-----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, Qe/W2c7xVW/TUa2cv25QRbQUBv9jiAc/i2bFisGsyyU10ZCMOG/7uwjJf3STZDaG 3UyztXMoUv1JdeFmJhsT2g== 0000891804-05-000393.txt : 20050204 0000891804-05-000393.hdr.sgml : 20050204 20050204162536 ACCESSION NUMBER: 0000891804-05-000393 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041130 FILED AS OF DATE: 20050204 DATE AS OF CHANGE: 20050204 EFFECTIVENESS DATE: 20050204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL MUNICIPAL INCOME TRUST CENTRAL INDEX KEY: 0000809844 IRS NUMBER: 000000000 FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04992 FILM NUMBER: 05577484 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) Vincent Pietropaolo, 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: 1-617-772-3698 ------------------ Date of fiscal year end: 11/30/2004 ------------------ Date of reporting period: 11/30/2004 ------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. COLONIAL MUNICIPAL INCOME TRUST ANNUAL REPORT NOVEMBER 30, 2004 [photo of colonial-style building] NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE PRESIDENT'S MESSAGE Dear Shareholder: In 2004, Colonial Funds became part of the Bank of America family, one of the largest, most respected financial institutions in the United States. As a direct result of this merger, a number of changes are in the works that we believe offer significant potential benefits for our shareholders. First, some funds may be merged in order to eliminate redundancies, others may be liquidated and fund management teams will be aligned to maximize performance potential. You will receive more detailed information about these changes if your fund is affected and you may be asked to vote on certain fund changes. In this matter, your timely response will enable us to implement the changes in 2005. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the good has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a detailed report from the fund's manager or managers on key factors that influenced your fund's performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Colonial Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ Christopher L. Wilson Christopher L. Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. Economic and market conditions change frequently. There is no assurance that trends described in this report will continue or commence. PORTFOLIO MANAGER'S REPORT PRICE PER SHARE AS OF 11/30/04 ($) Net asset value 5.69 - ----------------------------- Market price 5.66 - ----------------------------- 1-YEAR TOTAL RETURN AS OF 11/30/04 (%) Net asset value 4.69 - ----------------------------- Market price 7.86 - ----------------------------- Lipper High Yield Municipal Debt Funds Category average 7.64 - ----------------------------- All returns shown assume reinvestment of distributions. DISTRIBUTIONS DECLARED PER COMMON SHARE 12/01/03 - 11/30/04 ($) 0.42 - ----------------------------- A portion of the trust's income may be subject to the alternative minimum tax. The trust may at times purchase tax-exempt securities at a discount from their original issue price. Some or all of this discount may be included in the trust's ordinary income, and any market discount is taxable when distributed. TOP 5 SECTORS AS OF 11/30/04 (%) Hospitals 10.7 - -------------------------------- Continuing care retirement 7.2 - -------------------------------- Local general obligations 6.6 - -------------------------------- Multi-family 5.2 - -------------------------------- Investor owned utility 5.1 - -------------------------------- QUALITY BREAKDOWN AS OF 11/30/04 (%) AAA 32.2 - ----------------------------- AA 0.6 - ----------------------------- A 6.8 - ----------------------------- BBB 21.0 - ----------------------------- BB 5.5 - ----------------------------- B 1.9 - ----------------------------- CCC 0.2 - ----------------------------- CC 0.2 - ----------------------------- Non-rated 30.1 - ----------------------------- Cash equivalents 1.5 - ----------------------------- Sector and quality breakdowns are calculated as a percentage of total investments. Ratings shown in the quality breakdown represent the lowest rating assigned to a particular bond by one of the following nationally recognized rating agencies: Standard & Poor's, a division of The McGraw Hill Companies, Inc., Moody's Investors Service, Inc. or Fitch Ratings, Ltd. The majority of the bonds that are non-rated are considered by the advisor to be of non-investment grade quality. Because the trust is actively managed, there is no guarantee that the trust will continue to invest in these sectors or maintain this quality breakdown in the future. For the 12-month period ended November 30, 2004, Colonial Municipal Income Trust generated a total return of 7.86%, based on its market price. Changes in the market price of the trust's shares reflect investor demand and are not necessarily linked directly to changes in the trust's net asset value. The trust returned 4.69%, based on investment at net asset value. The trust trailed the 7.64% average return of its peer group, the Lipper High Yield Municipal Debt Funds Category.1 It also lagged a customized peer group consisting of nine leveraged closed-end high-yield municipal funds, which averaged a 6.81% return over the period. High-yield municipals were top performers as investors searched for yield in a low interest rate environment. We sold Treasury futures early in the period to help keep the trust's sensitivity to interest rate changes in line with its Lipper peer group. When yields on 10- and 30-year Treasuries fell--and prices rose--this strategy hurt the trust because the Treasury futures fell in value more than the increase in the value of the hedged municipal bonds. Most of this underperformance occurred early in the year. As the year progressed, the trust made up some of its first quarter underperformance. Leverage increases the duration (sensitivity to interest rates) of the common shares because the trust borrows at a short term rate and invests in long term assets - the duration of those assets is borne by the common shares. Because many of the trusts in the Lipper High Yield Municipal Debt Funds Category are not leveraged, we used futures contracts to reduce the duration of the trust to bring its overall sensitivity to interest rates more in line with the average of the Lipper Category. The customized peer group that only includes leveraged closed-end high yield funds has a longer average duration than the Lipper High Yield Municipal Debt Funds Category. Therefore, the trust will have a longer duration but will be less reliant on hedging to bring its duration in line with its peer group and thus will be less subject to volatility related to relative performance of the Treasury market versus the municipal market. USING LEVERAGE TO ADD INCOME The trust's use of leverage gave it an income advantage over its non-leveraged peers. The leverage comes from the trust's preferred shares, which were issued in 1999, allowing the trust to borrow against its underlying investments. We invest the proceeds from the preferred shares in longer maturity, higher-yielding bonds, and then pay out to preferred shareholders a short-term rate influenced by the federal funds rate--the overnight rate at which banks lend each other money. Although the federal funds rate rose from 1.00% to 2.00% during the period,2 the trust benefited because short-term interest rates remained at low levels. We were able to keep the trust's dividend yield stable even as short-term interest rates rose. However, this could change in 2005. In addition, the use of leverage increases the likelihood of share price volatility and market risk. GAINS FROM HIGHER-YIELDING SECTORS The trust benefited as we trimmed its stake in higher-quality AAA-rated bonds and boosted our investment in higher-yielding BBB-rated issues. Purchases - ------------ 1 Lipper Inc., a widely respected data provider in the industry, calculates an average total return based on net asset value for mutual funds with similar investment objectives as those of the trust. 2 On December 14, 2004, the federal funds rate was increased to 2.25%. 1 PORTFOLIO MANAGER'S REPORT (CONTINUED) included tobacco bonds, as well as multi-family housing and retirement community bonds. Investor owned utilities, including Nevada Power (1.2 % of total investments), also did particularly well, as investor concerns finally eased following the Enron Corporation scandal.3 In addition, Nevada Power benefited from a positive ruling on the rates it charges customers. Pooled multi-family housing bonds and health-care issues also continued to contribute positively to performance. In the continuing care retirement sector, bonds such as Kahala Nui project (0.3% of total investments), a project in Hawaii, rallied nicely as new construction neared completion and residents prepared to occupy the units. However, our holdings of the Woodlawn Nursing Home bonds (0.1% of total investments) underperformed due to reduced cash flow from the project. ENVIRONMENT CONTINUES TO FAVOR HIGH-YIELD BONDS If the economy continues to grow at a reasonable rate and interest rates rise slightly, we believe that the environment for high-income municipal bonds should remain positive. Bonds with high coupons (or stated interest rates) tend to perform well even when interest rates rise because so much of their total return comes from income. In general, high coupon bonds tend to be less sensitive to interest rate changes. Also, high-yield bonds tend to perform well during periods of economic recovery because many issuers experience improved credit quality. We plan to continue trimming AAA-rated bonds, while adding BBB-rated issues in an effort to boost income. Going forward, we also expect to continue to reduce the trust's reliance on Treasury futures. /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 municipal funds for Columbia Management Advisors, Inc. or its predecessors or affiliate organizations since May 1996. PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. The values of fixed-income securities generally move inversely with changes in interest rates such that when interest rates rise, bond values fall and vice versa. 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. Please see Federal Income Tax Information. - ----------- 3 Holdings are disclosed as of November 30, 2004. 