UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-5754
Colonial High Income Municipal Trust
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
James R. Bordewick, Jr., Esq.
Columbia Management Advisors, LLC
One Financial Center
Boston, MA 02111
--------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-426-3750
Date of fiscal year end: November 30, 2006
Date of reporting period: May 31, 2006
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
Item 1. Reports to Stockholders
[PHOTO]
COLONIAL HIGH INCOME MUNICIPAL TRUST
Semiannual Report
May 31, 2006
[LOGO] Not FDIC Insured May Lose Value
No Bank Guarantee
[GRAPHIC]
Dear Shareholder:
The US stock and bond markets delivered positive, but modest, returns during
the six month period ended May 31, 2006. After a weak fourth quarter, economic
growth turned sharply higher in 2006 and job growth was steady, although
somewhat slower at the end of the period. Confident consumers continued to pump
dollars into US retail markets, despite higher energy prices, which boosted
inflation. The housing market continued to cool as mortgage rates moved higher,
but housing-market indicators--such as housing starts, sales of existing homes,
and house prices--remained strong by historical measures.
In this environment, the US fixed income markets faced the challenge of rising
interest rates, especially within the short-and intermediate-maturity ranges
and was generally flat for the period. The Federal Reserve Board, in an effort
to balance economic growth and the forces of inflation, raised short-term
interest rates by one full percentage point during the reporting period. The
yield on the 10-year US Treasury note, a bellwether for the bond market, moved
up from 4.5% to 5.1%. Lower quality bonds did better than higher quality bonds.
In fact, high-yield bonds did better than either stocks or investment-grade
bonds. A strong economy favored corporate high-yield bonds, as default rates
remained low and corporate profits surprised investors with
better-than-expected results. However, that trend showed signs of shifting near
the end of the six-month period. The municipal sector generated respectable
gains as economic growth helped buoy revenues and stabilize budgets in many
states and municipalities. Within the municipal market, high-yield also
outperformed high-grade bonds for the period.
In the pages that follow, your fund's manager discusses key factors that
influenced performance during this six-month reporting period. We urge you to
read this report carefully and to discuss any questions you might have with
your financial advisor.
As always, we thank you for choosing Colonial Funds. We look forward to
continuing to help you build toward your financial goals.
Sincerely,
/s/ Christopher L. Wilson
Christopher L. Wilson
President, Columbia Funds
Past performance is no guarantee of future results.
Investments in high-yield or "junk" bonds offer the potential for higher income
than investments in investment-grade bonds, but also have a higher degree of
risk. Changes in economic conditions or other circumstances may adversely
effect a high-yield bond issuer's ability to make timely principal and interest
payments.
The views expressed in the President's Message and Portfolio Manager's Report
reflect the current views of the respective parties. These views are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict so actual outcomes and results may
differ significantly from the views expressed. These views are subject to
change at any time based upon economic, market or other conditions and the
respective parties disclaim any responsibility to update such views. These
views may not be relied on as investment advice and, because investment
decisions for a Colonial Fund are based on numerous factors, may not be relied
on as an indication of trading intent on behalf of any particular Colonial
Fund. References for specific company securities should not be construed as a
recommendation or investment advice.
[GRAPHIC]
[GRAPHIC]
PORTFOLIO MANAGER'S REPORT
SUMMARY
.. For the six-month period ended May 31, 2006, Colonial High Income Municipal
Trust generated a total return of 8.70%, based on its market price. During
this period, the trust returned 4.19%, based on investment at net asset
value. This was less than the 4.41% average return of the Lipper High Yield
Municipal Debt Funds Category./1/ The trust's performance was much closer to
the 4.30% average return generated by a customized peer group consisting of
nine leveraged closed-end high-yield municipal funds that have all issued
preferred shares. The trust's dividend yield declined as rising short-term
interest rates cut into some of the income that the trust derived from
leverage. However, we believe that the trust's leverage continued to give
the common shareholders a higher dividend payment than would have been
available without it.
.. Strong gains from the multi-family housing sector and assisted living
projects bolstered returns. In addition, the trust's slightly longer
duration (a measure of bond price volatility) helped as long-term municipal
yields dropped slightly. The trust's slight overweight in higher quality
issues hampered performance as did its underweight in the volatile airline
sector. While airline holdings added to total return, the trust had less
exposure than some of its competitors to this top-performing sector. In
addition, some nursing home bonds fell due to credit deterioration.
.. At the end of the period, the trust had a slightly higher emphasis than its
peers on higher quality bonds, which we expect to do well if the difference
in yields between higher and lower quality bonds widens. We also kept the
trust's duration slightly longer than its peers because we do not expect
long-term interest rates to move much higher. We expect the Federal Reserve
Board to remain vigilant on inflation, which could benefit long-term bonds,
whose yields tend to reflect inflation expectations.
PORTFOLIO MANAGEMENT
Maureen G. Newman has been the portfolio manager of Colonial High Income
Municipal Trust since August 1998.
SHARES OF CLOSED-END FUNDS FREQUENTLY TRADE AT A DISCOUNT TO NET ASSET VALUE.
THE PRICE OF THE TRUST'S SHARES IS DETERMINED BY A NUMBER OF FACTORS, SEVERAL
OF WHICH ARE BEYOND THE CONTROL OF THE TRUST. THEREFORE, THE TRUST CANNOT
PREDICT WHETHER ITS SHARES WILL TRADE AT, BELOW OR ABOVE NET ASSET VALUE.
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
-----------
/1/Lipper Inc., a widely respected data provider in the industry, calculates an
average total return (assuming reinvestment of distributions) for mutual
funds with investment objectives similar to those of the fund. Lipper makes
no adjustment for the effect of sales loads.
Price per share as of 05/31/06 ($)
Market price 6.75
--------------------
Net asset value 6.52
--------------------
6-month (cumulative) total return as of 05/31/06 (%)
Market price 8.70
--------------------------------
Net asset value 4.19
--------------------------------
Lipper High Yield Municipal
Debt Funds Category average 4.41
--------------------------------
Performance is historical, assumes reinvestment of all dividends and capital
gains, and does not guarantee future results. Investment return and principal
value fluctuate with changing market conditions so that, when sold, shares may
be worth more or less than their original cost. Current performance may be
lower or higher than the performance data quoted. Please call 800-730-6001 for
the Trust's most recent performance.
Total return based on net asset value reflects changes in the trust's net asset
value during each period. Total return based on market value reflects changes
in market value. These figures will differ depending on the level of any
discount from or premium to during the period.
Distributions declared per common share 12/01/05-05/31/06 ($)
0.22
--------
A portion of the trust's income may be subject to the alternative minimum tax.
The trust may at times purchase tax-exempt securities at a discount from their
original issue price. Some or all of this discount may be included in the
trust's ordinary income, and any market discount is taxable when distributed.
Top 5 sectors as of 05/31/06 (%)
Hospitals 12.0
-------------------------------
Refunded/escrowed 9.4
-------------------------------
Congregate care retirement 9.0
-------------------------------
Investor owned utility 6.8
-------------------------------
Multi-family 6.5
-------------------------------
Quality breakdown as of 05/31/06 (%)
AAA 22.6
---------------------
AA 3.8
---------------------
A 10.9
---------------------
BBB 23.1
---------------------
BB 4.0
---------------------
B 1.5
---------------------
CCC 0.3
---------------------
Non-rated 32.1
---------------------
Cash equivalents 1.7
---------------------
Sector and quality breakdowns are calculated as a percentage of total
investments. Ratings shown in the quality breakdown represent the rating
assigned to a particular bond by one of the following nationally-recognized
rating agencies: Standard & Poor's, a division of the McGraw-Hill Companies,
Inc., Moody's Investors Service, Inc. or Fitch Ratings Ltd. The majority of the
bonds that are non-rated are considered by the advisor to be of non-investment
grade quality. Ratings are relative and subjective and are not absolute
standards of quality. The fund's credit quality does not remove market risk.
1
[GRAPHIC]
PORTFOLIO MANAGER'S REPORT (continued)
Investing in fixed-income securities may involve certain risks, including the
credit quality of individual issuers, possible prepayments, market or economic
developments and yield and share price fluctuations due to changes in interest
rates. When interest rates go up, bond prices typically drop, and vice versa.
Investing in high-yield or "junk" bonds offers the potential for higher income
than investments in investment-grade bonds but they also have a higher degree
of risk. Changes in economic conditions or other circumstances may adversely
affect a high-yield bond issuer's ability to make timely principal and interest
payments.
Tax-exempt investing offers current tax-exempt income, but it also involves
special risks. The value of the trust will be affected by interest rate changes
and the creditworthiness of issues held in the fund. Interest income from
certain tax-exempt bonds may be subject to certain state and local taxes and,
if applicable, the alternative minimum tax. Capital gains are not exempt from
income taxes.
[GRAPHIC]
2
[GRAPHIC]
INVESTMENT PORTFOLIO
May 31, 2006 (Unaudited)
MUNICIPAL BONDS - 153.4% PAR ($) VALUE ($)
---------------------------------------------------------
EDUCATION - 4.2%
EDUCATION - 2.9%
CA Educational Facilities Authority,
Loyola Marymount University,
Series 2001, Insured: MBIA
(a) 10/01/19 2,025,000 1,082,889
CA Public Works Board, UCLA,
Series 2002 A, Insured: FSA
5.375% 10/01/15 1,010,000 1,087,962
MI Southfield Economic Development
Corp., Lawrence University,
Series 1998 A,
5.400% 02/01/18 1,000,000 1,017,530
PA Higher Education Facilities
Authority, Philadelphia University,
Series 2004 A,
5.125% 06/01/25 600,000 606,474
VT Educational & Health Buildings
Finance Agency, Norwich
University, Series 1998,
5.500% 07/01/21 1,500,000 1,531,410
WV University, Series 2000 A,
Insured: AMBAC
(a) 04/01/19 1,000,000 547,460
---------
Education Total 5,873,725
---------
PREP SCHOOL - 1.3%
CA Statewide Communities
Development Authority, Crossroads
School for Arts & Sciences,
Series 1998,
6.000% 08/01/28(b) 1,240,000 1,282,259
MA Industrial Finance Agency,
Cambridge Friends School,
Series 1998,
5.800% 09/01/28 1,000,000 967,170
MI Summit Academy North,
Series 2005,
5.500% 11/01/35 500,000 461,785
---------
Prep School Total 2,711,214
---------
EDUCATION TOTAL 8,584,939
---------
---------------------------------------------------------
HEALTH CARE - 43.4%
CONTINUING CARE RETIREMENT - 14.3%
CA La Verne Brethren Hillcrest
Homes, Series 2003 B,
6.625% 02/15/25 690,000 747,001
CO Health Facilities Authority,
Covenant Retirement
Communities, Inc., Series 2005,
5.000% 12/01/35 1,400,000 1,372,490
PAR ($) VALUE ($)
----------------------------------------------------------
CT Development Authority, Elim
Park Baptist, Inc., Series 2003,
5.850% 12/01/33 660,000 689,944
FL Capital Projects Finance Authority,
Glenridge on Palmer Ranch,
Series 2002 A,
8.000% 06/01/32 750,000 827,790
FL Lee County Industrial
Development Authority, Shell Point
Village Project, Series 1999 A,
5.500% 11/15/29 600,000 603,066
GA Fulton County, Canterbury Court
Project, Series 2004 A,
6.125% 02/15/34 750,000 775,388
GA Savannah Economic Development
Authority, Marshes of Skidaway,
Series 2003 A,
7.400% 01/01/34 465,000 490,570
IL Finance Authority, Washington &
Jane Smith Community,
Series 2005 A,
6.250% 11/15/35 1,250,000 1,290,037
IL Health Facilities Authority:
Lutheran Senior Ministries,
Series 2001,
7.375% 08/15/31 900,000 977,661
Washington & Jane Smith
Community, Series 2003 A,
7.000% 11/15/32 725,000 777,410
IN Health & Educational Facilities
Financing Authority, Baptist Homes
of Indiana, Inc., Series 2005,
5.250% 11/15/35 1,000,000 997,150
KS Manhattan, Meadowlark Hills
Retirement Home, Series 1999 A,
6.375% 05/15/20 650,000 667,401
MA Boston Industrial Development
Financing Authority, Springhouse,
Inc., Series 1998,
5.875% 07/01/20 255,000 256,872
MA Development Finance Agency,
Loomis Communities:
Series 1999 A,
5.625% 07/01/15 400,000 407,884
Series 2002 A,
6.900% 03/01/32 100,000 108,426
MD Westminster Economic
Development Authority, Carroll
Lutheran Village, Inc.,
Series 2004 A:
5.875% 05/01/21 500,000 510,610
6.250% 05/01/34 250,000 256,730
See Accompanying Notes to Financial Statements.
