-----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, LWQOJ2J/ZTEOAcTYRDGfiBChweKdWrmmj+0X4s7xIO3BrYLIcnHyjwBXbBzYQNTg /uFDDnO2eSuAi9Yogl7n2w== 0000891804-04-000316.txt : 20040205 0000891804-04-000316.hdr.sgml : 20040205 20040205134558 ACCESSION NUMBER: 0000891804-04-000316 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031130 FILED AS OF DATE: 20040205 EFFECTIVENESS DATE: 20040205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL MUNICIPAL INCOME TRUST CENTRAL INDEX KEY: 0000809844 FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04992 FILM NUMBER: 04569519 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CTR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 N-CSR 1 file001.txt COLONIAL MUNICIPAL INCOME TRUST 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) Russell Kane, Esq. Columbia Management Group, Inc. One Financial Center Boston, MA 02111 - ------------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: 1-617-772-3363 ------------------- Date of fiscal year end: 11/30/2003 ------------------ Date of reporting period: 11/30/2003 ----------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. [photo of domed building] COLONIAL MUNICIPAL INCOME TRUST ANNUAL REPORT NOVEMBER 30, 2003 Not FDIC Insured May Lose Value No Bank Guarantee COLONIAL FUNDS One Financial Center Boston, MA 02111-2621 January 14, 2004 Dear Shareholder: I am writing to you as the independent chairman of the board of trustees of your Colonial fund. I have been privileged to serve on the board of the Colonial funds for more than three years and on the board of many of the affiliated Columbia funds for more than seven years. On December 8, 2003 the board of trustees elected me the chairman. Over those seven years I have gained a deep sense of responsibility for the continued success of our funds. Needless to say, the entire board shares that commitment to you. These have been troubling times in the fund industry, with newspapers reporting widely on trading and governance failings. Your board has been energetic over the past year in strengthening our organization and our capacity to effectively oversee the Colonial funds. First, as already indicated, the trustees in December elected an independent trustee to chair our twelve person board. All of the trustees are completely independent of the advisor and its affiliates except for the president of the funds, Joseph Palombo. Each committee of the board is comprised only of independent trustees. Second, last year we reconfigured the membership of the four person audit committee to include only persons qualifying as "audit committee financial experts" under the demanding standards of the Sarbanes-Oxley legislation. Few audit committees are fortunate to possess such a breadth and depth of financial experience. Third, we strengthened our oversight capacity by appointing Martha Fox as chief compliance officer of the Colonial funds, reporting directly to your fund's audit committee. We also assigned board members to four separate investment oversight committees, each better able to monitor performance of individual funds. Fourth, with guidance from our board the investment advisor last year increased its vigilance to identify and discourage trading in open end mutual fund shares by speculators. Monitoring personnel have attempted to identify and reject frequent traders, but frankly that effort by itself cannot be 100% effective. Accordingly, in February 2003 we implemented 2% redemption penalties in the open end international funds most subject to market timing, and we are considering still broader application of redemption fees to curb further attempts to profit from the open end funds by short-term trading. We are also closely monitoring legislative and regulatory initiatives that would aid in preventing abuses of open end funds that currently cannot be detected directly by management or our transfer agent. Finally, to further align the interests of the trustees with those of our shareholders, the board late last year voted to double the required investment by each trustee in the funds that we oversee. At the same time, new policies were instituted requiring all investment personnel and trustees to hold any mutual fund shares for a minimum of one year (unless extraordinary circumstances warrant an exception to be granted by a board committee). Undoubtedly, more improvements will be made in the period ahead, but the board wants you to know that we take our responsibilities very seriously and we commit to you our continued efforts to serve your interests. Sincerely, /s/ Thomas C. Theobald Thomas C. Theobald Chairman PRESIDENT'S MESSAGE DEAR SHAREHOLDER: It was another solid year for the US bond market. However, the positive gains reported from all major sectors masked an extremely volatile environment. Most of the gains were actually earned in the first half of the reporting period and they were sufficient to offset losses or declining performance in the second half. From December through mid-June, interest rates generally declined and bond prices rose as the economy struggled to gain a solid footing and the nation prepared to go to war. In June, the yield on the 10-year Treasury note fell to a 45-year low of just over 3.1%. High-yield bonds were the primary beneficiaries of this trend as investors seemed willing to put their fears aside and look to better times ahead. However, after the major military battles of the war were declared over and the economy showed clear signs of picking up, interest rates began to rise and bond prices came down in most sectors. The 10-year yield reached a high of 4.4% in August, then moved within a tight range around 4.0% to 4.2% for the remainder of the period. As the environment changed, high-yield and mortgage bonds held up better than other sectors while Treasury bonds lagged. This reversal of fortune for bonds and a shift of investor enthusiasm back to stocks, which drove equity returns back into double digit territory, serve as a reminder that a diversified portfolio may offer the best opportunity for long-term investment success. Talk to your financial advisor if you're uncertain about the level of diversification of your portfolio. Your advisor can help you keep your investments on track. As always, thank you for investing in Colonial Funds. We look forward to continuing to serve you in the years ahead. Sincerely, /s/ Joseph R. Palombo Joseph R. Palombo President January 12, 2004 Economic and market conditions change frequently. There is no assurance that the trends described in this report will continue or commence. 1 PORTFOLIO MANAGER'S REPORT PRICE PER SHARE AS OF 11/30/03 ($) Net asset value 5.85 - ----------------------------- Market price 5.65 - ----------------------------- 1-YEAR TOTAL RETURN AS OF 11/30/03 (%) Net asset value 8.27 - ----------------------------- Market price 7.35 - ----------------------------- Lipper High Yield Municipal Debt Funds Category average 8.61 - ----------------------------- All results shown assume reinvestment of distributions. DISTRIBUTIONS DECLARED PER COMMON SHARE 12/1/02-11/30/03 ($) 0.43 - ----------------------------- A portion of the trust's income may be subject to the alternative minimum tax. The trust may at times purchase tax-exempt securities at a discount from their original issue price. Some or all of this discount may be included in the trust's ordinary income, and any market discount is taxable when distributed. TOP 5 SECTORS AS OF 11/30/03 (%) Hospitals 10.0 - ------------------------------ Local general obligations 6.8 - ------------------------------ Nursing homes 6.2 - ------------------------------ Congregate care retirement 6.0 - ------------------------------ Water & sewer 6.0 - ------------------------------ QUALITY BREAKDOWN AS OF 11/30/03 (%) AAA 39.9 - ----------------------------- AA 0.5 - ----------------------------- A 4.5 - ----------------------------- BBB 16.5 - ----------------------------- BB 6.3 - ----------------------------- B 1.4 - ----------------------------- CCC 0.5 - ----------------------------- CC 0.3 - ----------------------------- Non-rated 29.4 - ----------------------------- Cash equivalents 0.7 - ----------------------------- Sector breakdowns are calculated as a percentage of net assets (including auction preferred shares). 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 that the trust will continue to maintain this quality breakdown or invest in these sectors in the future. For the 12-month period ended November 30, 2003, Colonial Municipal Income Trust returned 8.27%, based on investment at net asset value. The trust fell slightly behind its peer group, the Lipper High Yield Municipal Debt Funds Category average, which averaged 8.61%.1 In the first half of the period, the trust's performance was helped by its underweight in high-yield bonds, which lagged higher-quality issues when interest rates were falling. This underweight hurt the trust slightly in the second half of the period, when high-yield, lower-quality bonds outperformed as the economy improved and interest rates rose. Yet, its position in high yield was substantial enough to make a positive overall contribution to the trust's performance. We kept the trust's duration short relative to its peer group. Duration is a measure of interest rate sensitivity. We lower--or shorten--duration when we expect interest rates to rise and bond prices to fall. This move helped performance as rising interest rates hampered bond returns during this period. Leveraged positions provided the trust with additional income during the period. We have, in effect, "borrowed against" the trust's investment positions by issuing preferred shares, which pay out a short-term variable rate. When those preferred shares were issued in 1999, we invested the proceeds in bonds with longer maturities. During this reporting period, the payout rate of preferred shares was much lower than the yield the trust earned from those longer-maturity bonds. The trust issued preferred shares because the leverage they provided made it possible to enhance yield. However, the use of leverage increases the likelihood of share price volatility and market risk. In order to reduce that extra price volatility, we can hedge using futures contracts. When we shorten duration (decrease price volatility) using futures, and bond prices rise, we show losses on the futures contracts that are typically offset, at least partially, by unrealized price gains on the bonds held. Specific issues also contributed positively to performance, including HealthEast, a Minnesota hospital and US Airways (1.2% and 0.3% of total investments, respectively)2 and other airline bonds. The trust's sizable stake in zero coupon municipal bonds, which did especially well early in the period, further helped returns. - ------------ 1 Lipper, Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 2 Holdings are disclosed as of November 30, 2003. 