABLE RATE DEMAND NOTES (K) - 1.0%
FL Orange County School Board:
Series 2000 B,
SPA: SunTrust Bank N.A.
3.550% 08/01/25 300,000 300,000
Series 2002 B,
3.550% 08/01/27 300,000 300,000
KY Shelby County Lease Revenue,
Series 2004 A,
LOC: U.S. Bank N.A.
3.570% 09/01/34 100,000 100,000
MA Water Resources Authority,
Series 2002 D,
LOC: Landesbank Baden-
Wurttemberg
3.520% 08/01/17 100,000 100,000
MN Mankato, Bethany Lutheran
College, Inc., Series 2000 B,
LOC: Wells Fargo Bank
3.630% 11/01/15 100,000 100,000
WI Health & Educational Facilities
Authority, ProHealth Care, Inc.,
Series 2001 B,
3.580% 08/15/30 400,000 400,000
See Accompanying Notes to Financial Statements.
15
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
SHORT-TERM OBLIGATIONS - 1.0% PAR ($) VALUE ($)
----------------------------------------------------
VARIABLE RATE DEMAND NOTES (K) (CONTINUED)
WY Uinta County, Chevron Corp.,
Series 1997,
3.540% 04/01/10 300,000 300,000
-----------
VARIABLE RATE DEMAND NOTES TOTAL 1,600,000
-----------
TOTAL SHORT-TERM OBLIGATIONS
(cost of $1,600,000) 1,600,000
-----------
TOTAL INVESTMENTS - 155.5%
(cost of $249,794,590)(l) 250,238,925
-----------
AUCTION PREFERRED SHARES PLUS
CUMULATIVE UNPAID DISTRIBUTIONS -
(55.9)% (90,035,496)
OTHER ASSETS & LIABILITIES, NET - 0.4% 763,446
-----------
NET ASSETS - 100.0% 160,966,875
-----------
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a)Zero coupon bond.
(b)Denotes a restricted security, which is subject to registration with the SEC
or is required to be exempted from such registration prior to resale. At May
31, 2006, the value of these securities amounted to $5,301,950, which
represents 3.3% of net assets.
Additional information on these restricted securities is as follows:
Acquisition Acquisition
Security Date Cost
----------------------------------------------------------------
CA Statewide Communities Development
Authority,
Crossroads School for Arts & Sciences,
Series 1998,
6.00% 08/01/28 08/21/98 $1,070,000
(c)The issuer is in default of certain debt covenants. Income is not being
accrued. At May 31, 2006, the value of these securities amounted to
$771,559, which represents 0.5% 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 May 31,
2006, the value of these securities amounted to $723,145, which represents
0.4% of net assets.
(e)Security exempt from registration pursuant to Rule 144A under the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 2006,
these securities, which did not include any illiquid securities except for
the following, amounted to $5,301,950, which represents 3.3% 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 $455,481 $455,481 $443,370
(f)Security purchased on a delayed delivery basis.
(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)Step bond. This security is currently not paying a coupon. Shown
parenthetically is the next interest rate to be paid and the date the Trust
will begin accruing at this rate.
(i)Security purchased as collateral for open futures contracts.
(j)The issuer is in default of certain debt covenants. Income is being accrued.
At May 31, 2006, the value of this security represents 0.2% of net assets.
(k)Variable rate demand notes. These securities are payable upon demand and is
secured by letters of credit or other credit support agreements from banks.
The interest rate changes periodically and the interest rate shown reflect
the rate as of May 31, 2006.
(l)Cost for federal income tax purposes is $249,667,851.
