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
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Colonial High Income Municipal Trust
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(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
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(Address of principal executive offices) (Zip code)
James R. Bordewick, Jr., Esq.
Columbia Management Advisors, LLC
One Financial Center
Boston, MA 02111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-426-3750
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Date of fiscal year end: November 30, 2006
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Date of reporting period: November 30, 2006
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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. (S) 3507.
Item 1. Reports to Stockholders.
[PHOTO]
COLONIAL HIGH INCOME MUNICIPAL TRUST
Annual Report
November 30, 2006
[LOGO] NOT FDIC INSURED May Lose Value
No Bank Guarantee
Economic Update - Colonial High Income Municipal Trust
The US economy grew at a solid but uneven pace during the 12-month period that
began December 1, 2005 and ended November 30, 2006. Gross domestic product
(GDP) growth was robust in the first quarter of 2006, as businesses created
jobs at a brisk pace, industrial production rose and both personal spending and
personal income moved higher. However, a weak housing market began to weigh on
the economy, and the manufacturing sector contracted late in the
period--registering its first downturn since the spring of 2003. Against this
backdrop, economic growth averaged 3.0% for the 12-month period.
Between December and June, the Federal Reserve Board (the Fed) raised a key
short-term interest rate, the federal funds rate, five times--to 5.25%. But as
economic growth slowed, the Fed turned cautious and declined to increase the
federal funds rate after its June meeting. Inflation also retreated during the
period, which lent further support to the Fed's decision. Investors reacted
favorably to the prospect of stable or possibly even lower interest rates and
both the stock and bond markets rallied in the second half of the period.
Solid returns from fixed income markets
Although yields moved higher early in the period, the US fixed income markets
delivered respectable returns, as prices rose and yields declined in reaction
to the Fed's mid-year decision to put further short-term rate increases on
hold. The yield on the 10-year US Treasury note, a bellwether for the bond
market, ended the period at 4.4%--slightly lower than where it started.
High-yield bonds led the fixed income markets, reflecting investor confidence
about the overall resilience of the economy despite its slower pace of growth.
The views expressed in the Economic Update and the 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 the trust are based on numerous factors, may not be relied on as
an indication of trading intent on behalf of any fund. References to specific
company securities should not be construed as a recommendation or investment
advice.
Portfolio Manager's Report - Colonial High Income Municipal Trust
Price per share
as of 11/30/06 ($)
Market price 6.62
Net asset value 6.73
1-year total return
as of 11/30/06 (%)*
Market price 9.63
Net asset value 10.58
Lipper High Yield
Municipal Debt Funds
Classification average 10.80
Performance is historical, assumes reinvestment of all dividends and capital
gains, and does not guarantee future results. Investment return and principal
value fluctuate with changing market conditions so that, when sold, shares
may be worth more or less than their original cost. Current performance may
be lower or higher than the performance data quoted. Please call 800-730-6001
for the trust's most recent performance. Total return based on net asset
value reflects changes in the trust's net asset value during each period.
Total return based on market value reflects changes in market value. These
figures will differ depending on the level of any discount from or premium to
net asset value during the period.
Distributions declared per
common share
12/01/05 - 11/30/06 ($) 0.40
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.
For the 12-month period ended November 30, 2006, Colonial High Income Municipal
Trust generated a total return of 9.63%, based on its market price. Changes in
the market price of the trust's shares reflect investor demand and are not
necessarily linked directly to changes in the trust's net asset value. The
trust returned 10.58%, based on investment at net asset value, coming out
modestly behind the 10.80% average return of the Lipper High Yield Municipal
Debt Funds Classification./1/ The trust's performance also trailed the 10.90%
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 benefited from its focus on longer-maturity bonds, but was
hampered by having a below-average stake in the top-performing airline sector
and a slightly lower sensitivity to interest rate changes than several peers as
interest rates declined.
Longer-maturity, high-yield municipals were leaders
High-yield municipal bonds posted strong gains during the past year, outpacing
investment-grade municipal issues. The high-yield sector benefited as
relatively low yields on investment-grade bonds prompted investors to search
for alternatives that offered higher yields. Solid economic growth also gave
investors confidence that issuers with lower credit ratings would be able to
meet their interest payments to bond holders. Longer-maturity bonds, which tend
to be more sensitive to interest rate changes than shorter-maturity issues, did
particularly well as inflation concerns eased in the second half of the period.
