[GRAPHIC]
COLONIAL HIGH INCOME MUNICIPAL TRUST
SEMIANNUAL REPORT
MAY 31, 2002
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The environment for the municipal bond market has been shaped by economic events
and investor uncertainties over the past six months. Although the Federal
Reserve halted its string of interest rate cuts in December 2001, its presence
on the sidelines was felt by the market as investors tried to guess the timing
of its next move. A robust first quarter suggested that the Fed could act early
in 2002 to begin to raise short-term interest rates; however, they remained at a
40-year low throughout the period. Indications of more moderate economic growth
in the second quarter raised the possibility that the Fed may delay action until
later in the year.
The municipal bond market was one of the strongest bond market sectors for the
six-month period. As cities and states face leaner times and tighter budgets,
the volume of new municipal bonds increased somewhat. However, demand also
increased as investors favored bonds over stocks, and that has helped support
municipal bond returns.
The following report will provide you with more detailed information about
the trust's performance and the strategies used by portfolio manager Maureen
G. Newman. For more information, contact your financial advisor. As always,
we thank you for investing in Colonial High Income Municipal Trust and for
giving us the opportunity to help you build a strong financial future.
Sincerely,
/s/ Keith T. Banks
Keith T. Banks
President
Colonial Management Associates, Inc.
Not FDIC Insured
May Lose Value
No Bank Gurantee
Economic and market conditions change frequently. There is no assurance that the
trends described in this report will continue or commence.
PORTFOLIO MANAGER'S REPORT
For the six-month period ended May 31, 2002, Colonial High Income Municipal
Trust generated a 2.55% total return, based on net asset value. The trust
outperformed its peer group, the Lipper High Yield Municipal Debt Funds Category
Average, which was 2.01%. The trust performed in line with the Lehman Brothers
Municipal Bond Index, which returned 2.56%. Good security selection and a focus
on yield benefited the trust. The trust's leverage, investing the proceeds from
the sale of preferred shares in long-term bonds and paying out a short rate,
boosted its income. As a result, the income available for distribution to common
shareholders was enhanced. The trust's relatively large allocation to
intermediate-term bonds, which outperformed shorter-term bonds, also aided
performance.
Early in the period, financial data began to indicate that the economy was
poised for recovery. While there was uncertainty about how strong the economic
rebound would be, interest rates rose. In this environment, we began reducing
the trust's commitment to defensive issues, such as health care, which tend to
perform well in a poor economy, and added cyclical securities which usually do
well when economic growth picks up. In the cyclical area we invested in Cessna
Citation Service Center, the aircraft division of Textron Manufacturing Company
(0.2% of net assets).(1) We also established a position in Seminole Tribe
Convention Center (0.2% of net assets), a Florida gaming company.
Looking ahead, we believe interest rates have the potential to stabilize or rise
as the economy slowly recovers. Therefore, we expect most of the trust's total
return to come from income.
/s/ Maureen G. Newman
MAUREEN G. NEWMAN
MAUREEN G. NEWMAN is the portfolio manager of Colonial High Income Municipal
Trust and a senior vice president of Colonial Management Associates, Inc., an
affiliate of Columbia Management Group. Ms. Newman received her BA in economics
from Boston College and her MBA from Babson College. She is a Chartered
Financial Analyst, a member of the Boston Security Analysts Society and former
chairman of the National Federation of Municipal Analysts.
(1) Holdings are disclosed as of May 31, 2002 and are subject to change.
Because the trust is actively managed, there can be no guarantee that the trust
will continue to maintain this quality breakdown or invest in these sectors in
the future. Past performance is no guarantee of future investment results. The
principal value and investment returns will fluctuate, resulting in a gain or
loss on sale.
Tax-exempt investing offers current tax-exempt income, but it also involves
certain risks. The value of the trust shares will be affected by interest rate
changes and the creditworthiness of issues held in the trust. Interest income
from certain tax-exempt bonds may be subject to the federal alternative minimum
tax for individuals and corporations.
[SIDENOTE]
PRICE PER SHARE AS OF 5/31/02 ($)
NAV 6.85
------------------------------------------
Market price 6.78
------------------------------------------
SIX-MONTH CUMULATIVE TOTAL
RETURNS, ASSUMING REINVESTMENT
OF ALL DISTRIBUTIONS FOR THE
PERIOD ENDED 5/31/02 (%)
NAV 2.55
------------------------------------------
Market price 10.25
------------------------------------------
DISTRIBUTIONS DECLARED
PER COMMON SHARE
12/1/01-5/31/02 ($) 0.25
------------------------------------------
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 10 INDUSTRY SECTORS AS OF 5/31/02 (%)
Local general obligations 11.7
------------------------------------------------------
Hospitals 11.1
------------------------------------------------------
Airports 7.8
------------------------------------------------------
Nursing homes 7.8
------------------------------------------------------
Multi-family 6.4
------------------------------------------------------
Refunded/escrowed 5.8
------------------------------------------------------
State general obligations 5.2
------------------------------------------------------
Investor owned 3.7
------------------------------------------------------
Assisted living/senior 3.6
------------------------------------------------------
Congregate care retirement 3.4
------------------------------------------------------
Sector breakdowns are calculated as a percentage of net assets representing both
common shares and auction preferred shares.
QUALITY BREAKDOWN AS OF 5/31/02 (%)
AAA 34.9
------------------------------------------------------
AA 4.8
------------------------------------------------------
A 9.7
------------------------------------------------------
BBB 12.6
------------------------------------------------------
BB 3.1
------------------------------------------------------
B 0.3
------------------------------------------------------
CCC 0.3
------------------------------------------------------
Non-Rated 33.1
------------------------------------------------------
Cash Equivalents 1.2
------------------------------------------------------
Quality breakdown is calculated as a percentage of total investments, including
short-term obligations. Ratings shown in the quality breakdown represent the
highest rating assigned to a particular bond by one of the following
nationally-recognized rating agencies: Standard & Poor's Corporation, Moody's
Investors Service, Inc. or Fitch Investors Service, Inc.
1
INVESTMENT PORTFOLIO
May 31, 2002 (Unaudited)
MUNICIPAL BONDS - 96.4 PAR VALUE
------------------------------------------------------------------------------------------------
EDUCATION - 2.4%
CA Loyola Marymount University,
(a) 10/01/19 $ 2,025,000 $ 806,821
CA Statewide Community
Development Authority,
Crossroads School for Arts &
Sciences, Series 1998,
6.000% 08/01/28 (b) 1,340,000 1,356,241
IL State Development Finance Authority,
Latin School of Chicago, Series 1998,
5.650% 08/01/28 230,000 218,663
IL University of Illinois, Series 2001 A,
5.500% 08/15/17 685,000 722,901
MA State Industrial Finance Agency:
Cambridge Friends School,
Series 1998,
5.800% 09/01/28 1,000,000 948,730
St. John's High School, Series 1998,
5.350% 06/01/28 300,000 275,004
MI Southfield Economic Development
Corp., Lawrence University, Series 1998 A,
5.400% 02/01/18 1,000,000 942,030
NC State Capital Facilities Finance
Authority, Meredith College, Series 2001,
5.125% 06/01/16 1,000,000 1,030,480
VT State Educational & Health Buildings
Finance Agency, Norwich University, Series 1998,
5.500% 07/01/21 1,500,000 1,425,165
WV State University, Series 2000 A,
(a) 04/01/19 1,000,000 406,480
---------------
8,132,515
---------------
HEALTH CARE - 23.7%
CONGREGATE CARE RETIREMENT - 3.4%
CA Statewide Community Development
Authority, Eskaton Village - Grass Valley,
Series 2000,
8.250% 11/15/31 (b) 1,000,000 1,060,000
IL State Health Facilities Authority,
Lutheran Senior Ministries, Series 2001 A,
7.375% 08/15/31 300,000 300,750
KS Manhattan, Meadowlark Hills
Retirement Home, Series 1999 A,
6.375% 05/15/20 650,000 645,937
KY State Economic Development
Finance Authority, Christian Church
Homes of Kentucky, Inc., Series 1998,
5.500% 11/15/30 320,000 285,152
MA Boston Industrial Development
Financing Authority, Springhouse, Inc.,
Series 1988,
5.875% 07/01/20 605,000 511,981
MA State Development Finance Agency:
Series 1999 A, 5.625% 07/01/15 400,000 368,456
Loomis Communities, Series 2002 A,
6.900% 03/01/32 100,000 99,250
MN Columbia Heights, Crest View Corp.,
Series 1998,
6.000% 03/01/33 740,000 643,800
NH State Higher Educational & Health
Facilities Authority, Rivermead at
Peterborough, Series 1998:
5.625% 07/01/18 500,000 445,625
5.750% 07/01/28 500,000 429,375
NJ Economic Development Authority,
Seabrook Village, Inc., Series 2000 A,
8.250% 11/15/30 625,000 667,188
PA Lancaster Industrial Development
Authority, Garden Spot Village,
Series 2000 A,
7.625% 05/01/31 500,000 515,625
PA Philadelphia Authority for Industrial
Development, Baptist Home of
Philadelphia, Series 1998 A:
5.500% 11/15/18 360,000 306,000
5.600% 11/15/28 500,000 408,750
TN Metropolitan Government, Nashville &
Davidson Counties, Blakeford at Green
Hills, Series 1998,
5.650% 07/01/24 600,000 516,000
TX Abilene Health Facilities Development
Corp., Sears Methodist Retirement
Obligation Group:
Series 1998 A,
5.900% 11/15/25 1,000,000 833,750
Series 1999,
6.000% 11/15/29 500,000 425,000
WI State Health & Educational Facilities
Authority: Attic Angel Obligated Group,
5.750% 11/15/27 1,000,000 808,750
Clement Manor, Series 1998,
5.750% 08/15/24 1,300,000 1,101,750
United Lutheran Program for Aging, Inc.,
5.700% 03/01/28 1,000,000 840,000
---------------
11,213,139
---------------
See notes to investment portfolio.