At May 31, 2006 the Trust held the following open short futures contracts:
Aggregate Expiration Unrealized
Type Contracts Value Face Value Date Appreciation
-----------------------------------------------------------------------
U.S. Treasury
Bonds 71 $7,554,843 $8,011,675 Jun-06 $456,832
10 Yr. U.S.
Treasury Notes 85 $8,931,640 $9,080,113 Jun-06 $148,473
--------
$605,305
--------
At May 31, 2006, the Trust held the following forward swap contract:
Net
Unrealized
Notional Effective Expiration Counter- Receive Fixed Variable Depre-
Amount Date Date party (Pay) Rate Rate ciation
-------------------------------------------------------------------------------
$20,000,000 08/08/06 08/08/16 JPMorgan (Pay) 4.158% BMA $(92,383)
Chase Index
Bank
At May 31, 2006, the composition of the Trust by revenue source is as
follows:
% of
Holdings by Revenue Source Net Assets
------------------------------------------
Health Care 42.5%
Tax-Backed 28.0
Housing 20.1
Other 15.9
Utilities 15.8
Transportation 12.9
Industrial 7.8
Education 5.5
Other Revenue 3.9
Resource Recovery 2.1
Investment Company -*
Short-Term Obligations 1.0
Auction Preferred Shares (55.9)
Other Assets & Liabilities, Net 0.4
-----
100.0%
-----
*Rounds to less than 0.1%
See Accompanying Notes to Financial Statements.
16
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
Acronym Name
------------------------------------------
AMBAC Ambac Assurance Corp.
AMT Alternative Minimum Tax
BMA Bond Market Association
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Administration
FHLMC Federal Home Loan Mortgage
Corporation
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage
Association
LOC Letter of Credit
MBIA MBIA Insurance Corp.
SPA Stand-by Purchase Agreement
PSFG Permanent School Fund Guaranteed
See Accompanying Notes to Financial Statements.
17
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2006 (Unaudited)
ASSETS:
Investments, at cost $249,794,590
------------
Investments, at value $250,238,925
Cash 97,954
Receivable for:
Interest 3,929,796
Futures variation margin 48,750
Deferred Trustees' compensation plan 20,974
------------
Total Assets 254,336,399
------------
LIABILITIES:
Net unrealized depreciation on swap contracts 92,383
Payable for:
Investments purchased on a delayed delivery
basis 2,252,492
Distributions - common shares 751,952
Distributions - preferred shares 35,496
Investment advisory fee 137,084
Pricing and bookkeeping fees 22,168
Custody fee 5,052
Audit fee 13,990
Preferred shares remarketing commissions 2,880
Chief compliance officer expenses (See Note 4) 749
Deferred Trustees' fees 20,974
Other liabilities 34,304
------------
Total Liabilities 3,369,524
------------
AUCTION PREFERRED SHARES (3,600 shares
issued and outstanding at $25,000 per share) $ 90,000,000
------------
COMPOSITION OF NET ASSETS APPLICABLE
TO COMMON SHARES:
Paid-in capital - common shares $202,592,667
Overdistributed net investment income (143,445)
Accumulated net realized loss (42,439,604)
Net unrealized appreciation (depreciation) on:
Investments 444,335
Swap contracts (92,383)
Futures contracts 605,305
------------
Net assets at value applicable to 27,750,678
common shares of beneficial interest outstanding $160,966,875
------------
Net asset value per common share $ 5.80
------------
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 2006 (Unaudited)
INVESTMENT INCOME:
Interest $ 7,300,215
-----------
EXPENSES:
Investment advisory fee 814,308
Transfer agent fee 29,681
Pricing and bookkeeping fees 67,524
Trustees' fees 8,692
Preferred shares remarketing commissions 112,114
Custody fee 8,827
Chief compliance officer expenses (See Note 4) 2,337
Other expenses 72,694
-----------
Total Expenses 1,116,177
Custody earnings credit (1,515)
-----------
Net Expenses 1,114,662
-----------
Net Investment Income 6,185,553
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS, SWAP CONTRACTS AND
FUTURES CONTRACTS:
Net realized gain (loss) on:
Investments (440,562)
Futures contracts 502,367
-----------
Net realized gain 61,805
-----------
Net change in unrealized appreciation
(depreciation) on:
Investments 865,305
Swap contracts (92,383)
Futures contracts 604,499
-----------
Net change in unrealized appreciation
(depreciation) 1,377,421
-----------
Net Gain 1,439,226
-----------
Net Increase in Net Assets from Operations 7,624,779
-----------
LESS DISTRIBUTIONS DECLARED TO PREFERRED
SHAREHOLDERS:
From net investment income (1,453,207)
-----------
Net Increase in Net Assets from Operations
Applicable to Common Shares $ 6,171,572
-----------
See Accompanying Notes to Financial Statements.