2 PORTFOLIO MANAGER'S REPORT (CONTINUED) The trust's stake in nursing home bonds detracted from performance relative to its peer group, because many issuers suffered as liability insurance costs soared and some fiscally-strapped states lowered Medicaid payments. We reduced our nursing home holdings. We increased the trust's exposure to more economically-sensitive sectors, such as paper, where we added bonds issued on behalf of Weyerhaeuser (0.2% of total investments), which made a positive contribution to performance. Going forward, we expect high-yield municipal bonds to do well as the economy improves and interest rates slowly rise. /s/ Maureen G. Newman Maureen G. Newman has been the portfolio manager of Colonial Municipal Income Trust since August 1998. Ms. Newman has managed various other tax-exempt funds for Columbia Management Advisors, Inc. or its predecessors since May 1996. Past performance is no guarantee of future investment results. Current performance may be higher or lower than performance data shown. Tax-exempt investing offers current tax-free income, but it also involves certain risks. The value of the trust shares will be affected by interest rate changes and the creditworthiness of issues held in the trust. Investing in high-yield securities offers the potential for high current income and attractive total return, but involves certain risks. Lower-rated bond risks include default of the issuer and rising interest rates. Interest income from certain tax-exempt bonds may be subject to the federal alternative minimum tax for individuals and corporations. 3 INVESTMENT PORTFOLIO November 30, 2003 MUNICIPAL BONDS - 97.9% PAR VALUE - ----------------------------------------------------------- EDUCATION - 5.7% CA Educational Facilities Authority, Loyola Marymount University, Series 2001, (a) 10/01/14 $ 1,250,000 $ 786,450 CA Public Works Board Lease Revenue, UCLA, Series 2002 A, 5.375% 10/01/15 1,000,000 1,110,940 CA Statewide Community Development Authority, Crossroads School for Arts & Sciences, Series 1998, 6.000% 08/01/28 (b) 1,110,000 1,153,112 IL University of Illinois, Series 2001 A, 5.500% 08/15/17 600,000 669,348 MA Development Finance Agency, Western New England College, Series 2002, 6.125% 12/01/32 200,000 203,894 MA Health & Educational Facilities Authority, Massachusetts Institute of Technology, Series 2002 K, 5.500% 07/01/32 1,500,000 1,712,145 MA Industrial Finance Agency, St. John's High School, Series 1998, 5.350% 06/01/28 300,000 298,335 MI Southfield Economic Development Corp., Lawrence University, Series 1998 A, 5.400% 02/01/18 750,000 754,710 NC Capital Facilities Finance Authority, Meredith College, Series 2001, 5.125% 06/01/15 1,000,000 1,087,490 VT Educational & Health Buildings Finance Agency, Norwich University, Series 1998, 5.500% 07/01/21 1,000,000 1,007,080 WA Higher Education Facilities Authority, Puget Sound University, Series 1998, 5.375% 10/01/30 5,000,000 5,267,400 WV University, Series 2000 A, (a) 04/01/25 750,000 245,445 ----------- 14,296,349 ----------- - ----------------------------------------------------------- HEALTH CARE - 23.8% CONGREGATE CARE RETIREMENT - 6.0% CA La Verne Certificates of Participation, Brethren Hillcrest Homes, Series 2003 B, 6.625% 02/15/25 525,000 523,152 PAR VALUE - ----------------------------------------------------------- CA Statewide Community Development Authority, EskatonVillage-Grass Valley, Series 2000, 8.250% 11/15/31 (b) $ 750,000 $ 811,305 CT Development Authority, The Elim Park Baptist, Inc. Project, Series 2003, 5.850% 12/01/33 430,000 435,452 FL Capital Projects Finance Authority, Continuing Care Retirement, Glenridge on Palmer Ranch, Series 2002 A, 8.000% 06/01/32 500,000 514,490 FL Lee County Industrial Development Authority, Shell Point Village Project Series 1999 A, 5.500% 11/15/29 400,000 382,440 GA Savannah Economic Development Authority, 1st Mortgage, Marshes of Skidaway, Series 2003 A, 7.400% 01/01/34 350,000 345,761 HI Department of Budget & Finance, Kahala Nui Project, Series 2003 A, 8.000% 11/15/33 750,000 755,828 IL Health Facilities Authority Revenue: Lutheran Senior Ministries, Series 2001, 7.375% 08/15/31 250,000 255,152 Washington and Jane Smith Community Series 2003 A, 7.000% 11/15/32 525,000 523,661 KS Manhattan, Meadowlark Hills Retirement Home, Series 1999 A: 6.375% 05/15/20 250,000 254,180 6.500% 05/15/28 1,500,000 1,531,680 MA Boston Industrial Development Finance Authority, Springhouse, Inc., Series 1988, 5.875% 07/01/20 235,000 231,099 MA Development Finance Agency, Loomis Communities: Series 1999 A, 5.625% 07/01/15 250,000 242,835 Series 2002 A, 6.900% 03/01/32 125,000 128,745 NH Higher Educational & Health Facilities Authority, Rivermead at Peterborough, Series 1998, 5.750% 07/01/28 1,100,000 981,783 NJ Economic Development Authority, Seabrook Village, Inc., Series 2000 A, 8.250% 11/15/30 500,000 536,610 See notes to investment portfolio. 4 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ----------------------------------------------------------- HEALTH CARE (CONTINUED) CONGREGATE CARE RETIREMENT (CONTINUED) PA Chartiers Valley Industrial & Commercial Development Authority, Asbury Health Center, Series 1999, 6.375% 12/01/24 $ 1,000,000 $ 981,040 PA County Authority, Dunwoody Village, Series 2003 A, 5.375% 04/01/17 400,000 413,472 PA Lancaster Industrial Development Authority: Baptist Home of Philadelphia, Series 1998 A: 5.500% 11/15/18 360,000 326,268 5.600% 11/15/28 500,000 437,410 Garden Spot Village, Series 2000 A, 7.625% 05/01/31 325,000 342,852 TN Metropolitan Government, Nashville and Davidson Counties, Blakeford at Green Hills, Series 1998, 5.650% 07/01/24 575,000 523,353 TX Abilene Health Facilities Development Corp., Sears Methodist Retirement Obligated Group, Series 1998 A: 5.900% 11/15/25 750,000 701,685 7.000% 11/15/33 200,000 202,390 WI Health & Educational Facilities Authority: Attic Angel Obligated Group, Series 1998, 5.750% 11/15/27 875,000 780,990 Clement Manor, Series 1998, 5.750% 08/15/24 1,000,000 900,100 Three Pillars Senior Living Communities, Series 2003, 5.750% 08/15/26 500,000 494,950 United Lutheran Program for Aging, Inc., Series 1998, 5.700% 03/01/28 750,000 671,108 ----------- 15,229,791 ----------- HEALTH SERVICES - 0.5% IL Health Facilities Authority, Midwest Physician Group Ltd., Series 1998, 5.500% 11/15/19 90,000 71,239 MA Development Finance Agency, Boston Biomedical Research Institute, Series 1999, 5.650% 02/01/19 120,000 115,496 PAR VALUE - ----------------------------------------------------------- MA Health & Educational Facilities Authority, Civic Investments, Inc., Series 2002 A, 9.000% 12/15/15 $ 750,000 $ 854,790 MN Minneapolis & St. Paul Housing & Redevelopment Authority, Healthpartners Project, Series 2003, 5.625% 12/01/22 200,000 199,420 ----------- 1,240,945 ----------- HOSPITALS - 10.0% AR Conway Health Facilities Board, Conway Regional Medical Center: Series 1999 A, 6.400% 08/01/29 350,000 367,731 Series 1999 B, 6.400% 08/01/29 850,000 891,973 AZ Yavapai County Industrial Development Authority, Yavapai Regional Medical Center Series 2003 A, 6.000% 08/01/33 150,000 152,850 CA Health Facilities Financing Authority, Cedars-Sinai Medical Center, Series 1999 A, 6.125% 12/01/30 650,000 695,169 CO Health Care Facilities Authority, National Jewish Medical & Research Center, Series 1998: 5.375% 01/01/16 1,500,000 1,529,160 5.375% 01/01/23 340,000 336,580 FL Citrus County Hospital Board, Citrus Memorial Hospital, Series 2002, 6.375% 08/15/32 550,000 563,733 FL Orange County Health Facilities Authority, Orlando Regional Healthcare, Series 2002, 5.750% 12/01/32 150,000 154,027 FL South Lake County Hospital District, South Lake Hospital, Inc., Series 2003, 6.375% 10/01/34 250,000 252,575 FL West Orange Healthcare District, Series 2001 A, 5.650% 02/01/22 400,000 403,872 IL Health Facilities Authority: Swedish American Hospital, Series 2000, 6.875% 11/15/30 500,000 544,605 Thorek Hospital & Medical Center, Series 1998, 5.375% 08/15/28 500,000 440,910 IL Southwestern Development Authority, Anderson Hospital, Series 1999: 5.375% 08/15/15 500,000 507,365 5.500% 08/15/20 550,000 542,267 See notes to investment portfolio. 5 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ----------------------------------------------------------- HEALTH CARE (CONTINUED) HOSPITALS (CONTINUED) LA Public Facilities Authority, Touro Infirmary, Series 1999: 5.500% 08/15/19 $ 250,000 $ 255,177 5.625% 08/15/29 525,000 527,426 MA Health & Educational Facilities Authority: Jordan Hospital, Series 2003 E, 6.750% 10/01/33 250,000 246,872 Milford-Whitinsville Regional Hospital, Series 1998 C, 5.250% 07/15/18 500,000 477,360 MD Health & Higher Educational Facilities, Adventist Healthcare Series 2003 A: 5.000% 01/01/16 365,000 362,043 5.750% 01/01/25 400,000 403,328 MI Dickinson County Healthcare System, Series 1999, 5.700% 11/01/18 770,000 769,192 MI Flint Hospital Building Authority, Hurley Medical Center, Series 1998 A, 5.375% 07/01/20 460,000 403,158 MN St. Paul Housing & Redevelopment Authority, HealthEast Project, Series 2001 A, 5.700% 11/01/15 2,000,000 1,887,380 MN Washington County Housing & Redevelopment Authority, HealthEast, Inc., Series 1998, 5.250% 11/15/12 1,250,000 1,158,888 NH Higher Educational & Health Facilities Authority: Catholic Medical Center, Series 2002, 6.125% 07/01/32 200,000 203,336 Littleton Hospital Association, Inc., Series 1998 A: 5.900% 05/01/18 500,000 420,785 6.000% 05/01/28 625,000 500,856 Series 1998 B, 5.900% 05/01/28 675,000 530,570 NJ Health Care Facilities Financing Authority Revenue, Health Systems, Inc., Series 2003 A, 5.750% 07/01/23 (c) 500,000 511,060 NV Henderson Healthcare Facility Revenue, Catholic Healthcare West, Series 1998, 5.375% 07/01/26 500,000 468,625 PAR VALUE - ----------------------------------------------------------- NY State Dormitory Authority Revenues: North Shore-Long Island Jewish Medical Center, Series 2003, 5.500% 05/01/33 $ 200,000 $ 204,566 South Nassau Communities Hospital, Series 2003, 5.500% 07/01/23 400,000 409,256 OH Belmont County, East Ohio Regional Hospital, Series 1998, 5.700% 01/01/13 1,500,000 1,329,720 OH Highland County Joint Township Hospital District, Series 1999, 6.750% 12/01/29 725,000 684,262 OH Lakewood Hospital Improvement Revenue, Lakewood Hospital Association, Series 2003, 5.500% 02/15/14 400,000 428,000 OH Miami County, Upper Valley Medical Center, Inc., Series 1996 A, 6.250% 05/15/16 665,000 692,970 OH Sandusky County, County Memorial Hospital, Series 1998, 5.150% 01/01/08 270,000 272,862 PA Allegheny County Hospital Development, Ohio Valley General Hospital, Series 1998 A, 5.450% 01/01/28 1,050,000 975,597 PA Pottsville Hospital Authority, Pottsville Hospital & Warner Clinic, Series 1998, 5.625% 07/01/24 605,000 524,154 SC Lexington County Health Services District, Inc., Hospital Improvement, Series 2003, 5.500% 11/01/23 750,000 773,693 TX Richardson Hospital Authority, Baylor Richardson Medical Center, Series 1998, 5.625% 12/01/28 300,000 302,154 TX Tyler Health Facilities Development Corp., Mother Frances Hospital, Series 2001, 6.000% 07/01/31 750,000 764,558 VT Educational & Health Buildings Finance Agency, Brattleboro Memorial Hospital, 5.375% 03/01/28 500,000 468,765 WI Health & Educational Facilities Authority: Aurora Health Care, Inc., Series 2003, 6.400% 04/15/33 350,000 365,309 Wheaton Franciscan Services, Series 2002, 5.750% 08/15/30 450,000 465,899 ----------- 25,170,638 ----------- See notes to investment portfolio. 