2 INVESTMENT PORTFOLIO November 30, 2004 MUNICIPAL BONDS - 151.2% PAR ($) VALUE ($) - ----------------------------------------------------------- EDUCATION - 7.8% EDUCATION - 7.0% CA Educational Facilities Authority, Loyola Marymount University, Series 2001, Insured: MBIA (a) 10/01/14 1,250,000 818,463 CA Public Works Board Lease Revenue, UCLA, Series 2002 A, Insured: FSA 5.375% 10/01/15 1,000,000 1,099,420 MA Development Finance Agency, Western New England College, Series 2002, 6.125% 12/01/32 200,000 209,070 MI Southfield Economic Development Corp., Lawrence University, Series 1998 A, 5.400% 02/01/18 750,000 762,578 NC Capital Facilities Finance Authority, Meredith College, Series 2001, Insured: AMBAC 5.125% 06/01/15 1,000,000 1,074,730 PA Higher Educational Facilities Authority Revenue, Philadelphia University, Series 2004 A, 5.125% 06/01/25 570,000 554,838 VT Educational & Health Buildings Finance Agency, Norwich University, Series 1998, 5.500% 07/01/21 1,000,000 1,031,200 WA Higher Education Facilities Authority, University of Puget Sound, Series 1998, Insured: MBIA 5.375% 10/01/30 5,000,000 5,210,550 WV University, Series 2000 A, Insured: AMBAC (a) 04/01/25 750,000 260,820 ----------- Education Total 11,021,669 ----------- PREP SCHOOL - 0.8% CA Statewide Community Development Authority, Crossroads School for Arts & Sciences, Series 1998, 6.000% 08/01/28 (b) 1,080,000 1,118,653 MA Industrial Finance Agency, St. John's High School, Series 1998, 5.350% 06/01/28 200,000 201,068 ----------- Prep School Total 1,319,721 ----------- EDUCATION TOTAL 12,341,390 ----------- PAR ($) VALUE ($) - ----------------------------------------------------------- HEALTH CARE - 39.5% CONTINUING CARE RETIREMENT - 11.2% CA La Verne Certificates of Participation, Brethren Hillcrest Homes, Series 2003 B, 6.625% 02/15/25 525,000 531,925 CA Statewide Community Development Authority, Eskaton Village - Grass Valley, Series 2000, 8.250% 11/15/31 (b) 745,000 815,991 CT Development Authority, First Mortgage, The Elim Park Baptist, Inc. Project, Series 2003, 5.850% 12/01/33 430,000 439,593 FL Capital Projects Finance Authority, Continuing Care Retirement, Glenridge on Palmer Ranch, Series 2002 A, 8.000% 06/01/32 500,000 517,570 FL Lee County Industrial Development Authority, Shell Point Village Project, Series 1999 A, 5.500% 11/15/29 400,000 387,336 GA Fulton County Residential Care Facilities, Canterbury Court Project, Series 2004 A, 6.125% 02/15/26 500,000 503,790 GA Savannah Economic Development Authority, 1st Mortgage, Marshes of Skidaway, Series 2003 A, 7.400% 01/01/34 350,000 352,517 HI Department of Budget & Finance, Kahala Nui Project, Series 2003 A, 8.000% 11/15/33 750,000 800,220 IL Health Facilities Authority Revenue: Lutheran Senior Ministries, Series 2001, 7.375% 08/15/31 250,000 251,648 Washington and Jane Smith Community, Series 2003 A, 7.000% 11/15/32 525,000 528,197 KS Manhattan, Meadowlark Hills Retirement Home, Series 1999 A, 6.375% 05/15/20 250,000 256,870 MA Boston Industrial Development Finance Authority, Springhouse, Inc., Series 1988, 5.875% 07/01/20 235,000 235,785 See Accompanying Notes to Financial Statements. 3 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- HEALTH CARE (CONTINUED) CONTINUING CARE RETIREMENT (CONTINUED) MA Development Finance Agency, Loomis Communities: Series 1999 A, 5.625% 07/01/15 250,000 247,300 Series 2002 A, 6.900% 03/01/32 125,000 132,292 MD Westminster Economic Development, Carroll Lutheran Village, Series 2004 A, 6.250% 05/01/34 500,000 510,130 MO Cole County Industrial Development Authority, Senior Living Revenue, Heisinger Project, Series 2004, 5.500% 02/01/35 750,000 766,185 NH Higher Educational & Health Facilities Authority, Rivermead at Peterborough, Series 1998, 5.750% 07/01/28 1,100,000 1,046,738 NJ Economic Development Authority, Seabrook Village, Inc., Series 2000 A, 8.250% 11/15/30 500,000 545,265 Winchester Gardens, Series 2004 A, 5.750% 11/01/24 500,000 513,355 PA Chartiers Valley Industrial & Commercial Development Authority, Asbury Health Center, Series 1999, 6.375% 12/01/24 1,000,000 1,000,010 Friendship Village, Series 2003 A, 5.750% 08/15/20 1,000,000 998,670 PA Delaware County Authority, Dunwoody Village, Series 2003 A, 5.375% 04/01/17 400,000 422,656 PA Lancaster Industrial Development Authority, Garden Spot Village, Series 2000 A, 7.625% 05/01/31 325,000 344,133 TN Johnson City Health & Educational Facilities Board, Retirement Facility Revenue, Appalachian Christian Village Project, Series 2004, 6.250% 02/15/32 250,000 247,505 TN Metropolitan Government, Nashville & Davidson Counties, Blakeford at Green Hills, Series 1998, 5.650% 07/01/24 575,000 542,311 PAR ($) VALUE ($) - ----------------------------------------------------------- TN Shelby County Health, Education & Housing Facilities Board, Germantown Village, Series 2003 A, 7.250% 12/01/34 300,000 309,444 TX Abilene Health Facilities Development Corp., Sears Methodist Retirement Obligated Group: Series 1998 A, 5.900% 11/15/25 750,000 726,180 Series 2003 A, 7.000% 11/15/33 200,000 207,924 TX Houston Health Facilities Development Corp., Retirement Facilities Revenue, Buckingham Senior Living Community, Inc., Series 2004 A, 7.000% 02/15/26 500,000 518,355 WI Health & Educational Facilities Authority: Attic Angel Obligated Group, Series 1998, 5.750% 11/15/27 875,000 806,820 Clement Manor, Series 1998, 5.750% 08/15/24 1,000,000 970,980 Three Pillars Senior Living Communities, Series 2003, 5.750% 08/15/26 500,000 503,150 United Lutheran Program for Aging, Inc., Series 1998, 5.700% 03/01/28 750,000 696,960 ----------- Continuing Care Retirement Total 17,677,805 ----------- HEALTH SERVICES - 2.7% CO Health Care Facilities Authority, National Jewish Medical & Research Center, Series 1998: 5.375% 01/01/16 1,500,000 1,514,520 5.375% 01/01/23 340,000 330,412 MA Development Finance Agency, Boston Biomedical Research Institute, Series 1999, 5.650% 02/01/19 620,000 599,428 MA Health & Educational Facilities Authority, Civic Investments, Inc., Series 2002 A, 9.000% 12/15/15 750,000 855,188 MN Minneapolis & St. Paul Housing & Redevelopment Authority, Healthpartners Project, Series 2003, 5.625% 12/01/22 200,000 205,470 WI Health & Educational Facilities Authority, Blood Center Southeastern Project, Series 2004, 5.75 06/01/34 750,000 777,210 ----------- Health Services Total 4,282,228 ----------- See Accompanying Notes to Financial Statements. 4 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- HEALTH CARE (CONTINUED) HOSPITALS - 16.6% AR Conway Health Facilities Board, Conway Regional Medical Center: Series 1999 A, 6.400% 08/01/29 350,000 369,593 Series 1999 B, 6.400% 08/01/29 850,000 896,606 CA Health Facilities Financing Authority, Cedars-Sinai Medical Center, Series 1999 A, 6.125% 12/01/30 650,000 693,329 CA Rancho Mirage Joint Powers Finance Authority, Eisenhower Medical Center, Series 2004, 5.625% 07/01/29 750,000 776,078 CO Health Care Facilities Authority, Parkview Medical Center, Series 2004, 5.000% 09/01/25 550,000 540,408 Vail Valley Medical Center Project, Series 2004, 5.000% 01/15/20 (c) 500,000 504,285 FL Orange County Health Facilities Authority, Orlando Regional Healthcare, Series 2002, 5.750% 12/01/33 150,000 157,760 FL South Lake County Hospital District, South Lake Hospital, Inc., Series 2003, 6.375% 10/01/34 250,000 255,645 FL West Orange Healthcare District, Series 2001 A, 5.650% 02/01/22 400,000 416,060 GA Coffee County Hospital Authority Revenue, Coffee Regional Medical Center, Inc. Project, Series 2004, 5.000% 12/01/26 350,000 340,931 IL Health Facilities Authority: Swedish American Hospital, Series 2000, 6.875% 11/15/30 500,000 549,990 Thorek Hospital & Medical Center, Series 1998, 5.375% 08/15/28 500,000 485,865 IL Southwestern Development Authority, Anderson Hospital, Series 1999: 5.375% 08/15/15 500,000 510,905 5.500% 08/15/20 550,000 553,256 IN Health Facility Authority, Community Foundation, Northwest Indiana, Inc., Series 2004 A, 6.000% 03/01/34 425,000 419,756 PAR ($) VALUE ($) - ----------------------------------------------------------- LA Public Facilities Authority, Touro Infirmary, Series 1999: 5.625% 08/15/29 525,000 529,919 5.500% 08/15/19 250,000 257,748 MA Health & Educational Facilities Authority: Jordan Hospital, Series 2003 E, 6.750% 10/01/33 250,000 262,165 Milford-Whitinsville Regional Hospital: Series 1998 C, 5.250% 07/15/18 500,000 487,155 Series 2002 D, 6.350% 07/15/32 250,000 259,260 MD Health & Higher Educational Facilities Authority, Adventist Healthcare, Series 2003 A: 5.000% 01/01/16 365,000 371,654 5.750% 01/01/25 400,000 414,576 MI Dickinson County Healthcare System, Series 1999, 5.700% 11/01/18 770,000 765,288 MI Flint Hospital Building Authority, Hurley Medical Center, Series 1998 A, 5.375% 07/01/20 460,000 449,075 MN St. Paul Housing & Redevelopment Authority, HealthEast Project, Series 2001 A, 5.700% 11/01/15 2,000,000 1,975,700 NH Higher Educational & Health Facilities Authority: Catholic Medical Center, Series 2002, 6.125% 07/01/32 200,000 205,234 Littleton Hospital Association, Inc., Series 1998 A: 5.900% 05/01/18 500,000 481,225 6.000% 05/01/28 625,000 591,094 Series 1998 B, 5.900% 05/01/28 675,000 630,275 NJ Health Care Facilities Financing Authority Revenue, Capital Health Systems Obligated Group, Inc., Series 2003 A, 5.750% 07/01/23 500,000 528,215 NV Henderson Healthcare Facility Revenue, Catholic Healthcare West, Series 1998, 5.375% 07/01/26 500,000 502,725 NY State Dormitory Authority Revenue, North Shore - Long Island Jewish Medical Center, Series 2003, 5.500% 05/01/33 200,000 205,688 See Accompanying Notes to Financial Statements. 5 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- HEALTH CARE (CONTINUED) HOSPITALS (CONTINUED) OH Belmont County, East Ohio Regional Hospital, Series 1998, 5.700% 01/01/13 700,000 651,357 OH Highland County Joint Township Hospital District, Series 1999, 6.750% 12/01/29 715,000 688,166 OH Lakewood Hospital Improvement Revenue, Lakewood Hospital Association, Series 2003, 5.500% 02/15/14 400,000 429,016 OH Miami County, Upper Valley Medical Center, Inc., Series 1996 A, 6.250% 05/15/16 665,000 694,233 OH Sandusky County, County Memorial Hospital, Series 1998, 5.150% 01/01/08 270,000 277,106 PA Allegheny County Hospital Development, Ohio Valley General Hospital, Series 1998 A, 5.450% 01/01/28 1,050,000 991,788 SC Jobs Economic Development Authority, Bon Secours Health Care Systems, Inc., Series 2002 A, 5.250% 11/15/23 1,250,000 1,277,500 SC Lexington County Health Services District Inc. Hospital Improvement, Series 2003, 5.500% 11/01/23 750,000 780,083 SD Health & Educational Facilities Authority, Sioux Valley Hospitals & Health Systems, Series 2004 A, 5.250% 11/01/34 525,000 523,168 TX Richardson Hospital Authority, Baylor Richardson Medical Center, Series 1998, 5.625% 12/01/28 300,000 305,589 TX Tyler Health Facilities Development Corp., Mother Frances Hospital, Series 2001, 6.000% 07/01/31 750,000 778,613 VA Prince William County Industrial Development Authority Revenue, Potomac Hospital Corp., Series 2003, 5.200% 10/01/30 350,000 356,951 VT Educational & Health Buildings Finance Agency, Brattleboro Memorial Hospital, Series 1998, 5.375% 03/01/28 500,000 476,255 PAR ($) VALUE ($) - ----------------------------------------------------------- WI Health & Educational Facilities Authority: Aurora Health Care, Inc., Series 2003, 6.400% 04/15/33 350,000 371,175 Fort Health Care, Inc. Project, Series 2004, 6.100% 05/01/34 750,000 782,025 Wheaton Franciscan Services, Series 2002, 5.750% 08/15/30 450,000 469,382 ----------- Hospitals Total 26,239,870 ----------- INTERMEDIATE CARE FACILITIES - 1.2% IN Health Facilities Financing Authority, Hoosier Care, Inc., Series 1999 A, 7.125% 06/01/34 1,055,000 896,339 PA Economic Development Financing Authority, Northwestern Human Services, Inc., Series 1998 A, 5.250% 06/01/14 1,000,000 912,610 ----------- Intermediate Care Facilities Total 1,808,949 ----------- NURSING HOMES - 7.8% AK Juneau, St. Ann's Care Center, Series 1999, 6.875% 12/01/25 1,000,000 1,003,270 CO Health Facilities Authority: American Housing Foundation I, Inc. Project, Series 1990 A, 8.500% 12/01/31 545,000 533,473 Volunteers of America: Series 1998 A: 5.450% 07/01/08 250,000 247,513 5.750% 07/01/20 700,000 641,480 Series 1999 A, 6.000% 07/01/29 350,000 318,990 IA Finance Authority, Care Initiatives Project: Series 1996, 9.250% 07/01/25 965,000 1,166,048 Series 1998 B: 5.750% 07/01/18 550,000 513,167 5.750% 07/01/28 1,475,000 1,287,410 IN Gary Industrial Economic Development, West Side Health Care Center, Series 1987 A, 11.500% 10/01/17 (d) 2,230,000 1,115,000 IN Michigan City Health Facilities, Metro Health Foundation, Inc. Project, Series 1993, 11.000% 11/01/22 (e) 3,717,555 144,985 KY Economic Development Finance Authority, Health Facilities Revenue, Series 2003, 6.500% 01/01/29 925,000 844,266 See Accompanying Notes to Financial Statements. 