18
[GRAPHIC]
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
INCREASE (DECREASE) IN NET ASSETS: 2006 2005
-------------------------------------------------------------------
OPERATIONS:
Net investment income $ 6,185,553 $ 12,440,205
Net realized gain on investments
and futures contracts 61,805 1,501,601
Net change in unrealized
appreciation (depreciation) on
investments, swap contracts and
futures contracts 1,377,421 622,105
------------ ------------
Net Increase from Operations 7,624,779 14,563,911
------------ ------------
LESS DISTRIBUTIONS DECLARED
TO PREFERRED SHAREHOLDERS:
From net investment income (1,453,207) (2,031,984)
------------ ------------
Increase in Net Assets from
Operations Applicable to
Common Shares 6,171,572 12,531,927
------------ ------------
LESS DISTRIBUTIONS DECLARED
TO COMMON SHAREHOLDERS:
From net investment income (5,049,784) (10,623,821)
------------ ------------
SHARE TRANSACTIONS:
Distributions reinvested 52,880 127,412
------------ ------------
Total Increase in Net Assets
Applicable to Common Shares 1,174,668 2,035,518
NET ASSETS APPLICABLE TO
COMMON SHARES:
Beginning of period 159,792,207 157,756,689
------------ ------------
End of period (including
undistributed (overdistributed)
net investment income of
$(143,445) and $173,993,
respectively) $160,966,875 $159,792,207
------------ ------------
NUMBER OF TRUST SHARES:
Common Shares:
Issued for distributions reinvested 9,024 21,935
Outstanding at:
Beginning of period 27,741,654 27,719,719
------------ ------------
End of period 27,750,678 27,741,654
------------ ------------
Preferred Shares:
Outstanding at end of period 3,600 3,600
------------ ------------
See Accompanying Notes to Financial Statements.
19
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise noted):
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, ----------------------------------------------------
2006 2005 2004 2003 2002 2001
--------------------------------------------------- ----------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.76 $ 5.69 $ 5.85 $ 5.82 $ 6.12 $ 6.05
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.22 0.45 0.45 0.47 0.50(b) 0.53
Net realized and unrealized gain (loss) on
investments, swap contracts and futures
contracts 0.05 0.08 (0.15) 0.02 (0.33)(b) 0.03
-------- -------- -------- -------- -------- --------
Total from Investment Operations 0.27 0.53 0.30 0.49 0.17 0.56
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO PREFERRED
SHAREHOLDERS:
From net investment income (0.05) (0.08) (0.04) (0.03) (0.05) (0.10)
-------- -------- -------- -------- -------- --------
Total from Investment Operations Applicable to
Common Shareholders 0.22 0.45 0.26 0.46 0.12 0.46
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO COMMON
SHAREHOLDERS:
From net investment income (0.18) (0.38) (0.42) (0.43) (0.42) (0.39)
-------- -------- -------- -------- -------- --------
LESS SHARE TRANSACTIONS:
Commission and offering costs -- preferred shares -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 5.80 $ 5.76 $ 5.69 $ 5.85 $ 5.82 $ 6.12
-------- -------- -------- -------- -------- --------
Market price per share -- common shares $ 5.72 $ 5.36 $ 5.66 $ 5.65 $ 5.67 $ 5.65
-------- -------- -------- -------- -------- --------
Total return -- based on market value -- common
shares (c) 10.12%(d) 1.36% 7.86% 7.35% 7.87% 12.05%
-------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL
DATA:
Expenses (e)(f) 1.39%(g) 1.40% 1.42% 1.39% 1.37% 1.45%
Net investment income before preferred stock
dividend (e)(f) 7.69%(g) 7.73% 7.79% 8.17% 8.28%(b) 8.55%
Net investment income after preferred stock
dividend (e)(f) 5.89%(g) 6.46% 7.15% 7.61% 7.47%(b) 6.94%
Portfolio turnover rate 10%(d) 18% 16% 15% 27% 12%
Net assets, end of period (000's) -- common
shares $160,967 $159,792 $157,757 $161,994 $161,044 $169,080
(a)Per share data was calculated using average shares outstanding during the
period.