6 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ----------------------------------------------------------- HEALTH CARE (CONTINUED) INTERMEDIATE CARE FACILITIES - 1.1% IN Health Facilities Financing Authority, Hoosier Care, Inc., Series 1999 A, 7.125% 06/01/34 $ 1,065,000 $ 878,103 PA Economic Development Financing Authority, Northwestern Human Services, Inc., Series 1998 A, 5.250% 06/01/14 2,150,000 1,839,497 ----------- 2,717,600 ----------- NURSING HOMES - 6.2% AK Juneau, St. Ann's Care Center, Series 1999, 6.875% 12/01/25 1,000,000 1,016,660 CO Health Facilities Authority: American Housing Foundation I, Inc. Project, Series 1990 A, 8.500% 12/01/31 550,000 527,153 Volunteers of America Series 1998 A: 5.450% 07/01/08 250,000 244,807 5.750% 07/01/20 700,000 627,718 Series 1999 A, 6.000% 07/01/29 350,000 310,737 DE Sussex County, Healthcare Facility, Delaware Health Corp., Series 1994 A, 7.600% 01/01/24 960,000 819,514 IA Finance Authority, Care Initiatives Project: Series 1996, 9.250% 07/01/25 985,000 1,172,554 Series 1998 B: 5.750% 07/01/18 550,000 490,094 5.750% 07/01/28 1,475,000 1,253,322 IN Gary Industrial Economic Development, West Side Health Care Center, Series 1987 A, 11.500% 10/01/17 (d) 2,230,000 1,672,500 IN Michigan City Health Facilities, Metro Health Foundation, Inc. Project, 11.000% 11/01/22 (e) 4,500,000 1,170,000 KY Jefferson County First Mortgage, American Housing Funding, Kentucky-Iowa, Inc. Project, Series 1990, 10.250% 01/01/20 (e) 890,000 400,500 KY Lexington-Fayette Urban County Government, First Mortgage, American Housing Funding, Kentucky-Iowa, Inc. Project, Series 1990, 10.250% 01/01/20 (e) 900,000 405,000 PAR VALUE - ----------------------------------------------------------- MA Development Finance Agency: Alliance Health Care Facilities, Series 1999, 7.100% 07/01/32 $ 1,150,000 $ 1,111,556 American Health Woodlawn Manor, Inc.: Series 2000 A, 7.750% 12/01/27 375,000 318,083 Series 2000 B, 10.250% 06/01/27 80,000 72,660 GF/Massachusetts Inc., Series 1994, 8.300% 07/01/23 895,000 910,680 MI Cheboygan County Economic Development Corp., Metro Health Foundation Project, Series 1993, 11.000% 11/01/22 (e) 2,440,000 634,400 MN Carlton Inter-Faith Social Services, Inc., Series 2000, 7.500% 04/01/19 250,000 259,362 MN Sartell, Foundation for Healthcare, Series 1999 A, 6.625% 09/01/29 1,025,000 975,554 TX Kirbyville Health Facilities Development Corp., Heartway III Project: Series 1997 A, 10.000% 03/20/18 (d) 539,215 323,529 Series 1997 B, 6.000% 03/20/04 (d) 100,000 5,000 WA Kitsap County Housing Authority, Martha & Mary Nursing Home, Series 1996, 7.100% 02/20/36 643,000 779,843 ----------- 15,501,226 ----------- - ----------------------------------------------------------- HOUSING - 7.1% ASSISTED LIVING/SENIOR - 2.9% DE Kent County, Heritage at Dover, Series 1999, 7.625% 01/01/30 1,225,000 1,034,268 GA Columbus Housing Authority, The Gardens at Calvary, Series 1999, 7.000% 11/15/19 495,000 420,740 IL Development Finance Authority, Care Institute, Inc., 8.250% 06/01/25 1,435,000 1,424,266 MN Roseville, Care Institute, Inc., Series 1993, 7.750% 11/01/23 (d) 1,630,000 1,059,500 NC Medical Care Commission, DePaul Community Facilities Project, Series 1999, 7.625% 11/01/29 985,000 1,013,939 See notes to investment portfolio. 7 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ----------------------------------------------------------- HOUSING (CONTINUED) ASSISTED LIVING/SENIOR (CONTINUED) NY Huntington Housing Authority, Gurwin Jewish Senior Center, Series 1999: 5.875% 05/01/19 $ 420,000 $ 387,454 6.000% 05/01/29 650,000 581,523 TX Bell County Health Facilities Development Corp., Care Institutes, Inc., Series 1994, 9.000% 11/01/24 1,415,000 1,434,202 ----------- 7,355,892 ----------- MULTI-FAMILY - 4.2% DE Wilmington, Electra Arms Senior Association Project, Series 1998, 6.250% 06/01/28 945,000 765,970 FL Broward County Housing Finance Authority, Chaves Lake Apartment Project, Series 2000, 7.500% 07/01/40 500,000 504,980 FL Clay County Housing Finance Authority, Madison Commons Apartments, Series 2000 A, 7.450% 07/01/40 500,000 504,990 GA Clayton County Housing Authority, Magnolia Park Apartments, Series 1999 A, 6.250% 06/01/30 750,000 476,625 MN Washington County Housing & Redevelopment Authority, Cottages of Aspen, Series 1992, 9.250% 06/01/22 1,000,000 1,023,750 MN White Bear Lake, Birch Lake Townhome Project: Series 1989 A, 10.250% 07/15/19 1,770,000 1,782,744 Series 1989 B, (a) 07/15/19 628,000 486,046 Resolution Trust Corp., Pass Through Certificates, Series 1993 A, 9.750% 12/01/16 (f) 455,481 448,918 SC Housing Finance & Development, Multi-Family Housing Finance Revenue, Westbridge Apartments, Series 1990 A, 9.500% 09/01/20 1,981,000 1,975,532 TN Franklin Industrial Development Board, Landings Apartment Project, Series 1996 B, 8.750% 04/01/27 710,000 736,284 TX Affordable Housing Corp. NHT/GTEX Project, Series 2001 C, 10.000% 10/01/31 (d) 685,000 478,356 PAR VALUE - ----------------------------------------------------------- TX El Paso County Housing Finance Corp., American Village Communities: Series 2000 C, 8.000% 12/01/32 $ 300,000 $ 304,215 Series 2000 D, 10.000% 12/01/32 300,000 308,388 VA Alexandria Redevelopment & Housing Authority, Courthouse Commons Apartments, Series 1990 A, 10.000% 01/01/21 1,000,000 858,120 ----------- 10,654,918 ----------- SINGLE FAMILY - 0.0% KY Kentucky County Single Family Mortgage Revenue, Series 1987 A, 9.000% 09/01/16 30,000 30,068 ----------- - ----------------------------------------------------------- INDUSTRIAL - 4.7% FOOD PRODUCTS - 1.5% GA Cartersville Development Authority, Anheuser Busch Project, Inc., Series 2002, 5.950% 02/01/32 1,000,000 1,048,670 IN Hammond, American Maize Products Co., Series 1994, 8.000% 12/01/24 260,000 281,471 LA Port of New Orleans Industrial Development, Continental Grain Company, Series 1993, 7.500% 07/01/13 1,000,000 1,020,850 LA Southern Louisiana Port Commission, Cargill, Inc. Project, Series 1997, 5.850% 04/01/17 500,000 531,400 MI Strategic Fund, Michigan Sugar Co., Sebewaing Project, Series 1998 A, 6.250% 11/01/15 1,000,000 914,810 ----------- 3,797,201 ----------- FOREST PRODUCTS - 1.5% AL Camden Industrial Development Board, Weyerhaeuser Co., Series 2003 B, 6.375% 12/01/24 400,000 422,564 AL Courtland Industrial Development Board, Champion International Corp., Series 1999, 6.000% 08/01/29 1,000,000 1,014,620 GA Rockdale County Development Authority, Solid Waste Disposal Visy Paper, Inc., Series 1993, 7.500% 01/01/26 800,000 809,536 LA Beauregard Parish, Boise Cascade Corp. Project, Series 2002, 6.800% 02/01/27 1,000,000 998,930 See notes to investment portfolio. 8 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ----------------------------------------------------------- INDUSTRIAL (CONTINUED) FOREST PRODUCTS (CONTINUED) MI Delta County Economic Development Corp, Mead Westvaco-Escanaba, Series 2002 B, 6.450% 04/15/23 $ 300,000 $ 311,364 VA Bedford County Industrial Development Authority, Nekoosa Packaging Corp. Project, Series 1998, 5.600% 12/01/25 400,000 332,320 ----------- 3,889,334 ----------- MANUFACTURING - 0.7% IL Will-Kankakee Regional Development Authority, Flanders Corp., Precisionaire Project, Series 1997, 6.500% 12/15/17 860,000 847,711 TX Trinity River Authority, Texas Instruments Project, Series 1996, 6.200% 03/01/20 750,000 787,643 ----------- 1,635,354 ----------- METALS & MINING - 0.2% NV Department of Business & Industry, Wheeling-Pittsburgh Steel Corp., Series 1999 A, 8.000% 09/01/14 (f) 250,000 185,745 VA Greensville County Industrial Development Authority, Wheeling-Pittsburgh Steel Corp., Series 1999 A: 6.375% 04/01/04 70,000 68,751 7.000% 04/01/14 375,000 279,026 ----------- 533,522 ----------- OIL & GAS - 0.8% TX Gulf Coast Industrial Development Authority, Solid Waste Disposal Revenue, Citgo Petroleum, Series 1998, 8.000% 04/01/28 375,000 388,039 VI Virgin Islands Government Refinery Facilities Hovensa Coker Project, Series 2002, 6.500% 07/01/21 250,000 260,242 WA Pierce County Economic Development Corp., Occidental Petroleum Co., Series 1993, 5.800% 09/01/29 1,500,000 1,470,375 ----------- 2,118,656 ----------- - ----------------------------------------------------------- PAR VALUE - ----------------------------------------------------------- OTHER - 6.8% OTHER - 1.2% CA Golden State Tobacco Securitization Authority, Asset Backed: Series 2002 A-1: 6.250% 06/01/33 $ 1,100,000 $ 1,032,658 6.750% 06/01/39 275,000 264,987 Series 2003 B, 5.500% 06/01/43 500,000 490,515 NY Convention Center Operating Corp., Yale Building Project, Series 2003, (a) 06/01/08 1,000,000 782,690 WA Tobacco Settlement Authority, Series 2002, 6.625% 06/01/32 500,000 471,120 ----------- 3,041,970 ----------- POOL/BOND BANK - 0.2% MI Municipal Bond Authority, Local Government Loan Project, Series 2001 A, 5.375% 11/01/17 550,000 610,225 ----------- REFUNDED/ESCROWED (g) - 5.4% CA San Joaquin Hills Transportation Corridor Agency, Series 1993, (a) 01/01/25 10,000,000 3,393,600 CT Development Authority, Sewer Sludge Disposal Facilities, Series 1996, 8.250% 12/01/06 720,000 795,413 GA Forsyth County Hospital Authority, Georgia Baptist Healthcare System, Series 1998, 6.000% 10/01/08 755,000 833,777 ID Health Facilities Authority, IHC Hospitals, Inc., Series 1992, 6.650% 02/15/21 2,750,000 3,465,853 IL Metropolitan Pier & Exposition Authority, McCormick Project, Series 1994 A, (a) 06/15/14 1,010,000 648,834 NC Lincoln County, Lincoln County Hospital, Series 1991, 9.000% 05/01/07 255,000 289,190 PA Delaware County Authority, Mercy Health Corp., Southeastern Pennsylvania Obligated, Series 1996: 6.000% 12/15/16 1,400,000 1,579,480 6.000% 12/15/26 500,000 560,145 TN Shelby County, Health, Education & Housing Facilities Board, Open Arms Development Center: Series 1992 A, 9.750% 08/01/19 465,000 588,258 Series 1992 C, 9.750% 08/01/19 470,000 594,700 See notes to investment portfolio. 9 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ----------------------------------------------------------- OTHER (CONTINUED) REFUNDED/ESCROWED (CONTINUED) WV Hospital Finance Authority, Charleston Area Medical Center, Series 2000 A, 6.750% 09/01/30 $ 605,000 $ 749,147 ----------- 13,498,397 ----------- - ----------------------------------------------------------- OTHER REVENUE - 2.6% HOTELS - 0.8% PA Philadelphia Authority for Industrial Development, Doubletree Project, Series 1997 A, 6.500% 10/01/27 2,000,000 2,001,720 ----------- RECREATION - 1.1% CA Agua Cliente, Band of Cahuilla Indians Revenue, Series 2003, 5.600% 07/01/13 775,000 781,246 CT Mohegan Tribe Indians, Series 2001, 6.250% 01/01/31 200,000 211,686 FL Capital Trust Agency, Seminole Tribe Convention Center, Series 2002 A, 10.000% 10/01/33 900,000 1,110,015 NM Red River Sports Facility, Red River Ski Area Project, Series 1998, 6.450% 06/01/07 665,000 674,303 ----------- 2,777,250 ----------- RETAIL - 0.7% NJ Economic Development Authority, Glimcher Properties LP Project, Series 1998, 6.000% 11/01/28 1,000,000 1,013,240 OH Lake County, North Madison Properties, Series 1993, 8.819% 09/01/11 650,000 642,967 ----------- 1,656,207 ----------- - ----------------------------------------------------------- RESOURCE RECOVERY - 1.3% DISPOSAL - 0.5% MA Industrial Finance Agency, Peabody Monofill Associates, Inc., Series 1995, 9.000% 09/01/05 555,000 575,874 UT Carbon County, Laidlaw Environmental, Series 1997 A: 7.450% 07/01/17 500,000 509,875 7.500% 02/01/10 250,000 255,650 ----------- 1,341,399 ----------- RESOURCE RECOVERY - 0.8% MA Industrial Finance Agency, Ogden Haverhill Project, Series 1998 A, 5.500% 12/01/13 1,000,000 990,680 PAR VALUE - ----------------------------------------------------------- PA Delaware County Industrial Development Authority, BFI Project, Series 1988 A, 6.200% 07/01/19 $ 1,000,000 $ 1,038,590 ----------- 2,029,270 ----------- - ----------------------------------------------------------- TAX-BACKED - 17.1% LOCAL APPROPRIATED - 0.4% CA Compton Certificates of Participation, Civic Center & Capital Improvements, Series 1997 A, 5.500% 09/01/15 1,000,000 1,042,430 ----------- LOCAL GENERAL OBLIGATIONS - 6.8% CA East Side Union High School District, Series 2003 B, 5.100% 02/01/20 750,000 821,213 CA Fresno Unified School District, Series 2002 A, 6.000% 02/01/18 1,245,000 1,488,385 CA Los Angeles Unified School District: Series 1997 E, 5.125% 01/01/27 1,250,000 1,292,500 Series 2002, 5.750% 07/01/16 600,000 703,704 CA Vallejo Unified School District, Series 2002 A, 5.900% 08/01/25 1,000,000 1,167,980 LA New Orleans, Series 1991, (a) 09/01/15 4,000,000 2,406,040 NY New York City, Series 1998 H, 5.125% 08/01/25 5,000,000 5,128,850 TX Dallas County Flood Center, District 1, Series 2002, 7.250% 04/01/32 750,000 761,730 TX Irving Independent School District, Series 1997: (a) 02/15/15 1,500,000 913,680 (a) 02/15/16 1,000,000 575,030 WA Clark County School District No. 37, Series 2001 C, (a) 12/01/18 4,000,000 1,960,000 ----------- 17,219,112 ----------- SPECIAL NON-PROPERTY TAX - 4.6% CA San Diego Redevelopment Agency, Series 2001, (a) 09/01/18 1,015,000 503,288 FL Northern Palm Beach County Improvement District, Series 1999, 5.900% 08/01/19 500,000 561,835 See notes to investment portfolio. 