3
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
----------------------------------------------------------
HEALTH CARE (CONTINUED)
CONTINUING CARE RETIREMENT (CONTINUED)
NC Medical Care Commission, United
Methodist Retirement Homes, Inc.,
Series 2005 C,
5.500% 10/01/32 600,000 608,736
NH Higher Educational & Health
Facilities Authority, Rivermead at
Peterborough, Series 1998:
5.625% 07/01/18 500,000 501,520
5.750% 07/01/28 500,000 500,865
NJ Economic Development Authority:
Cranes Mill, Series 2005 A,
5.100% 06/01/27 500,000 489,155
Lions Gate, Series 2005 A:
5.750% 01/01/25 205,000 208,786
5.875% 01/01/37 830,000 845,347
Seabrook Village, Inc.,
Series 2000 A,
8.250% 11/15/30 925,000 1,023,993
Winchester Gardens, Series 2004 A,
5.750% 11/01/24 750,000 790,432
PA Bucks County Industrial
Development Authority, Ann's
Choice, Inc., Series 2005 A,
6.125% 01/01/25 1,000,000 1,020,820
PA Delaware County Authority,
Dunwoody Village, Series 2003 A,
5.375% 04/01/17 600,000 626,712
PA Montgomery County Industrial
Development Authority,
Whitemarsh Continuing Care
Retirement Community, Series 2005:
6.125% 02/01/28 250,000 262,285
6.250% 02/01/35 750,000 789,292
TN Johnson City Health &
Educational Facilities Authority,
Appalachian Christian Village,
Series 2004 A,
6.250% 02/15/32 250,000 256,455
TN Metropolitan Government
Nashville & Davidson County,
Blakeford at Green Hills,
Series 1998,
5.650% 07/01/24 600,000 586,500
TN Shelby County Health
Educational & Housing Facilities
Board:
Germantown Village,
Series 2003 A,
7.250% 12/01/34 450,000 477,666
Trezevant Manor, Series 2006 A,
5.625% 09/01/26 1,000,000 988,460
PAR ($) VALUE ($)
-------------------------------------------------------------
TX Abilene Health Facilities
Development Corp., Sears
Methodist Retirement Center:
Series 1998 A,
5.900% 11/15/25 1,000,000 1,007,560
Series 2003 A,
7.000% 11/15/33 500,000 535,785
TX Houston Health Facilities
Development Corp., Buckingham
Senior Living Community, Inc.,
Series 2004 A,
7.125% 02/15/34 500,000 548,115
TX Tarrant County Cultural
Education Facilities, Northwest
Senior Housing-Edgemere,
Series 2006 A,
6.000% 11/15/36 750,000 778,920
VA Virginia Beach Development
Authority, Westminster-Canterbury
of Hampton, Series 2005:
5.250% 11/01/26 250,000 251,208
5.375% 11/01/32 300,000 302,412
VA Winchester Industrial
Development Authority,
Westminster-Canterbury,
Series 2005 A,
5.300% 01/01/35 750,000 749,633
WI Health & Educational Facilities
Authority:
Clement Manor,
Series 1998,
5.750% 08/15/24 1,300,000 1,304,316
Eastcastle Place, Inc., Series 2004,
6.125% 12/01/34 350,000 353,094
Three Pillars Senior Living
Communities, Series 2003,
5.750% 08/15/26 500,000 510,405
United Lutheran Program for the
Aging, Series 1998,
5.700% 03/01/28 1,000,000 997,430
----------
Continuing Care Retirement Total 29,072,332
----------
HEALTH SERVICES - 1.7%
CO Health Facilities Authority
National Jewish Medical &
Research Center:
Series 1998,
5.375% 01/01/23 330,000 330,462
Series 1998 B,
5.375% 01/01/29 750,000 748,988
MA Development Finance Agency
Boston Biomedical Research
Institute,
Series 1999:
5.650% 02/01/19 200,000 206,992
5.750% 02/01/29 450,000 464,994
See Accompanying Notes to Financial Statements.
4
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED) (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
----------------------------------------------------------
HEALTH CARE (CONTINUED)
HEALTH SERVICES (CONTINUED)
MA Health & Educational Facilities
Authority, Civic Investments, Inc.,
Series 2002 A,
9.000% 12/15/15 1,000,000 1,203,750
MN Minneapolis & St. Paul
Housing & Redevelopment
Authority, Healthpartners Project,
Series 2003,
6.000% 12/01/21 500,000 537,485
---------
Health Services Total 3,492,671
---------
HOSPITALS - 19.2%
AR Conway Health Facilities Board,
Conway Regional Medical Center:
Series 1999 A,
6.400% 08/01/29 425,000 450,645
Series 1999 B,
6.400% 08/01/29 1,000,000 1,060,340
AR Washington County, Regional
Medical Center, Series 2005 B,
5.000% 02/01/30 750,000 737,685
CA Rancho Mirage Joint Powers
Financing Authority, Eisenhower
Medical Center, Series 2004,
5.625% 07/01/29 1,000,000 1,058,470
CA Turlock Emanuel Medical Center,
Inc., Series 2004,
5.375% 10/15/34 1,500,000 1,531,515
CO Health Facilities Authority:
Parkview Medical Center, Inc.,
Series 2001,
6.600% 09/01/25 300,000 325,509
Vail Valley Medical Center,
Series 2004,
5.000% 01/15/20 750,000 764,107
FL South Lake County Hospital
District, South Lake Hospital, Inc.,
Series 2003,
6.375% 10/01/34 500,000 541,700
FL Tampa, H. Lee Moffitt Cancer
Center, Series 1999 A,
5.750% 07/01/29 2,000,000 2,063,500
FL West Orange Healthcare District,
Series 2001 A,
5.650% 02/01/22 525,000 546,242
IL Health Facilities Authority, Thorek
Hospital & Medical Center,
Series 1998,
5.250% 08/15/18 600,000 604,926
IL Southwestern Development
Authority, Anderson Hospital,
Series 1999,
5.500% 08/15/20 225,000 230,195
PAR ($) VALUE ($)
---------------------------------------------------------
IN Health & Educational Facility
Financing Authority, Jackson
County, Schneck Memorial
Hospital Project, Series 2006 A,
5.250% 02/15/36 500,000 512,960
IN Health Facility Financing
Authority, Community Foundation
of Northwest Indiana, Inc.,
Series 2004 A,
6.000% 03/01/34 575,000 603,267
KS Salina Hospital Revenue, Salina
Regional Health Center Inc.,
Series 2005 A,
4.625% 10/01/31 600,000 571,980
LA Public Facilities Authority, Touro
Infirmary, Series 1999 A,
5.625% 08/15/29 450,000 432,774
MA Health & Educational Facilities
Authority:
Jordan Hospital,
Series 2003 E,
6.750% 10/01/33 500,000 540,065
Milford-Whitinsville Regional
Hospital, Series 2002 D,
6.350% 07/15/32 1,000,000 1,049,340
MD Health & Higher Educational
Facilities Authority, Adventist
Healthcare, Series 2003 A:
5.000% 01/01/16 400,000 406,288
5.750% 01/01/25 600,000 631,950
MI Dickinson County, Series 1999,
5.700% 11/01/18 750,000 768,825
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1998 A,
5.375% 07/01/20 450,000 442,998
MN St. Paul Housing &
Redevelopment Authority,
HealthEast, Inc., Series 2001 A,
5.700% 11/01/15 1,000,000 1,030,770
MN Washington County Housing &
Redevelopment Authority,
HealthEast, Inc., Series 1998,
5.250% 11/15/12 1,300,000 1,327,287
MO Saline County Industrial
Development Authority, John
Fitzgibbon Memorial Hospital,
Series 2005,
5.625% 12/01/35 1,250,000 1,241,875
NC Medical Care Commission, Stanly
Memorial Hospital, Series 1999,
6.375% 10/01/29 1,915,000 2,021,876
See Accompanying Notes to Financial Statements.
5
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
HEALTH CARE (CONTINUED)
HOSPITALS (CONTINUED)
NH Higher Educational & Health
Facilities Authority, Catholic
Medical Center, Series 2002,
6.125% 07/01/32 400,000 425,972
Littleton Hospital Association, Inc.:
Series 1998 A,
6.000% 05/01/28 625,000 638,231
Series 1998 B,
5.900% 05/01/28 780,000 792,152
NJ Health Care Facilities Financing
Authority, Capital Health Systems,
Inc., Series 2003 A,
5.750% 07/01/23 650,000 684,886
NV Henderson, St. Rose Dominican
Hospital, Series 1998 A,
5.375% 07/01/26 385,000 392,103
NY Dormitory Authority:
Mt. Sinai - NYU Medical Center:
Series 2000,
5.500% 07/01/26 400,000 405,604
Series 2000 C,
5.500% 07/01/26 850,000 861,908
North Shore - Long Island Jewish
Medical Center, Series 2003,
5.500% 05/01/33 300,000 315,774
OH Highland County Joint Township,
Hospital District, Series 1999,
6.750% 12/01/29 920,000 934,058
OH Lakewood, Lakewood Hospital
Association, Series 2003,
5.500% 02/15/14 600,000 632,370
OH Miami County Hospital Facilities
Authority, Upper Valley Medical
Center, Inc., Series 1996 A,
6.375% 05/15/26 1,000,000 1,021,170
OH Sandusky County, Memorial
Hospital, Series 1998,
5.150% 01/01/10 250,000 251,368
PA Allegheny County Hospital
Development Authority, Ohio
Valley General Hospital,
Series 1998 A,
5.450% 01/01/28 1,000,000 1,010,760
SC Jobs Economic Development
Authority, Bon Secours-St. Francis
Medical Center, Series 2002,
5.500% 11/15/23 1,750,000 1,827,227
PAR ($) VALUE ($)
------------------------------------------------------------
SC Lexington County Health Services
District Revenue, Lexington
Medical Center Project, Refunding,
Series 2003,
5.500% 11/01/23 750,000 779,655
SD Health & Educational Facilities
Authority, Sioux Valley Hospital &
Health System, Series 2004 A,
5.250% 11/01/34 800,000 820,360
TX Tyler Health Facilities
Development Corp., Mother
Frances Hospital, Series 2001,
6.000% 07/01/31 1,000,000 1,045,980
VA Prince William County Industrial
Development Authority, Potomac
Hospital Corp.,
Series 2003,
5.200% 10/01/30 650,000 670,222
VT Educational & Health Buildings
Finance Agency, Brattleboro
Memorial Hospital, Series 1998,
5.375% 03/01/28 1,075,000 1,055,972
WI Health Care Facilities Authority:
Aurora Health Care, Inc.,
Series 2003,
6.400% 04/15/33 525,000 574,030
Fort HealthCare, Inc.,
Series 2004,
5.750% 05/01/29 1,000,000 1,058,540
Kadlec Medical Center, Series 2001,
Insured: RAD
5.875% 12/01/21 600,000 638,544
Wheaton Franciscan Services,
Series 2002,
5.750% 08/15/30 600,000 631,950
----------
Hospitals Total 38,965,925
----------
INTERMEDIATE CARE FACILITIES - 0.6%
IL Development Finance Authority,
Hoosier Care, Inc., Series 1999 A,
7.125% 06/01/34 1,180,000 1,141,626
IN Health Facilities Financing
Authority, Hoosier Care, Inc.,
Series 1999 A,
7.125% 06/01/34 150,000 145,122
----------
Intermediate Care Facilities Total 1,286,748
----------
NURSING HOMES - 7.6%
AK Juneau, St. Ann's Care Center,
Inc., Series 1999,
6.875% 12/01/25 1,215,000 1,203,579
See Accompanying Notes to Financial Statements.