In this environment, the trust's focus on longer-maturity bonds worked well, as
did our decision to sell shorter-maturity issues.
Airline bonds aided returns
Airline bonds were strong contributors to performance, as the industry was
fueled by growing passenger loads and improved cash flows. Standouts included
bonds issued by American Airlines, Inc. and United Air Lines, Inc. (0.6% and
0.3% of total investments, respectively)./2/ Elsewhere, a multi-family housing
bond issued by Alexandria (Virginia) Courthouse Crossing, which was priced
below par, was unexpectedly called (or redeemed) at par ($100). In addition,
credit improvement gave a boost to bonds issued by Hoosier Care, Inc. (0.4% of
total investments), a nonprofit that runs pediatric and geriatric group homes
in Illinois and Indiana.
Nursing home bonds were detractors
Some of the trust's nursing home bonds experienced credit downgrades that
resulted in disappointing performance. They included bonds issued by a nursing
home in Gary, Indiana, which we sold at a loss, and bonds issued by Woodlawn
Manor, Inc. (0.2% of total investments), a Massachusetts nursing and
rehabilitation facility that is undergoing a management change.
/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 trust. Lipper makes
no adjustment for the effect of sales loads.
/2/Holdings are discussed as of November 30, 2006, and are subject to change.
*See page 30 for the returns based on market price for the past five fiscal
years.
1
Portfolio Manager's Report (continued) - Colonial High Income Municipal Trust
Top 5 sectors
as of 11/30/06 (%)
Continuing Care Retirement 11.6
Refunded/Escrowed 11.2
Hospitals 10.9
Multi-Family 7.6
Investor Owned 6.8
Quality breakdown
as of 11/30/06 (%)
AAA 22.3
AA 3.4
A 11.3
BBB 23.3
BB 3.1
B 1.5
CCC 0.4
Non-Rated 33.9
Cash Equivalents 0.8
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 rationally recognized
rating agencies: Standard & Poor's, a division of The McGraw Hill Companies,
Inc., Moody's Investors Service, Inc. or Fitch Ratings, Ltd. Ratings are
relative and subjective and are not absolute standards of quality. Credit
quality does not remove market risk. The majority of the bonds that are
non-rated are considered by the advisor to be of non-investment grade quality.
Portfolio characteristics and holdings are subject to change periodically and
may not be representative of current characteristics and holdings. Because
the trust is actively managed, there is no guarantee that the trust will
maintain these sectors or continue to have this quality breakdown in the
future.
The trust's dividend yield declined as long-term interest rates fell
The trust's dividend yield fell as the income derived from leverage dropped.
The trust's leverage comes from its preferred shares, which were issued in
1999. We invest the proceeds from the preferred shares in longer maturity,
higher-yielding bonds, and then pay out to preferred shareholders a short-term
rate influenced by the federal funds rate--the overnight rate at which banks
lend each other money. During the past year, the dividend yield was squeezed on
both ends as the federal funds rate rose to 5.25% and long-term yields fell.
However, we believe leverage still gave common shareholders a higher dividend
payment than they would have earned without it. We added a number of senior
housing bonds, which offered added yield over higher quality issues, as well as
the potential for price appreciation.
Our outlook is cautiously optimistic
Going forward, we expect the high-yield municipal sector to benefit from strong
investor demand, relatively low long-term interest rates, stable inflation and
solid economic growth. However, we plan to add new bonds selectively, given
that there is little difference between the yields of lower and higher quality
issues. We plan to continue to focus on longer-maturity issues, which have the
potential to fare well, as long as inflation remains contained.
Portfolio Management
Maureen G. Newman has been the portfolio manager of Colonial High Income
Municipal Trust since August 1998. Ms. Newman has managed various municipal
funds for Columbia Management Advisors, LLC or its predecessors or affiliate
organizations since May 1996.
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.
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 also has 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 trust. 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.