(b)Effective December 1, 2001, the Trust adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began accreting
market discount on all debt securities. The effect of this change, for the
year ended November 30, 2002, was to increase the ratio of net investment
income to average net assets from 8.24% to 8.28% and increase the ratio of
net investment income (adjusted for dividend payments to preferred
shareholders) from 7.43% to 7.47%. The impact to net investment income and
net realized and unrealized loss per share was less than $0.01. Per share
data and ratios for periods prior to November 30, 2002, have not been
restated to reflect this change in presentation.
(c)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(d)Not annualized.
(e)The benefits derived from custody credits had an impact of less than 0.01%.
(f)Ratios reflect average net assets available to common shares only.
(g)Annualized.
See Accompanying Notes to Financial Statements.
20
[GRAPHIC]
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise noted):
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.51 $ 7.57 $ 7.41 $ 7.41 $ 7.48
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.55(e) 0.46 0.47 0.51 0.51
Net realized and unrealized gain (loss) on investments and futures
contracts (0.44) (0.97) 0.18 --(a) (0.07)
-------- -------- -------- -------- --------
Total Income from Investment Operations 0.11 (0.51) 0.65 0.51 0.44
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS:
From net investment income (0.14) (0.04)
-------- -------- -------- -------- --------
Total from Investment Operations Applicable to Common
Shareholders (0.03) (0.55) -- -- --
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (0.43) (0.42) (0.48) (0.51) (0.51)
In excess of net investment -- (0.04) (0.01) -- --
-------- -------- -------- -------- --------
Total Distributions Declared to Common Shareholders (0.43) (0.46) (0.49) (0.51) (0.51)
-------- -------- -------- -------- --------
LESS SHARE TRANSACTIONS:
Commission and offering costs -- preferred shares --(a) (0.05) -- -- --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 6.05 $ 6.51 $ 7.57 $ 7.41 $ 7.41
-------- -------- -------- -------- --------
Market price per share -- common shares $ 5.38 $ 5.75 $ 8.13 $ 7.56 $ 7.25
-------- -------- -------- -------- --------
Total return -- based on market value -- common shares (b) 0.84% (24.33)% 14.57% 11.67% 15.36%
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA:
Expenses (c) 1.33%(d) 1.08%(d) 0.82% 0.86% 0.91%
Net investment income before preferred stock dividend (c) 8.88%(d) 7.00%(d) 6.20% 6.83% 6.87%
Net investment income after preferred stock dividend (c) 6.68%(d) 6.36%(d) -- -- --
Portfolio turnover rate 12% 20% 34% 15% 22%
Net assets, end of period (000's) -- common shares $167,265 $180,082 $208,931 $203,533 $202,793
(a)Rounds to less than $0.01 per share.
(b)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(c)The benefits derived from custody credits had an impact of less than 0.01%.
(d)Ratios reflect average net assets available to common shares only.
(e)The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
See Accompanying Notes to Financial Statements.
21
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS
May 31, 2006 (Unaudited)
NOTE 1. ORGANIZATION
Colonial Municipal Income Trust (the "Trust") is a Massachusetts business trust
registered under the Investment Company Act of 1940 (the "Act"), as amended, as
a non-diversified, closed-end management investment company.