6
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------------
HEALTH CARE (CONTINUED
NURSING HOMES (CONTINUED)
CO Health Facilities Authority:
American Housing Foundation I,
Inc., Series 2003 A,
8.500% 12/01/31 460,000 477,144
Evangelical Lutheran Good
Samaritan Foundation, Series 2005,
5.000% 06/01/35 375,000 372,896
Pioneer Health Care,
Series 1989,
10.500% 05/01/19 1,730,000 1,390,782
Volunteers of America Care Facilities:
Series 1998 A:
5.450% 07/01/08 120,000 119,969
5.750% 07/01/20 865,000 872,629
Series 1999 A,
6.000% 07/01/29 350,000 348,733
IA Finance Authority, Care Initiatives:
Series 1996,
9.250% 07/01/25 950,000 1,122,738
Series 1998 B:
5.750% 07/01/18 550,000 540,611
5.750% 07/01/28 1,475,000 1,345,731
IN Gary, West Side Health Care
Center, Series 1987 A,
11.500% 10/01/17(c) 1,330,000 359,100
IN Michigan City Health Facilities
Authority, Metro Health
Foundation, Inc. Project,
Series 1993,
11.000% 11/01/22(d) 2,294,190 25,810
MA Development Finance Agency:
AHF/Alliance Health Care
Facilities, Series 1999 A,
7.100% 07/01/32 1,270,000 1,286,104
AHF/Woodlawn Manor, Inc.:
Series 2000 A,
7.750% 12/01/27(c) 1,509,135 679,111
Series 2000 B,
10.250% 06/01/27(c) 475,907 23,795
MN Sartell, Foundation for Health
Care, Series 1999 A,
6.625% 09/01/29 1,145,000 1,165,015
PA Chester County Industrial
Development Authority,
Pennsylvania Nursing Home,
Series 2002,
8.500% 05/01/32 1,560,000 1,600,747
PA Washington County Industrial
Development Authority, AHF
Project, Series 2003,
7.750% 01/01/29 1,211,000 1,250,418
TN Metropolitan Government
Nashville & Davidson County
Health & Education Board, AHF
Project, Series 2003,
7.750% 01/01/29 1,141,000 1,178,140
PAR ($) VALUE ($)
---------------------------------------------------------
WI Health & Educational Facilities
Authority, Metro Health
Foundation, Inc., Series 1993,
11.000% 11/01/22(d) 2,063,727 23,217
----------
Nursing Homes Total 15,386,269
----------
HEALTH CARE TOTAL 88,203,945
----------
---------------------------------------------------------
HOUSING - 19.9%
ASSISTED LIVING/SENIOR - 4.5%
DE Kent County, Heritage at Dover,
Series 1999, AMT,
7.625% 01/01/30 1,640,000 1,475,360
GA Columbus Housing Authority, The
Gardens at Calvary, Series 1999,
7.000% 11/15/19 480,000 464,971
IL Development Finance Authority,
Care Institute, Inc., Series 1995,
8.250% 06/01/25 1,195,000 1,224,325
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 1,740,000 1,464,367
NC Medical Care Commission,
DePaul Community Facilities,
Series 1999,
7.625% 11/01/29 1,425,000 1,487,073
NY Huntington Housing Authority,
Gurwin Jewish Senior Center,
Series 1999 A:
5.875% 05/01/19 700,000 713,279
6.000% 05/01/29 775,000 791,818
TX Bell County Health Facility
Development Corp.,
Care Institute, Inc., Series 1994,
9.000% 11/01/24 1,625,000 1,586,487
----------
Assisted Living/Senior Total 9,207,680
----------
MULTI-FAMILY - 10.4%
DC Housing Finance Agency,
Henson Ridge,
Series 2004 E, AMT,
Insured: FHA
5.100% 06/01/37 1,000,000 1,008,720
DE Wilmington, Electra Arms Senior
Association Project,
Series 1998, AMT,
6.250% 06/01/28 910,000 874,091
FL Broward County Housing Finance
Authority,
Chaves Lake Apartment Project,
Series 2000 A, AMT,
7.500% 07/01/40 750,000 772,328
FL Capital Trust Agency, Atlantic
Housing Foundation, Inc.,
Series 2005 C,
5.875% 01/01/28 775,000 769,800
See Accompanying Notes to Financial Statements.
7
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------
HOUSING (CONTINUED)
MULTI-FAMILY (CONTINUED)
FL Clay County Housing Finance
Authority, Madison Commons
Apartments,
Series 2000 A, AMT,
7.450% 07/01/40 720,000 740,390
MA Housing Finance Agency,
Series 2004 A, AMT,
Insured: FSA
5.250% 07/01/25 3,000,000 3,080,130
Series 2005 E, AMT,
5.000% 12/01/28 500,000 501,375
MN Minneapolis Student Housing,
Riverton Community Housing, Inc.,
Series 2006 A,
5.700% 08/01/40 750,000 725,055
MN Robbinsdale Economic
Development Authority, Broadway
Court, Series 1999 A,
6.875% 01/01/26 500,000 507,760
MN Washington County Housing &
Redevelopment Authority, Cottages
of Aspen, Series 1992, AMT,
9.250% 06/01/22 950,000 971,688
MN White Bear Lake, Birch Lake
Townhome:
Series 1989 A, AMT,
10.250% 07/15/19 2,200,000 2,090,000
Series 1989 B, AMT,
(a) 07/15/19 690,000 213,900
NC Medical Care Commission, ARC
Projects, Series 2004 A,
5.800% 10/01/34 750,000 789,682
NM Mortgage Finance Authority,
Series 2005 E, AMT, Insured: FHA
4.800% 09/01/40 1,500,000 1,441,680
NY New York City Housing
Development Corp.,
Series 2005 F-1,
4.650% 11/01/25 1,000,000 998,690
OH Montgomery County, Series 2005,
AMT, Insured: FHLMC
4.950% 11/01/35 500,000 496,520
Resolution Trust Corp., Pass-Through
Certificates, Series 1993 A,
8.500% 12/01/16(f) 546,075 531,555
TN Franklin Industrial Development
Board, Landings Apartment Project,
Series 1996 B,
8.750% 04/01/27 800,000 809,976
TX Department of Housing &
Community Affairs, Pebble Brooks
Apartments, Series 1998, AMT,
Guarantor: FNMA
5.500% 12/01/18 1,000,000 1,028,840
PAR ($) VALUE ($)
--------------------------------------------------------------
TX El Paso County Housing Finance
Corp., American Village Communities:
Series 2000 C,
8.000% 12/01/32 375,000 384,124
Series 2000 D,
10.000% 12/01/32 405,000 415,587
VA Alexandria Redevelopment &
Housing Authority,
Courthouse Commons Apartments,
Series 1990 A, AMT,
10.000% 01/01/21 1,500,000 1,500,000
WA Seattle Housing Authority, High
Rise Rehabilitation Phase I LP,
Series 2005, AMT, Insured: FSA
5.000% 11/01/25 500,000 502,215
----------
Multi-Family Total 21,154,106
----------
SINGLE-FAMILY - 5.0%
MA Housing Finance Agency:
Series 2005 118, AMT,
4.850% 12/01/35(e) 1,750,000 1,692,968
Series 2005 B,
5.000% 06/01/30 500,000 510,575
ME Housing Authority,
Series 2005 D-2, AMT,
4.800% 11/15/36 1,000,000 978,200
MN Minneapolis/St. Paul Housing
Finance Board, Series 2006, AMT,
5.000% 12/01/38(g) 1,000,000 999,040
ND Housing Finance Agency,
Series 2006 A, AMT,
4.850% 07/01/21(g) 1,240,000 1,250,552
OK Housing Finance Agency,
Series 2006 C, AMT,
5.000% 09/01/26(g) 1,420,000 1,427,199
PA Pittsburgh Urban Redevelopment
Authority, Series 2006 C, Insured: GNMA
4.800% 04/01/28 2,000,000 1,970,600
WI Housing & Economic Development
Authority,
Series 2005 C, AMT,
4.875% 03/01/36 1,480,000 1,451,851
----------
Single-Family Total 10,280,985
----------
HOUSING TOTAL 40,642,771
----------
--------------------------------------------------------------
INDUSTRIALS - 6.7%
FOOD PRODUCTS - 1.7%
GA Cartersville Development
Authority, Anheuser Busch Project,
Inc., Series 2002, AMT,
5.950% 02/01/32 1,000,000 1,074,330
LA Southern Louisiana Port Commission,
Cargill, Inc., Series 1997,
5.850% 04/01/17 1,000,000 1,020,030
MI Strategic Fund, Imperial Holly
Corp., Series 1998 A,
6.250% 11/01/15 1,250,000 1,275,200
----------
Food Products Total 3,369,560
----------
See Accompanying Notes to Financial Statements.
8
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
---------------------------------------------------------
INDUSTRIALS (CONTINUED)
FOREST PRODUCTS & PAPER - 2.8%
AL Camden Industrial Development
Board, Weyerhaeuser Co.,
Series 2003 B, AMT,
6.375% 12/01/24 550,000 597,355
AL Courtland Industrial Development
Board, Series 2003 B, AMT,
6.250% 08/01/25 1,000,000 1,083,820
AL Phenix City Industrial
Development Board, MeadWestvaco
Corp., Series 2002 A, AMT,
6.350% 05/15/35 550,000 588,170
AR Camden Environmental
Improvement Authority,
International Paper Co.,
Series 2004 A, AMT,
5.000% 11/01/18 250,000 247,032
GA Rockdale County Development
Authority, Visy Paper, Inc.,
Series 1993, AMT,
7.500% 01/01/26 1,800,000 1,800,846
MS Lowndes County, Weyerhaeuser
Co. Project, Series 1992 B,
6.700% 04/01/22 850,000 1,000,535
VA Bedford County Industrial
Development Authority, Nekoosa
Packaging Corp.,
Series 1998, AMT,
5.600% 12/01/25 400,000 394,324
---------
Forest Products & Paper Total 5,712,082
---------
MANUFACTURING - 0.4%
IL Will-Kankakee Regional
Development Authority, Flanders
Corp., Precisionaire Project,
Series 1997, AMT,
6.500% 12/15/17 740,000 744,174
---------
Manufacturing Total 744,174
---------
METALS & MINING - 0.6%
NV Department of Business &
Industry, Wheeling-Pittsburgh Steel
Corp., Series 1999 A, AMT,
8.000% 09/01/14 835,000 857,470
VA Greensville County Industrial
Development Authority,
Wheeling-Pittsburgh Steel Corp.,
Series 1999 A, AMT,
7.000% 04/01/14 425,000 416,207
---------
Metals & Mining Total 1,273,677
---------
PAR ($) VALUE ($)
--------------------------------------------------------
OIL & GAS - 1.2%
NJ Middlesex County Pollution
Control Authority, Amerada Hess
Corp., Series 2004,
6.050% 09/15/34 285,000 307,230
TX Gulf Coast Industrial
Development Authority, Citgo
Petroleum, Series 1998, AMT,
8.000% 04/01/28 500,000 563,430
VI Virgin Islands Public Finance
Authority, Hovensa LLC:
Series 2003, AMT,
6.125% 07/01/22 525,000 575,568
Series 2004, AMT,
5.875% 07/01/22 600,000 650,712
VI Virgin Islands, Hovensa LLC,
Series 2002, AMT,
6.500% 07/01/21 375,000 420,937
----------
Oil & Gas Total 2,517,877
----------
INDUSTRIALS TOTAL 13,617,370
----------
--------------------------------------------------------
OTHER - 20.1%
OTHER - 1.2%
NY Convention Center Operating
Corp., Yale Building Project,
Series 2003,
(a) 06/01/08 1,700,000 1,576,138
PR Commonwealth of Puerto Rico
Government Development Bank,
Series 2006 B,
5.000% 12/01/15 700,000 724,241
----------
Other Total 2,300,379
----------
POOL/BOND BANK - 0.8%
MI Municipal Bond Authority, Local
Government Loan, Series 2001 A,
Insured: AMBAC
5.375% 11/01/17 750,000 802,125
OH Cleveland - Cuyahoga County
Port Authority, Columbia National
Group, Inc, Series 2005 D, AMT,
5.000% 05/15/20 820,000 824,026
----------
Pool/Bond Bank Total 1,626,151
----------
REFUNDED/ESCROWED(H) - 14.9%
CA ABAG Finance Authority for
Nonprofit Corps., Eskaton Gold
River Lodge, Series 1998,
Pre-refunded 11/15/08:
6.375% 11/15/15 620,000 653,716
6.375% 11/15/28 550,000 593,395
See Accompanying Notes to Financial Statements.
9
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
----------------------------------------------------------
OTHER (CONTINUED)
REFUNDED/ESCROWED(H) (CONTINUED)
CA Golden State Tobacco
Securitization Corp., Series 2003 B,
Pre-refunded 06/01/13:
5.500% 06/01/43 750,000 824,002
Insured: AMBAC
5.000% 06/01/43 3,500,000 3,738,945
CA Orange County Community
Facilities District, Ladera Ranch,
Series 1999 1,
Pre-refunded 08/15/09
6.700% 08/15/29 500,000 554,305
CA Riverside County Public Financing
Authority, Series 1997 A,
Pre-refunded 10/01/06,
5.500% 10/01/22 530,000 543,971
CA Statewide Communities
Development Authority, Eskaton
Village - Grass Valley, Series 2000,
Pre-refunded 11/15/10,
8.250% 11/15/31 985,000 1,159,207
CO Denver City & County Airport,
Series 1992 C, AMT:
Escrowed to Maturity:
6.125% 11/15/25 5,120,000 5,507,775
CO E-470 Public Highway Authority,
Series 2000 B,
Pre-refunded 09/01/10,
Insured: MBIA
(a) 09/01/35 8,750,000 1,128,925
CT Development Authority Sewer
Sludge Disposal Facilities, New
Haven Residuals LP, Series 1996,
AMT, Escrowed to Maturity,
8.250% 12/01/06 200,000 204,416
FL Northern Palm Beach County
Improvement District, Series 1999,
Pre-refunded 08/01/09,
Insured: MBIA
6.000% 08/01/29 750,000 807,667
FL Orange County Health Facilities
Authority, Orlando Regional
Healthcare System, Series 2002,
Pre-refunded 12/01/12,
5.750% 12/01/32 200,000 220,738
GA Forsyth County Hospital
Authority, Georgia Baptist Health
Care System, Series 1998,
Escrowed to Maturity,
6.000% 10/01/08 480,000 492,518
PAR ($) VALUE ($)
-------------------------------------------------------------
ID Health Facilities Authority, IHC
Hospitals, Inc., Series 1992,
Escrowed to Maturity,
6.650% 02/15/21 1,750,000 2,175,915
IL Development Finance Authority,
Latin School of Chicago,
Series 1998,
Pre-refunded 08/01/08,
5.650% 08/01/28 230,000 238,563
IL Health Facilities Authority,
Swedish American Hospital, Series
2000, Pre-refunded 05/15/10,
6.875% 11/15/30 500,000 554,035
IL University of Illinois, Series 2001 A,
Pre-refunded 08/15/11,
Insured: AMBAC
5.500% 08/15/17 685,000 740,327
MA Development Finance Agency,
Western New England College,
Series 2002,
Pre-refunded 12/01/12,
6.125% 12/01/32 300,000 339,837
NC Lincoln County, Lincoln County
Hospital, Series 1991,
Escrowed to Maturity,
9.000% 05/01/07 65,000 67,995
NV Henderson, St. Rose Dominican
Hospital, Series 1998 A,
Pre-refunded 07/01/08,
5.375% 07/01/26 115,000 119,116
NY New York City, Series 1997 A,
Pre-refunded 08/01/06,
7.000% 08/01/07 40,000 40,822
Series 1997 H,
Pre-refunded: 08/01/07,
6.000% 08/01/17 915,000 948,590
PA Delaware County Authority,
Mercy Health Corp., Series 1996,
Escrowed to Maturity:
6.000% 12/15/16 1,400,000 1,445,220
6.000% 12/15/26 1,000,000 1,032,240
PA Lancaster Industrial Development
Authority, Garden Spot Village,
Series 2000 A,
Pre-refunded 05/01/10,
7.625% 05/01/31 500,000 573,490
PA Philadelphia Authority for
Industrial Development, Doubletree
Project, Series 1997 A,
Pre-refunded 02/01/07,
6.500% 10/01/27 1,000,000 1,037,630
PR Commonwealth of Puerto Rico
Public Finance Corp.,
Series 2002 E,
Escrowed to Maturity,
6.000% 08/01/26 155,000 188,379
See Accompanying Notes to Financial Statements.