2
MUNICIPAL BONDS (CONTINUED) PAR VALUE
------------------------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
HEALTH SERVICES - 0.4%
IL State Health Facilities Authority,
Midwest Physician Group, Ltd.,
Series 1998, 5.500% 11/15/19 $ 120,000 $ 98,155
MA State Development Finance Agency,
Boston Biomedical Research Institute,
Series 1999:
5.650% 02/01/19 200,000 187,468
5.750% 02/01/29 450,000 413,577
MA State Health & Educational
Facilities Authority, Civic
Investments, Inc., Series 1999 A,
9.000% 12/15/15 750,000 757,500
---------------
1,456,700
---------------
HOSPITALS - 11.1%
AR Conway Health Facilities Board,
Conway Regional Medical Center:
Series 1999 A,
6.400% 08/01/29 425,000 438,744
Series 1999 B,
6.400% 08/01/29 1,000,000 1,030,910
AZ Maricopa County Industrial
Development Authority, National
Health Facilities, Series 1998 A,
5.100% 01/01/33 4,500,000 4,431,240
CA State Health Facilities Financing
Authority, Cedars-Sinai Medical Center,
Series 1999 A,
6.125% 12/01/30 750,000 785,115
CO State Health Facilities Authority:
National Jewish Medical & Research
Center, Series 1998,
5.375% 01/01/23 330,000 306,890
Parkview Medical Center, Inc.,
Series 2001,
6.600% 09/01/25 300,000 324,750
FL Orange County Health Facilities
Authority, Orlando Regional
Healthcare, Series 2002,
5.750% 12/01/32 (c) 200,000 199,144
FL Tampa, H. Lee Moffitt Cancer Center,
Series 1999 A,
5.750% 07/01/29 2,000,000 1,997,160
FL West Orange Healthcare District,
Series 2001 A,
5.650% 02/01/22 525,000 524,333
GA Forsyth County Hospital Authority,
Georgia Baptist Healthcare System,
Series 1998,
6.000% 10/01/08 1,000,000 1,002,500
IL Health Facilities Authority,
Thorek Hospital & Medical Center,
5.250% 08/15/18 600,000 532,578
IL Southwestern Illinois Development
Authority, Anderson Hospital,
Series 1999,
5.500% 08/15/20 225,000 210,119
IL State Health Facilities Authority,
Swedish American Hospital,
Series 2000,
6.875% 11/15/30 500,000 532,985
LA State Public Facilities Authority,
Touro Infirmary, Series 1999,
5.625% 08/15/29 600,000 588,072
MI Dickinson County Healthcare System,
Series 1999,
5.700% 11/01/18 750,000 704,325
MI Flint Hospital Building Authority,
Hurley Medical Center, Series 1998 A,
5.375% 07/01/20 450,000 392,179
MI State Hospital Finance Authority,
Detroit Medical Center, Series 1998 A,
5.250% 08/15/28 650,000 514,209
MN St. Paul Housing & Redevelopment
Authority, Healtheast Project,
Series 1997 A,
5.700% 11/01/15 1,000,000 782,500
MN Washington County Housing &
Redevelopment Authority,
Healtheast, Inc., Series 1998,
5.250% 11/15/12 1,500,000 1,181,250
MS State Business Finance Corp., Rush
Medical Foundation, Inc., Series 1998,
5.625% 07/01/23 910,000 768,686
NC Medical Care Commission:
Gaston Health Care, Series 1998,
5.000% 02/15/29 3,000,000 2,806,980
Stanley Memorial Hospital, Series 1999,
6.375% 10/01/29 1,915,000 2,018,831
NH State Higher Educational & Health
Facilities Authority, Littleton Hospital
Association, Inc., Series 1998 A:
5.900% 05/01/28 780,000 597,675
6.000% 05/01/28 625,000 485,938
NY City Industrial Development Agency,
Staten Island University Hospital,
Series 2001 B,
6.380% 07/01/31 500,000 496,170
See notes to investment portfolio.
3
MUNICIPAL BONDS (CONTINUED) PAR VALUE
------------------------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
HOSPITALS (CONTINUED)
OH Belmont County, East Ohio Regional
Hospital, Series 1998,
5.700% 01/01/13 $ 1,875,000 $ 1,668,750
OH Highland County Joint Township
Hospital District, Series 1999,
6.750% 12/01/29 980,000 900,375
OH Miami County, Upper Valley Medical
Center, Inc., Series 1996 A,
6.375% 05/15/26 1,000,000 1,003,640
OH Sandusky County, Memorial Hospital,
Series 1998,
5.150% 01/01/10 250,000 244,168
PA Allegheny County Hospital
Development, Ohio Valley General
Hospital, Series 1998 A,
5.450% 01/01/28 1,000,000 884,090
PA Pottsville Hospital Authority, Pottsville
Hospital & Warne Clinic, Series 1998,
5.500% 07/01/18 1,000,000 867,810
TX Lufkin Health Facilities Development
Corp., Memorial Health Systems of
East Texas, Series 1998,
5.700% 02/15/28 1,120,000 873,746
TX Richardson Hospital Authority, Baylor
Richardson Medical Center, Series 1998,
5.625% 12/01/28 1,200,000 1,145,244
TX Tyler Health Facilities Development
Corp., Mother Frances Hospital,
Series 2001,
6.000% 07/01/31 1,000,000 981,730
UT Weber County, IHC Health Services,
Inc., Series 1999,
5.000% 08/15/30 1,500,000 1,419,705
VT State Educational & Health
Buildings Authority, Brattleboro
Memorial Hospital,
5.375% 03/01/28 1,075,000 955,245
WA State Health Care Facilities Authority,
Kadlec Medical Center, Series 2001,
5.875% 12/01/21 600,000 612,258
WI State Health & Educational Facilities
Authority, Wheaton Franciscan Services,
Series 2002,
5.750% 08/15/30 600,000 599,106
WV Hospital Finance Authority, Charleston
Medical Center, Series 2000 A,
6.750% 09/01/30 1,000,000 1,067,890
---------------
36,877,040
---------------
INTERMEDIATE CARE FACILITIES - 1.0%
IL State Development Finance Authority,
Hoosier Care, Inc., Series 1999 A,
7.125% 06/01/34 $ 1,215,000 $ 1,063,125
IN State Health Facilities Financing
Authority, Hoosier Care, Inc.,
Series 1999 A,
7.125% 06/01/34 150,000 131,250
PA State Economic Development
Financing Authority, Northwestern
Human Services, Inc., Series 1998 A,
5.250% 06/01/14 2,510,000 2,088,646
---------------
3,283,021
---------------
NURSING HOMES - 7.8%
AK Juneau, St. Ann's Care Center,
Series 1999,
6.875% 12/01/25 1,250,000 1,248,437
CO Healthcare Facilities Authority:
American Housing Foundation, Inc.,
Series 1990 A,
10.250% 12/01/20 (d) 1,300,000 481,000
Pioneer Healthcare, Series 1989,
10.500% 05/01/19 1,885,000 1,859,081
CO State Health Facilities Authority,
Volunteers of America Care
Facilities, Inc.:
Series 1998 A:
5.450% 07/01/08 300,000 284,625
5.750% 07/01/20 865,000 734,169
Series 1999 A,
6.000% 07/01/29 350,000 294,437
IA State Finance Authority, Care Initiatives
Project:
Series 1996,
9.250% 07/01/25 1,000,000 1,196,250
Series 1998 B:
5.750% 07/01/18 550,000 495,000
5.750% 07/01/28 1,475,000 1,266,656
IN Gary Industrial Economic Development,
West Side Health Care Center,
Series 1987 A,
11.500% 10/01/17 1,365,000 1,377,258
IN Michigan City Health Facilities,
Metropolitan Health Foundation, Inc.
