-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lp1auDXey/YPa1djtXGBxqZfvQatU60cOHcrRvrM6VhNtN9ZlKXk2c72WlroyRRQ unEFDUI4EpmWgCTdYa3tGA== 0000891804-03-000319.txt : 20030206 0000891804-03-000319.hdr.sgml : 20030206 20030206141041 ACCESSION NUMBER: 0000891804-03-000319 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021130 FILED AS OF DATE: 20030206 EFFECTIVENESS DATE: 20030206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL MUNICIPAL INCOME TRUST CENTRAL INDEX KEY: 0000809844 FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04992 FILM NUMBER: 03542272 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CTR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 N-30D 1 file001.txt COLONIAL MUNICIPAL INCOME TRUST COLONIAL MUNICIPAL INCOME TRUST ANNUAL REPORT NOVEMBER 30, 2002 [PHOTO] PRESIDENT'S MESSAGE DEAR SHAREHOLDER: For a third consecutive year, the municipal bond market offered positive returns. In general, the bond market was aided by strong demand, as investors shied away from the stock market in light of economic uncertainty, corporate scandals and the threat of war. Relatively stable interest rates were also an aid to market performance. The Federal Reserve lowered short-term interest rates early in the period and again late in the period as the economy struggled and consumer confidence sagged. The volume of new municipal bonds increased as cities and states faced budget deficits and revenue shortfalls. However, investor demand for bonds also rose, and that helped support returns throughout the year. The following report will provide you with more detailed information about the fund's performance and the investment strategies used by portfolio manager Maureen Newman. As always, we thank you for choosing Colonial Municipal Income Trust and for giving us the opportunity to help you build a strong financial future. /s/ Keith T. Banks Keith T. Banks President o NOT FDIC INSURED o MAY LOSE VALUE o NO BANK GUARANTEE Economic and market conditions change frequently. There is no assurance that the trends described in this report will continue or commence. PORTFOLIO MANAGER'S REPORT For the 12-month period that ended November 30, 2002, Colonial Municipal Income Trust generated a total return of 2.21%, based on net asset value. The trust underperformed its peer group, the Lipper Municipal Debt Funds Category average, which returned 2.53%. The trust's underperformance was the result of our decision to reduce the trust's duration (which is a measure of interest rate sensitivity) by selling Treasury futures contracts. The use of the futures was driven by the longer duration that results from the leverage on the trust (the preferred shares). These short futures contracts held back the trust's results because US Treasuries actually significantly outperformed municipal bonds. (As the price of Treasury bonds went up, the value of the short futures contracts went down). However, the trust's leverage boosted the trust's income, which enhanced the income paid to common shareholders. During the period, high-quality municipal bonds outperformed lower-quality bonds and the trust benefited from its positions in high-quality securities relative to the peer funds in its Lipper category. Toward the end of the fiscal year, we sold some of the high-quality issues that had performed well and invested the proceeds in lower-quality bonds, which were laggards. We believe that lower-quality bonds have the potential for strong performance as economic growth improves. We found some of the best values in electric utility and certain housing development bonds, which are supported by property taxes. We have structured the portfolio to take advantage of a slowly improving economy and a stable or slightly rising interest-rate environment. Because most states project large budgetary imbalances, we have been cautious about investing in sectors that depend on state government spending and that may be affected by budget cuts. We believe some of the best opportunities will come from the essential service sectors, such as utilities and water and sewer. /s/ Maureen G. Newman Maureen G. Newman Maureen G. Newman is the portfolio manager of Colonial Municipal Income Trust and a senior vice president of Colonial Management Associates, Inc., an affiliate of Columbia Management Group. Ms. Newman received her BA in economics from Boston College and her MBA from Babson College. She is a Chartered Financial Analyst, a member of the Boston Security Analysts Society and former chairman of the National Federation of Municipal Analysts. Past performance is no guarantee of future investment results. The principal value and investment returns will fluctuate, resulting in a gain or loss on sale. Tax-exempt investing offers current tax-free income, but it also involves certain risks. The value of the trust shares will be affected by interest rate changes and the creditworthiness of issues held in the trust. Investing in high yield securities offers the potential for high current income and attractive total return, but involves certain risks. Lower-rated bond risks include default of the issuer and rising interest rates. Interest income from certain tax-exempt bonds may be subject to the federal alternative minimum tax for individuals and corporations. Lipper, Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the trust. PRICE PER SHARE AS OF 11/30/02 ($) NAV 5.82 - ------------------------------- Market Price 5.67 - ------------------------------- 12 MONTH TOTAL RETURN, ASSUMING REINVESTMENT OF ALL DISTRIBUTIONS FOR THE PERIOD ENDED 11/30/02 (%) NAV 2.21 - ------------------------------- Market Price 7.87 - ------------------------------- DISTRIBUTIONS DECLARED PER COMMON SHARE 12/1/01-11/30/02 ($) 0.42 - ------------------------------- 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 INDUSTRY SECTORS AS OF 11/30/02 (%) Hospitals 9.4 - ------------------------------- Nursing homes 8.7 - ------------------------------- Local general obligations 6.9 - ------------------------------- Refunded/escrowed 6.6 - ------------------------------- Water & sewer 5.9 - ------------------------------- Sector breakdowns are calculated as a percentage of net assets representing both common shares and auction preferred shares. QUALITY BREAKDOWN AS OF 11/30/02 (%) AAA 36.6 - ------------------------------- AA 1.2 - ------------------------------- A 3.6 - ------------------------------- BBB 15.7 - ------------------------------- BB 6.5 - ------------------------------- CCC 0.5 - ------------------------------- Non rated 34.6 - ------------------------------- Cash equivalents 1.3 - ------------------------------- Quality breakdowns are calculated as a percentage of total investments, including short-term obligations. Ratings shown in the quality breakdown represent the highest rating assigned to a particular bond by one of the following nationally-recognized rating agencies: Standard & Poor's Corporation, Moody's Investors Service, Inc. or Fitch Investors Service, Inc. Because the trust is actively managed, there can be no guarantee the trust will continue to maintain these quality breakdowns or invest in these sectors in the future. 1 INVESTMENT PORTFOLIO November 30, 2002 MUNICIPAL BONDS - 98.0% PAR VALUE - ------------------------------------------------------------ EDUCATION - 4.8% CA Educational Facilities Authority, Loyola Marymount University, Series 2001, (a) 10/01/14 $ 1,250,000 $ 721,200 CA Statewide Community Development Authority, Crossroads School for Arts & Sciences, Series 1998, 6.000% 08/01/28 (b) 1,135,000 1,173,613 CA Public Works Board Lease Revenue, UCLA Replacement Hospital, Series 2002 A, 5.375% 10/01/15 1,000,000 1,089,630 IL University of Illinois Series 2001 A, 5.500% 08/15/17 600,000 642,354 MA Industrial Finance Agency, St. John's High School, Series 1998, 5.350% 06/01/28 300,000 278,715 MI Southfield Economic Development Corp., Lawrence University, Series 1998 A, 5.400% 02/01/18 750,000 723,600 NC Capital Facilities Finance Authority, Meredith College, Series 2001, 5.125% 06/01/15 1,000,000 1,060,810 VT Educational & Health Buildings Finance Agency, Norwich University, Series 1998, 5.500% 07/01/21 1,000,000 987,350 WA Higher Education Facilities Authority, Puget Sound University, Series 1998, 5.375% 10/01/30 5,000,000 5,095,200 WV University, Series 2000 A, (a) 04/01/25 750,000 216,975 ----------- 11,989,447 ----------- - ----------------------------------------------------------- HEALTH CARE - 24.0% CONGREGATE CARE RETIREMENT - 4.5% CA Statewide Community Development Authority, Eskaton Village - Grass Valley, Series 2000, 8.250% 11/15/31 (b) 750,000 797,077 FL Capital Projects Finance Authority, Continuing Care Retirement, Glenridge on Palmer Ranch, Series 2002 A, 8.000% 06/01/32 500,000 474,955 IL Health Facilities Authority, Lutheran Senior Ministries, Series 2001, 7.375% 08/15/31 250,000 251,820 PAR VALUE - ------------------------------------------------------------ KS Manhattan, Meadowlark Hills Retirement Home, Series 1999 A: 6.375% 05/15/20 $ 250,000 $ 249,930 6.500% 05/15/28 1,500,000 1,506,825 KY Economic Development Finance Authority, Christian Church Homes of Kentucky, Inc., Series 1998, 5.500% 11/15/30 200,000 179,320 MA Boston Industrial Development Finance Authority, Springhouse, Inc., Series 1988, 5.875% 07/01/20 500,000 433,245 MA Development Finance Agency, Loomis Communities: Series 1999 A, 5.625% 07/01/15 250,000 232,183 Series 2002 A, 6.900% 03/01/32 125,000 124,960 NH Higher Educational & Health Facilities Authority, Rivermead at Peterborough, Series 1998, 5.750% 07/01/28 1,100,000 953,271 NJ Economic Development Authority, Seabrook Village, Inc., Series 2000 A, 8.250% 11/15/30 500,000 534,800 PA Chartiers Valley Industrial & Commercial Development Authority, Asbury Health Center, Series 1999, 6.375% 12/01/24 1,000,000 935,310 PA Lancaster Industrial Development Authority: Baptist Home of Philadelphia, Series 1998 A: 5.500% 11/15/18 360,000 309,240 5.600% 11/15/28 500,000 412,925 Garden Spot Village, Series 2000 A, 7.625% 05/01/31 325,000 336,066 TN Metropolitan Government, Nashville and Davidson Counties, Blakeford at Green Hills, Series 1998, 5.650% 07/01/24 575,000 499,261 TX Abilene Health Facilities Development Corp., Sears Methodist Retirement Obligated Group, Series 1998 A, 5.900% 11/15/25 750,000 683,175 See notes to investment portfolio. 