10
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
---------------------------------------------------------
OTHER (CONTINUED)
REFUNDED/ESCROWED(H) (CONTINUED)
TN Shelby County Health,
Educational & Housing Facilities
Board, Open Arms Development
Centers:
Series 1992 A,
Pre-refunded 08/01/07,
9.750% 08/01/19 780,000 864,263
Series 1992 C,
Pre-refunded 08/01/12,
9.750% 08/01/19 760,000 842,103
TX Board of Regents, University of
Texas, Series 2001 B, Escrowed to
Maturity,
5.375% 08/15/18 650,000 696,475
WI Health & Educational Facilities
Authority, Attic Angel Obligated
Group, Series 1998, Pre-refunded
11/17/08,
5.750% 11/15/27 1,000,000 1,064,880
WV Hospital Finance Authority,
Charleston Area Medical Center,
Series 2000 A, Pre-refunded
09/01/10,
6.750% 09/01/30 805,000 904,627
----------
Refunded/Escrowed Total 30,304,087
----------
TOBACCO - 3.2%
CA County Tobacco Securitization
Agency, Series 2006,
(a) 06/01/46 6,500,000 475,540
CA Golden State Tobacco
Securitization Corp.,
Series 2003 A-1,
6.250% 06/01/33 1,800,000 1,948,068
CA Los Angeles Tobacco
Securitization Authority,
Series 2006,
(a) 06/01/46 8,520,000 728,886
NJ Tobacco Settlement Financing
Corp., Series 2003,
6.750% 06/01/39 1,500,000 1,672,170
NY Nassau County Tobacco
Settlement Corp., Series 2006,
(a) 06/01/60 15,000,000 489,600
NY Tsasc, Inc., Series 2006 1,
5.125% 06/01/42 1,000,000 970,440
WA Tobacco Settlement Authority,
Series 2002,
6.625% 06/01/32 250,000 272,563
----------
Tobacco Total 6,557,267
----------
OTHER TOTAL 40,787,884
----------
---------------------------------------------------------
PAR ($) VALUE ($)
---------------------------------------------------------
OTHER REVENUE - 3.1%
HOTELS - 0.6%
NJ Middlesex County Improvement
Authority, Heldrich Associates LLC,
Series 2005 B,
6.250% 01/01/37 1,250,000 1,266,675
---------
Hotels Total 1,266,675
---------
RECREATION - 1.7%
CA Agua Caliente Band of Cahuilla
Indians, Series 2003,
5.600% 07/01/13 1,000,000 1,036,580
CA Cabazon Band Mission Indians,
Series 2004:
8.375% 10/01/15(f) 260,000 263,240
8.750% 10/01/19(f) 895,000 909,660
CT Mashantucket Western Pequot,
Series 1999 B,
(a) 09/01/16(f) 1,000,000 574,390
CT Mohegan Tribe Gaming
Authority, Series 2001,
6.250% 01/01/31(f) 275,000 290,735
NM Red River Sports Facility, Red
River Ski Area, Series 1998,
6.450% 06/01/07 400,000 400,408
---------
Recreation Total 3,475,013
---------
RETAIL - 0.8%
NY New York City Industrial
Development Agency, IAC/
Interactive Corp., Series 2005,
5.000% 09/01/35 1,000,000 1,002,860
OH Lake County, North Madison
Properties, Series 1993,
8.819% 09/01/11 580,000 588,544
---------
Retail Total 1,591,404
---------
OTHER REVENUE TOTAL 6,333,092
---------
---------------------------------------------------------
RESOURCE RECOVERY - 2.6%
DISPOSAL - 0.9%
CA Pollution Control Financing
Authority, Republic Services,
Series 2002 C, AMT,
5.250% 06/01/23(e) 500,000 519,260
FL Lee County Solid Waste Systems,
Series 2006 A, AMT, Insured:
AMBAC
5.000% 10/01/17 600,000 625,548
UT Carbon County, Laidlaw
Environmental:
Series 1995 A, AMT,
7.500% 02/01/10 250,000 253,360
Series 1997 A, AMT,
7.450% 07/01/17 500,000 523,435
---------
Disposal Total 1,921,603
---------
See Accompanying Notes to Financial Statements.
11
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------
RESOURCE RECOVERY (CONTINUED)
RESOURCE RECOVERY - 1.7%
MA Development Finance Agency,
Ogden Haverhill Associates,
Series 1999 A, AMT,
6.700% 12/01/14 250,000 269,710
MA Industrial Finance Agency, Ogden
Haverhill Associates,
Series 1998 A, AMT:
5.500% 12/01/13 500,000 518,925
5.600% 12/01/19 500,000 514,735
PA Delaware County Industrial
Development Authority, American
REF-Fuel Co., Series 1997 A,
6.200% 07/01/19 2,000,000 2,085,160
---------
Resource Recovery Total 3,388,530
---------
RESOURCE RECOVERY TOTAL 5,310,133
---------
--------------------------------------------------------
TAX-BACKED - 28.1%
LOCAL APPROPRIATED - 1.6%
CA Compton, Civic Center & Capital
Improvements, Series 1997 A,
5.500% 09/01/15 1,000,000 1,034,460
SC Dorchester County School District
No. 2, Series 2004,
5.250% 12/01/29 650,000 667,524
SC Laurens County School District
No. 55, Series 2005,
5.250% 12/01/30 1,050,000 1,071,336
SC Newberry County School District,
Series 2005,
5.000% 12/01/30 500,000 497,900
---------
Local Appropriated Total 3,271,220
---------
LOCAL GENERAL OBLIGATIONS - 9.7%
CA East Side Union High School
District, Series 2003 B,
Insured: MBIA
5.100% 02/01/20 1,000,000 1,081,970
CA Fresno Unified School District,
Series 2002 A, Insured: MBIA
6.000% 02/01/18 2,000,000 2,327,220
CA Los Angeles Unified School
District, Series 2002 E,
Insured: MBIA
5.750% 07/01/16 700,000 795,200
CA Montebello Unified School
District, Series 2001,
Insured: FSA:
(a) 08/01/21 1,435,000 695,803
(a) 08/01/23 1,505,000 655,578
PAR ($) VALUE ($)
---------------------------------------------------------
CO Northwest Metropolitan District
No. 3, Series 2005,
6.250% 12/01/35 500,000 521,670
IL Chicago Board of Education,
Series 1997 A, Insured: AMBAC
5.250% 12/01/30(i) 8,000,000 8,283,920
LA Greystone Community
Development, Livingston Parish,
Series 2005,
7.148% 08/01/36(j) 1,032,236 922,327
NJ Bergen County Improvement
Authority, Series 2005,
5.000% 11/15/24 1,210,000 1,304,259
NY New York City:
Series 1997 A,
7.000% 08/01/07 960,000 979,248
Series 1997 H,
6.000% 08/01/17 485,000 501,562
TX Dallas County Flood Control
District, Series 2002,
7.250% 04/01/32 1,000,000 1,053,930
TX Irving Independent School
District, Series 1997,
Insured: PSFG
(a) 02/15/18 1,000,000 580,470
----------
Local General Obligations Total 19,703,157
----------
SPECIAL NON-PROPERTY TAX - 5.2%
CA San Diego Redevelopment
Agency, Series 2001,
Insured: FSA:
(a) 09/01/19 1,910,000 1,021,430
(a) 09/01/22 1,910,000 875,296
IL Bolingbrook, Sales Tax Revenue,
Series 2005,
(k) 01/01/24
(6.250% 01/01/08) 750,000 673,027
IL Metropolitan Pier & Exposition
Authority, McCormick Place
Expansion Project, Series 1993 A,
Insured: FGIC
(a) 06/15/16 10,000,000 6,385,200
KS Wyandotte County, Series 2005,
5.000% 12/01/20 325,000 332,654
NJ Economic Development
Authority, Cigarette Tax,
Series 2004:
5.500% 06/15/31 150,000 155,715
5.750% 06/15/29 1,000,000 1,061,350
----------
Special Non-Property Tax Total 10,504,672
----------
SPECIAL PROPERTY TAX - 9.4%
CA Carson Improvement Bond Act
1915, Series 1992,
7.375% 09/02/22 35,000 35,297
See Accompanying Notes to Financial Statements.
12
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
---------------------------------------------------------
TAX-BACKED (CONTINUED)
SPECIAL PROPERTY TAX (CONTINUED)
CA Huntington Beach Community
Facilities District, Grand Coast
Resort, Series 2001-1,
6.450% 09/01/31 750,000 800,167
CA Lincoln Community Facilities
District No. 2003-1, Series 2004,
5.900% 09/01/24 500,000 527,130
CA Oakdale Public Financing
Authority, Central City
Redevelopment Project, Series 2004,
5.375% 06/01/33 1,375,000 1,410,942
CA Orange County Improvement
Bond Act 1915, Phase IV,
No. 01-1-B, Series 2003,
5.750% 09/02/33 500,000 509,770
CA Placer Unified High School
District, Series 2000 A,
Insured: FGIC
(a) 08/01/19 1,700,000 916,232
CA Redwood City, Community
Facilities District No. 1,
Series 2003 B,
5.950% 09/01/28 600,000 616,548
CA Riverside County Public Financing
Authority, Series 1997,
5.500% 10/01/22 120,000 122,023
CA Temecula Valley Unified School
District No. 1, Series 2003,
6.125% 09/01/33 400,000 408,540
FL Celebration Community
Development District,
Series 2003 A,
6.400% 05/01/34 975,000 1,021,771
FL Colonial Country Club
Community Development District,
Series 2003,
6.400% 05/01/33 720,000 761,047
FL Double Branch Community
Development District,
Series 2002 A,
6.700% 05/01/34 680,000 732,952
FL Islands at Doral Southwest
Community Development District,
Series 2003,
6.375% 05/01/35 375,000 392,153
FL Lexington Oaks Community
Development District:
Series 1998 A,
6.125% 05/01/19 345,000 347,222
Series 2000 A,
7.200% 05/01/30 275,000 283,825
Series 2002 A,
6.700% 05/01/33 250,000 263,028
PAR ($) VALUE ($)
----------------------------------------------------------
FL Orlando, Conroy Road
Interchange,
Series 1998 A:
5.500% 05/01/10 130,000 131,951
5.800% 05/01/26 300,000 304,368
FL Seven Oaks Community
Development District:
Series 2004 A,
5.875% 05/01/35 290,000 294,771
Series 2004 B,
5.000% 05/01/09 790,000 789,305
FL Stoneybrook Community
Development District:
Series 1998 A,
6.100% 05/01/19 275,000 276,804
Series 1998 B,
5.700% 05/01/08 25,000 25,016
FL West Villages Improvement
District, Series 2006,
5.500% 05/01/37 750,000 752,962
FL Westchester Community
Development District No.1,
Series 2003,
6.125% 05/01/35 425,000 444,363
FL Westridge Community
Development District, Series 2005,
5.800% 05/01/37 1,250,000 1,243,225
GA Atlanta, Eastside Project,
Series 2005 A, AMT,
5.625% 01/01/16 600,000 612,912
IL Chicago, Pilsen Redevelopment,
Series 2004 B,
6.750% 06/01/22 450,000 462,568
IL Lincolnshire Special Services Area
No. 1, Sedgebrook Project,
Series 2004,
6.250% 03/01/34 500,000 517,450
IL Plano Special Service Area No. 4,
Series 2005 5-B,
6.000% 03/01/35 2,000,000 1,938,800
IN City of Portage, Series 2006,
5.000% 07/15/23 300,000 297,090
MI Pontiac Tax Increment Finance
Authority, Development Area
No. 3, Series 2002,
6.375% 06/01/31 550,000 586,839
MI Taylor Tax Increment Finance
Authority, Series 2001,
Insured: FSA
5.375% 05/01/17 1,220,000 1,295,445
----------
Special Property Tax Total 19,122,516
----------
See Accompanying Notes to Financial Statements.