Project,
10.000% 11/01/22 (d) 3,085,000 1,048,900
IN State Health Facilities Financing
Authority, Metro Health Indiana, Inc.,
Series 1998,
6.400% 12/01/33 (d) 1,210,000 484,000
See notes to investment portfolio.
4
MUNICIPAL BONDS (CONTINUED) PAR VALUE
------------------------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
NURSING HOMES (CONTINUED)
MA State Development Finance Agency,
Alliance Health Care Facilities, Series 1999,
7.100% 07/01/32 $ 1,300,000 $ 1,280,500
MA State Industrial Finance Agency,
Woodlawn Nursing Home:
7.750% 01/01/28 1,598,135 1,410,458
10.250% 07/01/27 336,372 319,553
MN Carlton, Inter-Faith Social Services, Inc.,
Series 2000,
7.750% 04/01/29 750,000 771,562
MN New Hope, North Ridge Care Center,
Inc., Series 1999,
5.875% 03/01/29 600,000 542,250
MN Sartell, Foundation for Healthcare,
Series 1999 A,
6.625% 09/01/29 1,145,000 1,040,519
NJ State Economic Development Authority,
Geriatric & Medical Service, Inc.,
Series 1990 B,
10.500% 05/01/20 2,000,000 2,025,000
PA Chester County Industrial Development
Authority, RHA Nursing Home,
8.500% 05/01/32 1,615,000 1,603,404
PA Washington County Industrial
Development Authority, Central States,
Series 1989,
10.250% 11/01/19 1,750,000 875,000
TN Metropolitan Government, Nashville &
Davidson Counties Health & Education
Facilities, Central States, Series 1989,
10.250% 11/01/19 1,650,000 825,000
TX Kirbyville Health Facilities Development
Corp., Heartway III Project:
Series 1997 A,
10.000% 03/20/18 680,833 633,175
Series 1997 B,
6.000% 03/20/04 (d) 106,000 5,300
TX Whitehouse Health Facilities
Development Corp., Oak Brook
Healthcare Center, Series 1989,
10.000% 12/01/19 1,655,000 1,678,567
WA Kitsap County Housing Authority,
Martha & Mary Nursing Home,
7.100% 02/20/36 1,000,000 1,136,150
WI State Health & Educational Facilities
Authority, Metro Health
Foundation, Inc., Series 1993,
10.000% 11/01/22 (d) 2,775,000 943,500
---------------
25,859,751
---------------
HOUSING - 10.7%
ASSISTED LIVING/SENIOR - 3.6%
CA Association of Bay Area Governments
Finance Authority for Nonprofit
Corps., Eskaton Gold River Lodge,
Series 1998:
6.375% 11/15/15 $ 750,000 $ 693,750
6.375% 11/15/28 550,000 478,500
DE Kent County, Heritage at Dover,
Series 1999,
7.625% 01/01/30 1,730,000 1,537,537
GA Columbus Housing Authority,
The Gardens at Calvary, Series 1999,
7.000% 11/15/19 500,000 442,500
IL Clarendon Hills Residential Facilities,
Churchill Estate, Series 1998 A:
6.750% 03/01/24 (d) 1,050,000 787,500
6.750% 03/01/31 (d) 1,370,000 1,027,500
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 06/01/25 1,265,000 1,276,069
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 (d) 1,740,000 1,211,475
NC State Medical Care Commission,
DePaul Community Facilities Project,
Series 1999,
7.625% 11/01/29 1,500,000 1,507,500
NY Huntington Housing Authority,
Gurwin Jewish Senior Center,
Series 1999:
5.875% 05/01/19 700,000 623,000
6.000% 05/01/29 775,000 678,125
TX Bell County Health Facilities
Development Corp., Care Institute, Inc.,
9.000% 11/01/24 1,760,000 1,830,400
---------------
12,093,856
---------------
MULTI-FAMILY - 6.4%
DE Wilmington, Electra Arms Senior
Association Project,
6.250% 06/01/28 955,000 777,131
FL Broward County Housing Finance
Authority, Chaves Lake Apartment
Project, Series 2000,
7.500% 07/01/40 750,000 762,187
FL Clay County Housing Finance Authority,
Madison Commons Apartments,
Series 2000 A,
7.450% 07/01/40 750,000 762,188
GA Clayton County Housing Authority,
Magnolia Park Apartments,
Series 1999 A,
6.250% 06/01/30 955,000 870,292
See notes to investment portfolio.
5
MUNICIPAL BONDS (CONTINUED) PAR VALUE
------------------------------------------------------------------------------------------------
HOUSING (CONTINUED)
MULTI-FAMILY (CONTINUED)
MN Lakeville, Southfork Apartments Project:
Series 1989 A,
9.875% 02/01/20 $ 2,570,000 $ 2,576,374
Series 1989 B,
(a) 02/01/20 913,000 1,187,021
MN Robbinsdale Economic Development
Authority, Broadway Court,
Series 1999 A,
6.875% 01/01/26 500,000 464,375
MN Washington County Housing &
Redevelopment Authority, Cottages of
Aspen, Series 1992,
9.250% 06/01/22 1,020,000 1,055,700
MN White Bear Lake, Birch Lake
Townhome Project:
Series 1989 A,
10.250% 07/15/19 2,200,000 2,255,000
Series 1989 B,
(a) 07/15/19 (e) 711,000 309,430
NC Eastern Carolina Regional Housing
Authority, New River Apartments -
Jacksonville, Series 1994,
8.250% 09/01/14 1,620,000 1,632,150
NY Nyack Housing Assistance Corp.,
Nyack Plaza Apartments,
7.375% 06/01/21 318,704 319,456
Resolution Trust Corp., Pass-Through
Certificates, Series 1993 A,
8.750% 12/01/16 (f) 1,401,372 1,408,267
TN Franklin Industrial Board, Landings
Apartment Project, Series 1996 B,
8.750% 04/01/27 885,000 929,250
TX El Paso County Housing Finance Corp.,
American Village Communities:
Series 2000 C,
8.000% 12/01/32 395,000 395,494
Series 2000 D,
10.000% 12/01/32 425,000 425,531
TX Galveston Housing Finance Corp.,
Driftwood Apartments,
8.000% 08/01/23 1,000,000 1,032,500
TX State Affordable Housing Corp.,
NHT/GTEX Project, Series 2001 C,
10.000% 10/01/31 880,000 872,344
TX State Department of Housing &
Community Affairs, Pebble Brooks
Apartments, Series 1998,
5.500% 12/01/18 1,000,000 1,012,180
VA Alexandria Redevelopment &
Housing Authority, Courthouse
Commons Apartments, Series 1990 A,
10.000% 01/01/21 $ 1,500,000 $ 1,316,250
WA Vancouver Housing Authority,
Series 1998 I,
5.500% 03/01/28 1,000,000 966,520
---------------
21,329,640
---------------
SINGLE FAMILY - 0.7%
TX Bexar County Housing Finance Corp.,
GNMA Collateralized Mortgage,
Series 1989 A,
8.200% 04/01/22 1,335,000 1,337,083
WA State Housing Finance Commission,
Series 1992 D-1,
6.150% 01/01/26 855,000 911,439
---------------
2,248,522
---------------
INDUSTRIAL - 3.7%
FOOD PRODUCTS - 1.4%
GA Cartersville Development Authority,
Waste & Wastewater Facilities,
Anheuser Busch Cos., Inc. Project,
Series 1989 A,
5.950% 02/01/32 1,000,000 1,011,700
IN Hammond, American Maize
Products Co., Series 1994,
8.000% 12/01/24 1,760,000 1,828,658
LA Southern Louisiana Port Commission,
Cargill, Inc., Series 1997,
5.850% 04/01/17 1,000,000 1,046,020
MI State Strategic Fund, Michigan
Sugar Co., Sebewaing Project,
Series 1998 A,
6.250% 11/01/15 1,250,000 875,000
---------------
4,761,378
---------------
FOREST PRODUCTS - 0.7%
GA Effingham County Industrial
Development Authority,
Georgia-Pacific Corp., Series 2001,
6.500% 06/01/31 500,000 462,185
GA Rockdale County Development
Authority, Solid Waste Disposal,
Visy Paper, Inc., Series 1993,
7.500% 01/01/26 1,800,000 1,822,500
---------------
2,284,685
---------------
See notes to investment portfolio.