INVESTMENT GOAL
The Trust seeks to provide high current income, generally exempt from federal
income taxes, by investing primarily in medium and lower quality bonds and
notes issued by or on behalf of state and local government units whose interest
is exempt from ordinary federal income tax, other than the possible incidence
of any alternative minimum tax. The Trust's secondary goal is to seek total
return.
TRUST SHARES
The Trust may issue an unlimited number of common shares. On July 20, 1999, the
Trust issued 3,600 Auction Preferred Shares ("APS").
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements.
SECURITY VALUATION
Debt securities generally are valued by 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 that 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 a "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
22
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2006 (Unaudited)
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.
SWAPS
The Trust may engage in swap transactions such as interest rate, forward, total
return, index or currency swaps, consistent with its investment objective and
policies to obtain a desired return at a lower cost than if the Trust had
invested directly in the asset that yielded the desired return. Swaps involve
the exchange by the Trust with another party of their respective commitments to
pay or receive interest or total return throughout the lives of the agreements.
The interest to be paid or received on swaps is included in net realized
gain/(loss) on investments. Unrealized gains are reported as an asset and
unrealized losses are reported as a liability on the Statement of Assets and
Liabilities. A realized gain or loss is recorded upon termination of swap
agreements and is equal to the difference between the Trust's basis in the swap
and the proceeds from (or cost of) the closing transaction. Swap agreements are
stated at fair value. Notional principal amounts are used to express the extent
of involvement in these transactions, but the amounts potentially subject to
credit risk are much smaller.
If there is a default by the counterparty to a swap contract, the Trust will be
limited to contractual remedies pursuant to the agreements related to the
transaction. There is no assurance that the swap contract counterparties will
be able to meet their obligations pursuant to the swap contracts or that, in
the event of default, the Trust will succeed in pursuing contractual remedies.
The Trust thus assumes the risk that it may be delayed in or prevented from
obtaining payments owed to it pursuant to the swap contracts.
The use of derivative instruments involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statements of assets and
liabilities.
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 taxable income, if any, for its tax year,
and as such will not be subject to federal income taxes. In addition, the Trust
intends to distribute in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, such that
the Trust should not be subject to federal excise tax. Therefore, no federal
income or excise tax provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to common shareholders are recorded on the ex-date. Distributions
to Auction Preferred shareholders are recorded daily and payable at the end of
each dividend period. Each dividend payment period for the APS is generally
seven days. The applicable dividend rate for the APS on May 31, 2006 was 3.60%.
For the six months ended May 31, 2006, the Trust declared dividends to Auction
Preferred shareholders amounting to $1,453,207, representing an average
dividend rate of 3.25% per APS.
NOTE 3. FEDERAL TAX INFORMATION
The tax character of distributions paid during the year ended November 30, 2005
was as follows:
Distributions paid from:*
Tax-Exempt Income $12,655,805
Ordinary Income --
Long-Term Capital Gains --
* For tax purposes short-term capital gains distributions, if any, are
considered ordinary income distributions.
23
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2006 (Unaudited)
Unrealized appreciation and depreciation at May 31, 2006, based on cost of
investments for federal income tax purposes, was:
Unrealized appreciation $ 12,043,459
Unrealized depreciation (11,472,385)
------------
Net unrealized appreciation $ 571,074
------------
The following capital loss carryforwards, determined as of November 30, 2005,
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... $ 3,490,821
2008... 13,036,764
2009... 3,114,307
2010... 7,684,792
2011... 4,393,912
2012... 4,060,511
-----------
$35,781,107
-----------
Capital loss carryforwards of $1,771,364 were utilized and $5,425,419 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. Columbia receives a
monthly investment advisory fee at the annual rate of 0.65% of the Trust's
average weekly net assets, including assets applicable to the APS.
PRICING AND BOOKKEEPING FEES
Columbia is responsible for providing pricing and bookkeeping services to the
Trust under a pricing and bookkeeping agreement. Under a separate agreement
(the "Outsourcing Agreement"), Columbia has delegated those functions to State
Street Corporation ("State Street"). As a result, Columbia pays State Street
the total fees collected under the pricing and bookkeeping agreement.