10 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ----------------------------------------------------------- TAX-BACKED (CONTINUED) SPECIAL NON-PROPERTY TAX (CONTINUED) IL Metropolitan Pier & Exposition Authority, McCormick Project: Series 1994 A, (a) 06/15/14 $ 3,990,000 $ 2,555,276 (a) 06/15/15 3,000,000 1,808,790 Series 1996 A, (a) 12/15/13 5,000,000 3,309,650 PR Commonwealth Highway & Transportation Authority: Series 2003 AA: 5.500% 07/01/18 375,000 434,452 5.500% 07/01/20 1,500,000 1,733,220 Series 2002 E, 5.500% 07/01/21 500,000 575,510 ----------- 11,482,021 ----------- SPECIAL PROPERTY TAX - 3.5% CA Huntington Beach Community Facilities District, Grand Coast Resort, Series 2001, 6.450% 09/01/31 500,000 514,875 CA Orange County Community Facilities District, Ladera Ranch, Series 1999 A, 6.500% 08/15/21 1,000,000 1,042,240 CA Orange County Improvement Bond Act 1915, Phase IV, No. 01-1-B, Series 2003, 5.750% 09/02/33 500,000 503,285 CA Redwood City Community Facilities District, 1 Redwood, Series 2003 B, 6.000% 09/01/33 300,000 306,177 CA Temecula Valley Unified School District, No. 02-1, Series 2003, 6.125% 09/01/33 355,000 357,808 CA Yorba Linda Redevelopment Agency, Series 1998 A, (a) 09/01/24 1,325,000 442,828 FL Celebration Community Development District, Series 2003 A, 6.400% 05/01/34 750,000 767,490 FL Colonial Country Club Community Development District, Capital Improvement Series 2003, 6.400% 05/01/33 500,000 512,480 FL Double Branch Community Development District, Series 2002 A, 6.700% 05/01/34 500,000 518,810 FL Heritage Palms Community Development District, Series 1999 A, 6.250% 11/01/04 475,000 479,546 PAR VALUE - ----------------------------------------------------------- FL Islands at Doral Southwest Community Development District, Series 2003, 6.375% 05/01/35 $ 250,000 $ 255,665 FL Lexington Oaks Community Development District, Series 1998 A, 6.125% 05/01/19 710,000 720,508 FL Orlando, Conroy Road Interchange Project, Series 1998 A: 5.500% 05/01/10 125,000 127,799 5.800% 05/01/26 300,000 301,626 FL Stoneybrook Community Development District: Series 1998 A, 6.100% 05/01/19 245,000 248,741 Series 1998 B, 5.700% 05/01/08 100,000 100,908 MI Pontiac Finance Authority, Development Area, No. 3, Series 2002, 6.375% 06/01/31 450,000 451,575 MI Taylor Tax Increment Finance Authority, Series 2001, 5.375% 05/01/17 1,000,000 1,106,590 ----------- 8,758,951 ----------- STATE APPROPRIATED - 0.8% MI Building Authority, Series 2001 I, 5.000% 10/15/24 1,000,000 1,022,160 PR Commonwealth of Puerto Rico, Public Finance Corp., Series 2002 E, 6.000% 08/01/26 900,000 1,034,559 ----------- 2,056,719 ----------- STATE GENERAL OBLIGATIONS - 1.0% PR Commonwealth of Puerto Rico, Public Improvement, Series 2001 A, 5.500% 07/01/21 1,750,000 2,007,233 TX Board of Regents University, Series 2001 B, 5.375% 08/15/18 350,000 384,258 ----------- 2,391,491 ----------- - ----------------------------------------------------------- TRANSPORTATION - 10.3% AIR TRANSPORTATION - 3.2% CA Los Angeles Regional Airports Improvement: American Airlines, Series 2002 C, 7.500% 12/01/24 500,000 490,970 Laxfuel Corp., Series 2001, 5.250% 01/01/23 500,000 506,880 FL Capital Trust Agency Revenue, Air Cargo-Orlando Project, Series 2003, 6.750% 01/01/32 350,000 328,228 See notes to investment portfolio. 11 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ----------------------------------------------------------- TRANSPORTATION (CONTINUED) AIR TRANSPORTATION (CONTINUED) IN Indianapolis Airport Authority: FedEx Corp., Series 1994, 7.100% 01/15/17 $ 1,000,000 $ 1,050,510 United Airlines Project, Series 1995 A, 6.500% 11/15/31 (e) 1,000,000 372,480 KY Kenton County Airport Board, Delta Airlines, Inc., Series 1992 A, 7.500% 02/01/20 1,250,000 1,247,500 MN Minneapolis & St. Paul Metropolitan Airport Commission, Northwest Airlines, Inc.: Series 2001 A, 7.000% 04/01/25 325,000 303,709 Series 2001 B, 6.500% 04/01/25 250,000 242,813 NC Charlotte Special Facilities Revenue, Douglas International Airport, US Airways, Inc.: Series 1998, 5.600% 07/01/27 250,000 180,990 Series 2000, 7.750% 02/01/28 500,000 451,965 NJ Economic Development Authority, Continental Airlines Inc. Project, Series 2003, 9.000% 06/01/33 1,250,000 1,339,163 NY New York City Industrial Development, JFK International Airport Project, American Airlines, Inc., Series 2002 B, 8.500% 08/01/28 500,000 368,875 PA Philadelphia Authority for Industrial Development, Aero Philadelphia LLC, Series 1999, 5.250% 01/01/09 350,000 327,705 TX Houston Industrial Development, Air Cargo-Perot Development, Series 2002, 6.000% 03/01/23 555,000 558,824 WA Port Seattle, Northwest Airlines, Inc., Series 2000, 7.250% 04/01/30 425,000 404,727 ----------- 8,175,339 ----------- AIRPORTS - 3.5% PA Philadelphia Airport Authority for Industrial Development, Series 1998 A, 5.125% 07/01/28 8,750,000 8,860,863 ----------- PAR VALUE - ----------------------------------------------------------- TOLL FACILITIES - 2.3% CA San Joaquin Hills Transportation Corridor Agency, Series 1993 A, (a) 01/15/15 $ 3,000,000 $ 1,834,110 CO Northwest Parkway Public Highway Authority, Series 2001 D, 7.125% 06/15/41 750,000 756,615 CO Public Highway Authority, Arapahoe County, E-470, Series 2000 B: (a) 09/01/18 3,000,000 1,492,080 (a) 09/01/35 8,750,000 844,463 MA Turnpike Authority, Series 1999 A, 5.000% 01/01/39 500,000 504,415 NY Triborough Bridge & Tunnel Authority, Series 2002, 5.500% 11/15/20 375,000 431,246 ----------- 5,862,929 ----------- TRANSPORTATION - 1.3% NV Department of Business & Industry, Las Vegas Monorail Project, Series 2000, 7.375% 01/01/40 750,000 745,710 NY Metropolitan Transportation Authority Project, Series 2002 A, 5.000% 11/15/30 2,385,000 2,431,555 ----------- 3,177,265 ----------- - ----------------------------------------------------------- UTILITY - 18.5% INDEPENDENT POWER PRODUCER - 2.6% MI Midland County Economic Development Corp., Series 2000, 6.875% 07/23/09 1,000,000 1,028,940 NY Port Authority of New York & New Jersey, KIAC Partners, Series 1996 IV, 6.750% 10/01/11 2,000,000 2,096,080 PA Carbon City Industrial Development Panther Creek Partners Project, Series 2000, 6.650% 05/01/10 150,000 162,448 PA Economic Development Finance Authority, Colver Project, Series 1994 D, 7.150% 12/01/18 1,500,000 1,565,310 PR Commonwealth of Puerto Rico Industrial, Educational, Medical & Environmental Cogeneration Facilities, AES Project, Series 2000, 6.625% 06/01/26 325,000 337,191 VA Pittsylvania County Industrial Development Authority, Multi-trade of Pittsylvania, Series 1994 A: 7.450% 01/01/09 1,000,000 1,000,450 7.550% 01/01/19 250,000 247,137 ----------- 6,437,556 ----------- See notes to investment portfolio. 12 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 MUNICIPAL BONDS (CONTINUED) PAR VALUE - ----------------------------------------------------------- UTILITY (CONTINUED) INVESTOR OWNED - 4.3% AZ Maricopa County Pollution Control, El Paso Electric Co., Series 2002 A, 6.250% 05/01/37 $ 500,000 $ 516,085 AZ Pima Industrial Development Authority, Tucson Electric Power Co., Series 1997 A, 6.100% 09/01/25 750,000 713,362 CT Development Authority, Connecticut Light & Power Co., Series 1993 B, 5.950% 09/01/28 100,000 104,967 FL Polk County Industrial Development Authority, Tampa Electric Co. Project, Series 1996, 5.850% 12/01/30 800,000 796,768 IL Bryant Pollution Control Revenue, Central Illinois Light Co., Series 1993, 5.900% 08/01/23 1,000,000 1,005,040 IN Petersburg Pollution Control Revenue, Indianapolis Power & Light Project, Series 1995, 6.625% 12/01/24 750,000 767,280 LA Calcasieu Parish Industrial Development Board, Entergy Gulf States, Inc., Series 1999, 5.450% 07/01/10 500,000 503,095 LA West Feliciana Parish, Entergy Gulf States, Inc., Series 1999 B, 6.600% 09/01/28 500,000 508,945 MS Business Finance Corp., Systems Energy Resources Project, Series 1998, 5.875% 04/01/22 1,500,000 1,501,530 MT Forsyth Pollution Control, Portland General Series 1998, 5.200% 05/01/33 225,000 232,051 NV Clark County, Nevada Power Co., Series 1997 A, 5.900% 11/01/32 3,000,000 2,467,740 OH Air Quality Development Authority, Pollution Control Cleveland Electric, Series 2002 A, 6.000% 12/01/13 650,000 659,633 TX Brazos River Authority Pollution Control, TXU Electric Co.: Series 2001 C, 5.750% 05/01/36 275,000 288,439 Series 2003 C, 6.750% 10/01/38 775,000 814,324 ----------- 10,879,259 ----------- PAR VALUE - ----------------------------------------------------------- MUNICIPAL ELECTRIC - 5.6% CA Department of Water Resources, Power Supply Revenue Bonds, Series 2002 A, 5.500% 05/01/14 $ 2,000,000 $ 2,263,860 NC Eastern Municipal Power Agency, Series 2003 F, 5.500% 01/01/16 430,000 458,143 NY Long Island Power Authority Series 2003, 5.000% 04/01/10 1,000,000 1,113,150 PR Puerto Rico Electric Power Authority, Series 2002 II, 5.125% 07/01/26 1,500,000 1,570,290 TX Austin Utilities System, Series 1994: (a) 05/15/17 6,600,000 3,544,992 (a) 05/15/18 5,000,000 2,524,900 WA Seattle Light & Power, Series 2001, 5.500% 03/01/17 2,250,000 2,498,850 ----------- 13,974,185 ----------- WATER & SEWER - 6.0% CA Castaic Lake Water Agency, Series 1999 A: (a) 08/01/25 10,445,000 3,291,011 (a) 08/01/26 10,445,000 3,113,341 MA Water Resources Authority, Series 1997 D, 5.000% 08/01/24 (h) 6,000,000 6,112,020 MO V Lakes Utility District Ranking, Series 1994, 8.250% 07/15/24 500,000 484,720 TX Houston Water & Sewer System, Series 1991 C, (a) 12/01/12 3,000,000 2,103,690 ----------- 15,104,782 ----------- TOTAL MUNICIPAL BONDS (cost of $246,437,270) 246,550,834 ----------- MUNICIPAL PREFERRED STOCK - 0.2% SHARES - ----------------------------------------------------------- HOUSING - 0.2% MULTI-FAMILY - 0.2% Charter Mac Equity Issuer Trust Acceptance Co., 7.600% 11/30/50 (f) 500,000 554,760 ----------- (cost of $500,000) SHORT-TERM OBLIGATIONS - 0.7% PAR - ----------------------------------------------------------- VARIABLE RATE DEMAND NOTES (I) - 0.7% IA Hills Healthcare Revenue, Mercy Hospital, Series 2002, 1.100% 08/01/32 $ 100,000 100,000 See notes to investment portfolio. 