6
MUNICIPAL BONDS (CONTINUED) PAR VALUE
------------------------------------------------------------------------------------------------
INDUSTRIAL (CONTINUED)
MANUFACTURING - 1.0%
IL Will-Kankakee Regional Development
Authority, Flanders Corp./Precisionaire
Project, Series 1997,
6.500% 12/15/17 $ 890,000 $ 833,263
KS Wichita Airport Authority,
Cessna Citation Service Center,
Series 2002 A,
6.250% 06/15/32 675,000 677,916
MN Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 09/01/16 705,000 760,519
TX Trinity River Authority, Texas
Instruments Project, Series 1996,
6.200% 03/01/20 1,000,000 1,037,840
---------------
3,309,538
---------------
METALS & MINING - 0.4%
MD Baltimore County, Bethlehem Steel
Corp. Project, Series 1994 B,
7.500% 06/01/15 (d) 500,000 35,000
NV State Department of Business &
Industry, Wheeling-Pittsburgh Steel Corp.,
Series 1999 A,
8.000% 09/01/14 (d)(e) 1,000,000 700,000
VA Greensville County Industrial
Development Authority, Wheeling-
Pittsburgh Steel Corp., Series 1999 A:
6.375% 04/01/04 (d)(e) 95,000 66,500
7.000% 04/01/14 (d)(e) 500,000 350,000
---------------
1,151,500
---------------
OIL & GAS - 0.2%
CA Los Angeles Regional Airport,
LAXFuel Corp., Series 2001,
5.250% 01/01/23 750,000 726,135
---------------
OTHER - 6.5%
OTHER - 0.5%
CA Tobacco Securitization Authority,
Asset Backed, Series 2002 B,
6.000% 06/01/43 1,100,000 1,056,396
MD Baltimore, Park Charles Project,
Series 1986,
8.000% 01/01/15 660,935 668,741
---------------
1,725,137
---------------
POOL/BOND BANK - 0.2%
MI State Municipal Bond Authority,
Local Government Loan Project,
Series 2001 A,
5.375% 11/01/17 750,000 786,967
---------------
REFUNDED/ESCROWED (g) - 5.8%
CA Colton Public Financing Authority,
Series 1995,
7.500% 10/01/20 $ 1,880,000 $ 2,018,650
CA San Joaquin Hills Transportation
Corridor Agency, Series 1993,
7.000% 01/01/30 775,000 815,254
CO Denver City and County Airport:
Series B,
7.250% 11/15/23 580,000 605,445
Series C,
6.125% 11/15/25 2,280,000 2,498,310
CT State Development Authority,
Sewer Sludge Disposal Facilities,
Series 1996,
8.250% 12/01/06 715,000 807,056
FL Clearwater Housing Authority,
Hampton Apartments, Series 1994,
8.250% 05/01/24 2,390,000 2,706,675
ID State Health Facilities Authority,
IHC Hospitals, Inc.,
6.650% 02/15/21 1,750,000 2,093,280
MA State Health & Educational Facilities,
Authority Corporation for Independent
Living,
8.100% 07/01/18 680,000 739,616
MN Mille Lacs Capital Improvement
Authority, Mille Lacs Band of Chippewa,
Series 1992 A,
9.250% 11/01/12 870,000 920,947
NC Lincoln County, Lincoln County
Hospital,
9.000% 05/01/07 295,000 342,938
PA Delaware County Authority,
Southeastern Pennsylvania Obligated
Group, Series 1996:
6.000% 12/15/16 1,400,000 1,576,554
6.000% 12/15/26 1,000,000 1,099,840
PA Montgomery County Industrial
Development Authority, Assisted Living
Facility, Series 1993 A,
8.250% 05/01/23 800,000 860,720
TN Shelby County, Health, Education &
Housing Facilities Board, Open Arms
Development Center:
Series 1992 A,
9.750% 08/01/19 870,000 1,109,250
Series 1992 C,
9.750% 08/01/19 850,000 1,083,750
---------------
19,278,285
---------------
See notes to investment portfolio.
7
MUNICIPAL BONDS (CONTINUED) PAR VALUE
------------------------------------------------------------------------------------------------
OTHER REVENUE - 1.8%
HOTELS - 0.3%
PA Philadelphia Authority for
Industrial Development, Doubletree Project A,
6.500% 10/01/27 $ 1,000,000 $ 993,750
---------------
RECREATION - 0.9%
CT Gaming Authority, Mohegan Tribe,
Series 2001,
6.250% 01/01/31 275,000 279,337
FL Capital Trust Agency, Seminole
Tribe Convention Center, Series 2002 A,
10.000% 10/01/33 750,000 748,125
NM Red River Sports Facility,
Red River Ski Area Project, Series 1998,
6.450% 06/01/07 945,000 939,094
NY New York City Cultural Trust,
Museum of Modern Art, Series 2001 D,
5.125% 07/01/31 1,000,000 982,880
---------------
2,949,436
---------------
RETAIL - 0.6%
NJ State Economic Development Authority,
Glimcher Properties L.P. Project,
6.000% 11/01/28 1,250,000 1,220,312
OH Lake County, North Madison
Properties, Series 1993,
8.819% 09/01/11 750,000 714,375
---------------
1,934,687
---------------
RESOURCE RECOVERY - 1.2%
DISPOSAL - 0.4%
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 755,000 795,581
UT Carbon County, Laidlaw Environmental,
Series 1997 A,
7.450% 07/01/17 500,000 515,000
---------------
1,310,581
---------------
RESOURCE RECOVERY - 0.8%
MA State Development Finance Agency,
Ogden Haverhill Project, Series 1999 A,
6.700% 12/01/14 250,000 228,290
MA State Industrial Finance Agency,
Ogden Haverhill Project, Series 1998 A,
5.500% 12/01/13 500,000 410,415
PA Delaware County Industrial Development
Authority, BFI Project, Series 1997 A,
6.200% 07/01/19 2,000,000 2,025,000
---------------
2,663,705
---------------
TAX-BACKED - 22.7%
LOCAL GENERAL OBLIGATIONS - 11.7%
CA Los Angeles Unified
School District:
Series 1997 E,
5.125% 01/01/27 $ 4,000,000 $ 3,985,960
Series 2002,
5.750% 07/01/16 700,000 793,653
CA Montebello Unified School District,
Series 2001:
(a) 08/01/21 1,435,000 506,297
(a) 08/01/23 1,505,000 468,507
CA San Juan Unified School District,
Series 2001,
(a) 08/01/19 2,210,000 892,840
IL Chicago Board of Education,
Series 1997 A,
5.250% 12/01/30 (h) 14,470,000 14,259,606
IL Cook County, Series 1997 A,
5.625% 11/15/22 4,200,000 4,347,840
NY New York City:
Series 1997 A,
7.000% 08/01/07 1,000,000 1,150,470
Series 1997 H,
6.000% 08/01/17 1,400,000 1,476,398
TX Irving Independent School District,
Series 1997,
(a) 02/15/18 1,000,000 435,060
TX San Antonio Independent School
District, Series 1997,
5.000% 08/15/27 9,000,000 8,618,940
WA Clark County School District No. 037,
Vancouver, Series 2001 C,
(a) 12/01/18 5,000,000 2,068,950
---------------
39,004,521
---------------
SPECIAL NON-PROPERTY TAX - 2.2%
CA San Diego Redevelopment Agency,
(a) 09/01/22 1,910,000 621,724
IL Metropolitan Pier & Exposition
Authority, McCormick Place Expansion
Project, Series 1993 A,
(a) 06/15/16 10,000,000 4,837,600
OH Hamilton County,
Series 2000 B,
(a) 12/01/21 5,000,000 1,792,650
---------------
7,251,974
---------------
See notes to investment portfolio.