2
Investment Portfolio - Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds - 152.3%
Par ($) Value ($)
Education - 3.0%
Education - 1.7%
CA Educational Facilities Authority Loyola Marymount University, Series 2001,
Insured: MBIA
(a) 10/01/19 2,025,000 1,190,720
MI Southfield Economic Lawrence University, Series 1998 A,
Development Corp. 5.400% 02/01/18 1,000,000 1,021,880
PA Higher Education Facilities Philadelphia University, Series 2004 A,
Authority 5.125% 06/01/25 600,000 624,816
WV University Series 2000 A, Insured: AMBAC
(a) 04/01/19 1,000,000 600,290
--------------------------------------------------- --------- ---------
Education Total 3,437,706
Prep School - 1.3%
CA Statewide Communities Crossroads School for Arts & Sciences, Series 1998,
Development Authority 6.000% 08/01/28 (b) 1,230,000 1,281,574
MA Industrial Finance Agency Cambridge Friends School, Series 1998,
5.800% 09/01/28 1,000,000 1,024,570
MI Summit Academy North Series 2005,
5.500% 11/01/35 500,000 492,305
--------------------------------------------------- --------- ---------
Prep School Total 2,798,449
Education Total 6,236,155
Health Care - 44.7%
Continuing Care Retirement - 18.2%
CA La Verne Brethren Hillcrest Homes, Series 2003 B,
6.625% 02/15/25 690,000 769,460
CO Health Facilities Authority Christian Living Communities, Series 2006 A,
5.750% 01/01/26 600,000 633,744
Covenant Retirement Communities, Inc.,
Series 2005,
5.000% 12/01/35 1,400,000 1,443,092
CT Development Authority Elim Park Baptist Home, Inc., Series 2003,
5.850% 12/01/33 660,000 711,500
FL Capital Projects Finance Glenridge on Palmer Ranch, Series 2002 A,
Authority 8.000% 06/01/32 750,000 842,872
FL Lee County Industrial Shell Point Village, Series 1999 A,
Development Authority 5.500% 11/15/29 600,000 617,994
FL St. John's County Industrial Lifecare St. John's, Inc., Series 2006 A:
Development Authority 5.250% 01/01/26 500,000 509,685
5.375% 01/01/40 250,000 255,198
See Accompanying Notes to Financial Statements.
3
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Health Care (continued)
Continuing Care Retirement (continued)
GA Fulton County Canterbury Court, Series 2004 A,
6.125% 02/15/34 750,000 794,895
GA Savannah Economic Marshes of Skidaway, Series 2003 A,
Development Authority 7.400% 01/01/34 465,000 496,225
IL Finance Authority Lutheran Senior Services, Series 2006,
5.125% 02/01/26 1,250,000 1,316,250
Washington & Jane Smith Community, Series 2005 A,
6.250% 11/15/35 1,250,000 1,325,062
IL Health Facilities Authority Washington & Jane Smith Community, Series 2003 A,
7.000% 11/15/32 725,000 792,229
IN Health & Educational Facilities Baptist Homes of Indiana, Inc., Series 2005,
Financing Authority 5.250% 11/15/35 1,000,000 1,060,910
KS Manhattan Meadowlark Hills Retirement Home, Series 1999 A,
6.375% 05/15/20 650,000 672,724
MA Boston Industrial Development Springhouse, Inc., Series 1998,
Financing Authority 5.875% 07/01/20 255,000 260,284
MA Development Finance Agency Loomis House, Inc.:
Series 1999 A,
5.625% 07/01/15 400,000 412,632
Series 2002 A,
6.900% 03/01/32 100,000 110,337
MD Westminster Economic Carroll Lutheran Village, Inc., Series 2004 A:
Development Authority 5.875% 05/01/21 500,000 522,375
6.250% 05/01/34 250,000 264,695
MI Kentwood Economic Holland Home, Series 2006 A,
Development Corp. 5.375% 11/15/36 1,000,000 1,066,280
MT Facility Finance Authority St John's Lutheran Ministries, Inc., Series 2006 A,
6.125% 05/15/36 500,000 526,145
NC Medical Care Commission United Methodist Retirement Homes, Inc., Series 2005 C,
5.500% 10/01/32 600,000 625,962
NH Higher Educational & Health Rivermead at Peterborough, Series 1998:
Facilities Authority 5.625% 07/01/18 500,000 511,235
5.750% 07/01/28 500,000 509,165
NJ Economic Development Hebrew Old Age Center, Series 2006,
Authority 5.375% 11/01/36 500,000 503,840
Lions Gate, Series 2005 A:
5.750% 01/01/25 205,000 214,311
5.875% 01/01/37 830,000 867,051
Lutheran Social Ministries, Series 2005,
5.100% 06/01/27 500,000 517,350
See Accompanying Notes to Financial Statements.