6 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- HEALTH CARE (CONTINUED) NURSING HOMES (CONTINUED) MA Development Finance Agency: Alliance Health Care Facilities, Series 1999, 7.100% 07/01/32 1,135,000 1,114,536 American Health Woodlawn Manor, Inc.: Series 2000 A, 7.750% 12/01/27 370,000 199,896 Series 2000 B, 10.250% 06/01/27 (d)(l) 113,186 16,978 GF/Massachusetts, Inc., Series 1994, 8.300% 07/01/23 875,000 881,746 MI Cheboygan County Economic Development Corp., Metro Health Foundation Project, Series 1993, 11.000% 11/01/22 (e) 2,015,833 78,617 MN Carlton Inter-Faith Social Services, Inc., Series 2000, 7.500% 04/01/19 250,000 261,363 MN Sartell, Foundation for Healthcare, Series 1999 A, 6.625% 09/01/29 1,025,000 1,042,077 TX Kirbyville Health Facilities Development Corp., Heartway III Project, Series 1997 A, 10.000% 03/20/18 (d) 539,215 172,549 WA Kitsap County Housing Authority, Martha & Mary Nursing Home, Series 1996, Insured: GNMA 7.100% 02/20/36 643,000 750,169 ----------- Nursing Homes Total 12,333,533 ----------- HEALTH CARE TOTAL 62,342,385 ----------- - ----------------------------------------------------------- HOUSING - 10.7% ASSISTED LIVING/SENIOR - 4.6% DE Kent County, Heritage at Dover, Series 1999, AMT 7.625% 01/01/30 1,210,000 1,073,887 GA Columbus Housing Authority, The Gardens at Calvary, Series 1999, 7.000% 11/15/19 490,000 440,157 IL Development Finance Authority, Care Institute, Inc., Series 1995 8.250% 06/01/25 1,410,000 1,367,474 MN Roseville, Care Institute, Inc., Series 1993, 7.750% 11/01/23 (d) 1,630,000 1,059,500 PAR ($) VALUE ($) - ----------------------------------------------------------- NC Medical Care Commission, DePaul Community Facilities Project, Series 1999, 7.625% 11/01/29 975,000 1,005,410 NY Huntington Housing Authority, Gurwin Jewish Senior Center, Series 1999: 5.875% 05/01/19 420,000 399,504 6.000% 05/01/29 650,000 609,577 TX Bell County Health Facilities Development Corp., Care Institutes, Inc., Series 1994, 9.000% 11/01/24 1,390,000 1,276,368 ----------- Assisted Living/Senior Total 7,231,877 ----------- MULTI-FAMILY - 6.1% DE Wilmington, Electra Arms Senior Association Project, Series 1998, AMT, 6.250% 06/01/28 930,000 739,889 FL Broward County Housing Finance Authority, Chaves Lake Apartment Project, Series 2000, AMT, 7.500% 07/01/40 500,000 494,630 FL Clay County Housing Finance Authority, Madison Commons Apartments, Series 2000 A, AMT, 7.450% 07/01/40 500,000 497,690 MN Washington County Housing & Redevelopment Authority, Cottages of Aspen, Series 1992, AMT, 9.250% 06/01/22 980,000 1,002,275 MN White Bear Lake, Birch Lake Townhome Project: Series 1989 A, AMT, (a) 07/15/19 624,000 280,120 Series 1989 B, AMT, 10.250% 07/15/19 1,770,000 1,771,451 NC Medical Care Community Revenue, Healthcare Housing, ARC Projects, Series 2004 A, 5.800% 10/01/34 400,000 395,376 Resolution Trust Corp., Pass-Through Certificates, Series 1993 A, 8.750% 12/01/16 (f) 455,481 442,309 SC Housing Finance & Development, Multi-Family Housing Finance Revenue, Westbridge Apartments, Series 1990 A, AMT, 9.500% 09/01/20 1,865,000 1,828,800 TN Franklin Industrial Development Board, Landings Apartment Project, Series 1996 B, 8.750% 04/01/27 690,000 706,415 See Accompanying Notes to Financial Statements. 7 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- HOUSING (CONTINUED) MULTI-FAMILY (CONTINUED) TX Affordable Housing Corp., NHT/GTEX Project, Series 2001 C, 10.000% 10/01/31 (d) 685,000 23,975 TX El Paso County Housing Finance Corp., American Village Communities: Series 2000 C, 8.000% 12/01/32 300,000 307,818 Series 2000 D, 10.000% 12/01/32 300,000 307,932 VA Alexandria Redevelopment & Housing Authority, Courthouse Commons Apartments, Series 1990 A, AMT, 10.000% 01/01/21 1,000,000 829,410 ----------- Multi-Family Total 9,628,090 ----------- SINGLE FAMILY - 0.0% KY Kentucky County Single Family Mortgage Revenue, Series 1987 A, AMT, Insured: MBIA 9.000% 09/01/16 15,000 15,042 ----------- Single Family Total 15,042 ----------- HOUSING TOTAL 16,875,009 ----------- - ----------------------------------------------------------- INDUSTRIAL - 9.1% FOOD PRODUCTS - 2.5% GA Cartersville Development Authority, Anheuser Busch Project, Inc., Series 2002, AMT, 5.950% 02/01/32 1,000,000 1,043,350 IN Hammond, American Maize Products Co., Series 1994, AMT, 8.000% 12/01/24 260,000 272,693 LA Port of New Orleans Industrial Development, Continental Grain Co., Series 1993, 7.500% 07/01/13 1,000,000 1,012,490 LA Southern Louisiana Port Commission, Cargill, Inc. Project, Series 1997, 5.850% 04/01/17 500,000 525,455 MI Strategic Fund, Michigan Sugar Co., Sebewaing Project, Series 1998 A, 6.250% 11/01/15 1,000,000 989,640 ----------- Food Products Total 3,843,628 ----------- FOREST PRODUCTS - 3.3% AL Camden Industrial Development Board, Weyerhaeuser Co., Series 2003 B, AMT, 6.375% 12/01/24 400,000 429,436 PAR ($) VALUE ($) - ----------------------------------------------------------- AL Courtland Industrial Development Board, Champion International Corp., Series 1999, AMT, 6.000% 08/01/29 1,000,000 1,022,470 AL Phenix City Industrial Development Board Environmental Improvement Revenue, Meadwestvaco Corp., Series 2001 A, AMT, 6.350% 05/15/35 400,000 417,948 GA Rockdale County Development Authority, Solid Waste Disposal Visy Paper, Inc., Series 1993, AMT, 7.500% 01/01/26 800,000 823,624 LA Beauregard Parish, Boise Cascade Corp. Project, Series 2002, 6.800% 02/01/27 1,000,000 1,040,490 MI Delta County Economic Development Corp., Mead Westvaco-Escanaba, Series 2002 B, AMT, 6.450% 04/15/23 300,000 316,044 MS Lowndes County Solid Waste Disposal & Waste Control Revenue, Weyerhaeuser Co., Project, Series 1992 B, 6.700% 04/01/22 595,000 699,476 VA Bedford County Industrial Development Authority, Nekoosa Packaging Corp., Series 1998, AMT, 5.600% 12/01/25 400,000 389,596 ----------- Forest Products Total 5,139,084 ----------- MANUFACTURING - 1.0% IL Will-Kankakee Regional Development Authority, Flanders Corp., Precisionaire Project, Series 1997, AMT, 6.500% 12/15/17 825,000 829,447 TX Trinity River Authority, Texas Instruments Project, Series 1996, AMT, 6.200% 03/01/20 750,000 778,290 ----------- Manufacturing Total 1,607,737 ----------- METALS & MINING - 0.3% NV Department of Business & Industry, Wheeling-Pittsburgh Steel Corp., Series 1999 A, AMT, 8.000% 09/01/14 (f) 222,097 198,557 VA Greensville County Industrial Development Authority, Wheeling-Pittsburgh Steel Corp., Series 1999 A, AMT, 7.000% 04/01/14 375,000 335,246 ----------- Metals & Mining Total 533,803 ----------- See Accompanying Notes to Financial Statements. 8 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- INDUSTRIAL (CONTINUED) OIL & GAS - 2.0% NJ Middlesex County Pollution Control Authority Revenue, Financing Pollution Control, Amerada, Series 2004, 6.050% 09/15/34 115,000 119,969 TX Gulf Coast Industrial Development Authority, Solid Waste Disposal, Citgo Petroleum, Series 1998, AMT, 8.000% 04/01/28 375,000 414,446 VI Government Refinery Facilities, Hovensa Coker Project, Series 2002, AMT, 6.500% 07/01/21 250,000 271,305 VI Public Finance Authority, Refinery Facilities Revenue, Hovensa Refinery: Series 2003, AMT, 6.125% 07/01/22 425,000 452,969 Series 2004, AMT, 5.875% 07/01/22 400,000 420,068 WA Pierce County Economic Development Corp., Occidental Petroleum Co., Series 1993, AMT, 5.800% 09/01/29 1,500,000 1,501,830 ----------- Oil & Gas Total 3,180,587 ----------- INDUSTRIAL TOTAL 14,304,839 ----------- - ----------------------------------------------------------- OTHER - 11.2% OTHER - 0.5% NY Convention Center Operating Corp., Yale Building Project, Series 2003, (a) 06/01/08 1,000,000 857,150 ----------- Other Total 857,150 ----------- POOL/BOND BANK - 0.4% MI Municipal Bond Authority, Local Government Loan Project, Series 2001 A, Insured: AMBAC 5.375% 11/01/17 550,000 604,676 ----------- Pool/Bond Bank Total 604,676 ----------- REFUNDED/ESCROWED (g) - 8.0% CT Development Authority, Sewer Sludge Disposal Facilities, Series 1996, AMT, 8.250% 12/01/06 570,000 607,694 GA Forsyth County Hospital Authority, Georgia Baptist Healthcare System, Series 1998, 6.000% 10/01/08 620,000 664,851 ID Health Facilities Authority, IHC Hospitals, Inc., Series 1992, 6.650% 02/15/21 2,750,000 3,503,748 PAR ($) VALUE ($) - ----------------------------------------------------------- IL Metropolitan Pier & Exposition Authority, McCormick Project, Series 1993 A, Insured: FGIC (a) 06/15/14 3,990,000 2,650,038 IL University of Illinois, Series 2001 A, Insured: AMBAC 5.500% 08/15/17 600,000 678,246 NC Lincoln County, Lincoln County Hospital, Series 1991, 9.000% 05/01/07 200,000 217,444 PA Delaware County Authority, Mercy Health Corp., Southeastern Pennsylvania Obligated, Series 1996: 6.000% 12/15/16 1,400,000 1,514,156 6.000% 12/15/26 500,000 538,165 PR Commonwealth of Puerto Rico, Public Finance Corp., Series 2002 E, 6.000% 08/01/26 80,000 93,914 TN Shelby County, Health, Education & Housing Facilities Board, Open Arms Development Center: Series 1992 A, 9.750% 08/01/19 450,000 543,632 Series 1992 C, 9.750% 08/01/19 455,000 549,672 TX Board of Regents, University of Texas, Series 2001 B, 5.375% 08/15/18 350,000 392,585 WV Hospital Finance Authority, Charleston Area Medical Center, Series 2000 A, 6.750% 09/01/30 605,000 720,628 ----------- Refunded/Escrowed Total 12,674,773 ----------- TOBACCO - 2.3% CA Golden State Tobacco Securitization Authority, Asset Backed: Series 2002 A-1: 6.250% 06/01/33 1,600,000 1,557,488 Series 2003 B, 5.500% 06/01/43 500,000 517,845 NJ Tobacco Settlement Financing Corp., Series 2003, 6.750% 06/01/39 1,000,000 997,340 WA Tobacco Settlement Authority, Series 2002, 6.625% 06/01/32 500,000 490,700 ----------- Tobacco Total 3,563,373 ----------- OTHER TOTAL 17,699,972 ----------- See Accompanying Notes to Financial Statements. 