13 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 SHORT-TERM OBLIGATIONS (CONTINUED) PAR VALUE - ----------------------------------------------------------- IA Finance Authority, Drake University, Series 2001, 1.150% 07/01/31 $ 400,000 $ 400,000 IN Health Facility Financing Authority: Fayette Memorial Hospital Association, Inc., Series 2002 A, 1.150% 10/01/32 700,000 700,000 Golden Years Homestead, Inc., Series 2002 A, 1.150% 06/01/25 400,000 400,000 MO State Health & Educational Facilities Authority, Washington University, Series 1996 C, 1.050% 09/01/30 100,000 100,000 MS Jackson County Pollution Control Revenue, Chevron USA, Inc., Series 1993, 1.080% 06/01/23 100,000 100,000 ----------- TOTAL SHORT-TERM OBLIGATIONS (cost of $1,800,000) 1,800,000 ----------- TOTAL INVESTMENTS - 98.8% (cost of $248,737,270) (j) 248,905,594 ----------- OTHER ASSETS & LIABILITIES, NET - 1.2% 3,088,306 - ----------------------------------------------------------- NET ASSETS * - 100.0% $251,993,900 ============ NOTES TO INVESTMENT PORTFOLIO: ================================================================================ * Net assets represent both Common Shares and Auction Preferred Shares. (a) Zero coupon bond. (b) Denotes a restricted security, which is subject to restrictions on resale under federal securities laws. At November 30, 2003, the value of these securities amounted to $1,964,417, which represents 0.8% of net assets. Additional information on these securities are as follows: ACQUISITION ACQUISITION SECURITY DATE COST ---------------------------------------------------------- CA Statewide Community Development Authority: Crossroads School for Arts & Sciences, Series 1998: 6.000% 08/01/28 08/21/98 $ 410,000 6.000% 08/01/28 08/31/98 700,000 Eskaton Village-Grass Valley, Series 2000, 8.250% 11/15/31 09/08/00 750,000 ----------- $ 1,860,000 =========== - -------------------------------------------------------------------------------- (c) This security has been purchased on a delayed delivery basis. (d) The issuer is in default of certain debt covenants. Income is not being fully accrued. (e) As of November 30, 2003, the Trust held securities of certain issuers that have filed for bankruptcy protection under Chapter 11, representing 1.2% of net assets. This issuer is in default of certain debt covenants. Income is not being fully accrued. (f) 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, 2003, the value of these securities amounted to $1,189,423, which represents 0.5% of net assets. (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) This security, or a portion thereof, with a market value of $2,203,383, is being used to collateralize open futures contracts. (i) 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, 2003. (j) Cost for federal income tax purposes is $248,585,715. Short futures contracts open at November 30, 2003: PAR VALUE UNREALIZED COVERED BY EXPIRATION APPRECIATION TYPE CONTRACTS MONTH AT 11/30/03 - ----------------------------------------------------------- U.S. Treasury Bond $33,900,000 Mar-04 $67,988 10 Year U.S. Treasury Note 45,100,000 Mar-04 24,620 ---------- $92,608 ========== See notes to financial statements. 14 STATEMENT OF ASSETS AND LIABILITIES November 30, 2003 ASSETS: Investments, at cost $248,737,270 ------------ Investments, at value $248,905,594 Cash 24,437 Receivable for: Interest 3,893,089 Futures variation margin 673,703 Deferred Trustees' compensation plan 8,523 ------------ Total Assets 253,505,346 ------------ LIABILITIES: Payable for: Preferred shares remarketing commissions 5,554 Investments purchased on a delayed delivery basis 512,583 Distributions--common shares 779,675 Distributions--preferred shares 21,750 Investment advisory fee 132,648 Pricing and bookkeeping fees 7,374 Trustees' fees 490 Custody fee 4,561 Deferred Trustees' fees 8,523 Other liabilities 38,288 ------------ Total Liabilities 1,511,446 ------------ Auction Preferred Shares (3,600 shares issued and outstanding at $25,000 per share) $ 90,000,000 ------------ COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHARES: Paid-in capital--common shares $207,660,849 Undistributed net investment income 764,260 Accumulated net realized loss (46,692,141) Net unrealized appreciation on: Investments 168,324 Futures contracts 92,608 ------------ Net assets at value applicable to 27,688,567 common shares of beneficial interest outstanding $161,993,900 ============ Net asset value per common share $ 5.85 ============ STATEMENT OF OPERATIONS For the Year Ended November 30, 2003 INVESTMENT INCOME: Interest $ 15,286,359 ------------ EXPENSES: Investment advisory fee 1,624,571 Transfer agent fee 73,538 Pricing and bookkeeping fees 136,603 Trustees' fees 14,124 Preferred shares remarketing commissions 225,869 Custody fee 17,867 Other expenses 133,271 ------------ Total Expenses 2,225,843 Custody earnings credit (729) ------------ Net Expenses 2,225,114 ------------ Net Investment Income 13,061,245 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS: Net realized loss on: Investments (1,556,587) Futures contracts (4,462,309) ------------ Net realized loss (6,018,896) ------------ Net change in unrealized appreciation/ depreciation on: Investments 7,072,993 Futures contracts (569,303) ------------ Net change in unrealized appreciation/depreciation 6,503,690 ------------ Net Gain 484,794 ------------ Net Increase in Net Assets from Operations 13,546,039 ------------ LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (886,846) ------------ Net Increase in Net Assets from Operations Applicable to Common Shares $ 12,659,193 ------------ See notes to financial statements. 15
STATEMENT OF CHANGES IN NET ASSETS YEAR ENDED NOVEMBER 30, --------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 13,061,245 $ 13,809,914 Net realized loss on investments and futures contracts (6,018,896) (6,308,757) Net change in unrealized appreciation/depreciation on investments and futures contracts 6,503,690 (2,635,172) ------------ ------------ Net Increase from Operations 13,546,039 4,865,985 ------------ ------------ LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (886,846) (1,342,604) ------------ ------------ Net Increase in Net Assets from Operations Applicable to Common Shares 12,659,193 3,523,381 ------------ ------------ LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS: From net investment income: (11,897,663) (11,625,618) ------------ ------------ SHARE TRANSACTIONS: Distributions reinvested 188,292 66,517 ------------ ------------ Total Increase (Decrease) in Net Assets Applicable to Common Shares 949,822 (8,035,720) NET ASSETS APPLICABLE TO COMMON SHARES: Beginning of period 161,044,078 169,079,798 ------------ ------------ End of period (including undistributed net investment income of $764,260 and $565,056, respectively) $161,993,900 $161,044,078 ============ ============ NUMBER OF TRUST SHARES: Common Shares: Issued for distributions reinvested 32,387 11,067 Outstanding at: Beginning of period 27,656,180 27,645,113 ------------ ------------ End of period 27,688,567 27,656,180 ------------ ------------ Preferred Shares: Outstanding at end of period 3,600 3,600 ------------ ------------
See notes to financial statements. 16 NOTES TO FINANCIAL STATEMENTS November 30, 2003 NOTE 1. ORGANIZATION Colonial Municipal Income Trust (the "Trust"), is a Massachusetts business trust registered under the Investment Company Act of 1940 (the "Act"), as amended, as a non-diversified, closed-end management investment company. INVESTMENT GOAL The Trust seeks to provide high current income, generally exempt from federal income taxes, by investing primarily in medium and lower quality bonds and notes issued by or on behalf of state and local government units whose interest is exempt from ordinary federal income tax, other than the possible incidence of any alternative minimum tax. The Trust's secondary goal is to seek total return. TRUST SHARES The Trust may issue an unlimited number of common shares. On July 20, 1999, the Trust issued 3,600 Auction Preferred Shares ("APS"). NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. SECURITY VALUATION Debt securities generally are valued by a pricing service approved by the Trust's Board of Trustees, based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. 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. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation. Short-term obligations maturing within 60 days are valued at amortized cost, which approximates market value. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Investments for which market quotations are not readily available are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. SECURITY TRANSACTIONS Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. FUTURES CONTRACTS The Trust may invest in municipal and U.S. Treasury futures contracts. The Trust will invest in these instruments to hedge against the effects of changes in the value of portfolio securities due to anticipated changes in interest rates and/or market conditions, for duration management, or when the transactions are economically appropriate to the reduction of risk inherent in the management of the Trust and not for trading purposes. The use of futures contracts involves certain risks, which include: (1) imperfect correlation between the price movement of the instruments and the underlying securities, (2) inability to close out positions due to differing trading hours, or the temporary absence of a liquid market, for either the instrument or the underlying securities, or (3) an inaccurate prediction by Columbia Management Advisors, Inc. of the future direction of interest rates. Any of these risks may involve amounts exceeding the variation margin recorded in the Trust's Statement of Assets and Liabilities at any given time. Upon entering into a futures contract, the Trust deposits cash or securities with the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Trust equal to the daily change in the contract value and are recorded as variation margin payable or receivable and offset in unrealized gains or losses. The Trust also identifies portfolio securities as segregated with the custodian in a separate account in an amount equal to the futures contract. The Trust recognizes a realized gain or loss when the contract is closed or expires. 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. 17 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2003 OPTIONS The Trust may write call and put options on futures it owns or in which it may invest. Writing put options tends to increase the Trust's exposure to the underlying instrument. Writing call options tends to decrease the Trust's exposure to the underlying instrument. When the Trust writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked-to-market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future transaction to determine the realized gain or loss. The Trust as a writer of an option has no control over whether the underlying future may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future underlying the written option. There is the risk the Trust may not be able to enter into a closing transaction because of an illiquid market. The Trust may also purchase put and call options. Purchasing call options tends to increase the Trust's exposure to the underlying instrument. Purchasing put options tends to decrease the Trust's exposure to the underlying instrument. The Trust pays a premium, which is included in the Trust's Statement of Assets and Liabilities as an investment and subsequently marked-to-market to reflect the current value of the option. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying future transaction to determine the realized gain or loss. The Trust's custodian will set aside cash or liquid portfolio securities equal to the amount of the written options contract commitment in a separate account. 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's custodian will set aside cash or liquid portfolio securities equal to the amount of the delayed delivery commitment in a separate account. INCOME RECOGNITION Interest income is recorded on the accrual basis. Premium and discount are amortized and accreted, respectively, on all debt securities. FEDERAL INCOME TAX STATUS The Trust intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, by distributing substantially all of its taxable or tax-exempt income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, by distributing in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, the Trust will not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS Distributions to common shareholders are recorded on ex-date. Distributions to Auction Preferred shareholders are recorded daily and payable at the end of each dividend period. Each dividend payment period for the APS is generally seven days. The applicable dividend rate for the APS on November 30, 2003 was 1.06%. For the year ended November 30, 2003, the Trust declared dividends to Auction Preferred shareholders amounting to $886,846, representing an average APS dividend rate of 0.99%. NOTE 3. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Trust's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended November 30, 2003, permanent differences resulting primarily from differing treatments for market discount reclassifications, discount accretion/premium amortization on debt securities and expired capital loss carryforward were identified and reclassified among the components of the Trust's net assets as follows: UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN INCOME LOSS CAPITAL ------------ ------------ ----------- $(77,532) $7,576,458 $(7,498,926) Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended November 30, 2003 and November 30, 2002 was as follows: NOVEMBER 30, NOVEMBER 30, 2003 2002 ------------ ------------ Distributions paid from: Tax-Exempt Income $12,778,538 $12,956,212 Ordinary Income* 5,971 12,010 Long-Term Capital Gains -- -- * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. 18 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2003 As of November 30, 2003, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED TAX-EXEMPT ORDINARY LONG-TERM NET UNREALIZED INCOME INCOME CAPITAL GAINS APPRECIATION* ------------ ------------ ------------ ------------- $2,896,738 $-- $-- $319,879 * The differences between book-basis and tax-basis net unrealized appreciation is primarily due to discount accretion/premium amortization on debt securities. Unrealized appreciation (depreciation) at November 30, 2003, based on cost of investments for federal income tax purposes was: Unrealized appreciation $ 15,256,873 Unrealized depreciation (14,936,994) ------------ Net unrealized appreciation $ 319,879 ------------ 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 ---------- -------------- 2004 $ 4,074 2005 7,196,783 2007 3,490,821 2008 13,036,764 2009 3,114,307 2010 7,684,792 2011 4,393,912 -------------- $ 38,921,453 -------------- Capital loss carryforwards of $7,498,926 were utilized and/or expired during the year ended November 30, 2003 for the Trust. Expired capital loss carryforwards are recorded as a reduction of paid-in capital. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES On April 1, 2003, Colonial Management Associates, Inc., the previous investment advisor to the Trust, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly known as Columbia Management Co., an indirect, wholly-owned subsidiary of FleetBoston Financial Corporation. As a result of the merger, Columbia now serves as the Trust's investment advisor. The merger did not change the way the Trust is managed, the investment personnel assigned to manage the Trust or the fees paid by the Trust. INVESTMENT ADVISORY FEE Columbia is the investment advisor to the Trust and provides administrative and other services. Columbia receives a monthly 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"). Under its pricing and bookkeeping agreement with the Trust, Columbia receives from the Trust an annual flat fee of $10,000 paid monthly, and in any month that the Trust's average weekly net assets, including assets applicable to the APS, exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average weekly net assets, including assets applicable to the APS, of the Trust for that month. The Trust also pays additional fees for pricing services. For the year ended November 30, 2003, the effective pricing and bookkeeping fee rate was 0.055%. Columbia pays the total fees collected to State Street under the Outsourcing Agreement. CUSTODY CREDITS The Trust has an agreement with its custodian bank under which custody fees may be reduced by balance credits. The Trust could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. FEES PAID TO OFFICERS AND TRUSTEES The Trust pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Trust's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Trust's assets. NOTE 5. 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 November 30, 2003, there were no restrictions on the Trust. 19 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2003 NOTE 6. PORTFOLIO INFORMATION PURCHASES AND SALES OF SECURITIES For the year ended November 30, 2003, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $36,636,345 and $43,649,498, respectively. NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES INDUSTRY FOCUS The Trust may focus its investments in certain industries, subjecting it to greater risk than a trust that is more diversified. 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 and industry events 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 due to the extent that there is no established retail secondary market and because of a decline in the value of such securities. GEOGRAPHIC CONCENTRATION The Trust has greater than 5% of its net assets at November 30, 2003, invested in debt obligations issued by the states of California, Illinois, Massachusetts, New York, Pennsylvania, Texas and Washington, and their respective political subdivisions, agencies and public authorities to obtain funds for various purposes. The Trust is more susceptible to economic and political factors adversely affecting issuers of each respective state's specific municipal securities than are municipal bond funds that are not concentrated to the same extent in these issuers. 20 FINANCIAL HIGHLIGHTS Selected data for a share outstanding throughout each period is as follows (common shares unless otherwise noted):
YEAR ENDED NOVEMBER 30, ----------------------------------------------------------------- 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 5.82 $ 6.12 $ 6.05 $ 6.51 $ 7.57 ----------- ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.47(a) 0.50(a)(b) 0.53(a) 0.55(c) 0.46 Net realized and unrealized gain (loss) on investments and futures contracts 0.02 (0.33)(b) 0.03 (0.44) (0.97) ----------- ----------- ----------- ----------- ----------- Total from Investment Operations 0.49 0.17 0.56 0.11 (0.51) ----------- ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (0.03) (0.05) (0.10) (0.14) (0.04) ----------- ----------- ----------- ----------- ----------- Total from Investment Operations Applicable to Common Shareholders 0.46 0.12 0.46 (0.03) (0.55) ----------- ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS: From net investment income (0.43) (0.42) (0.39) (0.43) (0.42) In excess of net investment income -- -- -- -- (0.04) ----------- ----------- ----------- ----------- ----------- Total Distributions Declared to Common Shareholders (0.43) (0.42) (0.39) (0.43) (0.46) ----------- ----------- ----------- ----------- ----------- LESS SHARE TRANSACTIONS: Commission and offering costs-- preferred shares -- -- -- --(d) (0.05) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 5.85 $ 5.82 $ 6.12 $ 6.05 $ 6.51 =========== =========== =========== =========== =========== Market price per share-- common shares $ 5.65 $ 5.67 $ 5.65 $ 5.38 $ 5.75 =========== =========== =========== =========== =========== Total return-- based on market value-- common shares (e) 7.35% 7.87% 12.05% 0.84% (24.33)% =========== =========== =========== =========== =========== RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (f)(g) 1.39% 1.37% 1.45% 1.33% 1.08% Net investment income before preferred stock dividend (f)(g) 8.17% 8.28%(b) 8.55% 8.88% 7.00% Net investment income after preferred stock dividend (f)(g) 7.61% 7.47%(b) 6.94% 6.68% 6.36% Portfolio turnover rate 15% 27% 12% 12% 20% Net assets, end of period (000's)-- common shares $ 161,994 $ 161,044 $ 169,080 $ 167,265 $ 180,082
(a)Per share data was calculated using average shares outstanding during the period. (b)Effective December 1, 2001, the Trust adopted the 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 arrangement, if applicable, had an impact of less than 0.01%. (g)Ratios reflect average net assets available to common shares only. 21 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for a share outstanding throughout each period is as follows (common shares unless otherwise noted):
YEAR ENDED NOVEMBER 30, ----------------------------------------------------------------- 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 7.41 $ 7.41 $ 7.48 $ 7.15 $ 7.83 ----------- ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.47 0.51 0.51 0.55 0.61 Net realized and unrealized gain (loss) on investments and futures contracts 0.18 --(a) (0.07) 0.33 (0.71) ----------- ----------- ----------- ----------- ----------- Total Income from Investment Operations 0.65 0.51 0.44 0.88 (0.10) ----------- ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS: From net investment income (0.48) (0.51) (0.51) (0.55) (0.58) In excess of net investment income (0.01) -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total Distributions Declared to Common Shareholders (0.49) (0.51) (0.51) (0.55) (0.58) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 7.57 $ 7.41 $ 7.41 $ 7.48 $ 7.15 =========== =========== =========== =========== =========== Market price per share-- common shares $ 8.13 $ 7.56 $ 7.25 $ 6.75 $ 6.75 =========== =========== =========== =========== =========== Total return-- based on market value-- common shares (b) 14.57% 11.67% 15.36% 8.04% (10.06)% =========== =========== =========== =========== =========== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (c) 0.82% 0.86% 0.91% 0.98% 0.90% Net investment income (c) 6.20% 6.83% 6.87% 7.47% 8.12% Portfolio turnover rate 34% 15% 22% 24% 24% Net assets, end of period (000's)-- common shares $ 208,931 $ 203,533 $ 202,793 $ 204,666 $ 195,444
(a)Rounds to less than $0.01 per share. (b)Total return at market value assuming all distributions reinvested at prices calculated in accordance with the Dividend Reinvestment Plan. (c)The benefits derived from custody credits and directed brokerage arrangement, if applicable, had an impact of less than 0.01%.