4
Colonial High Income Municipal Trust
November 30, 2006
Municipals Bonds (continued)
Par ($) Value ($)
Health Care (continued)
Continuing Care Retirement (continued)
Marcus L. Ward Home, Series 2004,
5.750% 11/01/24 750,000 820,732
Seabrook Village, Inc., Series 2000 A,
8.250% 11/15/30 925,000 1,087,615
Series 2006,
5.250% 11/15/26 (c) 1,300,000 1,337,453
PA Bucks County Industrial Ann's Choice, Inc., Series 2005 A,
Development Authority 6.125% 01/01/25 1,000,000 1,066,950
PA Delaware County Authority Dunwoody Village, Series 2003 A,
5.375% 04/01/17 600,000 639,342
PA Montgomery County Industrial Whitemarsh Continuing Care Retirement Community,
Development Authority Series 2005:
6.125% 02/01/28 250,000 267,140
6.250% 02/01/35 750,000 800,377
SC Jobs-Economic Development Wesley Commons, Series 2006:
Authority 5.125% 10/01/26 600,000 605,730
5.300% 10/01/36 300,000 306,531
TN Johnson City Health & Appalachian Christian Village, Series 2004 A,
Educational Facilities Authority 6.250% 02/15/32 250,000 262,230
TN Metropolitan Government Blakeford at Green Hills, Series 1998,
Nashville & Davidson County 5.650% 07/01/24 600,000 607,506
TN Shelby County Health Germantown Village, Series 2003 A,
Educational & Housing Facilities 7.250% 12/01/34 450,000 487,004
Board Trezevant Manor, Series 2006 A:
5.625% 09/01/26 1,000,000 1,026,490
5.750% 09/01/37 350,000 359,881
TX Abilene Health Facilities Sears Methodist Retirement Center:
Development Corp. Series 1998 A,
5.900% 11/15/25 1,000,000 1,020,870
Series 2003 A,
7.000% 11/15/33 500,000 548,275
TX Health Facilities Development Legacy at Willow Bend, Series 2006 A,
Corp. of Central Texas, Inc. 5.750% 11/01/36 800,000 823,104
TX Houston Health Facilities Buckingham Senior Living Community, Inc., Series 2004 A,
Development Corp. 7.125% 02/15/34 500,000 558,670
TX Tarrant County Cultural Northwest Senior Housing-Edgemere, Series 2006 A,
Education Facilities 6.000% 11/15/36 750,000 801,810
VA Suffolk Industrial Development Lake Prince Center, Series 2006,
Authority Retirement Facilities 5.300% 09/01/31 500,000 513,155
VA Virginia Beach Development Westminster-Canterbury, Series 2005:
Authority 5.250% 11/01/26 250,000 258,723
5.375% 11/01/32 300,000 311,154
See Accompanying Notes to Financial Statements.
5
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Health Care (continued)
Continuing Care Retirement (continued)
VA Winchester Industrial Westminster-Canterbury, Series 2005 A,
Development Authority 5.300% 01/01/35 750,000 769,912
WI Health & Educational Facilities Clement Manor, Series 1998,
Authority 5.750% 08/15/24 1,300,000 1,323,634
Eastcastle Place, Inc., Series 2004,
6.125% 12/01/34 350,000 359,013
Milwaukee Catholic Home, Series 2006,
5.000% 07/01/26 500,000 526,035
Three Pillars Senior Living Communities, Series 2003,
5.750% 08/15/26 500,000 528,395
United Lutheran Program for the Aging, Series 1998,
5.700% 03/01/28 1,000,000 1,015,230
----------------------------------------------------- --------- ----------
Continuing Care Retirement Total 38,186,463
Health Services - 1.7%
CO Health Facilities Authority National Jewish Medical & Research Center:
Series 1998 B,
5.375% 01/01/29 750,000 763,275
Series 1998,
5.375% 01/01/23 330,000 335,227
MA Development Finance Agency Boston Biomedical Research Institute, Series 1999:
5.650% 02/01/19 200,000 208,456
5.750% 02/01/29 450,000 468,788
MA Health & Educational Facilities Civic Investments, Inc., Series 2002 A,
Authority GTY AGMT: Harvard Pilgrim Health Care
9.000% 12/15/15 1,000,000 1,241,420
MN Minneapolis & St. Paul Healthpartners Project, Series 2003,
Housing & Redevelopment Authority 6.000% 12/01/21 500,000 552,520
----------------------------------------------------- --------- ----------
Health Services Total 3,569,686
Hospitals - 17.1%
AR Conway Health Facilities Board Conway Regional Medical Center:
Series 1999 A,
6.400% 08/01/29 425,000 455,889
Series 1999 B,
6.400% 08/01/29 1,000,000 1,072,680
CA Turlock Emanuel Medical Center, Inc., Series 2004,
5.375% 10/15/34 1,500,000 1,593,495
CO Health Facilities Authority Parkview Medical Center, Inc., Series 2001,
6.600% 09/01/25 300,000 332,310
Vail Valley Medical Center, Series 2004,
5.000% 01/15/20 750,000 789,847
FL South Lake County Hospital South Lake Hospital, Inc., Series 2003,
District 6.375% 10/01/34 500,000 559,285
See Accompanying Notes to Financial Statements.