9 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- OTHER REVENUE - 4.9% HOTELS - 1.3% PA Philadelphia Authority for Industrial Development, Doubletree Project, Series 1997 A, 6.500% 10/01/27 2,000,000 2,028,940 ----------- Hotels Total 2,028,940 ----------- RECREATION - 2.6% CA Agua Caliente, Band of Cahuilla Indians Revenue, Series 2003, 5.600% 07/01/13 775,000 785,230 CA Cabazon Band Mission Indian, Series 2004: 8.375% 10/01/15 (f) 220,000 219,562 8.750% 07/01/19 (f) 780,000 778,424 CT Gaming Authority, Mohegan Tribe, Series 2001, 6.250% 01/01/31 (f) 200,000 211,528 CT Mashantucket Western Pequot Revenue, Series B, (a) 09/01/18 (f) 1,100,000 516,307 FL Capital Trust Agency, Seminole Tribe Convention Center, Series 2002 A, 10.000% 10/01/33 (f) 900,000 1,102,833 NM Red River Sports Facility, Red River Ski Area Project, Series 1998, 6.450% 06/01/07 515,000 521,834 ----------- Recreation Total 4,135,718 ----------- RETAIL - 1.0% NJ Economic Development Authority, Glimcher Properties LP Project, Series 1998, AMT, 6.000% 11/01/28 1,000,000 978,770 OH Lake County, North Madison Properties, Series 1993, 8.819% 09/01/11 610,000 609,335 ----------- Retail Total 1,588,105 ----------- OTHER REVENUE TOTAL 7,752,763 ----------- - ----------------------------------------------------------- RESOURCE RECOVERY - 2.4% DISPOSAL - 1.1% CA Pollution Control Financing Authority, Solid Waste Disposal Revenue, Republic Services, Inc. Project, Series 2002 C, AMT, 5.250% 06/01/23 500,000 515,710 MA Industrial Finance Agency, Peabody Monofill Associates, Inc., Series 1995, 9.000% 09/01/05 395,000 402,078 PAR ($) VALUE ($) - ----------------------------------------------------------- UT Carbon County, Laidlaw Environmental, Series 1997 A, AMT: 7.500% 02/01/10 250,000 255,398 7.450% 07/01/17 500,000 513,165 ----------- Disposal Total 1,686,351 ----------- RESOURCE RECOVERY - 1.3% MA Industrial Finance Agency, Ogden Haverhill Project, Series 1998 A, AMT, 5.500% 12/01/13 1,000,000 1,009,190 PA Delaware County Industrial Development Authority, BFI Project, Series 1988 A, 6.200% 07/01/19 1,000,000 1,060,320 ----------- Resource Recovery Total 2,069,510 ----------- RESOURCE RECOVERY TOTAL 3,755,861 ----------- - ----------------------------------------------------------- TAX-BACKED - 25.6% LOCAL APPROPRIATED - 1.0% CA Compton Certificates of Participation, Civic Center & Capital Improvements, Series 1997 A, 5.500% 09/01/15 1,000,000 1,046,690 SC Dorchester County School District No. 2 Installment Purchase Revenue, Series 2004, 5.250% 12/01/29 500,000 503,480 ----------- Local Appropriated Total 1,550,170 ----------- LOCAL GENERAL OBLIGATIONS - 10.3% CA East Side Union High School District, Series 2003 B, Insured: MBIA 5.100% 02/01/20 750,000 825,120 CA Fresno Unified School District, Series 2002 A, Insured: MBIA 6.000% 02/01/18 1,245,000 1,485,198 CA Los Angeles Unified School District, Series 2002, Insured: MBIA 5.750% 07/01/16 600,000 699,000 CA Vallejo Unified School District, Series 2002 A, Insured: MBIA 5.900% 08/01/25 1,000,000 1,162,700 LA New Orleans, Series 1991, Insured: AMBAC (a) 09/01/15 4,000,000 2,489,280 NY New York City, Series 1998 H, Insured: MBIA 5.125% 08/01/25 5,000,000 5,191,150 See Accompanying Notes to Financial Statements. 10 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- TAX-BACKED (CONTINUED) LOCAL GENERAL OBLIGATIONS (CONTINUED) TX Dallas County Flood Control, District No. 1, Series 2002, 7.250% 04/01/32 750,000 777,420 TX Irving Independent School District, Series 1997: Insured: PSFG (a) 02/15/15 1,500,000 951,975 (a) 02/15/16 1,000,000 597,370 WA Clark County School District No. 37, Series 2001 C, Insured: FGIC (a) 12/01/18 4,000,000 2,055,920 ----------- Local General Obligations Total 16,235,133 ----------- SPECIAL NON-PROPERTY TAX - 5.1% CA San Diego Redevelopment Agency, Series 2001, Insured: FSA (a) 09/01/18 1,015,000 523,689 FL Northern Palm Beach County Improvement District, Series 1999, Insured: MBIA 5.900% 08/01/19 500,000 550,955 IL Metropolitan Pier & Exposition Authority, McCormick Place Expansion Project: Series 1993 A, Insured: FGIC (a) 06/15/14 1,010,000 669,499 Series 1994 A, Insured: MBIA (a) 06/15/15 3,000,000 1,885,590 Series 1996 A, Insured: MBIA (a) 12/15/13 5,000,000 3,427,550 NJ Economic Development Authority Revenue, Cigarette Tax, Series 2004, 5.750% 06/15/29 500,000 510,660 5.750% 06/15/31 120,000 120,367 PR Commonwealth Highway & Transportation Authority, Series 2003 AA Insured: MBIA 5.500% 07/01/18 375,000 431,801 ----------- Special Non-Property Tax Total 8,120,111 ----------- SPECIAL PROPERTY TAX - 7.6% CA Huntington Beach Community Facilities District, Grand Coast Resort, Series 2001, 6.450% 09/01/31 500,000 516,105 CA Lincoln Community Facilities District, No. 2003-1, Series 2004, 5.550% 09/01/18 500,000 494,745 PAR ($) VALUE ($) - ----------------------------------------------------------- CA Oakdale Public Finance Authority, Tax Allocation Revenue, Central City Redevelopment Project, Series 2004, 5.375% 06/01/33 1,125,000 1,119,308 CA Orange County Community Facilities District, Ladera Ranch, Series 1999 A, 6.500% 08/15/21 1,000,000 1,088,450 CA Orange County Improvement Bond Act 1915, Phase IV, No. 01-1-B, Series 2003, 5.750% 09/02/33 500,000 506,460 CA Redwood City Community Facilities District, No. 1 Redwood, Series 2003 B, 6.000% 09/01/33 300,000 307,761 CA Temecula Valley Unified School District, No. 02-1, Series 2003, 6.125% 09/01/33 355,000 359,995 CA Yorba Linda Redevelopment Agency, Series 1998 A, Insured: MBIA (a) 09/01/24 1,325,000 468,772 FL Celebration Community Development District, Special Assessment, Series 2003 A, 6.400% 05/01/34 750,000 775,358 FL Colonial Country Club Community Development District, Capital Improvement, Series 2003, 6.400% 05/01/33 495,000 515,404 FL Double Branch Community Development District, Special Assessment, Series 2002 A, 6.700% 05/01/34 500,000 533,620 FL Heritage Palms Community Development District, Series 1999 A, 6.250% 11/01/07 250,000 251,610 FL Islands at Doral Southwest Community Development District, Series 2003, 6.375% 05/01/35 250,000 260,410 FL Lexington Oaks Community Development District, Series 1998 A, 6.125% 05/01/19 685,000 695,275 FL Orlando, Conroy Road Interchange Project, Series 1998 A: 5.500% 05/01/10 125,000 128,869 5.800% 05/01/26 300,000 303,675 See Accompanying Notes to Financial Statements. 11 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- TAX-BACKED (CONTINUED) SPECIAL PROPERTY TAX (CONTINUED) FL Seven Oaks Community Development District II, Special Assessment Revenue, Series 2004 B, 5.000% 05/01/09 1,000,000 1,000,990 FL Stoneybrook Community Development District: Series 1998 A, 6.100% 05/01/19 245,000 248,758 Series 1998 B, 5.700% 05/01/08 25,000 25,401 FL Westchester Community Development District No. 1, Special Assessment, Series 2003, 6.125% 05/01/35 275,000 277,527 IL Chicago Tax Increment, Pilsen Redevelopment, Series 2004 B, 6.750% 06/01/22 310,000 315,298 IL Lincolnshire Special Service No. 1, Sedgebrook Project, Series 2004, Insured: AMBAC 6.250% 03/01/34 250,000 247,650 MI Pontiac Finance Authority, Development Area, No. 3, Series 2002, 6.375% 06/01/31 450,000 455,792 MI Taylor Tax Increment Finance Authority, Series 2001, Insured: FSA 5.375% 05/01/17 1,000,000 1,095,500 ----------- Special Property Tax Total 11,992,733 ----------- STATE APPROPRIATED - 1.3% MI Building Authority, Series 2001 I, 5.000% 10/15/24 1,000,000 1,028,040 PR Commonwealth of Puerto Rico, Public Finance Corp., Series 2002 E, 6.000% 08/01/26 820,000 943,131 ----------- State Appropriated Total 1,971,171 ----------- STATE GENERAL OBLIGATIONS - 0.3% CA State, Series 2003 5.250% 02/01/23 380,000 409,682 ----------- State General Obligations Total 409,682 ----------- TAX-BACKED TOTAL 40,279,000 ----------- PAR ($) VALUE ($) - ----------------------------------------------------------- TRANSPORTATION - 14.0% AIR TRANSPORTATION - 3.8% CA Los Angeles Regional Airport Improvement, American Airlines, Series 2002 C, AMT, 7.500% 12/01/24 400,000 387,336 Laxfuel Corp., Series 2001, AMT, Insured: AMBAC 5.250% 01/01/23 500,000 508,255 FL Capital Trust Agency Revenue, Air Cargo - Orlando Project, Series 2003, AMT, 6.750% 01/01/32 350,000 336,077 IN Indianapolis Airport Authority: FedEx Corp., Series 1994, AMT, 7.100% 01/15/17 500,000 517,970 United Airlines Project, Series 1995 A, AMT, 6.500% 11/15/31 (e) 435,000 38,237 KY Kenton County Airport Board, Delta Airlines, Inc., Series 1992 A, AMT, 7.500% 02/01/20 500,000 402,120 MN Minneapolis & St. Paul Metropolitan Airport Commission, Northwest Airlines, Inc.: Series 2001 A, AMT, 7.000% 04/01/25 800,000 685,424 Series 2001 B, AMT, 6.500% 04/01/25 250,000 250,905 NC Charlotte Special Facilities Revenue, Douglas International Airport, US Airways, Inc.: Series 1998, AMT, 5.600% 07/01/27 (j) 250,000 115,465 Series 2000, AMT, 7.750% 02/01/28 (j) 500,000 244,470 NJ Economic Development Authority, Continental Airlines, Inc. Project, Series 2003, AMT, 9.000% 06/01/33 1,250,000 1,275,775 NY New York City Industrial Development, JFK International Airport Project, American Airlines, Inc., Series 2002 B, AMT, 8.500% 08/01/28 500,000 373,170 PA Philadelphia Authority for Industrial Development, Aero Philadelphia LLC, Series 1999, AMT, 5.250% 01/01/09 350,000 342,951 TX Houston Industrial Development, Air Cargo, Perot Development, Series 2002, AMT, 6.000% 03/01/23 541,150 553,082 ----------- Air Transportation Total 6,031,237 ----------- See Accompanying Notes to Financial Statements. 12 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- TRANSPORTATION (CONTINUED) AIRPORTS - 1.9% TX Dallas Fort Worth International Airport, Series 2004 B, AMT, Insured: FSA 5.000% 11/01/25 3,000,000 3,018,540 ----------- Airports Total 3,018,540 ----------- TOLL FACILITIES - 3.4% CA San Joaquin Hills Transportation Corridor Agency, Series 1993 A, Insured: MBIA (a) 01/15/15 3,000,000 1,908,000 CO Northwest Parkway Public Highway Authority, Series 2001 D, 7.125% 06/15/41 1,000,000 1,052,630 CO Public Highway Authority, Arapahoe County, E-470, Series 2000 B: Insured: MBIA (a) 09/01/18 3,000,000 1,566,900 Series 2000 B: (a) 09/01/35 8,750,000 909,038 ----------- Toll Facilities Total 5,436,568 ----------- TRANSPORTATION - 4.9% NV Department of Business & Industry, Las Vegas Monorail Project, Series 2000, 7.375% 01/01/40 750,000 760,673 NY Port Authority of New York & New Jersey Thirty-Seventh, Series 2004, AMT, Insured: FSA 5.125% 07/15/30 6,790,000 6,893,683 ----------- Transportation Total 7,654,356 ----------- TRANSPORTATION TOTAL 22,140,701 ----------- - ----------------------------------------------------------- UTILITY - 26.0% INDEPENDENT POWER PRODUCERS - 4.2% MI Midland County Economic Development Corp., Series 2000, AMT, 6.875% 07/23/09 1,000,000 1,039,200 NY Port Authority of New York & New Jersey, KIAC Partners, Series 1996 IV, AMT, 6.750% 10/01/11 2,000,000 2,098,580 NY Suffolk County Industrial Development Revenue, Nissequoque Cogeneration Partner Facilities, Series 1998, 5.500% 01/01/23 550,000 523,754 PA Carbon City Industrial Development, Panther Creek Partners Project, Series 2000, AMT, 6.650% 05/01/10 140,000 150,896 PAR ($) VALUE ($) - ----------------------------------------------------------- PA Economic Development Finance Authority, Colver Project, Series 1994 D, AMT, 7.150% 12/01/18 1,500,000 1,535,490 PR Commonwealth of Puerto Rico Industrial, Educational, Medical & Environmental Cogeneration Facilities, AES Project, Series 2000, AMT, 6.625% 06/01/26 320,000 344,857 VA Pittsylvania County Industrial Development Authority, Multi-trade of Pittsylvania, Series 1994 A, AMT, 7.450% 01/01/09 1,000,000 1,023,380 ----------- Independent Power Producers Total 6,716,157 ----------- INVESTOR OWNED - 8.0% AZ Maricopa County Pollution Control, El Paso Electric Co., Series 2002 A, 6.250% 05/01/37 500,000 511,830 AZ Pima Industrial Development Authority, Tucson Electric Power Co., Series 1997 A, AMT, 6.100% 09/01/25 750,000 749,850 CA Chula Vista Industrial Development Revenue, San Diego Gas & Electric Co., Series 1996 B, AMT, 5.500% 12/01/21 475,000 495,587 FL Polk County Industrial Development Authority, Tampa Electric Co. Project, Series 1996, AMT, 5.850% 12/01/30 800,000 815,712 IL Bryant Pollution Control Revenue, Central Illinois Light Co., Series 1993, 5.900% 08/01/23 1,000,000 1,018,950 IN Petersburg in Pollution Control Revenue, Indianapolis Power & Light Project, Series 1995, 6.625% 12/01/24 750,000 769,425 LA Calcasieu Parish Industrial Development Board, Entergy Gulf States, Inc., Series 1999, 5.450% 07/01/10 500,000 506,015 LA West Feliciana Parish, Entergy Gulf States, Inc., Series 1999 B, 6.600% 09/01/28 500,000 510,100 MS Business Finance Corp., Systems Energy Resources Project, Series 1998, 5.875% 04/01/22 1,500,000 1,507,725 MT Forsyth Pollution Control, Portland General, Series 1998, 5.200% 05/01/33 225,000 237,303 See Accompanying Notes to Financial Statements. 