8
MUNICIPAL BONDS (CONTINUED) PAR VALUE
------------------------------------------------------------------------------------------------
TAX-BACKED (CONTINUED)
SPECIAL PROPERTY TAX - 2.7%
CA Carson, Series 1992,
7.375% 09/02/22 $ 50,000 $ 51,628
CA Huntington Beach Community Facilities
District, Grand Coast Resort,
Series 2001-1,
6.450% 09/01/31 750,000 756,563
CA Orange County Community Facilities
District, Ladera Ranch, Series 1999 A,
6.700% 08/15/29 500,000 525,625
CA Placer Unified High School District,
Series 2000 A,
(a) 08/01/19 1,700,000 687,939
CA Riverside County Public Financing
Authority, Redevelopment Projects,
Series 1997 A,
5.500% 10/01/22 650,000 640,562
FL Heritage Palms Community
Development District:
Series 1999,
6.250% 11/01/04 1,015,000 1,027,687
Series 1999 B,
6.250% 05/01/05 365,000 370,475
FL Lexington Oaks Community
Development District:
Series 1998 A,
6.125% 05/01/19 370,000 370,462
Series 1998 B,
5.500% 05/01/05 145,000 145,544
Series 2000 A,
7.200% 05/01/30 295,000 307,169
Series 2000 D,
6.700% 05/01/07 120,000 123,900
Series 2002 A,
6.700% 05/01/33 250,000 251,562
FL Northern Palm Beach County
Improvement District, Series 1999,
6.000% 08/01/29 750,000 753,750
FL Orlando, Conroy Road Interchange
Project, Series 1998 A:
5.500% 05/01/10 180,000 179,100
5.800% 05/01/26 300,000 288,000
FL Stoneybrook Community
Development District:
Series 1998 A,
6.100% 05/01/19 325,000 325,406
Series 1998 B,
5.700% 05/01/08 445,000 446,113
MI Pontiac Finance Authority,
Development Area No. 3,
Series 2002,
6.375% 06/01/31 550,000 537,625
MI Taylor Tax Increment Finance Authority,
Series 2001,
5.375% 05/01/17 $ 1,220,000 $ 1,273,046
---------------
9,062,156
---------------
STATE APPROPRIATED - 0.9%
NY State Urban Development Corp.,
University Facilities Grants, Series 1995,
5.875% 01/01/21 1,000,000 1,105,050
PR Commonwealth of Puerto Rico Public
Finance Corp., Series 2002 E,
6.000% 08/01/26 1,800,000 2,000,250
---------------
3,105,300
---------------
STATE GENERAL OBLIGATIONS - 5.2%
DC District of Columbia,
Series 1999 A,
5.375% 06/01/18 2,395,000 2,526,423
TX Board of Regents, University of
Texas, Series 2001 B,
5.380% 08/15/18 650,000 675,539
TX State, Series 1999 ABC,
5.500% 08/01/35 4,200,000 4,264,722
WA State, Series 1999 B,
5.000% 01/01/24 10,000,000 9,716,700
---------------
17,183,384
---------------
TRANSPORTATION - 11.5%
AIR TRANSPORTATION - 1.7%
CO Denver City & County Airport, United
Airlines, Inc., Series 1992 A,
6.875% 10/01/32 1,645,000 1,069,250
KY Kenton County Airport Board,
Delta Airlines, Inc., Series 1992 A,
7.500% 02/01/20 500,000 497,410
MN Minneapolis & St. Paul Metropolitan
Airport Commission, Northwest Airlines,
Inc.:
Series 2001 A,
7.000% 04/01/25 500,000 448,750
Series 2001 B,
6.500% 04/01/25 250,000 245,625
NC Charlotte, US Airways, Inc.:
Series 1998,
5.600% 07/01/27 250,000 126,562
Series 2000,
7.750% 02/01/28 750,000 409,687
TX Alliance Airport Authority:
American Airlines Project,
7.500% 12/01/29 1,600,000 1,482,480
FedEx Corp., Series 1996,
6.375% 04/01/21 1,000,000 1,025,780
See notes to investment portfolio.
9
MUNICIPAL BONDS (CONTINUED) PAR VALUE
------------------------------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
AIR TRANSPORTATION (CONTINUED)
WA Seattle, Northwest Airlines, Inc.,
Series 2000,
7.250% 04/01/30 $ 500,000 $ 459,375
---------------
5,764,919
---------------
AIRPORTS - 7.8%
CO Denver City & County Airport:
Series 1992 B,
7.250% 11/15/23 2,275,000 2,358,447
Series 1992 C,
6.125% 11/15/25 2,840,000 2,953,770
Series 1997 E,
5.250% 11/15/23 4,590,000 4,595,462
Series 1998 B,
5.000% 11/15/25 2,440,000 2,351,818
MA State Port Authority,
Series 1998 D,
5.000% 07/01/28 5,850,000 5,617,579
MO St. Louis Airport,
5.000% 07/01/26 3,200,000 3,112,512
OH Cleveland, Series 2001 A,
5.000% 01/01/31 5,150,000 4,960,274
---------------
25,949,862
---------------
TOLL FACILITIES - 1.6%
CO Northwest Parkway Public Highway
Authority, Series 2001 D,
7.130% 06/15/41 1,000,000 1,020,000
CO State Public Highway Authority,
E-470, Series 2000 B:
(a) 09/01/18 3,000,000 1,274,100
(a) 09/01/35 8,750,000 748,650
VA Richmond Metropolitan Authority,
Series 1998,
5.250% 07/15/22 2,000,000 2,075,780
---------------
5,118,530
---------------
TRANSPORTATION - 0.4%
NV State Department of Business &
Industry, Las Vegas Monorail Project,
Series 2000,
7.375% 01/01/40 1,000,000 972,500
NY Metropolitan Transportation Authority,
Series 2002 A,
5.000% 11/15/30 350,000 335,643
---------------
1,308,143
---------------
UTILITY - 12.2%
INDEPENDENT POWER PRODUCER - 2.8%
MI Midland County Economic Development Corp.,
Series 2000,
6.875% 07/23/09 1,000,000 1,038,750
NY Port Authority of New York &
New Jersey, KIAC Partners,
Series 1996 IV,
6.750% 10/01/11 $ 2,000,000 $ 2,107,500
PA State Economic Development Finance
Authority:
Colver Project, Series 1994 D,
7.125% 12/01/15 3,000,000 3,136,500
Northampton Generating, Series 1994 A,
6.500% 01/01/13 1,000,000 1,011,830
PR Commonwealth of Puerto Rico
Industrial, Educational, Medical &
Environmental Cogeneration Facilities,
AES Project, Series 2000,
6.625% 06/01/26 650,000 673,368
VA Pittsylvania County Industrial
Development Authority, Multi-trade
of Pittsylvania, Series 1994 A:
7.450% 01/01/09 1,000,000 1,018,750
7.550% 01/01/09 500,000 506,875
---------------
9,493,573
---------------
INVESTOR OWNED - 3.7%
AZ Pima County Industrial Development
Authority, Tucson Electric Power Co.,
Series 1997 A,
6.100% 09/01/25 750,000 706,875
CT State Development Authority, Co.,
Connecticut Light & Power Co.,,
Series 1993 B,
5.950% 09/01/28 400,000 405,976
IL Bryant, Central Illinois Light Co.,
Series 1993,
5.900% 08/01/23 2,650,000 2,590,296
LA Calcasieu Parish Industrial
Development Board, Entergy Gulf
States, Inc., Series 1999,
5.450% 07/01/10 500,000 491,875
LA West Feliciana Parish, Entergy Gulf
States, Inc., Series 1999 B,
6.600% 09/01/28 500,000 503,750
MS State Business Finance Corp., Systems
Energy Resources Project, Series 1998,
5.875% 04/01/22 2,000,000 1,915,000
TX Brazos River Authority, TXU
Electric Co., Series 2001 C,
5.750% 05/01/36 900,000 903,393
WV Pleasant County, Western
Pennsylvania Power Co.,
Series 1999 E,
5.500% 04/01/29 4,750,000 4,779,640
---------------
12,296,805
---------------
See notes to investment portfolio.