2 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2002 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ------------------------------------------------------------ HEALTH CARE (CONTINUED) CONGREGATE CARE RETIREMENT (CONTINUED) WI Health & Educational Facilities Authority: Attic Angel Obligated Group, Series 1998, 5.750% 11/15/27 $ 875,000 $ 740,976 Clement Manor, Series 1998, 5.750% 08/15/24 1,000,000 855,970 United Lutheran Program for Aging, Inc., Series 1998, 5.700% 03/01/28 750,000 636,405 ----------- 11,147,714 ----------- HEALTH SERVICES - 0.3% IL Health Facilities Authority, Midwest Physician Group Ltd., Series 1998, 5.500% 11/15/19 90,000 74,641 MA Development Finance Agency, Boston Biomedical Research Institute, Series 1999, 5.650% 02/01/19 120,000 112,379 MA Health & Educational Facilities Authority, Civic Investments, Inc., Series 2002 A, 9.000% 12/15/15 500,000 526,990 ----------- 714,010 ----------- HOSPITALS - 9.4% AR Conway Health Facilities Board, Conway Regional Medical Center: Series 1999 A, 6.400% 08/01/29 350,000 361,805 Series 1999 B, 6.400% 08/01/29 850,000 877,506 CA Health Facilities Financing Authority, Cedars-Sinai Medical Center, Series 1999 A, 6.125% 12/01/30 650,000 679,016 CO Health Care Facilities Authority, National Jewish Medical & Research Center, Series 1998: 5.375% 01/01/16 1,500,000 1,471,620 5.375% 01/01/23 840,000 782,376 FL Orange County Health Facilities Authority, Orlando Regional Healthcare, Series 2002, 5.750% 12/01/32 150,000 150,680 FL West Orange Healthcare District, Series 2001 A, 5.650% 02/01/22 400,000 396,180 GA Forsyth County Hospital Authority, Georgia Baptist Healthcare System, Series 1998, 6.000% 10/01/08 880,000 964,814 PAR VALUE - ------------------------------------------------------------ IL Health Facilities Authority: Swedish American Hospital, Series 2000, 6.875% 11/15/30 $ 500,000 $ 533,290 Thorek Hospital & Medical Center, Series 1998, 5.375% 08/15/28 500,000 434,650 IL Southwestern Development Authority, Anderson Hospital, Series 1999: 5.375% 08/15/15 500,000 476,495 5.500% 08/15/20 550,000 515,526 LA Public Facilities Authority, Touro Infirmary, Series 1999: 5.500% 08/15/19 250,000 247,955 5.625% 08/15/29 1,275,000 1,243,074 MA Health & Educational Facilities Authority, Milford-Whitinsville Regional Hospital, Series 1998 C, 5.250% 07/15/18 500,000 458,615 MI Dickinson County Healthcare System, Series 1999, 5.700% 11/01/18 770,000 727,481 MI Flint Hospital Building Authority, Hurley Medical Center, Series 1998 A, 5.375% 07/01/20 460,000 404,800 MN St. Paul Housing & Redevelopment Authority, Healtheast Project, Series 2001 A, 5.700% 11/01/15 2,000,000 1,601,160 MN Washington County Housing & Redevelopment Authority, Healtheast, Inc., Series 1998, 5.250% 11/15/12 1,250,000 1,010,338 MS Business Finance Corp., Rush Medical Foundation, Inc., Series 1998, 5.625% 07/01/23 515,000 438,389 NH Higher Educational & Health Facilities Authority, Littleton Hospital Association, Inc.: Series 1998 A: 5.900% 05/01/18 500,000 410,485 5.900% 05/01/28 675,000 523,213 Series 1998 B: 6.000% 05/01/28 625,000 491,231 NY Staten Island University Hospital Project: Series 2001 B, 6.375% 07/01/31 500,000 496,385 Series 2002 C, 6.450% 07/01/32 200,000 197,230 OH Belmont County, East Ohio Regional Hospital, Series 1998, 5.700% 01/01/13 1,500,000 1,351,830 See notes to investment portfolio. 3 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2002 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ------------------------------------------------------------- HEALTH CARE (CONTINUED) HOSPITALS (CONTINUED) OH Highland County Joint Township Hospital District, Series 1999, 6.750% 12/01/29 $ 735,000 $ 681,705 OH Miami County, Upper Valley Medical Center, Inc., Series 1996 A, 6.250% 05/15/16 665,000 683,035 OH Sandusky County, County Memorial Hospital, Series 1998, 5.150% 01/01/08 270,000 270,586 PA Allegheny County Hospital Development, Ohio Valley General Hospital, Series 1998 A, 5.450% 01/01/28 1,050,000 931,886 PA Pottsville Hospital Authority, Pottsville Hospital & Warner Clinic, Series 1998, 5.625% 07/01/24 755,000 645,736 TX Lufkin Health Facilities Development Corp., Memorial Health Systems of East Texas, Series 1998, 5.700% 02/15/28 750,000 595,200 TX Richardson Hospital Authority, Baylor Richardson Medical Center, Series 1998, 5.625% 12/01/28 850,000 836,876 TX Tyler Health Facilities Development Corp., Mother Frances Hospital, Series 2001, 6.000% 07/01/31 750,000 739,860 VT Educational & Health Buildings Finance Agency, Brattleboro Memorial Hospital, 5.375% 03/01/28 500,000 446,195 WI Health & Educational Facilities Authority, Wheaton Franciscan Services, Series 2002, 5.750% 08/15/30 450,000 450,644 WV Hospital Finance Authority, Charleston Area Medical Center, Series 2000 A, 6.750% 09/01/30 145,000 156,587 ----------- 23,684,454 ----------- INTERMEDIATE CARE FACILITIES - 1.1% IN Health Facilities Financing Authority, Hoosier Care, Inc., Series 1999 A, 7.125% 06/01/34 1,075,000 914,116 PA Economic Development Financing Authority, Northwestern Human Services, Inc., Series 1998 A, 5.250% 06/01/14 2,150,000 1,853,128 ----------- 2,767,244 ----------- PAR VALUE - ------------------------------------------------------------ NURSING HOMES - 8.7% AK Juneau, St. Ann's Care Center, Series 1999, 6.875% 12/01/25 $ 1,000,000 $ 986,340 CO Health Facilities Authority, American Housing Foundation, Series 1990 A, 10.250% 12/01/20 (c) 1,500,000 465,000 Volunteers of America, Series 1998 A: 5.450% 07/01/08 250,000 239,275 5.750% 07/01/20 700,000 599,144 Series 1999 A, 6.000% 07/01/29 350,000 293,545 DE Sussex County, Healthcare Facility, Delaware Health Corp., Series 1994 A, 7.600% 01/01/24 975,000 853,603 IA Finance Authority, Care Initiatives Project: Series 1996, 9.250% 07/01/25 1,000,000 1,176,590 Series 1998 B: 5.750% 07/01/18 550,000 499,042 5.750% 07/01/28 1,475,000 1,276,671 IN Gary Industrial Economic Development, West Side Health Care Center, Series 1987 A, 11.500% 10/01/17 2,230,000 2,248,397 IN Health Facilities Financing Authority, Metro Health Indiana, Inc., Series 1998, 6.400% 12/01/33 (c) 1,000,000 400,000 IN Michigan City Health Facilities, Metro Health Foundation, Inc. Project, 11.000% 11/01/22 (c) 4,500,000 1,530,000 KY Jefferson County First Mortgage, American Housing Funding, Kentucky-Iowa, Inc. Project, Series 1990, 10.250% 01/01/20 (c) 890,000 516,200 KY Lexington-Fayette Urban County Government, First Mortgage, American Housing Funding, Kentucky-Iowa, Inc. Project, Series 1990, 10.250% 01/01/20 (c) 900,000 522,000 MA Development Finance Agency, Alliance Health Care Facilities, Series 1999, 7.100% 07/01/32 1,150,000 1,141,398 See notes to investment portfolio. 