13 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- UTILITY (CONTINUED) INVESTOR OWNED (CONTINUED) NV Clark County, Industrial Development Revenue, Nevada Power Co., Series 1997 A, AMT, 5.900% 11/01/32 3,000,000 2,920,170 OH Air Quality Development Authority, Pollution Control Revenue, Cleveland Electric, Series 2002 A, 6.000% 12/01/13 650,000 688,903 TX Brazos River Authority Pollution Control Revenue, TXU Electric Co.: Series 2001 C, AMT, 5.750% 05/01/36 220,000 237,461 Series 2003 C, AMT, 6.750% 10/01/38 555,000 600,549 WY Campbell County Pollution Control Revenue, Black Hills Power, Inc. Project, Series 2004, 5.350% 10/01/24 1,000,000 994,600 ----------- Investor Owned Total 12,564,180 ----------- JOINT POWER AUTHORITY - 0.3% NC Eastern Municipal Power Agency, Series 2003 F, 5.500% 01/01/16 430,000 459,158 ----------- Joint Power Authority Total 459,158 ----------- MUNICIPAL ELECTRIC - 7.0% CA Department of Water Resources, Power Supply Revenue Bonds, Series 2002 A, Insured: AMBAC 5.500% 05/01/14 2,000,000 2,259,420 TX Austin Utilities System, Series 1994: Insured: FGIC (a) 05/15/17 6,600,000 3,690,918 (a) 05/15/18 5,000,000 2,640,750 WA Seattle Light & Power, Series 2001, Insured: FSA 5.500% 03/01/17 2,250,000 2,464,425 ----------- Municipal Electric Total 11,055,513 ----------- WATER & SEWER - 6.5% CA Castaic Lake Water Agency, Series 1999 A, Insured: AMBAC (a) 08/01/25 10,445,000 3,472,127 MA Water Resources Authority, Series 1997 D, Insured: MBIA 5.000% 08/01/24 (h) 4,000,000 4,100,840 MS V Lakes Utility District, Series 1994, 8.250% 07/15/24 500,000 490,110 PAR ($) VALUE ($) - ----------------------------------------------------------- TX Houston Water & Sewer System, Series 1991 C, Insured: AMBAC (a) 12/01/12 3,000,000 2,173,140 ----------- Water & Sewer Total 10,236,217 ----------- UTILITY TOTAL 41,031,225 ----------- TOTAL MUNICIPAL BONDS (cost of $239,671,378) 238,523,145 ----------- MUNICIPAL PREFERRED STOCKS - 2.0% - ----------------------------------------------------------- HOUSING - 2.0% MULTI-FAMILY - 2.0% Charter Mac Equity Issuer Trust: Series A-4, AMT, 6.000% 04/30/19 (f) 1,000,000 1,068,130 AMT, 7.600% 11/30/10 (f) 500,000 577,690 GMAC Municipal Mortgage, 5.600% 10/31/39 (f) 500,000 497,980 Munimae Trust 5.800% 06/30/49 (f) 1,000,000 996,030 ----------- TOTAL MUNICIPAL PREFERRED STOCKS (cost of $3,000,000) 3,139,830 ----------- INVESTMENT COMPANY - 0.0% SHARES - ----------------------------------------------------------- Federated Tax-Free Obligations Fund 253 253 ----------- INVESTMENT COMPANY TOTAL (cost of $253) Investment Company Total 253 ----------- SHORT-TERM OBLIGATIONS - 2.4% PAR ($) - ----------------------------------------------------------- VARIABLE RATE DEMAND NOTES (i) - 2.4% FL Alachua County Health Facilities Continuing Care, Oak Hammock University Project, Series 2002 A, 1.490% 10/01/32 400,000 400,000 IL Healthcare Facilities Authority Revenue, OSF Healthcare System, Series 2002, 1.700% 11/15/27 100,000 100,000 IN Development Financing Authority Revenue, Cathedral High Trustees, Inc., Series 2001, 1.720% 09/01/26 200,000 200,000 IN Health Facility Financing Authority, Golden Years Homestead, Inc., Series 2002 A, 1.690% 06/01/25 600,000 600,000 See Accompanying Notes to Financial Statements. 14 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 SHORT-TERM OBLIGATIONS (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- VARIABLE RATE DEMAND NOTES (i) (CONTINUED) MO State Development Finance Board, Lease Revenue, Series 2003, 1.720% 06/01/33 395,000 395,000 MN Makato Revenue, Bethany Lutheran College, Series 2000 B, 1.720% 11/01/15 400,000 400,000 MN State Higher Education Facility Authority, Olaf College, Series 5-M1, 1.670% 10/01/32 300,000 300,000 NY New York City Municipal Water Financing Authority, Water & Sewer System Revenue, Series 1994 G, 1.640% 06/15/24 400,000 400,000 WY Uinta County Pollution Control Revenue, Chevron U.S.A. Inc., Project, Series 1993, 1.680% 08/15/20 400,000 400,000 1.680% 12/01/22 600,000 600,000 ----------- Variable Rate Demand Notes Total 3,795,000 ----------- TOTAL SHORT-TERM OBLIGATIONS (cost of $3,795,000) 3,795,000 ----------- TOTAL INVESTMENTS - 155.6% (cost of $246,466,631) (k) 245,458,228 AUCTION PREFERRED SHARES PLUS CUMULATIVE UNPAID DISTRIBUTIONS - (57.1)% (90,015,873) OTHER ASSETS & LIABILITIES, NET - 1.5% 2,314,334 ----------- NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS - 100.0% 157,756,689 =========== NOTES TO INVESTMENT PORTFOLIO: - -------------------------------------------------------------------------------- (a) Zero coupon bond. (b) Denotes a restricted security, which is subject to restrictions on resale under federal securities laws. At November 30, 2004, the value of these securities amounted to $1,934,644, which represents 1.2% of net assets. Additional information on these securities is as follows: ACQUISITION ACQUISITION SECURITY DATE COST - -------------------------------------------------------------------------------- CA Statewide Community Development Authority: Crossroads School for Arts & Sciences, Series 1998: 6.000% 08/01/28 08/21/98 $ 410,000 6.000% 08/01/28 08/31/98 700,000 Eskaton Village - Grass Valley, Series 2000, 11/15/31 09/08/00 750,000 ---------- $1,860,000 ========== (c) Security purchased on a delayed delivery basis. (d) The issuer is in default of certain debt covenants. Income is not being accrued. As of November 30, 2004, the value of these securities amounted to $2,388,002, which represents 1.5% of net assets. (e) The issuer has filed for bankruptcy protection under Chapter 11. Income is not being accrued. As of November 30, 2004, the value of these securities amounted to $261,839, which represents 0.2% of net assets. (f) Security 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, 2004 the value of these securities amounted to $6,609,350, which represents 4.2% 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) A portion of this security with a market value of $2,217,529 is pledged as collateral for open futures contracts. (i) Variable rate demand notes. These securities are payable upon demand and are secured by letters of credit or other credit support agreements from banks. The interest rates change periodically and the interest rates shown reflect the rates as of November 30, 2004. (j) The issuer has filed for bankruptcy protection under Chapter 11. Income is being accrued. As of November 30, 2004, the value of these securities amounted to $359,935, which represents 0.2% of net assets. (k) Cost for federal income tax purposes is $246,333,869. (l) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At November 30, 2004, the Fund held the following open short futures contracts: UNREALIZED AGGREGATE EXPIRATION APPRECIATION/ TYPE CONTRACTS VALUE FACE VALUE DATE (DEPRECIATION) - ------------------------------------------------------------------------------ U.S. Treasury Bonds 239 $26,319,875 $26,333,498 Mar-2005 $ 13,623 U.S. Treasury Note 10-Year 245 27,133,750 27,086,261 Mar-2005 (47,489) -------- $(33,866) -------- Acronym Name - ---------------------------------------------------------------- AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FSA Financial Security Assurance, Inc. GNMA Government National Mortgage Association MBIA MBIA Insurance Corp. PSFG Permanent School Fund Guaranteed At November 30, 2004, the Trust held investments in the following sectors: % OF HOLDINGS BY REVENUE SOURCE (UNAUDITED) NET ASSETS - --------------------------------------------------------------- Health Care 39.5 Utility 26.0 Tax-Backed 25.6 Transportation 14.0 Housing 12.7 Other 11.2 Industrial 9.1 Education 7.8 Other Revenue 4.9 Resource Recovery 2.4 Short-Term Obligations 2.4 Auction Preferred Shares (57.1) Other Assets & Liabilities 1.5 ----- 100.0% ----- See Accompanying Notes to Financial Statements. 15 STATEMENT OF ASSETS AND LIABILITIES November 30, 2004 ASSETS: Investments, at cost $246,466,631 ------------ Investments, at value $245,458,228 Cash 65,576 Receivable for: Interest 3,843,138 Futures variation margin 80,269 Deferred Trustees' compensation plan 12,727 ------------ Total Assets 249,459,938 ------------ LIABILITIES: Payable for: Investments purchased on a delayed delivery basis 503,920 Distributions -- common shares 970,190 Distributions -- preferred shares 15,873 Investment advisory fee 131,239 Pricing and bookkeeping fees 12,927 Trustees' fees 144 Custody fee 1,446 Preferred shares remarketing commissions 2,477 Deferred Trustees' fees 12,727 Other liabilities 52,306 ------------ Total Liabilities 1,703,249 ------------ 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 $207,837,794 Undistributed net investment income 428,592 Accumulated net realized loss (49,467,428) Net unrealized depreciation on: Investments (1,008,403) Futures contracts (33,866) ------------ Net assets at value applicable to 27,719,719 common shares of beneficial interest outstanding $157,756,689 ============ Net asset value per common share $ 5.69 ============ STATEMENT OF OPERATIONS For the Year Ended November 30, 2004 INVESTMENT INCOME: Interest $ 14,567,097 Dividends 2,755 ------------ Total Investment Income 14,569,852 ------------ EXPENSES: Investment Advisory fee 1,614,523 Transfer agent fee 55,733 Pricing and bookkeeping fees 127,467 Trustees' fees 12,311 Preferred shares remarketing commissions 225,874 Custody fee 17,250 Other expenses 191,039 ------------ Total Expenses 2,244,197 Custody earnings credit (716) ------------ Net Expenses 2,243,481 ------------ Net Investment Income 12,326,371 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS: Net realized gain (loss) on: Investments 1,149,397 Futures contracts (3,935,002) ------------ Net realized loss (2,785,605) ------------ Net change in unrealized appreciation/ depreciation on: Investments (1,176,727) Futures contracts (126,474) ------------ Net change in unrealized appreciation/depreciation (1,303,201) ------------ Net Loss (4,088,806) ------------ Net Increase in Net Assets from Operations 8,237,565 ------------ LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (1,014,983) ------------ Net Increase in Net Assets from Operations Applicable to Common Shares $ 7,222,582 ------------ See Accompanying Notes to Financial Statements. 16 STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30, --------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 12,326,371 $ 13,061,245 Net realized loss on investments and futures contracts (2,785,605) (6,018,896) Net change in unrealized appreciation (depreciation) on investments and futures contract (1,303,201) 6,503,690 ------------ ------------ Net Increase from Operations 8,237,565 13,546,039 ------------ ------------ LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (1,014,983) (886,846) ------------ ------------ Increase in Net Assets from Operations Applicable to Common Shares 7,222,582 12,659,193 ------------ ------------ LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS: From net investment income: (11,640,812) (11,897,663) ------------ ------------ SHARE TRANSACTIONS: Distributions reinvested 181,019 188,292 ------------ ------------ Total Increase (Decrease) in Net Assets (4,237,211) 949,822 NET ASSETS APPLICABLE TO COMMON SHARES: Beginning of period 161,993,900 161,044,078 ------------ ------------ End of period (including overdistributed net investment income of $428,592 and $764,260, respectively) $157,756,689 $161,993,900 ------------ ------------ NUMBER OF TRUST SHARES: Common Shares: Issued for distributions reinvested 31,152 32,387 Outstanding at: Beginning of period 27,688,567 27,656,180 ------------ ------------ End of period 27,719,719 27,688,567 ------------ ------------ Preferred Shares: Outstanding at end of period 3,600 3,600 ------------ ------------ See Accompanying Notes to Financial Statements.