13
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------
TAX-BACKED (CONTINUED)
STATE APPROPRIATED - 2.0%
CA Public Works Board, Department
of Mental Health, Coalinga State,
Series 2004 A,
5.500% 06/01/19 1,000,000 1,084,030
NY Urban Development Corp.,
University Facilities Grants,
Series 1995,
5.875% 01/01/21 1,000,000 1,153,970
PR Commonwealth of Puerto Rico
Public Finance Corp.,
Series 2002 E,
6.000% 08/01/26 1,645,000 1,877,258
----------
State Appropriated Total 4,115,258
----------
STATE GENERAL OBLIGATIONS - 0.2%
CA State, Series 2003,
5.250% 02/01/23 380,000 412,676
----------
State General Obligations Total 412,676
----------
TAX-BACKED TOTAL 57,129,499
----------
--------------------------------------------------------
TRANSPORTATION - 7.5%
AIR TRANSPORTATION - 4.2%
CA Los Angeles Regional Airport,
LAXfuel Corp., Series 2001, AMT,
Insured: AMBAC
5.250% 01/01/23 750,000 765,960
CO Denver City & County Airport,
United Air Lines, Inc.,
Series 1992 A, AMT,
6.875% 10/01/32(d) 1,000,000 1,031,140
FL Capital Trust Agency, Air Cargo-
Orlando, Series 2003, AMT,
6.750% 01/01/32 500,000 531,840
IN Indianapolis Airport Authority,
FedEx Corp., Series 2004, AMT,
5.100% 01/15/17 250,000 257,388
NC Charlotte Douglas International
Airport, US Airways, Inc.:
Series 1998, AMT,
5.600% 07/01/27 250,000 231,408
Series 2000, AMT,
7.750% 02/01/28 750,000 790,147
NJ Economic Development Authority,
Continental Airlines, Inc.:
Series 1999, AMT:
6.250% 09/15/19 180,000 178,088
6.250% 09/15/29 485,000 478,453
Series 2003, AMT,
9.000% 06/01/33 750,000 816,382
PAR ($) VALUE ($)
------------------------------------------------------------
NY New York City Industrial
Development Agency:
American Airlines, Inc, Series 2005,
AMT,
7.750% 08/01/31 500,000 557,130
Terminal One Group-JFK
International Airport, Series 2005,
AMT,
5.500% 01/01/21 750,000 793,462
TX Alliance Airport Authority, Inc.,
Federal Express Corp., Series 2006,
AMT,
4.850% 04/01/21 250,000 246,835
TX Dallas-Fort Worth International
Airport, American Airlines, Inc.,
Series 2000 A, AMT,
9.000% 05/01/29(e) 1,000,000 1,070,800
TX Houston Industrial Development
Corp., United Parcel Service,
Series 2002, AMT,
6.000% 03/01/23 700,000 724,836
----------
Air Transportation Total 8,473,869
----------
AIRPORTS - 0.1%
GA Augusta Airport, Series 2005 C,
AMT,
5.450% 01/01/31 250,000 252,375
----------
Airports Total 252,375
----------
TOLL FACILITIES - 2.7%
CO E-470 Public Highway Authority,
Series 2000 B, Insured: MBIA
(a) 09/01/18 3,000,000 1,694,670
CO Northwest Parkway Public
Highway Authority, Series 2001 D,
7.125% 06/15/41 1,250,000 1,151,650
PR Commonwealth of Puerto Rico
Highway & Transportation
Authority, Series 2003 AA,
Insured: MBIA
5.500% 07/01/18 500,000 556,565
VA Richmond Metropolitan
Authority, Series 1998,
Insured: FGIC
5.250% 07/15/22 2,000,000 2,204,480
----------
Toll Facilities Total 5,607,365
----------
TRANSPORTATION - 0.5%
NV Department of Business &
Industry, Las Vegas Monorail
Project, Series 2000,
7.375% 01/01/40 1,000,000 1,025,120
----------
Transportation Total 1,025,120
----------
TRANSPORTATION TOTAL 15,358,729
----------
------------------------------------------------------------
See Accompanying Notes to Financial Statements.
14
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
----------------------------------------------------------
UTILITIES - 17.8%
INDEPENDENT POWER PRODUCERS - 2.2%
NY Port Authority of New York &
New Jersey, KIAC Partners,
Series 1996 IV, AMT,
6.750% 10/01/11 2,000,000 2,037,000
NY Suffolk County Industrial
Development Authority,
Nissequogue Cogeneration Partners
Facilities, Series 1998, AMT,
5.500% 01/01/23 550,000 506,396
PA Carbon City Industrial
Development Authority, Panther
Creek Partners Project, Series 2000,
AMT,
6.650% 05/01/10 215,000 227,253
PA Economic Development Financing
Authority, Northampton
Generating, Series 1994 A, AMT,
6.500% 01/01/13 1,000,000 986,890
PR Commonwealth of Puerto Rico
Industrial, Tourist, Educational,
Medical & Environmental
Cogeneration Facilities, AES
Project, Series 2000, AMT,
6.625% 06/01/26 645,000 703,353
---------
Independent Power Producers Total 4,460,892
---------
INVESTOR OWNED - 10.8%
AZ Pima County Industrial
Development Authority, Tucson
Electric Power Co., Series 1997 A,
AMT,
6.100% 09/01/25 750,000 752,205
CA Chula Vista Industrial
Development Authority, San Diego
Gas & Electric Co., Series 1996 B,
AMT,
5.500% 12/01/21 625,000 666,131
FL Polk County Industrial
Development Authority, Tampa
Electric Co., Series 1996, AMT,
5.850% 12/01/30 1,200,000 1,223,472
IL Bryant, Central Illinois Light Co.,
Series 1993,
5.900% 08/01/23 2,650,000 2,665,052
IN Petersburg, Indianapolis Power &
Light Co., Series 1995,
6.625% 12/01/24 1,000,000 1,020,840
LA Calcasieu Parish Industrial
Development Board, Entergy Gulf
States, Inc., Series 1999,
5.450% 07/01/10 500,000 506,260
PAR ($) VALUE ($)
---------------------------------------------------------
LA West Feliciana Parish, Entergy
Gulf States, Inc., Series 1999 B,
6.600% 09/01/28 500,000 502,655
MS Business Finance Corp., Systems
Energy Resources, Series 1998,
5.875% 04/01/22 2,000,000 2,012,240
MT Forsyth:
Northwestern Corp., Series 2006,
Insured: AMBAC
4.650% 08/01/23 1,500,000 1,500,870
Portland General, Series 1998 A,
5.200% 05/01/33 300,000 308,751
NV Clark County Industrial
Development Authority, Nevada
Power Co., Series 1995 B, AMT,
5.900% 10/01/30 1,250,000 1,250,000
OH Air Quality Development
Authority, Cleveland Electric
Illuminating Co., Series 2002 A,
6.000% 12/01/13 900,000 932,391
PA Economic Development Financing
Authority, Reliant Energy, Inc.,
Series 2001 A, AMT,
6.750% 12/01/36 600,000 642,174
TX Brazos River Authority, TXU
Energy Co., LLC:
Series 2001 C, AMT,
5.750% 05/01/36 280,000 296,122
Series 2003 C, AMT,
6.750% 10/01/38 645,000 724,225
VA Pittsylvania County Industrial
Development Authority, Virginia
Electric & Power Co.,
Series 1994 A, AMT,
7.450% 01/01/09 700,000 708,617
WV Pleasant County, Western
Pennsylvania Power Co., Series
1999 E, AMT, Insured: AMBAC
5.500% 04/01/29 4,750,000 4,945,748
WY Campbell County, Black Hills
Power, Inc., Series 2004,
5.350% 10/01/24 1,250,000 1,287,013
----------
Investor Owned Total 21,944,766
----------
JOINT POWER AUTHORITY - 0.4%
NC Eastern Municipal Power Agency:
Series 1999 D,
6.700% 01/01/19 500,000 543,380
Series 2003 F,
5.500% 01/01/16 285,000 302,237
----------
Joint Power Authority Total 845,617
----------
MUNICIPAL ELECTRIC - 3.1%
PR Commonwealth of Puerto Rico
Electric Power Authority, Series
1998 II, Insured: FSA
5.125% 07/01/26 2,000,000 2,088,580
See Accompanying Notes to Financial Statements.
15
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
----------------------------------------------------------
UTILITIES (CONTINUED)
MUNICIPAL ELECTRIC (CONTINUED)
WA Chelan County Public Utility
District No. 1, Columbia River
Rock Hydroelectric, Series 1997,
Insured: MBIA
(a) 06/01/14 5,000,000 3,520,750
WA Seattle Light & Power,
Series 2001, Insured: FSA
5.500% 03/01/17 750,000 797,077
-----------
Municipal Electric Total 6,406,407
-----------
WATER & SEWER - 1.3%
Guam Government Waterworks
Authority, Water and Wastewater
Systems, Series 2005,
5.875% 07/01/35 1,125,000 1,177,335
MO Water & Sewer, Lee's Summit,
Series 2002, Insured: AMBAC
5.250% 07/01/15 500,000 530,835
MS V Lakes Utility District,
Series 1994,
8.250% 07/15/24(l) 480,000 379,618
NH Industrial Development Authority,
Pennichuck Water Works, Inc.,
Series 1988, AMT,
7.500% 07/01/18 405,000 454,082
-----------
Water & Sewer Total 2,541,870
-----------
UTILITIES TOTAL 36,199,552
-----------
TOTAL MUNICIPAL BONDS
(cost of $308,421,962) 312,167,914
-----------
MUNICIPAL PREFERRED
STOCKS - 3.2% SHARES
----------------------------------------------------------
HOUSING - 3.2%
MULTI-FAMILY - 3.2%
Charter Mac Equity Issuer Trust,
AMT:
6.300% 04/30/19(f) 1,000,000 1,077,460
Series 1999,
6.625% 06/30/09(f) 2,000,000 2,110,640
GMAC Municipal Mortgage Trust,
AMT,
5.600% 10/31/39(f) 1,000,000 1,019,940
Munimae TE Bond Subsidiary LLC,
Series 2000 B, AMT,
7.750% 06/30/50(f) 2,000,000 2,223,820
-----------
Multi-Family Total 6,431,860
-----------
HOUSING TOTAL 6,431,860
-----------
TOTAL MUNICIPAL PREFERRED STOCKS
(cost of $6,000,000) 6,431,860
-----------
SHARES VALUE ($)
--------------------------------------------------------
INVESTMENT COMPANY - 0.0%
--------------------------------------------------------
Dreyfus Tax-Exempt Cash
Management Fund 3,756 3,756
---------
TOTAL INVESTMENT COMPANY
(cost of $3,756) 3,756
---------
SHORT-TERM OBLIGATIONS - 2.6% PAR ($)
--------------------------------------------------------
VARIABLE RATE DEMAND NOTES (M) - 2.6%
FL Orange County School Board,
Series 2000 B, Insured: AMBAC,
SPA: SunTrust Bank N.A.
3.550% 08/01/25 400,000 400,000
FL Pinellas County Health Facility
Authority, All Childrens Hospital,
Series 1985, Insured: AMBAC,
LOC: Wachovia Bank N.A.
3.600% 12/01/15 1,600,000 1,600,000
IL Health Facilities Authority, OSF
Healthcare Systems, Series 2002,
LOC: Fifth Third Bank
3.550% 11/15/27 700,000 700,000
MN Higher Education Facilities
Authority, St. Olaf College,
Series 2002 5, LOC: Harris
Trust & Savings Bank
3.580% 10/01/32 100,000 100,000
MO Chesterfield Industrial
Development Authority Educational
Facilities, Gateway Academy Inc.,
Series 2003, LOC: U.S. Bank NA
3.630% 01/01/28 100,000 100,000
MS Jackson County Pollution Control
Revenue, Chevron USA, Inc.,
Series 1992,
3.540% 12/01/16 1,400,000 1,400,000
NE Educational Finance Authority,
Creighton University, Series 2003,
3.580% 03/01/33 800,000 800,000
WY Uinta County, Chevron USA
Project Inc., Series 1993,
3.540% 08/15/20 200,000 200,000
---------
VARIABLE RATE DEMAND NOTES TOTAL 5,300,000
---------
TOTAL SHORT-TERM OBLIGATIONS
(cost of $5,300,000) 5,300,000
------------
TOTAL INVESTMENTS - 159.2%
(cost of $319,725,718)(n) 323,903,530
------------
AUCTION PREFERRED SHARES PLUS CUMULATIVE
UNPAID DISTRIBUTIONS - (59.0)% (120,045,202)
OTHER ASSETS & LIABILITIES, NET - (0.2)% (424,055)
------------
NET ASSETS - 100.0% 203,434,273
------------
See Accompanying Notes to Financial Statements.
16
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a)Zero coupon bond.
(b)Denotes a restricted security, which is subject to restrictions on resale
under federal securities laws or in transactions exempt from registration.