10
MUNICIPAL BONDS (CONTINUED) PAR VALUE
------------------------------------------------------------------------------------------------
UTILITY (CONTINUED)
JOINT POWER AUTHORITY - 0.2%
NC Eastern Municipal Power Agency,
Series 1999 D, 6.700% 01/01/19 $ 500,000 $ 532,490
---------------
MUNICIPAL ELECTRIC - 2.7%
NY Long Island Power Authority,
Series 1998 A,
5.250% 12/01/26 2,000,000 1,994,540
PR Electric Power Authority,
Series 1998 II,
5.125% 07/01/26 3,500,000 3,504,235
WA Chelan County Public Utilities
District No. 1, Columbia River
Rock Hydroelectric,
(a) 06/01/14 5,000,000 2,757,900
WA Seattle, Series 2001,
5.500% 03/01/17 750,000 789,285
---------------
9,045,960
---------------
WATER & SEWER - 2.8%
LA Public Facility Belmont Water
Authority,
9.000% 03/15/24 (d) 760,000 608,000
MA State Water Resources Authority,
Series 1997 D,
5.000% 08/01/24 4,000,000 3,915,800
MO Water & Sewer, Lee's Summit,
Series 2002,
5.250% 07/01/15 500,000 527,305
MS Five Lakes Utility District,
8.250% 07/15/24 500,000 463,125
NH State Industrial Development
Authority, Pennichuck Water
Works, Inc., Series 1988,
7.500% 07/01/18 535,000 584,487
WA King County, Series 1999,
5.250% 01/01/30 3,250,000 3,194,067
---------------
9,292,784
---------------
TOTAL MUNICIPAL BONDS
(cost of $330,203,095) 320,780,369
---------------
MUNICIPAL PREFERRED STOCKS - 1.3% SHARES
------------------------------------------------------------------------------------------------
Charter Mac Equity Issue Trust,
6.625% 06/30/49 (f) 2,000,000 2,057,500
MuniMae Equity Issue Trust,
7.750% 11/01/10 (f) 2,000,000 2,132,500
---------------
TOTAL MUNICIPAL PREFERRED STOCKS
(cost of $4,000,000) 4,190,000
---------------
SHORT-TERM OBLIGATIONS - 1.1% PAR VALUE
------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (i) - 1.1%
CO State Educational & Cultural
Facilities Authority, Naropa University,
Series 1999,
1.150% 11/01/24 $ 105,000 $ 105,000
FL Dade County Industrial Development
Authority, Dolphins Stadium Project,
Series 1985 C,
1.200% 01/01/16 700,000 700,000
IA State Finance Authority:
Burlington Medical Center, Series 1997,
1.200% 06/01/27 190,000 190,000
Drake University, Series 2001,
1.250% 07/01/31 200,000 200,000
IA State Higher Education Loan
Authority, St. Ambrose University,
Series 1995,
1.250% 02/01/05 400,000 400,000
KS State Development Finance Authority,
Hays Medical Center, Series 2000,
1.200% 05/15/26 200,000 200,000
MN Mendota Heights, Series 2001,
1.100% 11/01/31 1,500,000 1,500,000
MN Minneapolis, Series 1997 B,
1.000% 12/01/07 200,000 200,000
MS Jackson County, Pollution Control
Chevron U.S.A., Inc. Project,
1.100% 12/01/16 200,000 200,000
NE State Educational Finance
Authority, Creighton University,
Series 2001,
1.150% 08/01/31 100,000 100,000
---------------
TOTAL SHORT-TERM OBLIGATIONS
(cost of $3,795,000) 3,795,000
---------------
TOTAL INVESTMENTS - 98.8%
(cost of $337,998,095) (j) 328,765,369
---------------
OTHER ASSETS & LIABILITIES, NET - 1.2% 4,099,690
---------------
NET ASSETS* - 100.0% $ 332,865,059
---------------
See notes to investment portfolio.
11
NOTES TO INVESTMENT PORTFOLIO:
(a) Zero coupon bond.
(b) Denotes a restricted security, which is subject to restrictions on resale
under federal securities laws. At May 31, 2002, these securities amounted
to $2,416,241, which represents 0.7% of net assets.
Additional information on these restricted securities is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
------------ --------------- ---------------
CA Statewide Community
Development Authority:
Crossroads School for Arts & Science,
6.000% 08/01/28 08/31/98 $ 1,340,000
Eskaton Village - Grass Valley,
8.250% 11/15/31 09/08/00 1,000,000
---------------
$ 2,340,000
---------------
(c) Settlement of this security is on a delayed delivery basis.
(d) This issue is in default of certain debt covenants. Income is not being
fully accrued.
(e) Accrued interest accumulates in the value of the security and is payable at
redemption.
(f) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933 and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 2002,
the value of these securities amounted to $5,598,267, which represents 1.7%
of net assets.
(g) The Trust has been informed that each issuer has placed direct obligations
of the U.S. Government in an irrevocable trust, solely for the payment of
principal and interest.
(h) This security, or a portion thereof with a market value of $2,759,288, is
being used to collateralize open futures contracts.
(i) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of May 31, 2002.
(j) Cost for generally accepted accounting principles is $337,998,095. Cost for
federal income tax purposes is $337,800,265. The difference between cost
for generally accepted accounting principles and cost on a tax basis is
related to amortization/accretion tax elections on fixed income securities.
Short futures contracts open at May 31, 2002:
UNREALIZED
PAR VALUE APPRECIATION
COVERED BY EXPIRATION (DEPRECIATION)
TYPE CONTRACTS MONTH AT 05/31/02
--------------- ----------- ----------- -------------
Municipal Bond Index $42,700,000 September $ (133,054)
10 Year U.S. Treasury Note 42,900,000 September (302,963)
30 Year U.S. Treasury Bond 52,000,000 September 169,702
-------------
$ (266,315)
-------------
* Net assets represent both Common Shares and Auction Preferred Shares.
See notes to financial statements.
12
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2002 (Unaudited)
ASSETS:
Investments, at cost $ 337,998,095
---------------
Investments, at value $ 328,765,369
Cash 63,027
Receivable for:
Investments sold 50,014
Interest 5,648,868
Futures variation margin 140,372
Deferred Trustees' compensation plan 8,342
Other assets 19,940
---------------
Total Assets 334,695,932
---------------
LIABILITIES:
Payable for:
Investments purchased on a delayed delivery basis 194,674
Distributions -- common shares 1,320,814
Distributions -- preferred shares 16,494
Management fee 209,525
Pricing and bookkeeping fees 13,628
Trustees' fee 1,278
Deferred Trustees' fee 8,342
Other liabilities 66,118
---------------
Total Liabilities 1,830,873
---------------
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 $ 274,733,509
Undistributed net investment income 823,689
Accumulated net realized loss (53,193,098)
Net unrealized depreciation on:
Investments (9,232,726)
Futures contracts (266,315)
---------------
Net assets at value applicable to 31,078,027 common
shares of beneficial interest outstanding $ 212,865,059
===============
Net asset value per common share $ 6.85
===============
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 2002 (Unaudited)
INVESTMENT INCOME:
Interest $ 10,545,102
---------------
EXPENSES:
Management fee 1,252,747
Pricing and bookkeeping fees 76,154
Trustees' fee 7,667
Preferred shares remarketing
commissions 149,761
Other expenses 111,942
---------------
Total Expenses 1,598,271
Custody earnings credit (1,591)
---------------
Net Expenses 1,596,680
---------------
Net Investment Income 8,948,422
---------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND FUTURES
CONTRACTS:
Net realized gain (loss) on:
Investments (223,986)
Futures contracts 4,042,675
---------------
Net realized gain 3,818,689
---------------
Net change in unrealized appreciation/ depreciation on:
Investments (1,903,562)
Futures contracts (4,811,169)
---------------
Net change in unrealized
appreciation/depreciation (6,714,731)
---------------
Net Loss (2,896,042)
---------------
Net Increase in Net Assets from Operations 6,052,380
---------------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (890,492)
---------------
Increase in Net Assets from Operations
Applicable to Common Shares $ 5,161,888
---------------
See notes to financial statements.