17 NOTES TO FINANCIAL STATEMENTS November 30, 2004 NOTE 1. ORGANIZATION Colonial Municipal Income Trust (the "Trust") is a Massachusetts business trust registered under the Investment Company Act of 1940 (the "Act"), as amended, as a non-diversified, closed-end management investment company. INVESTMENT GOAL The Trust seeks to provide high current income, generally exempt from federal income taxes, by investing primarily in medium and lower quality bonds and notes issued by or on behalf of state and local government units whose interest is exempt from ordinary federal income tax, other than the possible incidence of any alternative minimum tax. The Trust's secondary goal is to seek total return. TRUST SHARES The Trust may issue an unlimited number of common shares. On July 20, 1999, the Trust issued 3,600 Auction Preferred Shares ("APS"). NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. SECURITY VALUATION Debt securities generally are valued by pricing services approved by the Trust's Board of Trustees, based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation. Certain debt securities, which tend to be more thinly traded and of lesser quality, are priced based on fundamental analysis of the financial condition of the issuer and the estimated value of any collateral. Valuations developed through pricing techniques may vary from the actual amounts realized upon sale of the securities, and the potential variation may be greater for those securities valued using fundamental analysis. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Investments in other investment companies are valued at net asset value. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. SECURITY TRANSACTIONS Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. FUTURES CONTRACTS The Trust may invest in municipal and U.S. Treasury futures contracts. The Trust will invest in these instruments to hedge against the effects of changes in the value of portfolio securities due to anticipated changes in interest rates and/or market conditions, for duration management, or when the transactions are economically appropriate to the reduction of risk inherent in the management of the Trust and not for trading purposes. The use of futures contracts involves certain risks, which include: (1) imperfect correlation between the price movement of the instruments and the underlying securities, (2) inability to close out positions due to differing trading hours, or the temporary absence of a liquid market, for either the instrument or the underlying securities, or (3) an inaccurate prediction by Columbia Management Advisors, Inc. of the future direction of interest rates. Any of these risks may involve amounts exceeding the variation margin recorded in the Trust's Statement of Assets and Liabilities at any given time. Upon entering into a futures contract, the Trust deposits cash or securities with the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Trust equal to the daily change in the contract value and are recorded as variation margin receivable or payable and offset in unrealized gains or losses. The Trust also identifies portfolio securities as segregated with the custodian in a separate account in an amount equal to the futures contract. The Trust recognizes a realized gain or loss when the contract is closed or expires. 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. 18 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2004 Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees. The Trust will not incur any registration costs upon such resale. DELAYED DELIVERY SECURITIES The Trust may trade securities on other than normal settlement terms, including securities purchased or sold on a "when-issued" basis. This may increase the risk if the other party to the transaction fails to deliver and causes the Trust to subsequently invest at less advantageous prices. The Trust identifies cash or liquid portfolio securities as segregated with the custodian in an amount equal to the delayed delivery commitment. INCOME RECOGNITION Interest income is recorded on the accrual basis. Premium and discount are amortized and accreted, respectively, on all debt securities. Corporate actions and dividend income are recorded on the ex date. FEDERAL INCOME TAX STATUS The Trust intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its tax exempt or taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Trust intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Trust should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS Distributions to common shareholders are recorded on the ex-date. Distributions to Auction Preferred shareholders are recorded daily and payable at the end of each dividend period. Each dividend payment period for the APS is generally seven days. The applicable dividend rate for the APS on November 30, 2004, was 1.61%. For the year ended November 30, 2004, the Trust declared dividends to Auction Preferred shareholders amounting to $1,014,983, representing an average dividend rate of 1.13% per APS. NOTE 3. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Trust's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended November 30, 2004, permanent book and tax basis differences resulting primarily from differing treatments for expired capital loss carryforwards, discount accretion/premium amortization on debt securities and market discount reclassification 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 ------------ ------------ ----------- $(6,244) $10,318 $(4,074) 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, 2004 and November 30, 2003 was as follows: NOVEMBER 30, NOVEMBER 30, 2004 2003 ---------- ---------- Distributions paid from: Tax-Exempt Income $12,603,622 $12,778,538 Ordinary Income 52,173 5,971 Long-Term Capital Gains -- -- As of November 30, 2004, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED TAX-EXEMPT ORDINARY LONG-TERM NET UNREALIZED INCOME INCOME CAPITAL GAINS (DEPRECIATION)* ------------ ------------ ------------ ------------- $2,232,941 $-- $-- $(875,641) * The differences between book-basis and tax-basis net unrealized appreciation/depreciation are primarily due to discount accretion/premium amortization on debt securities. Unrealized appreciation and depreciation at November 30, 2004, based on cost of investments for federal income tax purposes, was: Unrealized appreciation $ 12,947,542 Unrealized depreciation (13,823,183) ------------ Net unrealized depreciation $ (875,641) ============ 19 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2004 The following capital loss carryforwards, determined as of November 30, 2004, may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code: YEAR OF CAPITAL LOSS EXPIRATION CARRYFORWARD ----------------- ----------------------- 2005 $ 7,196,783 2007 3,490,821 2008 13,036,764 2009 3,114,307 2010 7,684,792 2011 4,393,912 2012 4,060,511 ----------- $42,977,890 =========== Capital loss carryforwards of $4,074 expired during the year ended November 30, 2004 for the Trust. Expired capital loss carryforwards are recorded as a reduction of paid-in capital. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Trust. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Trust's investment advisor, was acquired by Bank of America Corporation ("BOA"). The acquisition 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 provides administrative and other services to the Trust in addition to investment advisory services. Columbia receives a monthly investment advisory fee at the annual rate of 0.65% of the Trust's average weekly net assets, including assets applicable to the APS. PRICING AND BOOKKEEPING FEES Columbia is responsible for providing pricing and bookkeeping services to the Trust under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Trust, Columbia receives from the Trust an annual flat fee of $10,000 paid monthly, and in any month that the Trust's average weekly net assets, including assets applicable to APS, exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average weekly net assets, including assets applicable to APS, of the Trust for that month. The Trust also pays additional fees for pricing services based on the number of securities held by the Trust. For the year ended November 30, 2004, the Trust's effective pricing and bookkeeping fee rate, inclusive of out-of-pocket expenses, was 0.051% of the Trust's average weekly net assets including assets applicable to APS. CUSTODY CREDITS The Trust has an agreement with its custodian bank under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of Operations. The Trust could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. FEES PAID TO OFFICERS AND TRUSTEES With the exception of one officer, all officers of the Trusts are employees of Columbia or its affiliates and receive no compensation from the Trust. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Trust in accordance with federal securities regulations. The Trust, along with other affiliated Trusts, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Trust's fee will not exceed $15,000 per year. The Trust's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Trust's assets. OTHER Columbia provides certain services to the Trust related to Sarbanes-Oxley compliance. For the year ended November 30, 2004, the Trust paid $1,538 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PORTFOLIO INFORMATION For the year ended November 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $39,792,164 and $45,936,859, respectively. NOTE 6. PREFERRED SHARES The Trust currently has outstanding 3,600 APS. The APS are redeemable at the option of the Trust on any dividend payment date at the redemption price of $25,000 per share, plus an amount equal to any dividends accumulated on a daily basis unpaid through the redemption date (whether or not such dividends have been declared). Under the Act, the Trust is required to maintain asset coverage of at least 200% with respect to the APS as of the last business day of each month in which any APS are outstanding. Additionally, the Trust is required to meet more stringent asset coverage requirements 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, 2004, there were no such restrictions on the Trust. 20 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2004 NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES CONCENTRATION OF CREDIT RISK The Trust holds investments that are insured by private insurers who guarantee the payment of principal and interest in the event of default or that are supported by a letter of credit. Each of the Trust's insurers is rated AAA by Moody's Investor Services, Inc. At November 30, 2004, investments supported by private insurers that represent greater than 5% of the total investments of the Trust were as follows: INSURER INVESTMENTS - ----------------------------------------------------------- MBIA Insurance Corp. 12.1% Financial Security Assurance, Inc. 6.1 Ambac Assurance Corp. 5.6 GEOGRAPHIC CONCENTRATION The Trust has greater than 5% of its total investments at November 30, 2004 invested in debt obligations issued by the states of California, Colorado, Florida, Illinois, Minnesota, Pennsylvania and Texas and their respective political subdivisions, agencies and public authorities. The Trust is more susceptible to economic and political factors adversely affecting issuers of these state's municipal securities than are municipal bond funds that are not concentrated to the same extent in these issuers. HIGH-YIELD SECURITIES Investing in high-yield securities may involve greater credit risk and considerations not typically associated with investing in U.S. government bonds and other higher quality fixed income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns 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 to the extent there is no established secondary market. LEGAL PROCEEDINGS Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and certain of their affiliates (collectively, "the Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or CFDI were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and CFDI, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and CFDI alleging that Columbia and CFDI had violated certain New York anti-fraud statutes. If either Columbia or CFDI is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, CFDI or any company that is an affiliated person of Columbia and CFDI from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and CFDI that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and CFDI entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and CFDI agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and CFDI to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and CFDI's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group and its affiliate Banc of America Capital Management, LLC have agreed to collectively reduce mutual fund fees by $160 million over a five-year period. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These suits and certain regulatory investigations are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. 21 FINANCIAL HIGHLIGHTS Selected data for a share outstanding throughout each period is as follows (common shares unless otherwise noted):
YEAR ENDED NOVEMBER 30, ----------------------------------------------------------------------------- 2004 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 5.85 $ 5.82 $ 6.12 $ 6.05 $ 6.51 $ 7.57 ----------- ----------- ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.45(a) 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 (0.15) 0.02 (0.33)(b) 0.03 (0.44) (0.97) ----------- ----------- ----------- ----------- ----------- ----------- Total from Investment Operations 0.30 0.49 0.17 0.56 0.11 (0.51) ----------- ----------- ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (0.04) (0.03) (0.05) (0.10) (0.14) (0.04) ----------- ----------- ----------- ----------- ----------- ----------- Total from Investment Operations Applicable to Common Shareholders 0.26 0.46 0.12 0.46 (0.03) (0.55) ----------- ----------- ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS: From net investment income (0.42) (0.43) (0.42) (0.39) (0.43) (0.42) In excess of net investment income -- -- -- -- -- (0.04) ----------- ----------- ----------- ----------- ----------- ----------- Total Distributions Declared to Common Shareholders (0.42) (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 $ 5.69 $ 5.85 $ 5.82 $ 6.12 $ 6.05 $ 6.51 ----------- ----------- ----------- ----------- ----------- ----------- Market price per share -- common shares $ 5.66 $ 5.65 $ 5.67 $ 5.65 $ 5.38 $ 5.75 ----------- ----------- ----------- ----------- ----------- ----------- Total return -- based on market value -- common shares (e) 7.86% 7.35% 7.87% 12.05% 0.84% (24.33)% ----------- ----------- ----------- ----------- ----------- ----------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (f)(g) 1.42% 1.39% 1.37% 1.45% 1.33% 1.08% Net investment income before preferred stock dividend (f)(g) 7.79% 8.17% 8.28%(b) 8.55% 8.88% 7.00% Net investment income after preferred stock dividend (f)(g) 7.15% 7.61% 7.47% (b) 6.94% 6.68% 6.36% Portfolio turnover rate 16% 15% 27% 12% 12% 20% Net assets, end of period (000's)-- common shares $ 157,757 $ 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. 22 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 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 7.41 $ 7.41 $ 7.48 $ 7.15 ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.47 0.51 0.51 0.55 Net realized and unrealized gain (loss) on investments and futures contracts 0.18 --(a) (0.07) 0.33 ----------- ------------ ---------- ----------- Total Income from Investment Operations 0.65 0.51 0.44 0.88 ----------- ------------ ---------- ----------- LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS: From net investment income (0.48) (0.51) (0.51) (0.55) In excess of net investment income (0.01) -- -- -- ----------- ----------- ----------- ----------- Total Distributions Declared to Common Shareholders (0.49) (0.51) (0.51) (0.55) ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 7.57 $ 7.41 $ 7.41 $ 7.48 ----------- ----------- ----------- ----------- Market price per share -- common shares $ 8.13 $ 7.56 $ 7.25 $ 6.75 ----------- ----------- ----------- ----------- Total return -- based on market value -- common shares (b) 14.57% 11.67% 15.36% 8.04% ----------- ------------ ---------- ----------- RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (c) 0.82% 0.86% 0.91% 0.98% Net investment income (c) 6.20% 6.83% 6.87% 7.47% Portfolio turnover rate 34% 15% 22% 24% Net assets, end of period (000's)-- common shares $ 208,931 $ 203,533 $ 202,793 $ 204,666
(a) Rounds to less than $0.01 per share. (b) Total return at market value assuming all distributions reinvested at prices calculated in accordance with the Dividend Reinvestment Plan. (c) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%.