At May 31, 2006, the value of these securities amounted to $2,862,403, which
represents 1.4% of net assets.
Additional information on this restricted security 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 $1,240,000
(c)The issuer is in default of certain debt covenants. Income is not being
accrued. At May 31, 2006, the value of these securities amounted to
$1,441,624, which represents 0.7% of net assets.
(d)The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is not being accrued. At May 31,
2006, the value of these securities amounted to $1,080,167, which represents
0.5% of net assets.
(e)The interest rate shown on floating rate or variable rate securities reflect
the rate at May 31, 2006.
(f)Security exempt from registration pursuant to Rule 144A under the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 2006,
these securities, which did not include any illiquid securities except for
the following, amounted to $9,001,440, which represents 4.4% of net assets.
Acquisition
Security Date Par Cost Value
------------------------------------------------------------
Resolution Trust
Corp.,
Pass-Through
Certificates, Series
1993 A, 8.500%
12/01/16 08/27/93 $546,075 $556,951 $531,555
(g)Security purchased on a delayed delivery basis.
(h)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.
(i)A portion of this security with a market value of $3,180,697 is pledged as
collateral for open futures contracts.
(j)Represents fair value as determined in good faith under procedures approved
by the Board of Trustees.
(k)Step bond. This security is currently not paying coupon. Shown
parenthetically is the interest rate to be paid and the date the Trust will
begin accruing at this rate.
(l)The issuer is in default of certain debt covenants. Income is being accrued.
At May 31, 2006, the value of this security represents 0.2% of net assets.
(m)Variable rate demand notes. These securities are payable upon demand and are
secured by letters of credit or other credit support agreements from banks.
The interest rates change periodically and the interest rates shown reflect
the rates at May 31, 2006.
(n)Cost for federal income tax purposes is $319,494,539.
At May 31, 2006, the Trust held the following open short futures contracts:
Aggregate Expiration Unrealized
Type Contracts Value Face Value Date Appreciation
-------------------------------------------------------------------
U.S.
Treasury
Bonds 84 $8,938,125 $9,478,602 Jun-2006 $540,477
10 Yr. U.S.
Treasury
Notes 92 $9,667,188 $9,827,889 Jun-2006 $160,701
--------
$701,178
--------
At May 31, 2006, the Trust held the following forward swap contract:
Net
Notional Effective Expiration Counter- Receive Fixed Variable Unrealized
Amount Date Date party (Pay) Rate Rate Depreciation
-----------------------------------------------------------------------------
$2,600,000 08/08/06 08/08/16 JPMorgan (Pay) 4.158% BMA $(120,097)
Chase Index
Bank
At May 31, 2006, the composition of the Trust by revenue source is as follows:
% of
Holdings by Revenue Source Net Assets
------------------------------------------
Health Care 43.4%
Tax-Backed 28.1
Housing 23.1
Other 20.1
Utilities 17.8
Transportation 7.5
Industrials 6.7
Education 4.2
Other Revenue 3.1
Resource Recovery 2.6
Short-Term Obligations 2.6
Investment Company --*
Auction Preferred Shares (59.0)
Other Assets & Liabilities, Net (0.2)
-----
100.0%
-----
* Rounds to less than 0.1%.
Acronym Name
----------------------------------------------
AMBAC Ambac Assurance Corp.
AMT Alternative Minimum Tax
BMA Bond Market Association
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Administration
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage
Association
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage
Association
LOC Letter of Credit
MBIA MBIA Insurance Corp.
PSFG Permanent School Fund Guaranteed
RAD Radian Asset Assurance, Inc.
SPA Stand-by Purchase Agreement
See Accompanying Notes to Financial Statements.
17
[GRAPHIC]
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2006 (Unaudited)
ASSETS:
Investments, at cost $319,725,718
------------
Investments, at value $323,903,530
Cash 20,451
Receivable for:
Interest 5,179,027
Futures variation margin 55,000
Deferred Trustees' compensation plan 26,346
------------
Total Assets 329,184,354
------------
LIABILITIES:
Net unrealized depreciation on swap contracts 120,097
Payable for:
Investments purchased on a delayed delivery
basis 4,175,661
Distributions -- common shares 1,092,443
Distributions -- preferred shares 45,202
Investment advisory fee 204,142
Pricing and bookkeeping fees 27,720
Trustees' fees 632
Custody fee 6,067
Transfer agent fee 10,535
Preferred shares remarketing commissions 3,291
Chief compliance officer expenses 792
Deferred Trustees' fees 26,346
Other liabilities 37,153
------------
Total Liabilities 5,750,081
------------
AUCTION PREFERRED SHARES (4,800 shares
issued and outstanding at $25,000 per share) $120,000,000
------------
COMPOSITION OF NET ASSETS
APPLICABLE TO COMMON SHARES:
Paid-in capital -- common shares $256,453,653
Overdistributed net investment income (70,618)
Accumulated net realized loss (57,707,655)
Net unrealized appreciation (depreciation) on:
Investments 4,177,812
Swap contracts (120,097)
Futures contracts 701,178
------------
Net assets at value applicable to 31,212,568
common shares of beneficial interest outstanding $203,434,273
------------
Net asset value per common share $ 6.52
------------
[GRAPHIC]
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 2006 (Unaudited)
INVESTMENT INCOME:
Interest $ 9,637,938
-----------
EXPENSES:
Investment advisory fee 1,210,814
Transfer agent fee 27,658
Pricing and bookkeeping fees 75,663
Trustees' fees 11,078
Preferred shares remarketing commissions 149,760
Custody fee 9,605
Chief compliance officer expenses 2,479
Other expenses 80,072
-----------
Total Expenses 1,567,129
Custody earnings credit (1,527)
-----------
Net Expenses 1,565,602
-----------
Net Investment Income 8,072,336
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS, FUTURES CONTRACTS
AND SWAP CONTRACTS:
Net realized gain (loss) on:
Investments (4,198,972)
Futures contracts 457,303
-----------
Net realized loss (3,741,669)
-----------
Net change in unrealized appreciation
(depreciation) on:
Investments 5,294,442
Swap contracts (120,097)
Futures contracts 694,155
-----------
Net change in unrealized appreciation
(depreciation) 5,868,500
-----------
Net Gain 2,126,831
-----------
Net Increase in Net Assets from Operations 10,199,167
-----------
LESS DISTRIBUTIONS DECLARED TO PREFERRED
SHAREHOLDERS:
From net investment income (1,915,402)
-----------
Net Increase in Net Assets from Operations
Applicable to Common Shares $ 8,283,765
-----------
See Accompanying Notes to Financial Statements.
18
[GRAPHIC]
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
INCREASE (DECREASE) IN NET ASSETS: 2006 2005
----------------------------------------- -------------
OPERATIONS:
Net investment income $ 8,072,336 $ 16,604,193
Net realized gain (loss) on
investments and futures
contracts (3,741,669) 3,346,659
Net change in unrealized
appreciation (depreciation) on
investments, swap contracts and
futures contracts 5,868,500 (590,198)
------------ ------------
Net Increase from Operations 10,199,167 19,360,654
------------ ------------
LESS DISTRIBUTIONS
DECLARED TO PREFERRED
SHAREHOLDERS:
From net investment income (1,915,402) (2,628,702)
------------ ------------
Increase in Net Assets from
Operations Applicable to
Common Shares 8,283,765 16,731,952
------------ ------------
LESS DISTRIBUTIONS
DECLARED TO COMMON
SHAREHOLDERS:
From net investment income (6,800,383) (14,274,618)
------------ ------------
SHARE TRANSACTIONS:
Distributions reinvested 284,933 110,419
------------ ------------
Total Increase in Net Assets
Applicable to Common Shares 1,768,315 2,567,753
NET ASSETS APPLICABLE TO
COMMON SHARES:
Beginning of period 201,665,958 199,098,205
------------ ------------
End of period (including
undistributed (overdistributed)
net investment income of
$(70,618) and $572,831,
respectively) $203,434,273 $201,665,958
------------ ------------
NUMBER OF TRUST SHARES:
Common Shares:
Issued for distributions reinvested 43,545 16,963
Outstanding at:
Beginning of period 31,169,023 31,152,060
------------ ------------
End of period 31,212,568 31,169,023
------------ ------------
Preferred Shares:
Outstanding at end of period 4,800 4,800
------------ ------------
See Accompanying Notes to Financial Statements.
19
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise noted):
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED NOVEMBER 30, ENDED
MAY 31, ----------------------------------------------------------------------- NOVEMBER 30,
2006 2005 2004 2003 2002 2001 2000 1999 (A)
---------------------------------------------------------------------------------------------------------------
NET ASSET
VALUE,
BEGINNING OF
PERIOD $ 6.47 $ 6.39 $ 6.57 $ 6.52 $ 6.93 $ 6.92 $ 7.49 $ 8.49
-------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income 0.26(b) 0.53(b) 0.52(b) 0.54(b) 0.57(b)(c) 0.61(b) 0.62(d) 0.46
Net realized
and
unrealized
gain (loss)
on
investments,
swap
contracts
and futures
contracts 0.07 0.09 (0.18) 0.04 (0.42)(c) (0.04) (0.54) (0.92)
-------- -------- -------- -------- -------- -------- -------- --------
Total from
Investment
Operations 0.33 0.62 0.34 0.58 0.15 0.57 0.08 (0.46)
-------- -------- -------- -------- -------- -------- -------- --------
LESS
DISTRIBUTIONS
DECLARED TO
PREFERRED
SHAREHOLDERS:
From net
investment
income (0.06) (0.08) (0.04) (0.04) (0.06) (0.12) (0.16) (0.04)
-------- -------- -------- -------- -------- -------- -------- --------
Total from
Investment
Operations
Applicable
to Common
Shareholders 0.27 0.54 0.30 0.54 0.09 0.45 (0.08) (0.50)
-------- -------- -------- -------- -------- -------- -------- --------
LESS
DISTRIBUTIONS
DECLARED TO
COMMON
SHAREHOLDERS:
From net
investment
income (0.22) (0.46) (0.48) (0.49) (0.50) (0.44) (0.48) (0.45)
-------- -------- -------- -------- -------- -------- -------- --------
LESS SHARE
TRANSACTIONS:
Commissions
and offering
costs
--preferred
shares -- -- -- -- -- -- (0.01) (0.05)
-------- -------- -------- -------- -------- -------- -------- --------
NET ASSET
VALUE, END OF
PERIOD $ 6.52 $ 6.47 $ 6.39 $ 6.57 $ 6.52 $ 6.93 $ 6.92 $ 7.49
-------- -------- -------- -------- -------- -------- -------- --------
Market price
per share --
common shares $ 6.75 $ 6.42 $ 6.43 $ 6.45 $ 6.26 $ 6.38 $ 5.75 $ 6.13
-------- -------- -------- -------- -------- -------- -------- --------
Total return
-- based on
market value
-- common
shares (e) 8.70%(f) 7.18% 7.44% 11.17% 5.81% 18.56% 1.05% (21.72)%(f)
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS TO
AVERAGE NET
ASSETS/ SUPPLEMENTAL
DATA:
Expenses (g)(h) 1.54%(i) 1.55% 1.58% 1.54% 1.49% 1.59% 1.60% 1.13%(i)
Net investment
income
before
preferred
stock
dividend
(g)(h) 7.94%(i) 8.17% 8.04% 8.30% 8.36 %(c) 8.67% 8.63% 6.18%(i)
Net investment
income after
preferred
stock
dividend
(g)(h) 6.06%(i) 6.88% 7.39% 7.72% 7.53 %(c) 7.00% 6.37% 5.67%(i)
Portfolio
turnover rate 11%(f) 15% 13% 14% 15% 15% 10% 16%(f)
Net assets,
end of
period
(000's)
--common
shares $203,434 $201,666 $199,098 $204,506 $202,765 $215,348 $214,975 $232,540
(a)The Trust changed its fiscal year end from December 31 to November 30.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Effective December 1, 2001, the Trust adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began accreting
market discount on all debt securities. The effect of this change, for the
year ended November 30, 2002, was to increase the ratio of net investment
income to average net assets from 8.31% to 8.36% and increase the ratio of
net investment income (adjusted for dividend payments to preferred
shareholders) from 7.48% to 7.53%. The impact to net investment income and
net realized and unrealized loss per share was less than $0.01. Per share
data and ratios for periods prior to November 30, 2002, have not been
restated to reflect this change in presentation.
(d)The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(e)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(f)Not annualized.
(g)The benefits derived from custody credits had an impact of less than 0.01%.
(h)Ratios reflect average net assets available to common shares only.
(i)Annualized.
See Accompanying Notes to Financial Statements.
20
[GRAPHIC]
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.56 $ 8.34 $ 8.55 $ 7.96
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.52 0.55 0.56 0.60
Net realized and unrealized gain (loss) on investments and futures contracts (0.07) 0.22 (0.19) 0.58
-------- -------- -------- --------
Total from Investment Operations Applicable to Common Shareholders 0.45 0.77 0.37 1.18
-------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (0.52) (0.55) (0.58) (0.59)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 8.49 $ 8.56 $ 8.34 $ 8.55
-------- -------- -------- --------
Market price per share -- common shares $ 8.31 $ 8.63 $ 8.25 $ 7.38
-------- -------- -------- --------
Total return -- based on market value -- common shares (a) 2.47% 11.60% 20.09% 15.65%
-------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (b) 0.93% 0.96% 1.00% 1.06%
Net investment income (b) 6.02% 6.54% 6.74% 7.15%
Portfolio turnover rate 29% 17% 15% 23%
Net assets, end of period (000's) -- common shares $263,705 $265,190 $257,768 $264,467
(a)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(b)The benefits derived from custody credits had an impact of less than 0.01%.