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 daily net assets for the month; provided that during any
12-month period, the aggregate fee, exclusive of out-of-pocket expenses and
changes, shall not exceed $140,000.
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 fund accounting oversight and monitoring and certain
other services. For the six months ended May 31, 2006, the annualized effective
pricing and bookkeeping fee rate for the Trust, inclusive of out-of-pocket
expenses, was 0.054% of the Trust's average daily net assets.
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 six months ended May 31, 2006, the Trust paid $1,232 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the six months ended May 31, 2006, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $46,884,379 and
$25,271,883, respectively.
24
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2006 (Unaudited)
NOTE 6. PREFERRED SHARES
The Trust currently has outstanding 3,600 APS. The APS are redeemable at the
option of the Trust on any dividend payment date at the redemption price of
$25,000 per share, plus an amount equal to any dividends accumulated on a daily
basis unpaid through the redemption date (whether or not such dividends have
been declared).
Under the Act, the Trust is required to maintain asset coverage of at least
200% with respect to the APS as of the last business day of each month in which
any APS are outstanding. Additionally, the Trust is required to meet more
stringent asset coverage requirements under the terms of the APS Agreement and
in accordance with the guidelines prescribed by the APS' rating agencies.
Should these requirements not be met, or should dividends accrued on the APS
not be paid, the Trust may be restricted in its ability to declare dividends to
common shareholders or may be required to redeem certain APS. At May 31, 2006,
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. At May 31, 2006, private insurers who insure
greater than 5% of the total investments of the Trust were as follows:
% OF TOTAL
INSURER INVESTMENTS
----------------------------------------------
MBIA Insurance Corp. 9.3%
Financial Security Assurance, Inc. 5.7
Ambac Assurance Corp. 5.3
GEOGRAPHIC CONCENTRATION
The Trust has greater than 5% of its total investments at May 31, 2006 invested
in debt obligations issued by the states of California, Illinois,
Massachusetts, New York, Pennsylvania 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.
ISSUER FOCUS
As a non-diversified fund, the Trust may invest a greater percentage of its
total assets in the securities of fewer issuers than a diversified fund. The
Trust may, therefore, have a greater risk of loss from a few issuers than a
similar fund that invests more broadly.
LEGAL PROCEEDINGS
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 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 management fees for certain Columbia Funds (including
the former Nations Funds) and
25
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2006 (Unaudited)
other mutual funds collectively by $32 million per year for five years, for a
projected total of $160 million in management fee reductions.
Pursuant to the procedures set forth in the SEC order, the $140 million in
settlement amounts described above will be distributed in accordance with a
distribution plan developed by an independent distribution consultant and
approved by the SEC. The independent distribution consultant has been in
consultation with the staff of the SEC and has submitted a proposed plan of
distribution. The SEC has not yet approved a final plan of distribution.
As a result of these matters or any adverse publicity or other developments
resulting from them, the market price of the 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.
On February 20, 2004, the Judicial Panel on Multidistrict Litigation
transferred these cases and cases against several other mutual fund companies
based on similar allegations to the United States District Court in Maryland
for consolidated or coordinated pretrial proceedings (the ''MDL'').
Subsequently, additional related cases were transferred to the MDL. On
September 29, 2004, the plaintiffs in the MDL filed amended and consolidated
complaints. One of these amended complaints is a putative class action that
includes claims under the federal securities laws and state common law, and
that names Columbia, the Distributor, the Trustees of the Columbia Funds, Bank
of America Corporation and others as defendants. Another of the amended
complaints is a derivative action purportedly on behalf of the Columbia Funds
that asserts claims under federal securities laws and state common law.