ASSET COVERAGE REQUIREMENTS INVOLUNTARY AVERAGE ASSET LIQUIDATING MARKET TOTAL AMOUNT COVERAGE PREFERENCE VALUE OUTSTANDING PER SHARE* PER SHARE PER SHARE - ---------------------------------------------------------------------------------------------------------------- 11/30/04 $90,000,000 $68,821 $25,004 $25,000 11/30/03 90,000,000 69,998 25,006 25,000 11/30/02 90,000,000 69,734 25,001 25,000 11/30/01 90,000,000 71,967 25,007 25,000 11/30/00 90,000,000 71,462 25,011 25,000 11/30/99 ** 90,000,000 50,023 25,006 25,000
* Calculated by subtracting the Fund's total liabilities from the Fund's total assets and dividing the amount by the number of APS outstanding. ** On July 20, 1999, the Trust began offering Auction Preferred Shares. 23 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 2004, and the results of its operations, the changes in its net assets, and its financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts January 19, 2005 24 UNAUDITED INFORMATION FEDERAL INCOME TAX INFORMATION 99.59% of distributions from net investment income will be treated as exempt income for federal income tax purposes. - -------------------------------------------------------------------------------- As of December 31, 2004, 24.35% of distributions from net investment income is subject to the alternative minimum tax. 25 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 or 95% of the market price. If the net asset value exceeds the market price of Trust shares at such time, or if the Trust declares a dividend or other distribution payable only in cash, the Plan Agent will, as agent for Plan participants, buy Trust shares in the open market, on the New York Stock Exchange or elsewhere, for the participants' accounts. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value of the Trust's shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the Trust's shares, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Trust. Participants in the Plan may withdraw from the Plan upon written notice to the Plan Agent. When a participant withdraws from the Plan or upon termination of the Plan as provided below, certificates for whole shares credited to the participant's account under the Plan will be issued and a cash payment will be made for any fraction of a share credited to such account. Participants in the Plan have the option of making additional cash payments to the Plan Agent semi-annually, for investment in the Trust's shares. Such payments may be made in any amount from $100 to $500. State Street will use all funds received from participants (as well as any dividends and distributions received in cash) to purchase Trust shares in the open market semiannually. Interest will not be paid on any uninvested cash payments. In the case of shareholders such as banks, brokers or nominees holding shares for others who are the beneficial owners of those shares, the Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by the shareholder of record as representing the total amount registered in such shareholder's name and held for the account of beneficial owners who are to participate in the Plan. There is no charge to Plan participants for reinvesting dividends or distributions. The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Trust. There will be no brokerage charges with respect to shares issued directly by the Trust as a result of dividends or distributions payable either in stock or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends or distributions as well as from voluntary cash payments. Brokerage charges for purchasing small amounts of stock for individual accounts under the voluntary cash purchase provisions of the Plan are expected to be less than the usual brokerage charges for individual transactions of comparable size, because the Plan Agent will be purchasing shares for all participants in blocks and charging to cash purchase Plan participants a pro rated portion of the lower commissions usually obtainable on such block purchases. The automatic reinvestment of dividends and distributions will not relieve participants of any income tax that may be payable on such dividends or distributions. The Plan may be amended or terminated on 30 days' written notice to the Plan participants. All correspondence concerning the Plan should be directed to EquiServe by mail at P.O. Box 403011, Providence, RI 02940-3011, or by phone at 1-800-426-5523. 26 TRUSTEES AND OFFICERS The Trustees/Directors serve terms of indefinite duration. The names, addresses and ages of the Trustees/Directors and officers of the Trust 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 Trust in the Columbia Funds Complex.
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST ELECTED OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS APPOINTED TO OFFICE(1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD - -------------------------------------------------------------------------------------------------------------------------------- DISINTERESTED TRUSTEES DOUGLAS A. HACKER (age 49) Executive Vice President-Strategy of United Airlines (airline) since December 2002 (formerly P.O. Box 66100 President of UAL Loyalty Services (airline) from September 2001 to December 2002; Executive Vice Chicago, IL 60666 President and Chief Financial Officer of United Airlines from March 1999 to September 2001; Senior Trustee (since 1996) Vice President-Finance from March 1993 to July 1999). Oversees 118, None JANET LANGFORD KELLY (age 47) Adjunct Professor of Law, Northwestern University, since September 2004; Private Investor since 9534 W. Gull Lake Drive March 2004 (formerly Chief Administrative Officer and Senior Vice President, Kmart Holding Richland, MI 49083-8530 Corporation (consumer goods), from September 2003 to March 2004; Executive Vice President-Corporate Trustee (since 1996) 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). Oversees 118, None RICHARD W. LOWRY (age 68) Private Investor since August 1987 (formerly Chairman and Chief Executive Officer, U. S. Plywood 10701 Charleston Drive Corporation (building products manufacturer)). Oversees 120(3), None Vero Beach, FL 32963 Trustee (since 1995) CHARLES R. NELSON (age 62) Professor of Economics, University of Washington, since January 1976; Ford and Louisa Van Voorhis Department of Economics Professor of Political Economy, University of Washington, since September 1993 (formerly Director, University of Washington Institute for Economic Research, University of Washington from September 2001 to June 2003) Adjunct Seattle, WA 98195 Professor of Statistics, University of Washington, since September 1980; Associate Editor, Journal Trustee (since 1981) of Money Credit and Banking, since September 1993; consultant on econometric and statistical matters. Oversees 118, None JOHN J. NEUHAUSER (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston College (formerly Dean, 84 College Road Boston College School of Management from September 1977 to September 1999). Oversees 121(3), (4), Chestnut Hill, MA 02467-3838 Saucony, Inc. (athletic footwear) Trustee (since 1985) PATRICK J. SIMPSON (age 60) Partner, Perkins Coie LLP (law firm). Oversees 118, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000)
27 TRUSTEES AND OFFICERS (CONTINUED)
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST ELECTED OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS APPOINTED TO OFFICE(1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD - -------------------------------------------------------------------------------------------------------------------------------- DISINTERESTED TRUSTEES (continued) THOMAS E. STITZEL (age 68) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999, College of 2208 Tawny Woods Place Business, Boise State University); Chartered Financial Analyst. Oversees 118, None. Boise, ID 83706 Trustee (since 1998) THOMAS C. THEOBALD (age 67) Partner and Senior Advisor, Chicago Growth Partners (private equity investing) since September 2004 303 W. Madison (formerly Managing Director, William Blair Capital Partners (private equity investing) from Suite 2500 September 1994 to September 2004). Oversees 118, Anixter International (network support equipment Chicago, IL 60606 distributor); Ventas, Inc. (real estate investment trust); Jones Lang LaSalle (real estate Trustee and Chairman management services) and Ambac Financial Group (financial guaranty insurance) of the Board(5) (since 1996) ANNE-LEE VERVILLE (age 59) Retired since 1997 (formerly General Manager, Global Education Industry, IBM Corporation (computer 359 Stickney Hill Road and technology) from 1994 to 1997). Oversees 119(4), Chairman of the Board of Directors, Enesco Hopkinton, NH 03229 Group, Inc. (designer, importer and distributor of giftware and collectibles) Trustee (since 1998) RICHARD L. WOOLWORTH (age 63) Retired since December 2003 (formerly Chairman and Chief Executive Officer, The Regence Group 100 S.W. Market Street #1500 (regional health insurer); Chairman and Chief Executive Officer, BlueCross BlueShield of Oregon; Portland, OR 97207 Certified Public Accountant, Arthur Young & Company). Oversees 118, Northwest Natural Gas Co. Trustee (since 1991) (natural gas service provider) INTERESTED TRUSTEE WILLIAM E. MAYER(2) (age 64) Partner, Park Avenue Equity Partners (private equity) since February 1999 (formerly Partner, 399 Park Avenue Development Capital LLC from November 1996 to February 1999). Oversees 120(3), Lee Enterprises Suite 3204 (print media), WR Hambrecht + Co. (financial service provider); First Health (healthcare); Reader's New York, NY 10022 Digest (publishing); OPENFIELD Solutions (retail industry technology provider) Trustee (since 1994)
(1) In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds Complex. (2) Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. (3) Messrs. Lowry, Neuhauser and Mayer also serve as directors/trustees of the Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. 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. Theobald was appointed as Chairman of the Board effective December 10, 2003. 28 TRUSTEES AND OFFICERS (CONTINUED)
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS - ------------------------------------------------------------------------------------------------------------------- OFFICERS CHRISTOPHER L. WILSON (age 47) Head of Mutual Funds for the Advisor since August 2004; President of the Columbia Funds since One Financial Center October 2004 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Boston, MA 02111 Inc. from September 1998 to August 2004). President (since 2004) J. KEVIN CONNAUGHTON (age 40) Treasurer of the Columbia Funds and of the Liberty All-Star Funds since December 2000; Vice One Financial Center President of the Advisor since April 2003 (formerly President of the Columbia Funds from February Boston, MA 02111 2004 to October 2004; Chief Accounting Officer and Controller of the Liberty Funds and of the Treasurer (since 2000) Liberty All-Star Funds from February 1998 to October 2000); Treasurer of the Galaxy Funds since September 2002; (formerly Treasurer from December 2002 to December 2004 and President from February 2004 to December 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February 1998 to October 2000). MARY JOAN HOENE (age 54) Senior Vice President and Chief Compliance Officer of the Columbia Funds and of the Liberty All-Star 40 West 57th Street Funds since August 2004 (formerly Partner, Carter, Ledyard & Milburn LLP from January 2001 to August New York, NY 10019 2004; Counsel, Carter, Ledyard & Milburn LLP from November 1999 to December 2000; Vice President and Chief Compliance Officer Counsel, Equitable Life Assurance Society of the United States Senior Vice President and from April (since 2004) 1998 to November 1999). MICHAEL G. CLARKE (age 34) Chief Accounting Officer of the Columbia Funds and of the Liberty All-Star Funds since October 2004 One Financial Center (formerly Controller of the Columbia Funds and of the Liberty All-Star Funds from May 2004 to Boston, MA 02111 October 2004; Assistant Treasurer from June, 2002 to May 2004; Vice President, Product Strategy & Chief Accounting Officer Development of the Liberty Funds Group from February 2001 to June 2002; Assistant Treasurer of the (since 2004) Liberty Funds and of the Liberty All-Star Funds from August 1999 to February 2001; Audit Manager, Deloitte & Touche LLP from May 1997 to August 1999). JEFFREY R. COLEMAN (age 35) Controller of the Columbia Funds and of the Liberty All-Star Funds since October 2004 (formerly Vice One Financial Center President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds Boston, MA 02111 and Loomis Sayles Funds from February 2003 to September 2004; Assistant Vice President of CDC IXIS Controller (since 2004) Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August 2000 to February 2003; Tax Manager of PFPC Inc. from November 1996 to August 2000). R. SCOTT HENDERSON (age 45) Secretary of the Columbia Funds since December 2004 (formerly Of Counsel, Bingham McCutchen from One Financial Center April 2001 to September 2004; Executive Director and General Counsel, Massachusetts Pension Reserves Boston, MA 02111 Investment Management Board from September 1997 to March 2001). Secretary (since 2004)