See Accompanying Notes to Financial Statements.
21
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS
May 31, 2006 (Unaudited)
NOTE 1. ORGANIZATION
Colonial High Income Municipal Trust (the "Trust") is a Massachusetts business
trust registered under the Investment Company Act of 1940 (the "Act"), as
amended, as a diversified, closed-end management investment company.
INVESTMENT GOAL
The Trust seeks to provide high current income, generally exempt from federal
income taxes. The Trust's secondary goal is to seek total return.
TRUST SHARES
The Trust may issue an unlimited number of common shares. On August 26, 1999,
the Trust issued 4,800 Auction Preferred Shares ("APS").
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements.
SECURITY VALUATION
Debt securities generally are valued by pricing services approved by the
Trust's Board of Trustees, based upon market transactions for normal,
institutional-size trading units of similar securities. The services may use
various pricing techniques which take into account appropriate factors such as
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other data, as well as broker quotes. Debt securities for which quotations
are readily available are valued at an over-the-counter or exchange bid
quotation. Certain debt securities, which tend to be more thinly traded and of
lesser quality, are priced based on fundamental analysis of the financial
condition of the issuer and the estimated value of any collateral. Valuations
developed through pricing techniques may vary from the actual amounts realized
upon sale of the securities, and the potential variation may be greater for
those securities valued using fundamental analysis.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Investments in open-end investment companies are valued at net asset value.
Futures contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are traded.
Investments for which market quotations are not readily available, or that have
quotations which management believes are not appropriate, are valued at fair
value as determined in good faith under consistently applied procedures
established by and under the general supervision of the Board of Trustees. If a
security is valued at "fair value", such value is likely to be different from
the last quoted market price for the security.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
FUTURES CONTRACTS
The Trust may invest in municipal and U.S. Treasury futures contracts. The
Trust will invest in these instruments to hedge against the effects of changes
in the value of portfolio securities due to anticipated changes in interest
rates and/or market conditions, for duration management, or when the
transactions are economically appropriate to the reduction of risk inherent in
the management of the Trust and not for trading purposes. The use of futures
contracts involves certain risks, which include: (1) imperfect correlation
between the price movement of the instruments and the underlying securities,
(2) inability to close out positions due to differing trading hours, or the
temporary absence of a liquid market, for either the instrument or the
underlying securities, or (3) an inaccurate prediction by Columbia Management
Advisors, LLC of the future direction of interest rates. Any of these risks may
involve amounts exceeding the variation margin recorded in the Trust's
Statement of Assets and Liabilities at any given time.
Upon entering into a futures contract, the Trust deposits cash or securities
with the broker in an amount sufficient to meet the initial margin requirement.
Subsequent payments are made or received by the Trust equal to the daily change
in the contract value and are recorded as variation margin receivable or
payable and offset in unrealized gains or losses. The Trust also identifies
portfolio securities as segregated with the custodian in a separate account in
an amount equal to the futures contract. The Trust recognizes a realized gain
or loss when the contract is closed or expires.
22
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
SWAPS
The Trust may engage in swap transactions such as interest rate, forward, total
return, index or currency swaps, consistent with its investment objective and
policies to obtain a desired return at a lower cost than if the Trust had
invested directly in the asset that yielded the desired return. Swaps involve
the exchange by the Trust with another party of their respective commitments to
pay or receive interest or total return throughout the lives of the agreements.
The interest to be paid or received on swaps is included in net realized
gain/(loss) on investments. Unrealized gains are reported as an asset and
unrealized losses are reported as a liability on the Statement of Assets and
Liabilities. A realized gain or loss is recorded upon termination of swap
agreements and is equal to the difference between the Trust's basis in the swap
and the proceeds from (or cost of) the closing transaction. Swap agreements are
stated at fair value. Notional principal amounts are used to express the extent
of involvement in these transactions, but the amounts potentially subject to
credit risk are much smaller.
If there is a default by the counterparty to a swap contract, the Trust will be
limited to contractual remedies pursuant to the agreements related to the
transaction. There is no assurance that the swap contract counterparties will
be able to meet their obligations pursuant to the swap contracts or that, in
the event of default, the Trust will succeed in pursuing contractual remedies.
The Trust thus assumes the risk that it may be delayed in or prevented from
obtaining payments owed to it pursuant to the swap contracts.
The use of derivative instruments involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statements of assets and
liabilities.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from registration. In
some cases, the issuer of restricted securities has agreed to register such
securities for resale at the issuer's expense either upon demand by the Trust
or in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Board of Trustees. The Trust will not
incur any registration costs upon such resale.
DELAYED DELIVERY SECURITIES
The Trust may trade securities on other than normal settlement terms, including
securities purchased or sold on a "when-issued" basis. This may increase the
risk if the other party to the transaction fails to deliver and causes the
Trust to subsequently invest at less advantageous prices. The Trust identifies
cash or liquid portfolio securities as segregated with the custodian in an
amount equal to the delayed delivery commitment.
INCOME RECOGNITION
Interest income is recorded on the accrual basis. Premium and discount are
amortized and accreted, respectively, on all debt securities. Corporate actions
and dividend income are recorded on the ex-date.
FEDERAL INCOME TAX STATUS
The Trust intends to qualify each year as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, as amended, and will
distribute substantially all of its taxable income, if any, for its tax year,
and as such will not be subject to federal income taxes. In addition, the Trust
intends to distribute in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, such that
the Trust should not be subject to federal excise tax. Therefore, no federal
income or excise tax provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to common shareholders are recorded on the ex-date. Distributions
to Auction Preferred shareholders are recorded daily and payable at the end of
each dividend period. Each dividend payment period for the APS is generally
seven days. The applicable dividend rate for the APS on May 31, 2006, was 3.35%
for Series T and 3.41% for Series W. For the six months ended May 31, 2006, the
Trust declared dividends to Auction Preferred shareholders amounting to
$1,915,402 representing an average dividend rate of 3.23% per APS.
NOTE 3. FEDERAL TAX INFORMATION
The tax character of distributions paid during the year ended November 30, 2005
was as follows:
Distributions paid from:
Tax-Exempt Income $16,903,320
Ordinary Income --
Long-Term Capital Gains --
Unrealized appreciation and depreciation at May 31, 2006, based on cost of
investments for federal income tax purposes, was:
Unrealized appreciation $ 16,172,702
Unrealized depreciation (11,763,711)
------------
Net unrealized appreciation $ 4,408,991
------------
23
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
The following capital loss carryforwards may be available to reduce taxable
income arising from future net realized gains on investments, if any, to the
extent permitted by the Internal Revenue Code:
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
------------ --------------
2007 3,941,668
2008 14,340,573
2009 4,198,716
2010 12,980,738
2011 4,761,736
2012 4,055,363
-----------
$44,278,794
-----------
Capital loss carryforwards of $1,444,131 were utilized and $4,482,522 expired
during the year ended November 30, 2005 for the Trust.
Expired capital loss carryforwards are recorded as a reduction of paid-in
capital.
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
INVESTMENT ADVISORY FEE
Columbia Management Advisors, LLC ("Columbia"), an indirect, wholly-owned
subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to
the Trust and provides administrative and other services. Columbia receives a
monthly investment advisory fee at the annual rate of 0.75% of the Trust's
average weekly net assets, including assets applicable to the APS.
PRICING AND BOOKKEEPING FEES
Columbia is responsible for providing pricing and bookkeeping services to the
Trust under a pricing and bookkeeping agreement. Under a separate agreement
(the "Outsourcing Agreement"), Columbia has delegated those functions to State
Street Corporation ("State Street"). As a result, Columbia pays State Street
the total fees collected under the pricing and bookkeeping agreement.
Under its pricing and bookkeeping agreement with the Trust, Columbia receives
an annual fee of $38,000 paid monthly plus an additional monthly fee based on
the level of average daily net assets for the month; provided that during any
12-month period, the aggregate fee, exclusive of out-of-pocket expenses and
charges, shall not exceed $140,000.
The Trust also reimburses Columbia and State Street for out-of-pocket expenses
and charges, including fees payable to third parties for pricing the Trust's
portfolio securities and direct internal costs incurred by Columbia in
connection with providing fund accounting oversight and monitoring and certain
other services. For the six months ended May 31, 2006, the annualized effective
pricing and bookkeeping fee rate for the Trust, inclusive of out-of-pocket
expenses, was 0.047% of the Trust's average daily net assets.
CUSTODY CREDITS
The Trust has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. These credits are recorded as a reduction of
total expenses on the Statement of Operations. The Trust could have invested a
portion of the assets utilized in connection with the expense offset
arrangement in an income-producing asset if it had not entered into such an
agreement.
FEES PAID TO OFFICERS AND TRUSTEES
All officers of the Trust, with the exception of the Trust's Chief Compliance
Officer, are employees of Columbia or its affiliates and receive no
compensation from the Trust. The Board of Trustees has appointed a Chief
Compliance Officer to the Trust in accordance with federal securities
regulations. The Trust, along with other affiliated funds, pays its pro-rata
share of the expenses associated with the Chief Compliance Officer. The Trust's
expenses for the Chief Compliance Officer will not exceed $15,000 per year.
The Trust's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Trust's assets.
OTHER
Columbia provides certain services to the Trust related to Sarbanes-Oxley
compliance. For the six months ended May 31, 2006, the Trust paid $1,246 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the six months ended May 31, 2006, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $64,928,825 and
$35,590,131, respectively.
NOTE 6. PREFERRED SHARES
The Trust currently has outstanding 4,800 APS (2,400 shares each of Series T
and W). The APS are redeemable at the option of the Trust on any dividend
payment date at the redemption price of $25,000 per share, plus an amount equal
to any dividends accumulated on a daily basis unpaid through the redemption
date (whether or not such dividends have been declared).
24
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
Under the Act, the Trust is required to maintain asset coverage of at least
200% with respect to the APS as of the last business day of each month in which
any APS are outstanding. Additionally, the Trust is required to meet more
stringent asset coverage requirements under the terms of the APS Agreement and
in accordance with the guidelines prescribed by the APS' rating agencies.
Should these requirements not be met, or should dividends accrued on the APS
not be paid, the Trust may be restricted in its ability to declare dividends to
common shareholders or may be required to redeem certain APS. At May 31, 2006,
there were no such restrictions on the Trust.
NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
CONCENTRATION OF CREDIT RISK
The Trust holds investments that are insured by private insurers who guarantee
the payment of principal and interest in the event of default or that are
supported by a letter of credit. Each of the Trust's insurers is rated Aaa by
Moody's Investor Services Inc., except for Radian Asset Assurance, Inc., which
is rated Aa3. At May 31, 2006, private insurers who insured greater than 5% of
the total investments of the Trust were as follows:
% OF TOTAL
INSURER INVESTMENTS
---------------------------------
Ambac Assurance Corp. 7.1%
GEOGRAPHIC CONCENTRATION
The Trust has greater than 5% of its total investments at May 31, 2006 invested
in debt obligations issued by the states of California, Colorado, Florida,
Illinois and Pennsylvania and their respective political subdivisions, agencies
and public authorities. The Trust is more susceptible to economic and political
factors adversely affecting issuers of the specific state's municipal
securities than are municipal bond funds that are not concentrated to the same
extent in these issuers.
HIGH-YIELD SECURITIES
Investing in high-yield securities may involve greater credit risk and
considerations not typically associated with investing in U.S. government bonds
and other higher quality fixed income securities. These securities are
non-investment grade securities, often referred to as "junk" bonds. Economic
downturns may disrupt the high yield market and impair the ability of issuers
to repay principal and interest. Also, an increase in interest rates would
likely have an adverse impact on the value of such obligations. Moreover,
high-yield securities may be less liquid to the extent that there is no
established secondary market.
INDUSTRY FOCUS
The Trust may focus its investments in certain industries, subjecting it to
greater risk than a trust that is more diversified.
LEGAL PROCEEDINGS
On February 9, 2005, Columbia Management Advisors, Inc. (which has since merged
into Banc of America Capital Management, LLC (now named Columbia Management
Advisors, LLC)) ("Columbia") and Columbia Funds Distributor, Inc. (which has
been renamed Columbia Management Distributors, Inc.) (the "Distributor")
(collectively, the "Columbia Group") entered into an Assurance of
Discontinuance with the New York Attorney General ("NYAG") (the "NYAG
Settlement") and consented to the entry of a cease-and-desist order by the
Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and
the NYAG Settlement are referred to collectively as the "Settlements". The
Settlements contain substantially the same terms and conditions as outlined in
the agreements in principle which Columbia Group entered into with the SEC and
NYAG in March 2004.