ASSET COVERAGE REQUIREMENTS INVOLUNTARY AVERAGE ASSET LIQUIDATING MARKET TOTAL AMOUNT COVERAGE PREFERENCE VALUE OUTSTANDING PER SHARE PER SHARE PER SHARE - -------------------------------------------------------------------------------------------------------------------------------- 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 * On July 20, 1999, the Trust began offering Auction Preferred Shares.
22 REPORT OF INDEPENDENT AUDITORS 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, 2003, 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, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts January 12, 2004 23 UNAUDITED INFORMATION FEDERAL INCOME TAX INFORMATION 99.95% of the distributions from net investment income will be treated as exempt income for federal income tax purposes. 24 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 of comparable size, because the Plan Agent will be purchasing shares for all participants in blocks and charging to cash purchase Plan participants a pro rated portion of the lower commissions usually obtainable on such block purchases. The automatic reinvestment of dividends and distributions will not relieve participants of any income tax that may be payable on such dividends or distributions. The Plan may be amended or terminated on 30 days' written notice to the Plan participants. All correspondence concerning the Plan should be directed to EquiServe Trust Company, N.A., by mail at P.O. Box 403011, Providence, RI 02940-3011, or by phone at 1-800-426-5523. 25 TRUSTEES Effective October 8, 2003, Patrick J. Simpson and Richard L. Woolworth were appointed to the Board of Trustees of the Fund. Messrs. Simpson and Woolworth had been directors of 15 Columbia Funds and 20 funds in the CMG Fund Trust. Also effective October 8, 2003, the incumbent trustees of the Fund were elected as directors of the 15 Columbia Funds and as trustees of the 20 funds in the CMG Fund Trust. The new combined Board of Trustees/Directors of the Fund now oversees 119 funds in the Columbia Funds Complex (including the former Liberty Funds, former Stein Roe Funds, Columbia Funds and CMG Funds). Several of these trustees/directors also serve on the Boards of other funds in the Columbia Funds Complex. The Trustees/Directors serve terms of indefinite duration. The names, addresses and ages of the Trustees/Directors and officers of the Funds in the Columbia Funds complex, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee/Director and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex.
Number of portfolios in Year first Columbia Funds elected or Complex Other Position appointed Principal occupation(s) overseen by directorships Name, address and age with Funds to office1 during past five years Trustee/Director held - --------------------------------------------------------------------------------------------------------------------------------- Disinterested Trustees - ---------------------- Douglas A. Hacker Trustee 1996 Executive Vice President-Strategy of United Airlines 119 Orbitz (age 48) (airline) since December, 2002 (formerly President (online P.O. Box 66100 of UAL Loyalty Services (airline) from September, travel Chicago, IL 60666 2001 to December, 2002; Executive Vice President company) and Chief Financial Officer of United Airlines from March, 1993 to September, 2001). Janet Langford Kelly Trustee 1996 Chief Administrative Officer and Senior Vice 119 None (age 45) President, Kmart Holding Corporation (consumer 3100 West Beaver Road goods) since September, 2003 (formerly Executive Troy, MI 48084-3163 Vice President-Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September, 1999 to August, 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January, 1995 to September, 1999). Richard W. Lowry Trustee 1995 Private Investor since August, 1987 (formerly 121 3 None (age 67) Chairman and Chief Executive Officer, U.S. Plywood 10701 Charleston Drive Corporation (building products manufacturer)). Vero Beach, FL 32963 Charles R. Nelson Trustee 1981 Professor of Economics, University of Washington, 119 None (age 61) since January, 1976; Ford and Louisa Van Voorhis Department of Economics Professor of Political Economy, University of University of Washington Washington, since September, 1993; Director, Seattle, WA 98195 Institute for Economic Research, University of Washington, since September, 2001; Adjunct Professor of Statistics, University of Washington, since September, 1980; Associate Editor, Journal of Money Credit and Banking, since September, 1993; consultant on econometric and statistical matters. John J. Neuhauser Trustee 1985 Academic Vice President and Dean of Faculties 122 3,4 Saucony, Inc. (age 60) since August, 1999, Boston College (formerly (athletic 84 College Road Dean, Boston College School of Management from footwear); Chestnut Hill, MA 02467-3838 September, 1977 to September, 1999). SkillSoft Corp. (e-learning) Patrick J. Simpson Trustee 2000 Partner, Perkins Coie L.L.P. (law firm). 119 None (age 58) 1211 S.W. 5th Avenue Suite 1500 Portland, OR 97204 26 TRUSTEES (CONTINUED) Number of portfolios in Year first Columbia Funds elected or Complex Other Position appointed Principal occupation(s) overseen by directorships Name, address and age with Funds to office1 during past five years Trustee/Director held - --------------------------------------------------------------------------------------------------------------------------------- Disinterested Trustees (continued) - ---------------------------------- Thomas E. Stitzel Trustee 1998 Business Consultant since 1999 (formerly Professor 119 None (age 67) of Finance from 1975 to 1999, College of Business, 2208 Tawny Woods Place Boise State University); Chartered Financial Analyst. Boise, ID 83706 Thomas C. Theobald Trustee 1996 Managing Director, William Blair Capital Partners 119 Anixter (age 66) and (private equity investing) since September, 1994. International 27 West Monroe Street, Chairman of (network Suite 3500 the Board6 support Chicago, IL 60606 equipment distributor), Jones Lang LaSalle (real estate management services) and MONY Group (life insurance) Anne-Lee Verville Trustee 1998 Author and speaker on educational systems needs 120 4 Chairman of (age 58) (formerly General Manager, Global Education the Board of 359 Stickney Hill Road Industry, IBM Corporation (computer and Directors, Hopkinton, NH 03229 technology) from 1994 to 1997). Enesco Group, Inc. (designer, importer and distributor of giftware and collectibles) Richard L. Woolworth Trustee 1991 Retired since December 2003 (formerly Chairman 119 NW Natural (age 62) and Chief Executive Officer, The Regence Group (a natural gas 100 S.W. Market Street (regional health insurer); Chairman and Chief service provider) #1500 Executive Officer, BlueCross BlueShield of Oregon; Portland, OR 97207 Certified Public Accountant, Arthur Young & Company). 27 TRUSTEES (CONTINUED) Number of portfolios in Year first Columbia Funds elected or Complex Other Position appointed Principal occupation(s) overseen by directorships Name, address and age with Funds to office1 during past five years Trustee/Director held - --------------------------------------------------------------------------------------------------------------------------------- Interested Trustees - ------------------- William E. Mayer2 Trustee 1994 Managing Partner, Park Avenue Equity Partners 121 3 Lee Enterprises (age 63) (private equity) since February, 1999 (formerly (print media), 399 Park Avenue Founding Partner, Development Capital LLC from WR Hambrecht Suite 3204 November 1996 to February, 1999). + Co. (financial New York, NY 10022 service provider) and First Health (healthcare) Joseph R. Palombo2 Trustee 2000 Executive Vice President and Chief Operating 120 5 None (age 50) and Officer of Columbia Management Group, Inc. since One Financial Center President December, 2001 and Director, Executive Vice Boston, MA 02111 President and Chief Operating Officer of Columbia Management Advisors, Inc. (Advisor) since April, 2003 (formerly Chief Operations Officer of Mutual Funds, Liberty Financial Companies, Inc. from August, 2000 to November, 2001; Executive Vice President of Stein Roe & Farnham Incorporated (Stein Roe) from April, 1999 to April, 2003; Director of Colonial Management Associates, Inc. (Colonial) from April, 1999 to April, 2003; Director of Stein Roe from September, 2000 to April, 2003) President of Columbia Funds and Galaxy Funds since February, 2003 (formerly Vice President from September 2002 to February 2003); Manager of Columbia Floating Rate Limited Liability Company since October, 2000; (formerly Vice President of the Columbia Funds from April, 1999 to August, 2000; Chief Operating Officer and Chief Compliance Officer, Putnam Mutual Funds from December, 1993 to March, 1999).
1 In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds complex. 2 Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. Mr. Palombo is an interested person as an employee of the Advisor. 3 Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of the All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. 4 Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. 5 Mr. Palombo also serves as an interested director of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. 6 Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. Prior to that date, Mr. Palombo was Chairman of the Board. 28
OFFICERS Year first Position with elected or Columbia appointed Name, address and age funds to office Principal occupation(s) during past five years - ------------------------------------------------------------------------------------------------------------------------------------ Officers - -------- Vicki L. Benjamin Chief 2001 Controller of the Columbia Funds and of the Liberty All-Star Funds since May, 2002; (Age 42) Accounting Chief Accounting Officer of the Columbia Funds and Liberty All-Star Funds since One Financial Center Officer and June, 2001; Controller and Chief Accounting Officer of the Galaxy Funds since Boston, MA 02111 Controller September, 2002 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May, 1998 to April, 2001). J. Kevin Connaughton Treasurer 2000 Treasurer of the Columbia Funds and of the Liberty All-Star Funds since December, (Age 39) 2000; Vice President of the Advisor since April, 2003 (formerly Controller of the One Financial Center Liberty Funds and of the Liberty All-Star Funds from February, 1998 to October, Boston, MA 02111 2000); Treasurer of the Galaxy Funds since September 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December, 2002 (formerly Vice President of Colonial from February, 1998 to October, 2000). David A. Rozenson Secretary 2003 Secretary of the Columbia Funds and of the Liberty All-Star Funds since December, (Age 49) 2003; Senior Counsel, Fleet Boston Financial Corporation since January, 1996; One Financial Center Associate General Counsel, Columbia Management Group since November, 2002. Boston, MA 02111
29 This page intentionally left blank. This page intentionally left blank. This page intentionally left blank. 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 The trust mails one shareholder report to each shareholder address. Shareholders can order additional reports by calling 800-730-6001. In addition, representatives at that number can provide shareholders information about the trust. Financial advisors who want additional information about the trust may speak to a representative at 800-426-3750. A description of the policies and procedures that the trust uses to determine how to vote proxies relating to its portfolio securities is available (i) without charge, upon request, by calling 800-730-6001 and (ii) on the Securities and Exchange Commission's website at http://www.sec.gov. This report has been prepared for shareholders of Colonial Municipal Income Trust. COLONIAL MUNICIPAL INCOME TRUST ANNUAL REPORT 101-02/583Q-1103 (01/04) 03/3857 Item 2. Code of Ethics. (a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. Item 3. Audit Committee Financial Expert. The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members of the registrant's Board of Trustees and Audit Committee, each qualify as an audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr. Woolworth are each independent trustees, as defined in paragraph (a)(2) of this item's instructions and collectively constitute the entire Audit Committee. Item 4. Principal Accountant Fees and Services. Not applicable at this time. Item 5. Audit Committee of Listed Registrants. Not applicable at this time. Item 6. Reserved. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. The Fund has delegated to Columbia Management Advisors, Inc. (the "Advisor") the responsibility to vote proxies relating to portfolio securities held by the Fund. In deciding to delegate this responsibility to the Advisor, the Board of Trustees of the Trust reviewed and approved the policies and procedures adopted by the Advisor. These included the procedures that the Advisor follows when a vote presents a conflict between the interests of the Fund and its shareholders and the Advisor, its affiliates, its other clients or other persons. The Advisor's policy is to vote all proxies for Fund securities in a manner considered by the Advisor to be in the best interest of the Fund and its shareholders without regard to any benefit to the Advisor, its affiliates, its other clients or other persons. The Advisor examines each proposal and votes against the proposal, if, in its judgment, approval or adoption of the proposal would be expected to impact adversely the current or potential market value of the issuer's securities. The Advisor also examines each proposal and votes the proxies against the proposal, if, in its judgment, the proposal would be expected to affect adversely the best interest of the Fund. The Advisor determines the best interest of the Fund in light of the potential economic return on the Fund's investment. The Advisor addresses potential material conflicts of interest by having predetermined voting guidelines. For those proposals that require special consideration or in instances where special circumstances may require varying from the predetermined guideline, the Advisor's Proxy Committee determines the vote in the best interest of the Fund, without consideration of any benefit to the Advisor, its affiliates, its other clients or other persons. A member of the Proxy Committee is prohibited from voting on any proposal for which he or she has a conflict of interest by reason of a direct relationship with the issuer or other party affected by a given proposal. Persons making recommendations to the Proxy Committee or its members are required to disclose to the Committee any relationship with a party making a proposal or other matter known to the person that would create a potential conflict of interest. The Advisor has three classes of proxy proposals. The first two classes are predetermined guidelines to vote for or against specific proposals, unless otherwise directed by the Proxy Committee. The third class is for proposals given special consideration by the Proxy Committee. In addition, the Proxy Committee considers requests to vote on proposals in the first two