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. P.O. Box 43010 Providence, RI 02940-3010 The trust mails one shareholder report to each shareholder address. Shareholders can order additional reports by calling 800-730-6001. In addition, representatives at that number can provide shareholders information about the trust. Financial advisors who want additional information about the trust may speak to a representative at 800-426-3750. A description of the trust's proxy voting policies and procedures is available (i) at www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-730-6001. Information regarding how the trust voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the trust voted proxies relating to portfolio securities is also available at www.columbiamanagement.com. The trust files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The trust's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. This report has been prepared for shareholders of Colonial Municipal Income Trust. COLONIAL MUNICIPAL INCOME TRUST ANNUAL REPORT 101-02/738T-1104 (01/05) 05/3936 ITEM 2. CODE OF ETHICS. (a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members of the registrant's Board of Trustees and Audit Committee, each qualify as an audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr. Woolworth are each independent trustees, as defined in paragraph (a)(2) of this Item's instructions and collectively constitute the entire Audit Committee. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Aggregate Audit Fees billed by the principal accountant for professional services rendered during the fiscal years ended November 30, 2004 and November 30, 2003 are approximately as follows: 2004 2003 $26,670 $28,460 Audit Fees include amounts related to the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Aggregate Audit-Related Fees billed by the principal accountant for professional services rendered during the fiscal years ended November 30, 2004 and November 30, 2003 are approximately as follows: 2004 2003 $7,100 $7,400 Audit-Related Fees include amounts for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported in Audit Fees above. In both fiscal years 2004 and 2003, Audit-Related Fees include certain agreed-upon procedures performed for semi-annual shareholder reports. (c) Aggregate Tax Fees billed by the principal accountant for professional services rendered during the fiscal years ended November 30, 2004 and November 30, 2003 are approximately as follows: 2004 2003 $3,110 $3,071 Tax Fees in both fiscal years 2004 and 2003 consist primarily of the review of annual tax returns and include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning. (d) Aggregate All Other Fees billed by the principal accountant for professional services rendered during the fiscal years ended November 30, 2004 and November 30, 2003 are as follows: 2004 2003 $0 $0 All Other Fees include amounts for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) above. None of the amounts described in paragraphs (a) through (d) above were approved pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES I. GENERAL OVERVIEW The Audit Committee of the registrant has adopted a formal policy (the "Policy") which sets forth the procedures and the conditions pursuant to which the Audit Committee will pre-approve (i) all audit and non-audit (including audit related, tax and all other) services provided by the registrant's independent auditor to the registrant and individual funds (collectively "Fund Services"), and (ii) all non-audit services provided by the registrant's independent auditor to the funds' adviser or a control affiliate of the adviser, that relate directly to the funds' operations and financial reporting (collectively "Fund-related Adviser Services"). A "control affiliate" is an entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the funds, and the term "adviser" is deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser. The adviser and control affiliates are collectively referred to as "Adviser Entities." The Audit Committee uses a combination of specific (on a case-by-case basis as potential services are contemplated) and general (pre-determined list of permitted services) pre-approvals. Unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent auditor. The Policy does not delegate the Audit Committee's responsibilities to pre-approve services performed by the independent auditor to management. II. GENERAL PROCEDURES On an annual basis, the Fund Treasurer and/or Director of Trustee Administration shall submit to the Audit Committee a schedule of the types of Fund Services and Fund-related Adviser Services that are subject to general pre-approval. These schedules will provide a description of each type of service that is subject to general pre-approval and, where possible, will provide estimated fees for each instance of providing each service. This general pre-approval and related fees (where provided) will generally cover a one-year period (for example, from June 1 through May 31 of the following year). The Audit Committee will review and approve the types of services and review the projected fees for the next one-year period and may add to, or subtract from, the list of general pre-approved services from time to time, based on subsequent determinations. This approval acknowledges that the Audit Committee is in agreement with the specific types of services that the independent auditor will be permitted to perform. The fee amounts will be updated to the extent necessary at other regularly scheduled meetings of the Audit Committee. In addition to the fees for each individual service, the Audit Committee has the authority to implement a fee cap on the aggregate amount of non-audit services provided to an individual fund. If, subsequent to general pre-approval, a fund, its investment adviser or a control affiliate determines that it would like to engage the independent auditor to perform a service that requires pre-approval and that is not included in the general pre-approval list, the specific pre-approval procedure shall be as follows: o A brief written request shall be prepared by management detailing the proposed engagement with explanation as to why the work is proposed to be performed by the independent auditor; o The request should be addressed to the Audit Committee with copies to the Fund Treasurer and/or Director of Trustee Administration; o The Fund Treasurer and/or Director of Trustee Administration will arrange for a discussion of the service to be included on the agenda for the next regularly scheduled Audit Committee meeting, when the Committee will discuss the proposed engagement and approve or deny the request. o If the timing of the project is critical and the project needs to commence before the next regularly scheduled meeting, the Chairperson of the Audit Committee may approve or deny the request on behalf of the Audit Committee, or, in the Chairperson's discretion, determine to call a special meeting of the Audit Committee for the purpose of considering the proposal. Should the Chairperson of the Audit Committee be unavailable, any other member of the Audit Committee may serve as an alternate for the purpose of approving or denying the request. Discussion with the Chairperson (or alternate, if necessary) will be arranged by the Fund Treasurer and/or Director of Trustee Administration. The independent auditor will not commence any such project unless and until specific approval has been given. III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES The Audit Committee recognizes that there are cases where services proposed to be provided by the independent auditor to the adviser or control affiliates are not Fund-related Adviser Services within the meaning of the Policy, but nonetheless may be relevant to the Audit Committee's ongoing evaluation of the auditor's independence and objectivity with respect to its audit services to the funds. As a result, in all cases where an Adviser Entity engages the independent auditor to provide audit or non-audit services that are not Fund Services or Fund-related Adviser Services, were not subject to pre-approval by the Audit Committee, and the projected fees for any such engagement (or the aggregate of all such engagements during the period covered by the Policy) exceeds a pre-determined threshold established by the Audit Committee; the independent auditor, Fund Treasurer and/or Director of Trustee Administration will notify the Audit Committee not later than its next meeting. Such notification shall include a general description of the services provided, the entity that is to be the recipient of such services, the timing of the engagement, the entity's reasons for selecting the independent auditor, and the projected fees. Such information will allow the Audit Committee to consider whether non-audit services provided to the adviser and Adviser Entities, which were not subject to Audit Committee pre-approval, are compatible with maintaining the auditor's independence with respect to the Funds. IV. REPORTING TO THE AUDIT COMMITTEE The Fund Treasurer or Director of Trustee Administration shall report to the Audit Committee at each of its regular meetings regarding all Fund Services or Fund-related Adviser Services initiated since the last such report was rendered, including: o A general description of the services, and o Actual billed and projected fees, and o The means by which such Fund Services or Fund-related Adviser Services were pre-approved by the Audit Committee. In addition, the independent auditor shall report to the Audit Committee annually, and no more than 90 days prior to the filing of audit reports with the SEC, all non-audit services provided to entities in the funds' "investment company complex," as defined by SEC rules, that did not require pre-approval under the Policy. V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE The Policy may be amended from time to time by the Audit Committee. Prompt notice of any amendments will be provided to the independent auditor, Fund Treasurer and Director of Trustee Administration. The Policy shall be reviewed and approved at least annually by the Audit Committee. ***** (e)(2) The percentage of services described in paragraphs (b) through (d) of this Item approved pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years ended November 30, 2004 and November 30, 2003 was zero. (f) Not applicable. (g) All non-audit fees billed by the registrant's accountant for services rendered to the registrant for the fiscal years ended November 30, 2004 and November 30, 2003 are disclosed in (b) through (d) of this Item. During the fiscal years ended November 30, 2004 and November 30, 2003, there were no Audit-Related Fees, Tax Fees or All Other Fees that were approved for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The percentage of Audit-Related Fees, Tax Fees and All Other Fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during both fiscal years ended November 30, 2004 and November 30, 2003 was zero. (h) The registrant's Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence. The Audit Committee determined that the provision of such services is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and Richard L. Woolworth are each independent trustees and collectively constitute the entire Audit Committee. ITEM 6. SCHEDULE OF INVESTMENTS The registrant's "Schedule I - Investments in securities of unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. The Fund has delegated to Columbia Management Advisors, 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. The Advisor's Proxy Committee is composed of representatives of the Advisor's equity investments, equity research, compliance, legal and fund administration functions. In addition to the responsibilities described above, the Proxy Committee has the responsibility to review, on a semi-annual basis, the Advisor's proxy voting policies to ensure consistency with internal policies and regulatory agency policies and to develop additional voting guidelines to assist in the review of proxy proposals. 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. A member of the Proxy Committee is prohibited from voting on any proposal for which he or she has a conflict of interest by reason of a direct relationship with the issuer or other party affected by a given proposal. Persons making recommendations to the Proxy Committee or its members are required to disclose to the Committee any relationship with a party making a proposal or other matter known to the person that would create a potential conflict of interest. The Advisor has retained Institutional Shareholder Services ("ISS"), a third party vendor, to implement its proxy voting process. ISS provides proxy analysis, record keeping services and vote disclosure services. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not yet applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Registrant Purchases of Equity Securities* (a) (b) (c) (d) Total Number of Maximum Number of Shares Purchased as Shares that May Yet Period Total Number Average Price Part of Publically Be Purchased Under of Shares Paid Per Share Announced Plans the Plans or Programs - ------------------------------------------------------------------------------------------------------------------------------------ 06/01/04 through 06/30/04 11,584 $5.39 11,584 N/A 07/01/04 through 07/31/04 10,745 $5.60 10,745 N/A 08/01/04 through 08/31/04 10,883 $5.63 10,883 N/A 09/01/04 through 09/30/04 10,626 $5.82 10,626 N/A 10/01/04 through 10/31/04 10,347 $5.80 10,347 N/A 11/01/04 through 11/30/04 10,322 $5.76 10,322 N/A - ------------------------------------------------------------------------------------------------------------------------------------ Total 64,507 $5.66 64,507 N/A - ------------------------------------------------------------------------------------------------------------------------------------
* Includes shares purchased by the Dividend Reinvestment Agent pursuant to the Registrant's Dividend Reinvestment Plan. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have not been any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, since those procedures were last disclosed in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officers, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR 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/ Christopher L. Wilson -------------------------------------------------------- Christopher L. Wilson, President Date January 26, 2005 ---------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /S/ Christopher L. Wilson -------------------------------------------------------- Christopher L. Wilson, President Date January 26, 2005 ---------------------------------------------------------------------------- By (Signature and Title) /S/ J. Kevin Connaughton -------------------------------------------------------- J. Kevin Connaughton, Treasurer Date January 26, 2005 ---------------------------------------------------------------------------- EX-99.CODE ETH 2 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 3 file003.txt CERTIFICATIONS I, Christopher L. Wilson, 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 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: January 26, 2005 /S/ Christopher L. Wilson ----------------------------------- Christopher L. Wilson, 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 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: January 26, 2005 /S/ J. Kevin Connaughton ------------------------------------ J. Kevin Connaughton, Treasurer EX-99.906CERT 4 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, 2004, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), 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: January 26, 2005 /S/ Christopher L. Wilson ----------------------------------- Christopher L. Wilson, President Date: January 26, 2005 /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-----