13
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
INCREASE (DECREASE) IN NET ASSETS: 2002 2001
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 8,948,422 $ 18,967,985
Net realized gain (loss) on investments and
futures contracts 3,818,689 (15,428,929)
Net change in unrealized appreciation/depreciation
on investments and futures contracts (6,714,731) 14,127,254
---------------- ---------------
Net Increase from Operations 6,052,380 17,666,310
---------------- ---------------
LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS:
From net investment income (890,492) (3,649,679)
---------------- ---------------
Increase in Net Assets from Operations Applicable
to Common Shares 5,161,888 14,016,631
---------------- ---------------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (7,645,197) (13,643,254)
---------------- ---------------
Total Increase (Decrease) in Net Assets
Applicable to Common Shares (2,483,309) 373,377
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of period 215,348,368 214,974,991
---------------- ---------------
End of period (including undistributed net investment income
of $823,689 and $259,160, respectively) $ 212,865,059 $ 215,348,368
================ ===============
NUMBER OF FUND SHARES:
Common Shares:
Outstanding at end of period 31,078,027 31,078,027
---------------- ---------------
Preferred Shares:
Outstanding at end of period 4,800 4,800
---------------- ---------------
See notes to financial statements.
14
NOTES TO FINANCIAL STATEMENTS
May 31, 2002 (Unaudited)
NOTE 1. ACCOUNTING POLICIES
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. The Trust's
investment goal is to provide high current income, generally exempt from federal
income taxes. The Trust's secondary investment goal is to seek total return. The
Trust is authorized to issue an unlimited number of common shares of beneficial
interest and 4,800 Auction Preferred Shares ("APS").
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS:
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar securities.
When management deems it appropriate, an over-the-counter or exchange bid
quotation is used.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Options are valued at the last reported sale price, or in the absence of a sale,
the mean between the last quoted bid and asking price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Investments for which market quotations are not readily available are valued at
fair value under procedures approved by the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Trust may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Trust to subsequently invest at less advantageous prices.
FEDERAL INCOME TAXES:
Consistent with the Trust's policy to qualify as a regulated investment company
and to distribute all of its taxable and tax-exempt income, no federal income
tax has been accrued.
At November 30, 2001, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were as follows:
YEAR OF EXPIRATION CAPITAL LOSS CARRYFORWARD
------------------ -------------------------
2002 $ 6,578,630
2003 5,267,623
2004 2,815,387
2005 5,926,653
2007 3,941,668
2008 14,340,573
2009 4,198,716
-----------
$43,069,250
===========
Expired capital loss carryforwards, if any, are recorded as a reduction of
paid-in capital. Interest income, debt discount and premium:
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM:
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of the security with a corresponding
increase in the cost basis. Premium is amortized against interest income with a
corresponding decrease in the cost basis.
Effective December 1, 2001, the Trust adopted the provisions of the AICPA Audit
and Accounting Guide for Investment Companies and began accreting discount on
all debt securities. The cumulative effect of this accounting change did not
impact total net assets, but resulted in a $151,796 increase in cost of
securities and a corresponding $151,796 increase in net unrealized depreciation,
based on securities held by the Trust on December 1, 2001.
The effect of this change for the six months ended May 31, 2002 was to increase
net investment income by $44,578, increase net unrealized depreciation by
$46,034 and decrease net realized losses by $1,456. The Statement of Changes in
Net Assets and the Financial Highlights for prior periods have not been restated
to reflect this change.
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to common shareholders are recorded on the ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Trust's capital
accounts to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
Distributions to preferred shareholders are recorded daily and are payable at
the end of each dividend period. Each dividend payment period for the APS is
generally seven days. The applicable dividend rate for the APS on May 31, 2002
was 1.60% for Series T and 1.54% for Series W. For the six months ended May 31,
2002, the Trust declared dividends to Auction Preferred shareholders amounting
to $890,492 representing an average APS dividend rate of 1.48%.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE:
Colonial Management Associates, Inc. (the "Advisor") is the investment advisor
of the Trust and furnishes accounting and other services and office facilities
for a monthly fee equal to 0.75% annually of the Trust's average weekly net
assets.
15
BOOKKEEPING FEE:
The Advisor is responsible for providing pricing and bookkeeping services to the
Trust under a Pricing and Bookkeeping Agreement. Under a separate agreement (the
"Outsourcing Agreement"), the Advisor has delegated those functions to State
Street Bank and Trust Company ("State Street"). The Advisor pays fees to State
Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Trust, the Advisor receives
from the Trust an annual flat fee of $10,000, paid monthly, and in any month
that the Trust's average weekly net assets are more than $50 million, a monthly
fee equal to the average weekly net assets of the Trust for that month
multiplied by a fee rate that is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement.
OTHER:
The Trust pays no compensation to its officers, all of whom are employees of the
Advisor or its affiliates.
The Trust's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Trust's assets.
The Trust has an agreement with its custodian bank under which $1,591 of custody
fees were reduced by balance credits for the six months ended May 31, 2002. The
Trust could have invested a portion of the assets utilized in connection with
the expense offset arrangement in an income-producing asset if it had not
entered into such an agreement.
NOTE 3. PREFERRED SHARE OFFERING
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).
Under the Act, the Trust is required to maintain asset coverage of at least 200%
with respect to the APS as of the last business day of each month in which any
APS are outstanding. Additionally, the Trust is required to meet more stringent
asset coverage requirements under the terms of the APS and in accordance with
the guidelines prescribed by the rating agencies. Should these requirements not
be met, or should dividends accrued on the APS not be paid, the Trust may be
restricted in its ability to declare dividends to common shareholders or may be
required to redeem certain of the APS. At May 31, 2002, there were no such
restrictions on the Trust.
Certain reclassifications have been made relating to the presentation of the
APS in the Statement of Changes in Net Assets for the year ending November 30,
2001 and the financial highlights for the year ending November 30, 2001 and 2000
to conform to current requirements.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY:
For the six months ended May 31, 2002, purchases and sales of investments, other
than short-term obligations, were $26,212,574 and $22,647,177, respectively.
Unrealized appreciation (depreciation) at May 31, 2002, based on cost of
investments for federal income tax purposes, was:
Gross unrealized appreciation $ 13,657,261
Gross unrealized depreciation (22,692,157)
------------
Net unrealized depreciation $ (9,034,896)
============
OTHER:
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Trust may focus its investments in certain industries, subjecting it to
greater risk than a trust that is more diversified.
The Trust may invest in municipal and Treasury bond futures contracts and
purchase and write options on futures. The Trust may invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Trust and not for trading
purposes. The use of futures contracts and options involves certain risks, which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out positions due to
different trading hours, or the temporary absence of a liquid market, for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Advisor of the future direction of interest rates. Any of these risks may
involve amounts exceeding the amount recorded in the Trust's Statement of Assets
and Liabilities at any given time.
Upon entering into a futures contract, the Trust deposits cash or securities
with its custodian in an amount sufficient to meet the initial margin
requirement. Subsequent payments are made or received by the Trust equal to the
daily change in the contract value and are recorded as variation margin payable
or receivable and offset in unrealized gains or losses. The Trust recognizes a
realized gain or loss when the contract is closed or expires. Refer to the
Trust's Investment Portfolio for a summary of open futures contracts at May 31,
2002.
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
In some cases, the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand by the Trust
or in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Board of Trustees. The Trust will not
incur any registration costs upon such resale. The Trust's restricted securities
are valued at the price provided by dealers in the secondary market or, if no
market prices are available, at the fair value as determined in good faith using
methods approved by the Board of Trustees.