4 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2002 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ------------------------------------------------------------ HEALTH CARE (CONTINUED) NURSING HOMES (CONTINUED) MA Development Finance Agency: American Health Woodlawn Manor, Inc.: Series 2000 A, 7.750% 12/01/27 $ 380,000 $ 331,227 Series 2000 B, 10.250% 06/01/27 80,000 74,400 GF/Massachusetts Inc., Series 1994, 8.300% 07/01/23 915,000 931,552 MI Cheboygan County Economic Development Corp., Metro Health Foundation Project, Series 1993, 11.000% 11/01/22 (c) 2,440,000 829,600 MN Carlton Inter-Faith Social Services, Inc., Series 2000: 7.500% 04/01/19 250,000 255,732 7.750% 04/01/29 250,000 258,045 MN New Hope, North Ridge Care Center, Inc., Series 1999, 5.875% 03/01/29 250,000 227,748 MN Sartell, Foundation for Healthcare, Series 1999 A, 6.625% 09/01/29 2,025,000 1,855,487 NJ Economic Development Authority, Geriatric and Medical Service, Inc., Series 1990 A, 10.500% 05/01/04 265,000 267,165 OH Montgomery County, Grafton Oaks LP, Series 1986, 9.750% 12/01/16 1,450,000 1,392,044 TN New Tazewell Health Education & Housing Facilities Board, New Tazewell Project, Series 1987, 10.000% 06/01/17 1,455,000 1,476,345 TX Kirbyville Health Facilities Development Corp., Heartway III Project: Series 1997 A, 10.000% 03/20/18 542,995 504,985 Series 1997 B, 6.000% 03/20/04 (c) 100,000 5,000 WA Kitsap County Housing Authority, Martha & Mary Nursing Home, Series 1996, 7.100% 02/20/36 643,000 751,474 ----------- 21,908,009 ----------- - ----------------------------------------------------------- HOUSING - 8.2% ASSISTED LIVING/SENIOR - 3.0% DE Kent County, Heritage at Dover, Series 1999, 7.625% 01/01/30 1,240,000 1,072,575 PAR VALUE - ----------------------------------------------------------- GA Columbus Housing Authority, The Gardens at Calvary, Series 1999, 7.000% 11/15/19 $ 500,000 $ 432,810 IL Development Finance Authority, Care Institute, Inc., 8.250% 06/01/25 1,460,000 1,451,897 MN Roseville, Care Institute, Inc., Series 1993, 7.750% 11/01/23 (c) 1,630,000 1,113,046 NC Medical Care Commission, DePaul Community Facilities Project, Series 1999, 7.625% 11/01/29 995,000 1,003,597 NY Huntington Housing Authority, Gurwin Jewish Senior Center, Series 1999: 5.875% 05/01/19 420,000 369,516 6.000% 05/01/29 650,000 560,131 TX Bell County Health Facilities Development Corp., Care Institutes, Inc., 9.000% 11/01/24 1,440,000 1,477,339 ----------- 7,480,911 ----------- MULTI-FAMILY - 5.0% DE Wilmington, Electra Arms Senior Association Project, Series 1998, 6.250% 06/01/28 960,000 788,198 FL Broward County Housing Finance Authority, Chaves Lake Apartment Project, Series 2000, 7.500% 07/01/40 500,000 510,210 FL Clay County Housing Finance Authority, Madison Commons Apartments, Series 2000 A, 7.450% 07/01/40 500,000 510,230 GA Clayton County Housing Authority, Magnolia Park Apartments, Series 1999 A, 6.250% 06/01/30 750,000 653,168 IL Chicago, Michigan Boulevard Garden Apartment Rehabilitation Project, Series 1985, 12.000% 01/01/50 (c) 70,000 7,000 MN Columbia Heights, Crest View Corp., Series 1998, 6.000% 03/01/33 245,000 215,110 MN Washington County Housing & Redevelopment Authority, Cottages of Aspen, Series 1992, 9.250% 06/01/22 1,020,000 1,053,415 MN White Bear Lake, Birch Lake Townhome Project: Series 1989 A, 10.250% 07/15/19 1,770,000 1,805,913 Series 1989 B, (a) 07/15/19 (b) 636,000 492,238 See notes to investment portfolio. 5 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2002 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ------------------------------------------------------------ HOUSING (CONTINUED) MULTI-FAMILY (CONTINUED) Resolution Trust Corp., Pass Through Certificates, Series 1993 A, 8.750% 12/01/16 (d) $ 455,481 $ 456,451 SC Housing Finance & Development, Multi-Family Housing Finance Revenue, Westbridge Apartments, Series 1990 A, 9.500% 09/01/20 1,981,000 1,981,852 TN Franklin Industrial Development Board, Landings Apartment Project, Series 1996 B, 8.750% 04/01/27 730,000 766,347 TX El Paso County Housing Finance Corp., American Village Communities: Series 2000 C, 8.000% 12/01/32 300,000 303,486 Series 2000 D, 10.000% 12/01/32 300,000 303,384 TX Galveston Housing Facilities Center, Driftwood Apartments, 8.000% 08/01/23 1,000,000 1,040,000 TX National Housing Trust Project, Series 2001 C, 10.000% 10/01/31 695,000 687,049 VA Alexandria Redevelopment & Housing Authority, Courthouse Commons Apartments, Series 1990 A, 10.000% 01/01/21 1,000,000 878,000 ----------- 12,452,051 ----------- SINGLE FAMILY - 0.2% AK Housing Finance Corp., Series 1996 A, 6.050% 12/01/17 560,000 589,148 KY Kentucky County Single Family Mortgage Revenue, Class A, Series 1987, 9.000% 09/01/16 30,000 30,074 ----------- 619,222 ----------- - ----------------------------------------------------------- INDUSTRIAL - 5.4% FOOD PRODUCTS - 2.1% GA Cartersville Development Authority, Anheuser Busch Project, Inc., Series 2002, 5.950% 02/01/32 1,000,000 1,029,880 IN Hammond, American Maize Products Co., Series 1994, 8.000% 12/01/24 1,760,000 1,920,952 PAR VALUE - ------------------------------------------------------------ LA Port of New Orleans Industrial Development Continental Grain Company, Series 1993, 7.500% 07/01/13 $ 1,000,000 $ 1,028,710 LA Southern Louisiana Port Commission, Cargill, Inc. Project, Series 1997, 5.850% 04/01/17 500,000 527,640 MI Strategic Fund, Michigan Sugar Co., Sebewaing Project, Series 1998 A, 6.250% 11/01/15 1,000,000 715,430 ----------- 5,222,612 ----------- FOREST PRODUCTS - 1.2% AL Courtland Industrial Development Board, Champion International Corp., Series 1999, 6.000% 08/01/29 1,000,000 984,220 GA Rockdale County Development Authority, Solid Waste Disposal, Visy Paper, Inc., Series 1993, 7.500% 01/01/26 800,000 803,400 LA Beauregard Parish, Boise Cascade Corp. Project, Series 2002, 6.800% 02/01/27 1,000,000 985,880 MI Delta County Economic Development Corp., Mead Westvaco-Escanaba, Series 2002 B, 6.450% 04/15/23 300,000 294,969 ----------- 3,068,469 ----------- MANUFACTURING - 1.1% IL Will-Kankakee Regional Development Authority, Flanders Corp., Precisionaire Project, Series 1997, 6.500% 12/15/17 895,000 850,733 KS Wichita Airport Authority, Cessna Citation Service Center, Series 2002 A, 6.250% 06/15/32 475,000 484,647 MN Brooklyn Park, TL Systems Corp., Series 1991, 10.000% 09/01/16 695,000 734,552 TX Trinity River Authority, Texas Instruments Project, Series 1996, 6.200% 03/01/20 750,000 784,980 ----------- 2,854,912 ----------- METALS & MINING - 0.2% MD Baltimore County, Bethlehem Steel Corp. Project, Series 1994 B, 7.500% 06/01/15 (c) 500,000 30,000 NV Department of Business & Industry, Wheeling-Pittsburgh Steel Corp., Series 1999 A, 8.000% 09/01/14 (c)(d) 250,000 175,000 See notes to investment portfolio. 6 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2002 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ------------------------------------------------------------ INDUSTRIAL (CONTINUED) METALS & MINING (CONTINUED) VA Greensville County Industrial Development Authority, Wheeling-Pittsburgh Steel Corp., Series 1999 A: 6.375% 04/01/04 (c) $ 70,000 $ 49,000 7.000% 04/01/14 (c) 375,000 262,500 ----------- 516,500 ----------- OIL & GAS - 0.8% TX Gulf Coast Industrial Development Authority, Solid Waste Disposal Revenue, Citgo Petroleum PJ-RMKT 07/01/02, Series 1998, 8.000% 04/01/28 375,000 386,029 VI Virgin Islands Government Refinery Facilities Hovensa Coker Project, Series 2002, 6.500% 07/01/21 250,000 250,715 WA Pierce County Economic Development Corp., Occidental Petroleum Co., Series 1993, 5.800% 09/01/29 1,500,000 1,441,995 ----------- 2,078,739 ----------- - ----------------------------------------------------------- OTHER - 8.4% OTHER - 0.8% CA Tobacco Securitization Authority, Series 2002 B, 6.000% 06/01/43 900,000 885,204 MD Baltimore, Park Charles Project, Series 1986, 8.000% 01/01/15 603,088 604,312 WA Tobacco Settlement Authority, Series 2002, 6.625% 06/01/32 500,000 494,565 ----------- 1,984,081 ----------- POOL/BOND BANK - 1.0% IN Indianapolis Local Public Improvement Bond Bank, Series 1999 E, 5.750% 02/01/29 2,000,000 2,003,560 MI Municipal Bond Authority, Local Government Loan Project, Series 2001 A, 5.375% 11/01/17 550,000 584,193 ----------- 2,587,753 ----------- REFUNDED/ESCROWED (E) - 6.6% CA San Joaquin Hills Transportation Corridor Agency, Series 1993, (a) 01/01/25 10,000,000 3,095,400 CT Development Authority, Sewer Sludge Disposal Facilities, Series 1996, 8.250% 12/01/06 855,000 960,105 PAR VALUE - ------------------------------------------------------------ FL Clearwater Housing Authority, Hampton Apartments, Series 1994, 8.250% 05/01/24 $ 2,390,000 $ 2,665,710 ID Health Facilities Authority, IHC Hospitals, Inc., Series 1992, 6.650% 02/15/21 2,750,000 3,337,895 IL Metropolitan Pier & Exposition Authority, McCormick Project, Series 1994 A, (a) 06/15/14 1,010,000 588,759 MA Health & Educational Facilities Authority, Corp. for Independent Living, Series 1993, 8.100% 07/01/18 620,000 655,811 NC Lincoln County, Lincoln County Hospital, Series 1991, 9.000% 05/01/07 305,000 351,900 PA Delaware County Authority, Mercy Health Corp., Southeastern Pennsylvania Obligated, Series 1996: 6.000% 12/15/16 1,400,000 1,598,884 6.000% 12/15/26 500,000 555,995 PA Montgomery County Industrial Development Authority, Assisted Living Facility, Series 1993 A, 8.250% 05/01/23 750,000 784,778 TN Shelby County, Health, Education & Housing Facilities Board, Open Arms Development Center: Series 1992 A, 9.750% 08/01/19 475,000 605,625 Series 1992 C, 9.750% 08/01/19 480,000 612,067 WV Hospital Finance Authority, Charleston Area Medical Center, Series 2000 A, 6.750% 09/01/30 605,000 736,134 ----------- 16,549,063 ----------- - ----------------------------------------------------------- OTHER REVENUE - 2.1% HOTELS - 0.8% PA Philadelphia Authority for Industrial Development, Doubletree Project, Series 1997 A, 6.500% 10/01/27 2,000,000 1,968,840 ----------- RECREATION - 0.6% CT Mohegan Tribe Indians, Series 2001, 6.250% 01/01/31 200,000 204,152 FL Capital Trust Agency, Seminole Tribe Convention Center, Series 2002 A, 10.000% 10/01/33 500,000 514,575 7 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2002 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ------------------------------------------------------------ OTHER REVENUE (CONTINUED) RECREATION (CONTINUED) NM Red River Sports Facility, Red River Ski Area Project, Series 1998, 6.450% 06/01/07 $ 830,000 $ 829,519 ----------- 1,548,246 ----------- RETAIL - 0.7% NJ Economic Development Authority, Glimcher Properties LP Project, Series 1998, 6.000% 11/01/28 1,000,000 996,130 OH Lake County, North Madison Properties, Series 1993, 8.819% 09/01/11 680,000 654,303 ----------- 1,650,433 ----------- - ----------------------------------------------------------- RESOURCE RECOVERY - 1.2% DISPOSAL - 0.4% MA Industrial Finance Agency, Peabody Monofill Associates, Inc., Series 1995, 9.000% 09/01/05 555,000 581,745 UT Carbon County, Laidlaw Environmental, Series 1997 A, 7.450% 07/01/17 500,000 500,505 ----------- 1,082,250 ----------- RESOURCE RECOVERY - 0.8% MA Industrial Finance Agency, Ogden Haverhill Project, Series 1998 A, 5.500% 12/01/13 1,000,000 893,270 PA Delaware County Industrial Development Authority, BFI Project, Series 1988 A, 6.200% 07/01/19 1,000,000 1,001,010 ----------- 1,894,280 ----------- - ----------------------------------------------------------- TAX-BACKED - 14.2% LOCAL APPROPRIATED - 0.4% CA Compton, Civic Center Project, Series 1997, 5.500% 09/01/15 1,000,000 1,035,820 ----------- LOCAL GENERAL OBLIGATIONS - 6.9% CA Fresno Unified, School District, Series 2002 A, 6.000% 02/01/18 (f) 1,245,000 1,448,645 CA Los Angeles Unified School District: Series 1997 E, 5.125% 01/01/27 3,750,000 3,793,725 Series 2002, 5.750% 07/01/16 600,000 687,468 PAR VALUE - ------------------------------------------------------------ CA Vallejo Unified, School District, Series 2002 A, 5.900% 08/01/25 $ 1,000,000 $ 1,134,420 LA New Orleans, Series 1991, (a) 09/01/15 4,000,000 2,167,960 NY New York City, Series 1998 H, 5.125% 08/01/25 5,000,000 5,007,500 TX Irving Independent School District, Series 1997: (a) 02/15/15 1,500,000 833,520 (a) 02/15/16 1,000,000 520,780 WA Clark County School District No. 37, Series 2001 C, (a) 12/01/18 4,000,000 1,753,320 ----------- 17,347,338 ----------- SPECIAL NON-PROPERTY TAX - 3.2% CA San Diego Redevelopment Agency, Series 2001, (a) 09/01/18 1,015,000 455,552 IL Metropolitan Pier & Exposition Authority, McCormick Project: Series 1994 A: (a) 06/15/14 3,990,000 2,320,624 (a) 06/15/15 3,000,000 1,638,510 Series 1996 A, (a) 12/15/13 5,000,000 3,025,700 PR Puerto Rico Commonwealth Highway & Transportation Authority, Series 2002 E, 5.500% 07/01/21 500,000 547,890 ----------- 7,988,276 ----------- SPECIAL PROPERTY TAX - 2.8% CA Huntington Beach Community Facilities District, Grand Coast Resort, Series 2001, 6.450% 09/01/31 500,000 511,210 CA Orange County Community Facilities District, Ladera Ranch, Series 1999 A, 6.500% 08/15/21 1,000,000 1,052,060 CA Yorba Linda Redevelopment Agency, Series 1998 A, (a) 09/01/24 1,325,000 400,998 FL Double Branch Community Development District, Series 2002 A, 6.700% 05/01/34 500,000 498,015 FL Heritage Palms Community Development District, Series 1999 A, 6.250% 11/01/04 670,000 679,199 FL Lexington Oaks Community Development District: Series 1998 A, 6.125% 05/01/19 735,000 739,167 Series 2000 A, 6.700% 05/01/07 90,000 92,986 See notes to investment portfolio. 8 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2002 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ------------------------------------------------------------ TAX-BACKED (CONTINUED) SPECIAL PROPERTY TAX (CONTINUED) FL Northern Palm Beach County Improvement District, Series 1999, 5.900% 08/01/19 $ 500,000 $ 506,390 FL Orlando, Conroy Road Interchange Project, Series 1998 A: 5.500% 05/01/10 125,000 125,739 5.800% 05/01/26 300,000 292,845 FL Stoneybrook Community Development District: Series 1998 A, 6.100% 05/01/19 250,000 251,563 Series 1998 B, 5.700% 05/01/08 315,000 318,430 MI Pontiac Finance Authority, Development Area No. 3, Series 2002, 6.375% 06/01/31 450,000 446,823 MI Taylor Tax Increment Finance Authority, Series 2001, 5.375% 05/01/17 1,000,000 1,056,430 ----------- 6,971,855 ----------- STATE APPROPRIATED - 0.8% MI Building Authority, Series 2001 I, 5.000% 10/15/24 1,000,000 994,680 PR Commonwealth of Puerto Rico, Public Finance Corp., Series 2002 E, 6.000% 08/01/26 900,000 1,017,432 ----------- 2,012,112 ----------- STATE GENERAL OBLIGATIONS - 0.1% TX Board of Regents University, Series 2001 B, 5.375% 08/15/18 350,000 367,724 ----------- - ----------------------------------------------------------- TRANSPORTATION - 12.4% AIR TRANSPORTATION - 3.1% CA Los Angeles Regional Airports Improvement, Laxfuel Corp.: Series 2001, 5.250% 01/01/23 500,000 490,850 Series 2002 C, 7.500% 12/01/24 500,000 383,775 IN Indianapolis Airport Authority: FedEx Corp., Series 1994, 7.100% 01/15/17 2,000,000 2,124,000 United Airlines Project, Series 1995 A, 6.500% 11/15/31 (g) 1,000,000 424,970 KY Kenton County Airport Board, Delta Airlines, Inc., Series 1992 A, 7.500% 02/01/20 2,500,000 2,055,825 PAR VALUE - ------------------------------------------------------------ MN Minneapolis & St. Paul Metropolitan Airport Commission, Northwest Airlines, Inc.: Series 2001 A, 7.000% 04/01/25 $ 325,000 $ 238,092 Series 2001 B, 6.500% 04/01/25 250,000 237,305 NC Charlotte Special Facilities Revenue, Douglas International Airport, US Airways, Inc.: Series 1998, 5.600% 07/01/27 (h) 250,000 120,940 Series 2000, 7.750% 02/01/28 (h) 500,000 271,515 NY New York City Industrial Development, JFK International Airport Project, American Airlines, Inc., Series 2002 B, 8.500% 08/01/28 500,000 283,805 PA Philadelphia Authority for Industrial Development, Aero Philadelphia LLC, Series 1999, 5.250% 01/01/09 400,000 369,664 TX Houston Industrial Development, Air Cargo-Perot Development, Series 2002, 6.000% 03/01/23 555,000 555,444 WA Port Seattle, Northwest Airlines, Inc., Series 2000, 7.250% 04/01/30 425,000 312,018 ----------- 7,868,203 ----------- AIRPORTS - 4.8% OH Cleveland Airport, Series 2001 A, 5.000% 01/01/31 3,465,000 3,433,850 PA Philadelphia Airport Authority for Industrial Development, Series 1998 A, 5.125% 07/01/28 8,750,000 8,624,438 ----------- 12,058,288 ----------- TOLL FACILITIES - 3.0% CA San Joaquin Hills Transportation Corridor Agency, Series 1993 A, (a) 01/15/15 3,000,000 1,679,700 CO Northwest Parkway Public Highway Authority, Series 2001 D, 7.125% 06/15/41 750,000 763,395 CO Public Highway Authority, Arapahoe County, E-470, Series 2000 B: (a) 09/01/18 3,000,000 1,336,140 (a) 09/01/35 8,750,000 787,237 MA Turnpike Authority, Series 1999 A, 5.000% 01/01/39 2,500,000 2,438,700 NY Triborough Bridge & Tunnel Authority, Series 2002, 5.500% 11/15/20 375,000 410,633 ----------- 7,415,805 ----------- See notes to investment portfolio. 9 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2002 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ------------------------------------------------------------ TRANSPORTATION (CONTINUED) TRANSPORTATION - 1.5% NV Department of Business & Industry, Las Vegas Monorail Project, Series 2000, 7.375% 01/01/40 $ 750,000 $ 721,875 NY Metropolitan Transportation Authority Project, Series 2002 A, 5.000% 11/15/30 3,000,000 2,968,740 ----------- 3,690,615 ----------- - ----------------------------------------------------------- UTILITY - 17.3% INDEPENDENT POWER PRODUCER - 2.7% MI Midland County Economic Development Corp., Series 2000, 6.875% 07/23/09 1,000,000 997,650 NY Port Authority of New York & New Jersey, KIAC Partners, Series 1996 IV, 6.750% 10/01/11 2,000,000 2,076,080 PA Economic Development Finance Authority, Colver Project, Series 1994 D: 7.125% 12/01/15 500,000 519,985 7.150% 12/01/18 1,500,000 1,557,765 PR Commonwealth of Puerto Rico Industrial, Educational, Medical & Environmental Cogeneration Facilities, AES Project, Series 2000, 6.625% 06/01/26 325,000 335,322 VA Pittsylvania County Industrial Development Authority, Multi-trade of Pittsylvania, Series 1994 A: 7.450% 01/01/09 1,000,000 1,019,860 7.550% 01/01/19 250,000 253,363 ----------- 6,760,025 ----------- INVESTOR OWNED - 3.5% AZ Maricopa County Pollution Control, El Paso Electric Co., Project, Series 2002 A, 6.250% 05/01/37 500,000 501,885 AZ Pima County Industrial Development Authority, Tucson Electric Development Authority, Electric Power Co., Series 1997 A, 6.100% 09/01/25 750,000 686,078 CT Development Authority, Connecticut Light & Power Co., Series 1993 B, 5.950% 09/01/28 100,000 103,992 IL Bryant Pollution Control Revenue, Central Illinois Light Co., Series 1993, 5.900% 08/01/23 1,000,000 925,140 LA Calcasieu Parish Industrial Development Board, Entergy Gulf States, Inc., Series 1999, 5.450% 07/01/10 500,000 496,585 PAR VALUE - ------------------------------------------------------------ LA West Feliciana Parish, Entergy Gulf States, Inc., Series 1999 B, 6.600% 09/01/28 $ 500,000 $ 504,870 MS Business Finance Corp., Systems Energy Resources Project, Series 1998, 5.875% 04/01/22 1,500,000 1,352,550 NV Clark County, Nevada Power Co., Series 1997 A, 5.900% 11/01/32 3,000,000 2,429,040 OH Air Quality Development Authority, Pollution Control, Cleveland Electric, Series 2002 A, 6.000% 12/01/13 850,000 866,864 TX Brazos River Authority Pollution Control, TXU Electric, Series 2001, 5.750% 05/01/36 1,050,000 947,635 ----------- 8,814,639 ----------- MUNICIPAL ELECTRIC - 5.2% CA Department of Water Resources, Power Supply Revenue Bonds, Series 2002 A, 5.500% 05/01/14 2,000,000 2,217,340 NY Long Island Power Authority, Series 1998 A, 5.250% 12/01/26 1,550,000 1,567,236 PR Puerto Rico Electric Power Authority, Series 2002 II, 5.125% 07/01/26 1,500,000 1,526,565 TX Austin Utilities System, Series 1994: (a) 05/15/17 6,600,000 3,186,084 (a) 05/15/18 5,000,000 2,264,250 WA Seattle Light & Power, Series 2001, 5.500% 03/01/17 2,250,000 2,387,633 ----------- 13,149,108 ----------- WATER & SEWER - 5.9% CA Castaic Lake Water Agency, Series 1999 A: (a) 08/01/25 10,445,000 2,999,177 (a) 08/01/26 10,445,000 2,832,057 LA Public Facility Authority, Belmont Water, 9.000% 09/15/24 (c) 730,000 511,000 MA Water Resources Authority, Series 1997 D, 5.000% 08/01/24 (i) 6,000,000 5,968,140 MS Five Lakes Utility District, 8.250% 07/15/24 500,000 467,500 TX Houston Water & Sewer System, Series 1991 C, (a) 12/01/12 3,000,000 1,935,180 ----------- 14,713,054 ----------- TOTAL MUNICIPAL BONDS (cost of $252,906,071) 245,962,102 ----------- See notes to investment portfolio. 