classes other than according to the predetermined guidelines. The Advisor generally votes in favor of proposals related to the following matters: selection of auditors (unless the auditor receives more than 50% of its revenues from non-audit activities from the company and its affiliates), election of directors (unless the proposal gives management the ability to alter the size of the board without shareholder approval), different persons for chairman of the board /chief executive officer (unless, in light of the size of the company and the nature of its shareholder base, the role of chairman and CEO are not held by different persons), compensation (if provisions are consistent with standard business practices), debt limits (unless proposed specifically as an anti-takeover action), indemnifications (unless for negligence and or breaches of fiduciary duty), meetings, name of company, principal office (unless the purpose is to reduce regulatory or financial supervision), reports and accounts (if the certifications required by Sarbanes-Oxley Act of 2002 have been provided), par value, shares (unless proposed as an anti-takeover action), share repurchase programs, independent committees, and equal opportunity employment. The Advisor generally votes against proposals related to the following matters: super majority voting, cumulative voting, preferred stock, warrants, rights, poison pills, reclassification of common stock and meetings held by written consent. The Advisor gives the following matters special consideration: new proposals, proxies of investment company shares (other than those covered by the predetermined guidelines), mergers/acquisitions (proposals where a hostile merger/acquisition is apparent or where the Advisor represents ownership in more than one of the companies involved), shareholder proposals (other than those covered by the predetermined guidelines), executive/director compensation (other than those covered by the predetermined guidelines), pre-emptive rights and proxies of international issuers which block securities sales between submission of a proxy and the meeting (proposals for these securities are voted only on the specific instruction of the Proxy Committee and to the extent practicable in accordance with predetermined guidelines). In addition, if a portfolio manager or other party involved with a client of the Advisor or Fund account concludes that the interest of the client or Fund requires that a proxy be voted on a proposal other than according to the predetermined guidelines, he or she may request that the Proxy Committee consider voting the proxy differently. If any person (or entity) requests the Proxy Committee (or any of its members) to vote a proxy other than according to a predetermined guideline, that person must furnish to the Proxy Committee a written explanation of the reasons for the request and a description of the person's (or entity's) relationship with the party proposing the matter to shareholders or any other matter known to the person (or entity) that would create a potential conflict of interest. The Proxy Committee may vary from the predetermined guideline if it determines that voting on the proposal according to the predetermined guideline would be expected to impact adversely the current or potential market value of the issuer's securities or to affect adversely the best interest of the client. References to the best interest of a client refer to the interest of the client in terms of the potential economic return on the client's investment. In determining the vote on any proposal, the Proxy Committee does not consider any benefit other than benefits to the owner of the securities to be voted. The Advisor's Proxy Committee is composed of operational and investment representatives of its regional offices as well as senior representatives of the Advisor's equity investments, equity research, compliance and legal functions. During the first quarter of each year, the Proxy Committee reviews all guidelines and establishes guidelines for expected new proposals. In addition to these reviews and its other responsibilities described above, its functions include annual review of its Proxy Voting Policy and Procedures to ensure consistency with internal policies and regulatory agency policies, and development and modification of voting guidelines and procedures as it deems appropriate or necessary. The Advisor uses Institutional Shareholder Services ("ISS"), a third party vendor, to implement its proxy voting process. ISS provides proxy analysis, record keeping services and vote disclosure services. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable at this time. Item 9. Submission of Matters to a Vote of Security Holders. Not applicable at this time. Item 10. Controls and Procedures. (a) The registrant's principal executive officer and principal financial officer, 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 last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11. Exhibits. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Colonial Municipal Income Trust ------------------------------------------------------------------ By (Signature and Title) /s/ Joseph R. Palombo ------------------------------------------------------ Joseph R. Palombo, President Date February 4, 2004 -------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ Joseph R. Palombo ------------------------------------------------------ Joseph R. Palombo, President Date February 4, 2004 -------------------------------------------------------------------------- By (Signature and Title) /s/ J. Kevin Connaughton ------------------------------------------------------ J. Kevin Connaughton, Treasurer Date February 4, 2004 -------------------------------------------------------------------------- EX-99.CODE ETH 3 file002.txt CODE OF ETHICS COLUMBIA MANAGEMENT GROUP FAMILY OF FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS/PURPOSE OF THE CODE This Code of Ethics (the "Code") for the investment companies within the Columbia Management Group fund complex (collectively the "Funds" and each, a "Fund") applies to the Funds' Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Director of Trustee Administration (the "Covered Officers") for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC"), and in other public communications made by a Fund; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer shall adhere to a high standard of business ethics and shall be sensitive to situations that may give rise to actual or apparent conflicts of interest. II. ADMINISTRATION OF THE CODE The Boards of Trustees and Boards of Directors of the Funds (collectively, the "Board") shall designate an individual to be primarily responsible for the administration of the Code (the "Code Officer"). The Code shall be administered by the Columbia Management Group Compliance Department. In the absence of the Code Officer, his or her designee shall serve as the Code Officer, but only on a temporary basis. Each Fund has designated a chief legal officer (the "Chief Legal Officer") for purposes of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The Chief Legal Officer of a Fund shall assist the Fund's Code Officer in administration of this Code. The Chief Legal Officer shall be responsible for applying this Code to specific situations in which questions are presented under it (in consultation with Fund counsel, where appropriate) and has the authority to interpret this Code in any particular situation. However, any waivers sought by a Covered Officer must be approved by each Audit Committee of the Funds (collectively, the "Audit Committee"). III. MANAGING CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his/her service to, a Fund. For example, a conflict of interest would arise if a Covered Officer, or a family member, receives improper personal benefits as a result of the Covered Officer's position with a Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and a Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (the "Company Act") and the Investment Advisers Act of 1940 (the "Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as "affiliated persons" of the Fund. A Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of those provisions. This Code does not, and is not intended to, repeat or replace those programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between a Fund and its investment adviser, administrator, principal underwriter, pricing and bookkeeping agent and/or transfer agent (each, a "Service Provider") of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Fund or for a Service Provider, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Service Provider and a Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the Service Provider and is consistent with the performance by the Covered Officers of their duties as officers of a Fund. In addition, it is recognized by the Board that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions of the Company Act and the Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Fund. Each Covered Officer must: o not use personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund whereby the Covered Officer or an immediate family member would benefit personally to the detriment of a Fund; and o not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer or an immediate family member rather than the benefit of the Fund.1. There are some conflict of interest situations that must be approved by the Code Officer, after consultation with the Chief Legal Officer. Those situations include, but are not limited to,: o service as director on the board of any public or private company; o the receipt of any gifts in excess of $100 in the aggregate from a third party that does or seeks to do business with the Funds during any 12-month period; o the receipt of any entertainment from any company with which a Fund has current or prospective business dealings, unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any material ownership interest in, or any consulting or employment relationship with, any Fund service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; o a direct or indirect material financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. IV. DISCLOSURE AND COMPLIANCE Each Covered Officer shall: o be familiar with the disclosure requirements generally applicable to the Funds; - ---------------------- 1 For purposes of this Code, personal trading activity of the Covered Officers shall be monitored in accordance with the Columbia Management Group Code of Ethics. Each Covered Officer shall be considered an "Access Person" under such Code. The term "immediate family" shall have the same meaning as provided in such Code. o not knowingly misrepresent, or cause others to misrepresent, facts about any Fund to others, whether within or outside the Fund, including to the Fund's trustees and auditors, and to governmental regulators and self-regulatory organizations; o to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and o promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. V. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code (or after becoming a Covered Officer), affirm in writing to the Board that he/she has received, read and understands the Code; o annually affirm to the Board compliance with the requirements of the Code; o not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; o notify the Chief Legal Officer and the Code Officer promptly if he/she knows of any violation of this Code; and o respond to the trustee and officer questionnaires circulated periodically in connection with the preparation of disclosure documents for the Funds. The Code Officer shall maintain records of all activities related to this Code. The Funds will follow the procedures set forth below in investigating and enforcing this Code: o The Chief Legal Officer and/or the Code Officer will take all appropriate action to investigate any potential violation reported to him/her; o If, after such investigation, the Chief Legal Officer and the Code Officer believes that no violation has occurred, the Code Officer will notify the person(s) reporting the potential violation, and no further action is required; o Any matter that the Chief Legal Officer and/or the Code Officer believes is a violation will be reported to the Audit Committee; o If the Audit Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to the Chief Executive Officer of Columbia Management Group; or a recommendation to sanction or dismiss the Covered Officer; o The Audit Committee will be responsible for granting waivers in its sole discretion; o Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. The Chief Legal Officer shall: o report to the Audit Committee quarterly any approvals provided in accordance with Section III of this Code; and o report to the Audit Committee quarterly any violations of, or material issues arising under, this Code. VI. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for the purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other polices or procedures of the Funds or the Funds' Service Providers govern or purport to govern the behavior or activities (including, but not limited to, personal trading activities) of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment advisers' and principal underwriter's codes of ethics under Rule 17j-1 under the Company Act and any policies and procedures of the Service Providers are separate requirements applicable to the Covered Officers and are not part of this Code. VII. AMENDMENTS All material amendments to this Code must be approved or ratified by the Board, including a majority of independent directors. VIII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board, the Covered Officers, the Chief Legal Officer, the Code Officer, outside audit firms and legal counsel to the Funds, and senior management of Columbia Management Group. IX. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. EX-99.CERT 4 file003.txt CERTIFICATIONS I, Joseph R. Palombo, certify that: 1. I have reviewed this report on Form N-CSR of Colonial Municipal Income Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 4, 2004 /s/ Joseph R. Palombo --------------------------------- Joseph R. Palombo, President I, J. Kevin Connaughton, certify that: 1. I have reviewed this report on Form N-CSR of Colonial Municipal Income Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 4, 2004 /s/ J. Kevin Connaughton ----------------------------------- J. Kevin Connaughton, Treasurer EX-99.906CERT 5 file004.txt CERTIFICATIONS CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Certified Shareholder Report of Colonial Municipal Income Trust (the "Trust") on Form N-CSR for the period ending November 30, 2003, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), each of the undersigned hereby certifies that, to his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Date: February 4, 2004 /s/ Joseph R. Palombo ----------------------------------- Joseph R. Palombo, President Date: February 4, 2004 /s/ J. Kevin Connaughton ----------------------------------- J. Kevin Connaughton, Treasurer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss.1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----