16
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise stated):
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED NOVEMBER 30, ENDED
MAY 31, ----------------------- NOVEMBER 30,
2002 2001 2000 1999 (a)
----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.93 $ 6.92 $ 7.49 $ 8.49
---------- ---------- --------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.29(b)(c) 0.61(c) 0.62(d) 0.46
Net realized and unrealized gain (loss) on
investments and futures contracts (0.09)(b) (0.04) (0.54) (0.92)
---------- ---------- --------- ------------
Total from Investment Operations 0.20 0.57 0.08 (0.46)
---------- ---------- --------- ------------
LESS DISTRIBUTIONS DECLARED TO PREFERRED
SHAREHOLDERS:
From net investment income (0.03) (0.12) (0.16) (0.04)
---------- ---------- --------- ------------
Total from Investment Operations Applicable
to Common Shareholders 0.17 0.45 (0.08) (0.50)
---------- ---------- --------- ------------
LESS DISTRIBUTIONS DECLARED TO COMMON
SHAREHOLDERS:
From net investment income (0.25) (0.44) (0.48) (0.45)
---------- ---------- --------- ------------
LESS CAPITAL TRANSACTIONS:
Commissions and offering costs --
preferred shares -- -- (0.01) (0.05)
---------- ---------- --------- ------------
NET ASSET VALUE, END OF PERIOD $ 6.85 $ 6.93 $ 6.92 $ 7.49
========== ========== ========= ============
Market price per share -- common shares $ 6.78 $ 6.38 $ 5.75 $ 6.13
========== ========== ========= ============
Total return -- based on market value --
common shares (e) 10.25%(f) 18.56% 1.05% (21.72)%(f)
========== ========== ========= ============
RATIOS TO AVERAGE NET ASSETS:
Expenses (g)(h) 1.49%(i) 1.59% 1.60% 1.13%(i)
Net investment income (g)(h) 8.36%(b)(i) 8.67% 8.63% 6.18%(i)
Net investment income (g)(h) 7.53%(b)(i)(j) 7.00%(j) 6.37%(j) 5.67%(i)(j)
Portfolio turnover rate 7%(f) 15% 10% 16%(f)
Net assets, end of period (000's) --
common shares $ 212,865 $ 215,348 $ 214,975 $ 232,540
YEAR ENDED DECEMBER 31,
---------------------------
1998 1997
---------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.56 $ 8.34
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.52 0.55
Net realized and unrealized gain (loss) on
investments and futures contracts (0.07) 0.22
---------- ----------
Total from Investment Operations 0.45 0.77
---------- ----------
LESS DISTRIBUTIONS DECLARED TO PREFERRED
SHAREHOLDERS:
From net investment income -- --
---------- ----------
Total from Investment Operations Applicable
to Common Shareholders 0.45 0.77
---------- ----------
LESS DISTRIBUTIONS DECLARED TO COMMON
SHAREHOLDERS:
From net investment income (0.52) (0.55)
---------- ----------
Less Capital Transactions:
Commissions and offering costs --
preferred shares -- --
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 8.49 $ 8.56
========== ==========
Market price per share -- common shares $ 8.31 $ 8.63
========== ==========
Total return -- based on market value --
common shares (e) 2.47% 11.60%
========== ==========
RATIOS TO AVERAGE NET ASSETS:
Expenses (g)(h) 0.93% 0.96%
Net investment income (g)(h) 6.02% 6.54%
Net investment income (g)(h) 6.02% 6.54%
Portfolio turnover rate 29% 17%
Net assets, end of period (000's) --
common shares $ 263,705 $ 265,190
(a) The Trust changed its fiscal year end from December 31 to November 30.
(b) Effective December 1, 2001, the Trust adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began accreting
discount on all debt securities. The effect of this change, for the six
months ended May 31, 2002, was to increase the ratio of net investment
income to average net assets from 8.32% to 8.36% and increase the ratio of
net investment income (adjusted for dividend payments to preferred
shareholders) from 7.49% to 7.53%. The impact to the 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 May 31, 2002 have not been
restated to reflect this change in presentation.
(c) Per share data was calculated using average shares outstanding during the
period.
(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 and directed brokerage
arrangements, if applicable, had no impact.
(h) Ratios reflect average net assets available to common shares only.
(i) Annualized.
(j) Ratios reflect reduction for dividend payments to preferred shareholders.
ASSET COVERAGE REQUIREMENTS
INVOLUNTARY
LIQUIDATING AVERAGE
TOTAL AMOUNT ASSET COVERAGE PREFERENCE MARKET VALUE
OUTSTANDING PER SHARE PER SHARE PER SHARE
-------------- -------------- ----------- ------------
05/31/02* $ 120,000,000 $ 69,347 $ 25,003 $ 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
* Unaudited.
** On August 26, 1999, the Trust began offering Auction Preferred
Shares.
17
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise stated):
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.55 $ 7.96 $ 8.67 $ 8.78 $ 8.91
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.56 0.60 0.62 0.67 0.69
Net realized and unrealized gain (loss) on investments
and futures contracts (0.19) 0.58 (0.72) (0.11) (0.14)
--------- --------- --------- --------- ---------
Total from Investment Operations Applicable
to Common Shareholders 0.37 1.18 (0.10) 0.56 0.55
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (0.58) (0.59) (0.61) (0.67) (0.68)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 8.34 $ 8.55 $ 7.96 $ 8.67 $ 8.78
========= ========= ========= ========= =========
Market price per share -- common shares $ 8.25 $ 7.38 $ 6.88 $ 8.25 $ 8.25
========= ========= ========= ========= =========
Total return -- based on market value -- common
shares (a) 20.09% 15.65% (9.83)% 7.96% 3.51%
========= ========= ========= ========= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses (b) 1.00% 1.06% 1.03% 0.97% 0.96%
Net investment income (b) 6.74% 7.15% 7.44% 7.58% 7.86%
Portfolio turnover rate 15% 23% 20% 29% 15%
Net assets, end of period (000's) -- common shares $ 257,768 $ 264,467 $ 245,967 $ 268,130 $ 269,848
(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 and directed brokerage
arrangements, if applicable, had no impact.
18
SHAREHOLDER MEETING RESULTS
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On May 22, 2002, the Annual Meeting of Shareholders of the Trust was held to
conduct a vote for or against the approval of the following Items listed on the
Trust's Proxy Statement for said Meeting. On March 1, 2002, the record date for
the Meeting, the Trust had 31,078,027 shares outstanding. The votes cast were as
follows:
PROPOSAL 1. FOR WITHHELD
---------- --------
ELECTION OF TRUSTEES:
Douglas A. Hacker 26,468,794 547,150
Richard W. Lowry 26,461,616 554,328
John J. Neuhauser 26,464,870 551,074
On March 1, 2002, the record date for the Meeting, the Trust had 4,800 preferred
shares outstanding. The votes cast were as follows:
PROPOSAL 1. FOR WITHHELD
----- --------
ELECTION OF TRUSTEES:
Douglas A. Hacker 4,360 0
Richard W. Lowry 4,360 0
Salvatore Macera 4,360 0
John J. Neuhauser 4,360 0
Thomas E. Stitzel 4,360 0
19
DIVIDEND REINVESTMENT PLAN
As a shareholder in the Trust you are eligible to participate in the Dividend
Reinvestment Plan.
The Trust generally distributes net investment income monthly and capital gains
annually. Under the Trust's Dividend Reinvestment Plan (the "Plan") all
distributions will be reinvested automatically in additional shares of the
Trust, unless the shareholder elects to receive cash or the shares are held in
broker or nominee name and a reinvestment service is not provided by the broker
or nominee. All cash distributions will be mailed by check directly to the
record holder by the dividend paying agent.
If the market price of the shares on the distribution payment date is equal to
or greater than the net asset value, Plan participants will be issued shares at
the higher of net asset value or 95% of the market price. The aggregate market
value of the shares may constitute income to shareholders for federal income tax
purposes. However, if the market price of the shares is less than the net asset
value, shares will be bought as soon as practicable (but no more than 30 days
after the distribution, except as may be required to comply with federal
securities laws) in the open market for the accounts of Plan participants. If,
during this purchase period, the market price surpasses the net asset value, the
average per share price paid may exceed the net asset value of the shares,
resulting in the acquisition of fewer shares than if the distribution had been
in newly-issued shares.
All Plan accounts receive written confirmations of all transactions. Shares
purchased under the Plan are held in uncertificated form. Each shareholder's
proxy includes shares purchased pursuant to the Plan. The automatic reinvestment
of distributions does not relieve participants of any income tax payable on the
distributions.
Fees and expenses of the Plan other than brokerage charges are incurred on
shares issued directly by the Trust. Participants will bear a pro-rata share of
brokerage charges incurred on open market purchases.
A Plan participant may terminate his or her participation by written notice to
the Plan agent. The Plan may be amended or terminated on 30 days written notice
to the Plan participants. All correspondence concerning the Plan should be
directed to State Street Bank and Trust Company*, the Plan agent, by mail at
P.O. Box 8200, Boston, MA 02266-8200 or by phone at 1-800-426-5523.
* EquiServe Trust Company, N.A. currently serves as Agent under the Dividend
Reinvestment Plan.
20
TRANSFER AGENT
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial High Income Municipal Trust is:
-------------------------------------------------------------------------------
EquiServe Trust Company, N.A.
150 Royal Street
Canton, MA 02021
The trust mails one shareholder report to each shareholder address. Shareholders
can order additional reports by calling 800-345-6611. In addition,
representatives at that number can provide shareholders information about the
trust.
Financial advisors who want additional information about the trust may speak to
a representative at 800-426-3750.
This report has been prepared for shareholders of Colonial High Income Municipal
Trust.
COLONIAL HIGH INCOME MUNICIPAL TRUST SEMIANNUAL REPORT
120-03/962J-0502 (07/02) 02/1217