10 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2002 MUNICIPAL PREFERRED STOCK - 0.2% SHARES VALUE - ------------------------------------------------------------ HOUSING - 0.2% MULTI-FAMILY - 0.2% Charter Mac Equity Issuer Trust Acceptance Co., 7.600% 11/30/50 (d) (cost of $500,000) 500,000 $ 539,300 ----------- SHORT-TERM OBLIGATIONS - 1.3% PAR - ------------------------------------------------------------ VARIABLE RATE DEMAND NOTES (J) - 1.3% MI Farmington Hills Hospital Financial Authority, Botsford General Hospital, Series 1991 B, 1.300% 02/15/16 $ 600,000 600,000 MN Minneapolis, Series 1997 B, 1.100% 12/01/07 300,000 300,000 NY New York City Municipal Finance Authority Water & Sewer, Series 1994 G, 1.300% 06/15/24 200,000 200,000 NY Long Island Power Authority, Electric Systems, Series 1998 2B, 1.300% 05/01/33 1,200,000 1,200,000 NY New York, Series 1993 A7, 1.300% 08/01/21 1,000,000 1,000,000 ----------- TOTAL SHORT-TERM OBLIGATIONS (cost of $3,300,000) 3,300,000 ----------- TOTAL INVESTMENTS - 99.5% (cost of $256,706,071) (k) 249,801,402 ----------- OTHER ASSETS & LIABILITIES, NET - 0.5% 1,242,676 - ----------------------------------------------------------- NET ASSETS* - 100.0% $251,044,078 ----------- NOTES TO INVESTMENT PORTFOLIO: - -------------------------------------------------------------------------------- (a) Zero coupon bond. (b) Denotes a restricted security, which is subject to restrictions on resale under federal securities laws. At November 30, 2002, these securities amounted to $2,462,928, which represents 1.0% of net assets. Additional information on these restricted securities held at November 30, 2002 are as follows: ACQUISITION ACQUISITION SECURITY DATE COST - -------------------------------------------------------------------------------- CA Statewide Community Development Authority: Crossroads School for Arts & Science, Series 1998: 6.000% 08/01/28 08/21/98 $ 460,000 6.000% 08/01/28 08/31/98 700,000 Eskaton Village-Grass Valley, Series 2000, 8.250% 11/15/31 09/08/00 750,000 MN White Bear Lake, Birch Lake Townhome Project, Series 1989 B, (a) 07/15/19 07/19/89 636,000 ----------- $2,546,000 ----------- (c) The issuer is in default of certain debt covenants. Income is not being fully accrued. (d) This security is exempt from registration under Rule 144A of the Securities Act of 1933 and may be resold in transactions exempt from registration normally to qualified institutional buyers. At November 30, 2002, the value of these securities amounted to $1,170,751 which represents 0.5% of net assets. (e) 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 interest and principal. (f) Settlement for this security is on a delayed delivery basis. (g) As of November 30, 2002, the Fund held bonds of United Airlines, Inc. representing 0.2% of net assets. United Airlines, Inc. filed for bankruptcy protection under Chapter 11 on December 9, 2002. (h) As of November 30, 2002, the Trust held securities of certain issuers that have filed for bankruptcy protection under Chapter 11 representing 0.2% of net assets. (i) This security, or a portion thereof with a market value of $2,141,568, is being used to collateralize open futures contracts. (j) Variable rate demand notes are considered short-term obligations. Interest rates change periodically on specified dates. These securities are payable on demand and are secured by either letters of credit or other credit support agreements from banks. The rates listed are as of November 30, 2002. (k) Cost for generally accepted accounting principles is $256,706,071. Cost for federal income tax purposes is $256,582,574. The difference between cost for generally accepted accounting principles and cost on a tax basis is related to amortization/accretion tax elections on fixed-income securities. Short futures contracts open at November 30, 2002: UNREALIZED PAR VALUE APPRECIATION COVERED BY EXPIRATION (DEPRECIATION) TYPE CONTRACTS MONTH AT 11/30/02 - ----------------------------------------------------------------- 10 Year U.S. Treasury Note $62,100,000 March $305,150 30 Year U.S. Treasury Bond 33,900,000 March 280,819 Municipal 10 Year Note Index 12,900,000 March 75,942 ----------- $661,911 ----------- * Net assets represent both Common Shares and Auction Preferred Shares. See notes to financial statements. 11 STATEMENT OF ASSETS AND LIABILITIES November 30, 2002 ASSETS: Investments, at cost $256,706,071 ------------- Investments, at value $249,801,402 Cash 54,803 Receivable for: Investments sold 135,000 Interest 4,134,028 Deferred Trustees' compensation plan 7,022 ------------- Total Assets 254,132,255 ------------- LIABILITIES: Payable for: Investments purchased on a delayed delivery basis 1,434,082 Futures variation margin 394,098 Distributions-- common shares 1,023,279 Distributions-- preferred shares 5,301 Management fee 132,515 Pricing and bookkeeping fees 7,406 Trustees' fee 267 Deferred Trustees' fee 7,022 Other liabilities 84,207 ------------- Total Liabilities 3,088,177 ------------- 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 $214,971,483 Undistributed net investment income 565,056 Accumulated net realized loss (48,249,703) Net unrealized appreciation (depreciation) on: Investments (6,904,669) Futures contracts 661,911 ------------- Net assets at value applicable to 27,656,180 common shares of beneficial interest outstanding $161,044,078 ------------- Net asset value per common share $ 5.82 ------------- STATEMENT OF OPERATIONS For the Year Ended November 30, 2002 INVESTMENT INCOME: Interest $ 16,097,889 ------------- EXPENSES: Management fee 1,669,903 Pricing and bookkeeping fees 131,136 Trustees' fee 14,673 Preferred shares remarketing commissions 225,258 Custody fee 11,376 Transfer agent fee 110,248 Other expenses 126,968 ------------- Total Expenses 2,289,562 Custody earnings credit (1,587) ------------- Net Expenses 2,287,975 ------------- Net Investment Income 13,809,914 ------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FUTURES CONTRACTS: Net realized loss on: Investments (155,213) Futures contracts (6,153,544) ------------- Net realized loss (6,308,757) ------------- Net change in unrealized appreciation/ depreciation on: Investments (309,449) Futures contracts (2,325,723) ------------- Net change in unrealized appreciation/depreciation (2,635,172) ------------- Net Loss (8,943,929) ------------- Net Increase in Net Assets from Operations 4,865,985 ------------- LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (1,342,604) ------------- Net Increase in Net Assets from Operations Applicable to Common Shares $ 3,523,381 ------------- See notes to financial statements. 12
STATEMENT OF CHANGES IN NET ASSETS YEAR ENDED NOVEMBER 30, ------------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 13,809,914 $ 14,607,706 Net realized loss on investments and futures contracts (6,308,757) (10,760,964) Net change in unrealized appreciation/depreciation on investments and futures contracts (2,635,172) 11,360,310 ------------- ------------- Net Increase from Operations 4,865,985 15,207,052 ------------- ------------- LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (1,342,604) (2,721,317) ------------- ------------- Net Increase in Net Assets from Operations Applicable to Common Shares 3,523,381 12,485,735 ------------- ------------- LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS: From net investment income (11,625,618) (10,670,628) ------------- ------------- SHARE TRANSACTIONS: Distributions reinvested 66,517 -- ------------- ------------- Total Increase (Decrease) in Net Assets Applicable to Common Shares (8,035,720) 1,815,107 NET ASSETS APPLICABLE TO COMMON SHARES: Beginning of period 169,079,798 167,264,691 ------------- ------------- End of period (including undistributed net investment income and overdistributed net investment income of $565,056 and $(339,824), respectively) $161,044,078 $169,079,798 ------------- ------------- NUMBER OF TRUST SHARES: Common Shares: Issued for distributions reinvested 11,067 -- Outstanding at: Beginning of period 27,645,113 27,645,113 ------------- ------------- End of period 27,656,180 27,645,113 ------------- ------------- Preferred Shares: Outstanding at end of period 3,600 3,600 ------------- ------------- See notes to financial statements.