On February 25, 2005, Columbia and other defendants filed motions to dismiss
the claims in the pending cases. On March 1, 2006, for reasons stated in the
court's memoranda dated November 3, 2005, the U.S. District Court for the
District of Maryland granted in part and denied in part the defendants' motions
to dismiss. The court dismissed all of the class action claims pending against
the Columbia Funds Trusts and the Columbia Acorn Trust. As to Columbia, and the
Distributor, the claims under the Securities Act of 1933, the claims under
Sections 34(b) and 36(a) of the Investment Company Act of 1940 ("ICA") and the
state law claims were dismissed. The claims under Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and claims under Section 36(b) of the ICA
along with related claims under Section 48(a) of the ICA were not dismissed.
On March 21, 2005, a purported class action was filed 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 purpose. On March 2,
2005, the actions were consolidated in the Massachusetts federal court as In re
Columbia Entities Litigation. The plaintiffs filed a consolidated amended
complaint on June 9, 2005. 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 and this appeal is pending.
26
[GRAPHIC]
ASSET COVERAGE REQUIREMENTS
INVOLUNTARY
ASSET LIQUIDATING AVERAGE
TOTAL AMOUNT COVERAGE PREFERENCE MARKET VALUE
OUTSTANDING PER SHARE* PER SHARE PER SHARE
-------------------------------------------------------------
05/31/06 ** $90,000,000 $69,713 $25,010 $25,000
11/30/05 90,000,000 69,387 25,010 25,000
11/30/04 90,000,000 68,821 25,004 25,000
11/30/03 90,000,000 69,998 25,006 25,000
11/30/02 90,000,000 69,734 25,001 25,000
11/30/01 90,000,000 71,967 25,007 25,000
11/30/00 90,000,000 71,462 25,011 25,000
11/30/99 *** 90,000,000 50,023 25,006 25,000
* Calculated by subtracting the Trust's total liabilities from the Trust's
total assets and dividing the amount by the number of APS outstanding.
** Unaudited.
***On July 20, 1999, the Trust began offering Auction Preferred Shares.
See Accompanying Notes to Financial Statements.
27
[GRAPHIC]
SHAREHOLDER MEETING RESULTS
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On May 24, 2006, the Annual Meeting of Shareholders of the Trust was held to
consider re-election of Trustees. On March 10, 2006, the record date for the
Meeting, the Trust had 27,741,654 common shares outstanding and 3,600 preferred
shares outstanding. The votes cast were as follows:
ELECTION OF TRUSTEES:
The shareholders re-elected the following Trustees as follows:
FOR WITHHELD
----------------------------------------
Janet Langford Kelly 23,116,936 417,008
Charles R. Nelson 23,125,521 408,423
Patrick J. Simpson 23,120,073 413,871
Richard L. Woolworth 23,107,372 423,368
The holders of preferred shareholders re-elected the following Trustees as
follows:
FOR WITHHELD
--------------------------------
Douglas A. Hacker 3,204 0
Thomas E. Stitzel 3,204 0
The terms of office of Thomas C. Theobald, John J. Neuhauser, William E. Mayer,
Anne-Lee Verville and Richard W. Lowry continued after the Meeting.
See Accompanying Notes to Financial Statements.
28
[GRAPHIC]
DIVIDEND REINVESTMENT PLAN
COLONIAL MUNICIPAL INCOME 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 and Cash Purchase Plan (the "Plan"). Pursuant
to the Plan, the provisions of which are described below, shareholders not
making such an election will receive all such amounts in cash paid by check
mailed directly to the shareholder by the Plan Agent, as the dividend paying
agent.
If the Trustees of the Trust declare a dividend or determine to make a capital
gain distribution payable either in shares of the Trust or in cash, as
shareholders may have elected, non-participants in the Plan will receive cash
and participants in the Plan will receive the equivalent in shares of the
Trust. If the market price of the shares on the payment date for the dividend
or distribution is equal to or exceeds their net asset value, participants will
be issued shares of the Trust at the higher of net asset value 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.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent. When a participant withdraws from the Plan or upon termination of
the Plan as provided below, certificates for whole shares credited to the
participant's account under the Plan will be issued and a cash payment will be
made for any fraction of a share credited to such account.