Under the terms of the SEC Order, the Columbia Group agreed among other things,
to: pay
$70 million in disgorgement and $70 million in civil money penalties; cease and
desist from violations of the antifraud provisions and certain other provisions
of the federal securities laws; maintain certain compliance and ethics
oversight structures; retain an independent consultant to review the Columbia
Group's applicable supervisory, compliance, control and other policies and
procedures; and retain an independent distribution consultant (see below). The
Columbia Funds have also voluntarily undertaken to implement certain governance
measures designed to maintain the independence of their boards of trustees. The
NYAG Settlement also, among other things, requires Columbia and its affiliates
to reduce management fees for certain Columbia Funds (including the former
Nations Funds) and other mutual funds collectively by $32 million per year for
five years, for a projected total of $160 million in management fee reductions.
Pursuant to the procedures set forth in the SEC order, the $140 million in
settlement amounts described above will be distributed in accordance with a
distribution plan developed by an independent distribution consultant and
approved by the SEC. The independent distribution consultant has been in
consultation with the staff of the SEC and has submitted a proposed plan of
distribution. The SEC has not yet approved a final plan of distribution.
25
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
As a result of these matters or any adverse publicity or other developments
resulting from them, the market price of the shares could decline.
A copy of the SEC Order is available on the SEC website at http://www.sec.gov.
A copy of the NYAG Settlement is available as part of the Bank of America
Corporation Form 8-K filing on February 10, 2005.
In connection with the events described in detail above, various parties have
filed suit against certain funds, the Trustees of the Columbia Funds,
FleetBoston Financial Corporation and its affiliated entities and/or Bank of
America and its affiliated entities.
On February 20, 2004, the Judicial Panel on Multidistrict Litigation
transferred these cases and cases against several other mutual fund companies
based on similar allegations to the United States District Court in Maryland
for consolidated or coordinated pretrial proceedings (the ''MDL'').
Subsequently, additional related cases were transferred to the MDL. On
September 29, 2004, the plaintiffs in the MDL filed amended and consolidated
complaints. One of these amended complaints is a putative class action that
includes claims under the federal securities laws and state common law, and
that names Columbia, the Distributor, the Trustees of the Columbia Funds, Bank
of America Corporation and others as defendants. Another of the amended
complaints is a derivative action purportedly on behalf of the Columbia Funds
that asserts claims under federal securities laws and state common law.
On February 25, 2005, Columbia and other defendants filed motions to dismiss
the claims in the pending cases. On March 1, 2006, for reasons stated in the
court's memoranda dated November 3, 2005, the U.S. District Court for the
District of Maryland granted in part and denied in part the defendants' motions
to dismiss. The court dismissed all of the class action claims pending against
the Columbia Funds Trusts and the Columbia Acorn Trust. As to Columbia, and the
Distributor, the claims under the Securities Act of 1933, the claims under
Sections 34(b) and 36(a) of the Investment Company Act of 1940 ("ICA") and the
state law claims were dismissed. The claims under Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and claims under Section 36(b) of the ICA
along with related claims under Section 48(a) of the ICA were not dismissed.
On March 21, 2005, a purported class action was filed in Massachusetts state
court alleging that the conduct, including market timing, entitles Class B
shareholders in certain Columbia funds to an exemption from contingent deferred
sales charges upon early redemption ("the CDSC Lawsuit"). The CDSC Lawsuit has
been removed to federal court in Massachusetts and the federal Judicial Panel
has transferred the CDSC Lawsuit to the MDL.
The MDL is ongoing. Accordingly, an estimate of the financial impact of this
litigation on any fund, if any, cannot currently be made.
In 2004, certain Columbia funds, the Trustees of the Columbia Funds, advisers
and affiliated entities were named as defendants in certain purported
shareholder class and derivative actions making claims, including claims under
the Investment Company and the Investment Advisers Acts of 1940 and state law.
The suits allege, inter alia, that the fees and expenses paid by the funds are
excessive and that the advisers and their affiliates inappropriately used fund
assets to distribute the funds and for other improper purpose. On March 2,
2005, the actions were consolidated in the Massachusetts federal court as In re
Columbia Entities Litigation. The plaintiffs filed a consolidated amended
complaint on June 9, 2005. On November 30, 2005, the judge dismissed all claims
by plaintiffs and ordered that the case be closed. The plaintiffs filed a
notice of appeal on December 30, 2005 and this appeal is pending.
26
[GRAPHIC]
ASSET COVERAGE REQUIREMENTS
INVOLUNTARY
ASSET LIQUIDATING AVERAGE
TOTAL AMOUNT COVERAGE PREFERENCE MARKET VALUE
OUTSTANDING PER SHARE* PER SHARE PER SHARE
------------------------------------------------------------
05/31/06** $120,000,000 $67,382 $25,009 $25,000
11/30/05 120,000,000 67,014 25,009 25,000
11/30/04 120,000,000 66,479 25,008 25,000
11/30/03 120,000,000 67,605 25,003 25,000
11/30/02 120,000,000 67,243 25,002 25,000
11/30/01 120,000,000 69,864 25,004 25,000
11/30/00 120,000,000 69,786 25,009 25,000
11/30/99*** 120,000,000 73,466 25,021 25,000
*Calculated by subtracting the Trust's total liabilities from the Trust's total
assets and dividing the amount by the number of APS outstanding.
**Unaudited.
***On August 26, 1999, the Trust began offering Auction Preferred Shares.
See Accompanying Notes to Financial Statements.
27
[GRAPHIC]
SHAREHOLDER MEETING RESULTS
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On May 24, 2006, the Annual Meeting of Shareholders of the Trust was held to
consider re-election of Trustees. On March 10, 2006, the record date for the
Meeting, the Trust had 31,191,047 common shares outstanding and 4,800 preferred
shares. The votes cast were as follows:
ELECTION OF TRUSTEES:
The shareholders re-elected the following Trustees as follows:
FOR WITHHELD
----------------------------------------
Janet Langford Kelly 27,687,178 404,124
Anne-Lee Verville 27,697,445 393,857
The holders of preferred shareholders re-elected the following Trustees as
follows:
FOR WITHHELD
--------------------------------
Douglas A. Hacker 4,463 4
Thomas E. Stitzel 4,463 4
The terms of office of Thomas C. Theobald, John J. Neuhauser, Richard L.
Woolworth, William E. Mayer, Richard W. Lowry, Charles R. Nelson and Patrick J.
Simpson continued after the Meeting.
28
[GRAPHIC]
DIVIDEND REINVESTMENT PLAN
COLONIAL HIGH INCOME MUNICIPAL TRUST
Shareholders may elect to have all distributions of dividends and capital gains
automatically reinvested by Computershare (the "Plan Agent"), as agent under
the Trust's Dividend Reinvestment Plan (the "Plan"). Pursuant to the Plan, the
provisions of which are described below, shareholders not making such an
election will receive all such amounts in cash paid by check mailed directly to
the shareholder by the Plan Agent, as the dividend paying agent.
If the Trustees of the Trust declare a dividend or determine to make a capital
gain distribution payable either in shares of the Trust or in cash, as
shareholders may have elected, nonparticipants in the Plan will receive cash
and participants in the Plan will receive the equivalent in shares of the
Trust. If the market price of the shares on the payment date for the dividend
or distribution is equal to or exceeds their net asset value, participants will
be issued shares of the Trust at the higher of net asset value or 95% of the
market price. If the net asset value exceeds the market price of Trust shares
at such time, or if the Trust declares a dividend or other distribution payable
only in cash, the Plan Agent will, as agent for Plan participants, buy Trust
shares in the open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts. If, before the Plan Agent has completed its purchases,
the market price exceeds the net asset value of the Trust's shares, the average
per share purchase price paid by the Plan Agent may exceed the net asset value
of the Trust's shares, resulting in the acquisition of fewer shares than if the
dividend or distribution had been paid in shares issued by the Trust. In
circumstances in which the net asset value of Trust shares is more than 5%
below their market price, participants in the Plan will be issued shares
through the Plan at a price exceeding net asset value.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent. When a participant withdraws from the Plan or upon termination of
the Plan as provided below, certificates for whole shares credited to the
participant's account under the Plan will be issued and a cash payment will be
made for any fraction of a share credited to such account. A shareholder's
notice of election to participate in or withdraw from the Plan must be received
by the Plan Agent before the record date for a dividend in order to be given
effect with respect to that dividend.
In the case of shareholders such as banks, brokers or nominees holding shares
for others who are the beneficial owners of those shares, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time to
time by the shareholder of record as representing the total amount registered
in such shareholder's name and held for the account of beneficial owners who
are to participate in the Plan.
There is no charge to Plan participants for reinvesting dividends or
distributions. The Plan Agent's fees for the handling of the reinvestment of
dividends and distributions will be paid by the Trust. There will be no
brokerage charges with respect to shares issued directly by the Trust as a
result of dividends or distributions payable either in stock or in cash.
However, each participant will pay a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases in connection
with the reinvestment of dividends or distributions.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income tax that may be payable on such dividends or
distributions.
The Plan may be amended or terminated on 30 days written notice to Plan
participants. Contact the Plan Agent for more information regarding the Plan.
All correspondence concerning the Plan should be directed to Computershare by
mail at P.O. Box 43010, Providence, RI 02940-3010, or by phone at
1-800-730-6001.
29
[LOGO]
Transfer Agent
Important Information About This Report
The Transfer Agent for Colonial High Income Municipal Trust is:
Computershare
P.O. Box 43010
Providence, RI 02940-3010
The trust mails one shareholder report to each shareholder address.
Shareholders can order additional reports by calling 800-730-6001. In addition,
representatives at that number can provide shareholders information about the
trust.
Financial advisors who want additional information about the trust may speak to
a representative at 800-426-3750.
A description of the trust's proxy voting policies and procedures is available
(i) at www.columbiamanagement.com; (ii) on the Securities and Exchange
Commission's website at www.sec.gov, and (iii) without charge, upon request, by
calling 800-730-6001. Information regarding how the trust voted proxies
relating to portfolio securities during the 12-month period ended June 30 is
available from the SEC's website. Information regarding how the trust voted
proxies relating to portfolio securities is also available at
www.columbiamanagement.com.
The trust files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q.The trust's Form N-Q
is available on the SEC's website at www.sec.gov and may be reviewed and copied
at the SEC's Public Reference Room in Washington,DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Annual Certifications -- As required, on June 21, 2006, the trust submitted to
the New York Stock Exchange ("NYSE") the annual certification of the trust's
Chief Executive Officer certifying that he is not aware of any violation of the
NYSE's Corporate Governance listing standards. The trust also has included the
certifications of the trust's Chief Executive Officer and Chief Financial
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits
to the trust's Form N-CSR filed with the Securities and Exchange Commission for
the annual period.
This report has been prepared for shareholders of Colonial High Income
Municipal Trust.
[GRAPHIC]
COLONIAL HIGH INCOME MUNICIPAL TRUST
SEMIANNUAL REPORT
SHC-44/111527-0506 (07/06) 06/26646
Item 2. Code of Ethics.
Not applicable at this time.
Item 3. Audit Committee Financial Expert.
Not applicable at this time.
Item 4. Principal Accountant Fees and Services.
Not applicable at this time.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments
The registrant's "Schedule I - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form
N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Registrant Purchases of Equity Securities*
-----------------------------------------------------------------
(c)
Total Number of (d)
(a) (b) Shares Purchased as Maximum Number of
Total Number Average Part of Publicly Shares that May Yet
of Shares Price Paid Announced Plans Be Purchased Under
Period Purchased Per Share or Programs the Plans or Programs
------ ------------ ---------- ------------------- ---------------------
12/01/05 through 12/31/05... 0 $0.00 0 N/A
01/01/06 through 01/31/06... 0 $0.00 0 N/A
02/01/06 through 02/28/06... 0 $0.00 0 N/A
03/01/06 through 03/31/06... 0 $0.00 0 N/A
04/01/06 through 04/30/06... 0 $0.00 0 N/A
05/01/06 through 05/31/06... 0 $0.00 0 N/A
- ----- - ---
Total....................... 0 $0.00 0 N/A
- ----- - ---
--------
* Includes shares purchased by the Dividend Reinvestment Agent pursuant to
the Registrant's Dividend Reinvestment Plan.
Item 10. Submission of Matters to a Vote of Security Holders.
There have not been any material changes to the procedures by which
shareholders may recommend nominees to the registrant's board of directors,
since those procedures were last disclosed in response to the requirements of
Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial
officers, based on their evaluation of the registrant's disclosure
controls and procedures as of a date within 90 days of the filing of
this report, have concluded that such controls and procedures are
adequately designed to ensure that information required to be
disclosed by the registrant in Form N-CSR is accumulated and
communicated to the registrant's management, including the principal
executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not
applicable at this time.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Colonial High Income Municipal Trust
-------------------------------------------------
By (Signature and Title) /S/ Christopher L. Wilson
-------------------------------------
Christopher L. Wilson, President
Date July 27, 2006
---------------------------------------------------------
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 July 27, 2006
---------------------------------------------------------
By (Signature and Title) /S/ J. Kevin Connaughton
-------------------------------------
J. Kevin Connaughton, Treasurer
Date July 27, 2006
---------------------------------------------------------