13 NOTES TO FINANCIAL STATEMENTS November 30, 2002 NOTE 1. ACCOUNTING POLICIES 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. The Trust's primary investment goal is to provide high current income, generally exempt from federal income taxes. The Trust's secondary goal is to seek total return. The Trust is authorized to issue an unlimited number of common shares of beneficial interest and 3,600 Auction Preferred Shares ("APS"). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of 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 AND TRANSACTIONS: Debt securities generally are valued by a pricing service based upon market transactions for normal, institutional-size trading units of similar securities. Such 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. Certain 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. When management deems it appropriate, an over-the-counter or exchange bid quotation is used. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Options are valued at the last reported sale price, or in the absence of a sale, the mean between the last quoted bid and asking price. Short-term obligations with a maturity of 60 days or less are valued at amortized cost. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value under procedures approved by the Board of Trustees. Security transactions are accounted for on the date the securities are purchased, sold or mature. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. The Trust may trade securities on other than normal settlement terms. This may increase the risk if the other party to the transaction fails to deliver and causes the Trust to subsequently invest at less advantageous prices. FEDERAL INCOME TAXES: Consistent with the Trust's policy to qualify as a regulated investment company and to distribute all of its taxable and tax-exempt income, no federal income tax has been accrued. INTEREST INCOME, DEBT DISCOUNT AND PREMIUM: Interest income is recorded on the accrual basis. Original issue discount is accreted to interest income over the life of the security with a corresponding increase in the cost basis. Premium is amortized against interest income with a corresponding decrease in the cost basis. 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 cumulative effect of this accounting change did not impact total net assets of the Trust, but resulted in reclassifications as follows, based on securities held by the Trust on December 1, 2001: NET UNREALIZED COST APPRECIATION ------ -------------- $63,284 $(63,284) The effect of this change, for the year ended November 30, 2002, was as follows: NET INVESTMENT NET REALIZED NET UNREALIZED INCOME GAINS APPRECIATION ------ ------- ------------ $60,310 $(97) $(60,213) The Statement of Changes in Net Assets and Financial Highlights for prior periods have not been restated to reflect this change. DISTRIBUTIONS TO SHAREHOLDERS: Distributions to common shareholders are recorded on the ex-date. Distributions to preferred shareholders are recorded daily and are payable at the end of each dividend period. Each dividend payment period for the APS is generally seven days. The applicable dividend rate for the APS on November 30, 2002 was 1.25%. For the year ended November 30, 2002, the Trust declared dividends to Auction Preferred shareholders amounting to $1,342,604, representing an average APS dividend rate of 1.49%. NOTE 2. FEDERAL TAX INFORMATION Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from 14 NOTES TO FINANCIAL STATEMENTS (CONTINUED) generally accepted accounting principles. These differences are primarily due to differing treatments for discount accretion on debt securities, straddle deferrals, mark-to-market on futures contracts, current year distribution payable, capital loss carryforwards, non-deductible expenses and defaulted bond interest. Reclassifications are made to the Trust's capital accounts to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended November 30, 2002, permanent items identified and reclassified among the components of net assets are as follows: UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN INCOME LOSS CAPITAL ------ ------- ------------ $(96) $5,301,321 $(5,301,225) Net investment income, net realized gain (loss) and net assets were not affected by this reclassification. The tax character of distributions paid to common and APS shareholders during the year was as follows: LONG-TERM TAX-EXEMPT ORDINARY INCOME CAPITAL GAINS INCOME ------------ ------------ ---------------- $12,010 $-- $12,956,212 As of November 30, 2002, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED TAX-EXEMPT LONG-TERM UNREALIZED INCOME CAPITAL GAINS DEPRECIATION ------------ ------------ ---------------- $2,972,888 $-- $(6,119,261) The following capital loss carryforwards are 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 ---------- -------------- 2003 $ 7,498,926 2004 4,074 2005 7,196,783 2007 3,490,821 2008 13,036,764 2009 3,114,307 2010 7,684,792 -------------- $ 42,026,467 -------------- NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES MANAGEMENT FEE: Colonial Management Associates, Inc. (the "Advisor") is the investment advisor of the Trust and furnishes accounting and other services and office facilities for a fee to be paid monthly 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: The Advisor is responsible for providing pricing and bookkeeping services to the Trust under a Pricing and Bookkeeping Agreement. Under a separate agreement (the "Outsourcing Agreement"), the Advisor has delegated those functions to State Street Bank and Trust Company ("State Street"). The Advisor pays fees to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Trust, the Advisor receives from the Trust an annual flat fee of $10,000, paid monthly, and in any month that the Trust's average weekly net assets, including assets applicable to the APS, are more than $50 million, a monthly fee equal to the average weekly net assets, including assets applicable to the APS, of the Trust for that month multiplied by a fee rate that is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. For the year ended November 30, 2002, the net asset based fee rate was 0.036%. The Trust also pays out-of-pocket costs for pricing services. OTHER: The Trust pays no compensation to its officers, all of whom are employees of the Advisor or its affiliates. The Trust's Independent 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. The Trust has an agreement with its custodian bank under which $1,587 of custody fees were reduced by balance credits for the year ended November 30, 2002. 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. NOTE 4. 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 and in accordance with the guidelines prescribed by the 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 of the APS. At November 30, 2002, there were no such restrictions on the Trust. 15 NOTES TO FINANCIAL STATEMENTS (CONTINUED) Under Emerging Issues Task Force ("EITF") promulgation Topic D-98, Classification and Measurement of Redeemable Securities, which was issued on July 19, 2001, preferred securities that are redeemable for cash or other assets are classified outside of permanent equity to the extent that the redemption is at a fixed or determinable price and at the option of the holder or upon the occurrence of an event that is not solely within the control of the issuer. Subject to the guidance of the EITF, the Trust's preferred shares, which were previously classified as a component of net assets, have been reclassified outside of permanent equity (net assets) in the accompanying financial statements. Prior year amounts have also been reclassified to conform with this presentation. The impact of this reclassification creates no change to the net assets available to common shareholders. NOTE 5. PORTFOLIO INFORMATION INVESTMENT ACTIVITY: For the year ended November 30, 2002, purchases and sales of investments, other than short-term obligations, were $69,135,000 and $70,599,997, respectively. Unrealized appreciation (depreciation) at November 30, 2002, based on cost of investments for federal income tax purposes, was: Gross unrealized appreciation $ 11,481,671 Gross unrealized depreciation (18,262,843) ------------ Net unrealized depreciation $ (6,781,172) ------------ OTHER: There are certain risks arising from geographic concentration in any state. Certain revenue or tax related events in a state may impair the ability of certain issuers of municipal securities to pay principal and interest on their obligations. The Trust may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. The Trust may invest in municipal and U.S. Treasury futures contracts and purchase and write options on futures. 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 and options involves certain risks which include: (1) imperfect correlation between the price movement of the instruments and the underlying securities, (2) inability to close out a position due to different trading hours, or the temporary absence of a liquid market for either the instrument or the underlying securities or (3) an inaccurate prediction by the Advisor 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 its custodian in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Trust equal to the daily change in the contract value and are recorded as variation margin payable or receivable and offset in unrealized gains or losses. The Trust recognizes a realized gain or loss when the contract is closed or expires. Refer to the Trust's Investment Portfolio for a summary of open futures contracts at November 30, 2002. Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such 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 resales. The Trust's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in good faith using methods approved by the Board of Trustees. 16 FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows (common shares unless otherwise noted): YEAR ENDED NOVEMBER 30, ------------------------------------------------------------------- 2002 2001 2000 1999 1998 ------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 6.12 $ 6.05 $ 6.51 $ 7.57 $ 7.41 ----------- ----------- ------------ ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.50(a)(b) 0.53(a) 0.55(c) 0.46 0.47 Net realized and unrealized gain (loss) on investments and futures contracts (0.33)(b) 0.03 (0.44) (0.97) 0.18 ----------- ----------- ------------ ----------- ----------- Total from Investment Operations 0.17 0.56 0.11 (0.51) 0.65 ----------- ----------- ------------ ----------- ----------- LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (0.05) (0.10) (0.14) (0.04) -- ----------- ----------- ------------ ----------- ----------- Total from Investment Operations Applicable to Common Shareholders 0.12 0.46 (0.03) (0.55) 0.65 ----------- ----------- ------------ ----------- ----------- LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS: From net investment income (0.42) (0.39) (0.43) (0.42) (0.48) In excess of net investment income -- -- -- (0.04) (0.01) ----------- ----------- ------------ ----------- ----------- Total Distributions Declared to Common Shareholders (0.42) (0.39) (0.43) (0.46) (0.49) ----------- ----------- ------------ ----------- ----------- LESS SHARE TRANSACTIONS: Commission and offering costs-- preferred shares -- -- --(d) (0.05) -- ----------- ----------- ------------ ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 5.82 $ 6.12 $ 6.05 $ 6.51 $ 7.57 ----------- ----------- ------------ ----------- ----------- Market price per share-- common shares $ 5.67 $ 5.65 $ 5.38 $ 5.75 $ 8.13 ----------- ----------- ------------ ----------- ----------- Total return-- based on market value -- common shares (e) 7.87% 12.05% 0.84% (24.33)% 14.57% ----------- ----------- ------------ ----------- ----------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (f)(g) 1.37% 1.45% 1.33% 1.08% 0.82% Net investment income before preferred stock dividend (f)(g) 8.28%(b) 8.55% 8.88% 7.00% 6.20% Net investment income after preferred stock dividend (f)(g) 7.47%(b) 6.94% 6.68% 6.36% 6.20% Portfolio turnover rate 27% 12% 12% 20% 34% Net assets, end of period (000's)-- common shares $ 161,044 $ 169,080 $ 167,265 $ 180,082 $ 208,931 (a)Per share data was calculated using average shares outstanding for the period. (b)Effective December 1, 2001, the Trust adopted the provision of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on all debt securities. The effect of this change, for the year ended November 30, 2002, was to increase the ratio of net investment income to average net assets from 8.24% to 8.28% and increase the ratio of net investment income (adjusted for dividend payments to preferred shareholders) from 7.43% to 7.47%. The impact to net investment income and net realized and unrealized loss per share was less than $0.01. Per share data and ratios for periods prior to November 30, 2002, have not been restated to reflect this change in presentation. (c)The per share net investment income amount does not reflect the period's reclassification of differences between book and tax basis net investment income. (d)Rounds to less than $0.01 per share. (e)Total return at market value assuming all distributions reinvested at prices calculated in accordance with the Dividend Reinvestment Plan. (f)The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (g)Ratios reflect average net assets available to common shares only. ASSET COVERAGE REQUIREMENTS INVOLUNTARY AVERAGE ASSET LIQUIDATING MARKET TOTAL AMOUNT COVERAGE PREFERENCE VALUE OUTSTANDING PER SHARE PER SHARE PER SHARE - ------------------------------------------------------------------------------------------------------------------------------- 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 * On July 20, 1999, the Trust began offering Auction Preferred Shares.
17 FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows (common shares unless otherwise noted): YEAR ENDED NOVEMBER 30, ------------------------------------------------------------------- 1997 1996 1995 1994 1993 ------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 7.41 $ 7.48 $ 7.15 $ 7.83 $ 7.89 ----------- ----------- ------------ ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.51 0.51 0.55 0.61 0.64 Net realized and unrealized gain (loss) on investments and futures contracts --(a) (0.07) 0.33 (0.71) (0.06) ----------- ----------- ------------ ----------- ----------- Total Income from Investment Operations 0.51 0.44 0.88 (0.10) 0.58 ----------- ----------- ------------ ----------- ----------- LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS: From net investment income (0.51) (0.51) (0.55) (0.58) (0.64) ----------- ----------- ------------ ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 7.41 $ 7.41 $ 7.48 $ 7.15 $ 7.83 ----------- ----------- ------------ ----------- ----------- Market price per share-- common shares $ 7.56 $ 7.25 $ 6.75 $ 6.75 $ 8.00 ----------- ----------- ------------ ----------- ----------- Total return-- based on market value-- common shares (b) 11.67% 15.36% 8.04% (10.06)% 11.56% ----------- ----------- ------------ ----------- ----------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (c) 0.86% 0.91% 0.98% 0.90% 0.87% Net investment income (c) 6.83% 6.87% 7.47% 8.12% 8.03% Portfolio turnover rate 15% 22% 24% 24% 21% Net assets, end of period (000's)-- common shares $ 203,533 $ 202,793 $ 204,666 $ 195,444 $ 213,292 (a)Rounds to less than $0.01 per share. (b)Total return at market value assuming all distributions reinvested at prices calculated in accordance with the Dividend Reinvestment Plan. (c)The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%.
18 REPORT OF INDEPENDENT ACCOUNTANTS TO THE TRUSTEES AND THE SHAREHOLDERS OF COLONIAL MUNICIPAL INCOME TRUST In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Colonial Municipal Income Trust (the "Trust") at November 30, 2002, and the results of its operations, the changes in its net assets, and its financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at November 30, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts January 20, 2003 19 UNAUDITED INFORMATION FEDERAL INCOME TAX INFORMATION 99.91% of the distributions from net investment income will be treated as exempt income for federal income tax purposes. 20 DIVIDEND REINVESTMENT PLAN COLONIAL MUNICIPAL INCOME TRUST Shareholders may elect to have all distributions of dividends and capital gains automatically reinvested by EquiServe Trust Company, N.A. (the "Plan Agent"), as agent under the Trust's Dividend Reinvestment and Cash Purchase Plan (the "Plan"). Pursuant to the Plan, the provisions of which are described below, shareholders not making such an election will receive all such amounts in cash paid by check mailed directly to the shareholder by the Plan Agent, as the dividend paying agent. If the Trustees of the Trust declare a dividend or determine to make a capital gain distribution payable either in shares of the Trust or in cash, as shareholders may have elected, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in shares of the Trust. If the market price of the shares on the payment date for the dividend or distribution is equal to or exceeds their net asset value, participants will be issued shares of the Trust at the higher of net asset value of 95% of the market price. If 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 his 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 or comparable size, because the Plan Agent will be purchasing shares for all participants in blocks and charging to cash purchase Plan participants a pro rated portion of the lower commissions usually obtainable on such block purchases. The automatic reinvestment of dividends and distributions will not relieve participants of any income tax that may be payable on such dividends or distributions. The Plan may be amended or terminated on 30 days' written notice to the Plan participants. All correspondence concerning the Plan should be directed to EquiServe Trust Company, N.A., by mail at P.O. Box 403011, Providence, RI 02940-3011, or by phone at 1-800-426-5523. 21 TRUSTEES The Trustees serve terms of indefinite duration. The names, addresses and ages of the Trustees and officers of Colonial Municipal Income Trust, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee, and other directorships they hold are shown below.