Participants in the Plan have the option of making additional cash payments to
the Plan Agent semi-annually, for investment in the Trust's shares. Such
payments may be made in any amount from $100 to $500. State Street will use all
funds received from participants (as well as any dividends and distributions
received in cash) to purchase Trust shares in the open market semiannually.
Interest will not be paid on any uninvested cash payments.
In the case of shareholders such as banks, brokers or nominees holding shares
for others who are the beneficial owners of those shares, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time to
time by the shareholder of record as representing the total amount registered
in such shareholder's name and held for the account of beneficial owners who
are to participate in the Plan.
There is no charge to Plan participants for reinvesting dividends or
distributions. The Plan Agent's fees for the handling of the reinvestment of
dividends and distributions will be paid by the Trust. There will be no
brokerage charges with respect to shares issued directly by the Trust as a
result of dividends or distributions payable either in stock or in cash.
However, each participant will pay a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases in connection
with the reinvestment of dividends or distributions as well as from voluntary
cash payments. Brokerage charges for purchasing small amounts of stock for
individual accounts under the voluntary cash purchase provisions of the Plan
are expected to be less than the usual brokerage charges for individual
transactions of comparable size, because the Plan Agent will be purchasing
shares for all participants in blocks and charging to cash purchase Plan
participants a pro rated portion of the lower commissions usually obtainable on
such block purchases.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income tax that may be payable on such dividends or
distributions.
The Plan may be amended or terminated on 30 days written notice to the Plan
participants. Contact the Plan Agent for more information regarding the Plan.
All correspondence concerning the Plan should be directed to Computershare by
mail at P.O. Box 403011, Providence, RI 02940-3011, or by phone at
1-800-426-5523.
29
[LOGO]
Transfer Agent
Important Information About This Report
The Transfer Agent for Colonial Municipal Income 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 21, 2006, 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 Municipal Income
Trust.
[GRAPHIC]
COLONIAL MUNICIPAL INCOME TRUST
SEMIANNUAL REPORT
SHC-44/111423-0506 (07/06) 06/26759
Item 2. Code of Ethics.
Not applicable at this time.
Item 3. Audit Committee Financial Expert.
Not applicable at this time.
Item 4. Principal Accountant Fees and Services.
Not applicable at this time.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments
The registrant's "Schedule I - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form
N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Registrant Purchases of Equity Securities*
-----------------------------------------------------------------
(c)
Total Number of (d)
(a) (b) Shares Purchased as Maximum Number of
Total Number Average Part of Publicly Shares that May Yet
of Shares Price Paid Announced Plans Be Purchased Under
Period Purchased Per Share or Programs the Plans or Programs
------ ------------ ---------- ------------------- ---------------------
12/01/05 through 12/31/05... 9,695 $5.39 9,695 N/A
01/01/06 through 01/31/06... 9,588 $5.56 9,588 N/A
02/01/06 through 02/28/06... 9,169 $5.83 9,169 N/A
03/01/06 through 03/31/06... 0 $0.00 0 N/A
04/01/06 through 04/30/06... 9,086 $5.82 9,086 N/A
05/01/06 through 05/31/06... 8,432 $5.88 8,432 N/A
------ ----- ------ ---
Total....................... 45,970 $5.69 45,970 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 the requirements of
Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial
officers, based on their evaluation of the registrant's disclosure
controls and procedures as of a date within 90 days of the filing of
this report, have concluded that such controls and procedures are
adequately designed to ensure that information required to be
disclosed by the registrant in Form N-CSR is accumulated and
communicated to the registrant's management, including the principal
executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not
applicable at this time.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Colonial Municipal Income Trust
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By (Signature and Title) /S/ Christopher L. Wilson
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Christopher L. Wilson, President
Date July 27, 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 July 27, 2006
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By (Signature and Title) /S/ J. Kevin Connaughton
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J. Kevin Connaughton, Treasurer
Date July 27, 2006
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