Year first Number of elected or portfolios in fund Other Position with appointed Principal occupation(s) complex overseen directorships Name, address and age Liberty Funds1 to office during past five years by trustee held - ------------------------------------------------------------------------------------------------------------------------------------ Disinterested Trustees - ---------------------- Douglas A. Hacker (age 47) Trustee 1996 Executive Vice President-Strategy of United Airlines 103 None c/o Liberty Funds Group LLC since December 2002 (formerly President of UAL One Financial Center Loyalty Services and Executive Vice President Boston, MA 02111 of United Airlines (airline) from September 2001 to December 2002; formerly Executive Vice President from July 1999 to September 2001); Chief Financial Officer of United Airlines since July 1999; Senior Vice President and Chief Financial Officer of UAL, Inc. prior thereto Janet Langford Kelly (age 45) Trustee 1996 Executive Vice President-Corporate Development 103 None c/o Liberty Funds Group LLC and Administration, General Counsel and One Financial Center Secretary, Kellogg Company (food manufacturer), Boston, MA 02111 since September 1999; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer- products manufacturer) prior thereto Richard W. Lowry (age 66) Trustee 1995 Private Investor since 1987 (formerly 105*** None c/o Liberty Funds Group LLC Chairman and Chief Executive Officer, U.S. One Financial Center Plywood Corporation (building products Boston, MA 02111 manufacturer)) Salvatore Macera (age 71) Trustee 1998 Private Investor since 1981 (formerly Executive 103 None c/o Liberty Funds Group LLC Vice President and Director of Itek Corporation One Financial Center (electronics) from 1975 to 1981) Boston, MA 02111 Charles R. Nelson (age 60) Trustee 1981 Professor of Economics, University of Washington, 118* None c/o Liberty Funds Group LLC since January 1976; Ford and Louisa Van Voorhis One Financial Center Professor of Political Economy, University of Boston, MA 02111 Washington, since September 1993; Director, Institute for Economic Research, University of Washington, since September2001; Adjunct Professor of Statistics, University of Washington, since September 1980; Associate Editor, Journal of Money Credit and Banking, since September, 1993; Trustee, Columbia Funds since July 2002; consultant on economic and statistical matters John J. Neuhauser (age 59) Trustee 1985 Academic Vice President and Dean of Faculties 105*** Saucony, Inc. c/o Liberty Funds Group LLC since August 1999, Boston College (formerly (athletic footwear) One Financial Center Dean, Boston College School of Management and SkillSoft Corp. Boston, MA 02111 from September 1977 to September 1999) (e-learning) Thomas E. Stitzel (age 66) Trustee 1998 Business Consultant since 1999 (formerly 103 None c/o Liberty Funds Group LLC Professor of Finance from 1975 to 1999 and Dean One Financial Center from 1977 to 1991, College of Business, Boise State Boston, MA 02111 University); Chartered Financial Analyst 1 In December 2000, the board of each of the Liberty Funds and Stein Roe Funds were combined into one board of trustees with common membership. The date shown is the earliest date on which a trustee was elected to either the Liberty board or the former Stein Roe Funds board.
22
TRUSTEES (CONTINUED) Year first Number of elected or portfolios in fund Other Position with appointed Principal occupation(s) complex overseen directorships Name, address and age Liberty Funds to office during past five years by trustee held - ------------------------------------------------------------------------------------------------------------------------------------ Disinterested Trustees - ---------------------- Thomas C. Theobald (age 65) Trustee 1996 Managing Director, William Blair Capital Partners 103 Xerox Corporation c/o Liberty Funds Group LLC (private equity investing) since September 1994 (business products One Financial Center (formerly Chief Executive Officer and Chairman and services), Boston, MA 02111 of the Board of Directors, Continental Bank Anixter International Corporation) (network support equipment distributor), Jones Lang LaSalle (real estate management services) and MONY Group (life insurance) Anne-Lee Verville (age 57) Trustee 1998 Author and speaker on educational systems needs 103 Chairman of the c/o Liberty Funds Group LLC (formerly General Manager, Global Education Board of Directors, One Financial Center Industry from 1994 to 1997, and President, Enesco Group, Inc. Boston, MA 02111 Applications Solutions Division from 1991 to (designer, importer 1994, IBM Corporation (global education and and distributor of global applications)) giftware and collectibles) Interested Trustees - ------------------- William E. Mayer** (age 62) Trustee 1994 Managing Partner, Park Avenue Equity Partners 105*** Lee Enterprises c/o Liberty Funds Group LLC (private equity fund) since February 1999 (print and online One Financial Center (formerly Founding Partner, Development Capital media), WR Hambrecht Boston, MA 02111 LLC from November 1996 to February 1999; + Co. (financial Dean and Professor, College of Business and service provider), Management, University of Maryland from First Health (health October 1992 to November 1996) care) and Systech Retail Systems (retail industry technology provider) Joseph R. Palombo** (age 49) Trustee 2000 Chief Operating Officer of Columbia 103 None One Financial Center and Management Group, Inc. (Columbia Management Boston, MA 02111 Chairman Group) since November 2001; formerly Chief of the Operations Officer of Mutual Funds, Liberty Board Financial Companies, Inc. from August 2000 to November 2001; Executive Vice President of Stein Roe & Farnham, Incorporated (Stein Roe) since April 1999; Executive Vice President and Director of Colonial Management Associates, Inc. since April 1999; Executive Vice President and Chief Administrative Officer of Liberty Funds Group LLC (LFG) since April 1999; Director of Stein Roe since September 2000; Trustee and Chairman of the Board of Stein Roe Mutual Funds since October 2000; Manager of Stein Roe Floating Rate Limited Liability Company since October 2000; Vice President of Galaxy Funds since September 2002; (formerly Vice President of Liberty Funds from April 1999 to August 2000; Chief Operating Officer and Chief Compliance Officer, Putnam Mutual Funds from December 1993 to March 1999)
* In addition to serving as a disinterested trustee of Liberty Funds, Mr. Nelson serves as a disinterested director of Columbia Funds, currently consisting of 15 funds, which are advised by an affiliate of the Advisor. ** Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 ("1940 Act")) by reason of his affiliation with WR Hambrecht + Co, a registered broker-dealer. Mr. Palombo is an interested person as an employee of an affiliate of the Advisor. *** In addition to serving as a trustee of Liberty Funds, Mr. Lowry, Mr. Neuhauser and Mr. Mayer each serve as a director/trustee of Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. 23
OFFICERS Year first elected or Position with appointed Name, address and age Liberty Funds to office Principal occupation(s) during past five years - ------------------------------------------------------------------------------------------------------------------------------------ Keith T. Banks (age 47) President 2001 President of Liberty Funds since November 2001; President, Chief Investment Columbia Management Group, Inc. Officer and Chief Executive Officer of Columbia Management Group or its 590 Madison Avenue, 36th Floor predecessor since August 2000; President, Chief Executive Officer and Chief New York, NY 10022 Investment Officer of Fleet Investment Advisors Inc. since 2000 (formerly Managing Director and Head of U.S. Equity, J.P. Morgan Investment Management from November 1996 to August 2000); President of Galaxy Funds since September 2002 Vicki L. Benjamin (age 41) Chief 2001 Controller of Liberty Funds, Stein Roe and Liberty All-Star Funds since May One Financial Center Accounting 2002; Chief Accounting Officer of Liberty Funds, Stein Roe and Liberty All-Star Boston, MA 02111 Officer Funds since June 2001; Controller and Chief Accounting Officer of Galaxy Funds since September 2002; Vice President of Liberty Funds since April 2001 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May 1998 to April 2001; Audit Manager from July 1994 to June 1997; Senior Audit Manager from July 1997 to May 1998, Coopers & Lybrand, LLP) J. Kevin Connaughton (age 38) Treasurer 2000 Treasurer of Liberty Funds and Liberty All-Star Funds since December 2000 One Financial Center (formerly Controller of the Liberty Funds and Liberty All-Star Funds from Boston, MA 02111 February 1998 to October 2000); Treasurer of Stein Roe Funds since February 2001 (formerly Controller from May 2000 to February 2001); Treasurer of Galaxy Funds since September 2002; Senior Vice President of Liberty Funds since January 2001 (formerly Vice President from April 2000 to January 2001; Vice President of Colonial Management Associates, Inc. from February 1998 to October 2000; Senior Tax Manager; Coopers & Lybrand, LLP from April 1996 to January 1998) Jean S. Loewenberg (age 57) Secretary 2002 Secretary of Liberty Funds, Stein RoeFunds and Liberty All-Star Funds since One Financial Center February 2002; General Counsel of Columbia Management Group since December 2001; Boston, MA 02111 Senior Vice President since November 1996, Assistant General Counsel since September 2002 of Fleet National Bank (formerly Senior Vice President and Group Counsel of Fleet National Bank from November 1996 to September 2002)
24 TRANSFER AGENT - -------------------------------------------------------------------------------- IMPORTANT INFORMATION ABOUT THIS REPORT The Transfer Agent for Colonial Municipal Income Trust is: EquiServe Trust Company, N.A. 150 Royall Street Canton, MA 02021 800-426-5523 The trust mails one shareholder report to each shareholder address. Shareholders can order additional reports by calling 800-345-6611. In addition, representatives at that number can provide shareholders information about the trust. Financial advisors who want additional information about the fund may speak to a representative at 800-426-3750. This report has been prepared for shareholders of Colonial Municipal Income Trust. COLONIAL MUNICIPAL INCOME TRUST ANNUAL REPORT 101-02/043M-1102 (01/03) 02/3047 -----END PRIVACY-ENHANCED MESSAGE-----