6
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Health Care (continued)
Hospitals (continued)
FL Tampa H. Lee Moffitt Cancer Center, Series 1999 A,
5.750% 07/01/29 2,000,000 2,090,100
FL West Orange Healthcare District Series 2001 A,
5.650% 02/01/22 525,000 556,815
IL Health Facilities Authority Thorek Hospital & Medical Center, Series 1998,
5.250% 08/15/18 600,000 614,430
IL Southwestern Development Anderson Hospital:
Authority Series 1999,
5.500% 08/15/20 225,000 232,772
Series 2006,
5.125% 08/15/36 (c) 1,000,000 1,043,150
IN Health & Educational Facility Jackson County Schneck Memorial, Series 2006 A,
Financing Authority 5.250% 02/15/36 500,000 537,345
IN Health Facility Financing Community Foundation of Northwest Indiana, Inc.,
Authority Series 2004 A,
6.000% 03/01/34 575,000 624,881
KS Salina Hospital Revenue Salina Regional Health Center Inc., Series 2005 A,
4.625% 10/01/31 600,000 607,458
KS University Hospital Authority Series 2006,
4.500% 09/01/32 (c) 500,000 499,210
LA Public Facilities Authority Touro Infirmary, Series 1999 A,
5.625% 08/15/29 450,000 458,006
MA Health & Educational Facilities Jordan Hospital, Series 2003 E,
Authority 6.750% 10/01/33 500,000 558,370
Milford-Whitinsville Regional Hospital, Series 2002 D,
6.350% 07/15/32 1,000,000 1,090,850
MD Health & Higher Educational Adventist Healthcare, Series 2003 A:
Facilities Authority 5.000% 01/01/16 400,000 417,680
5.750% 01/01/25 600,000 651,768
MI Dickinson County Series 1999,
5.700% 11/01/18 750,000 777,667
MN St. Paul Housing & HealthEast, Inc., Series 2001 A,
Redevelopment Authority 5.700% 11/01/15 1,000,000 1,031,770
MN Washington County Housing & HealthEast, Inc., Series 1998,
Redevelopment Authority 5.250% 11/15/12 1,300,000 1,337,440
MO Saline County Industrial John Fitzgibbon Memorial Hospital, Series 2005,
Development Authority 5.625% 12/01/35 1,250,000 1,280,750
See Accompanying Notes to Financial Statements.
7
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Health Care (continued)
Hospitals (continued)
NC Medical Care Commission Stanly Memorial Hospital, Series 1999,
6.375% 10/01/29 1,915,000 2,045,871
NH Health & Education Facilities Memorial Hospital at North Conway, Series 2006,
Authority 5.250% 06/01/36 800,000 845,976
NH Higher Educational & Health Catholic Medical Center, Series 2002 A,
Facilities Authority 6.125% 07/01/32 50,000 54,790
Littleton Hospital Association, Inc.:
Series 1998 A,
6.000% 05/01/28 625,000 646,131
Series 1998 B,
5.900% 05/01/28 780,000 804,890
NV Henderson St. Rose Dominican Hospital, Series 1998 A,
5.375% 07/01/26 385,000 395,491
NY Dormitory Authority Long Island Jewish Medical Center, Series 2003,
5.500% 05/01/33 300,000 324,540
Mount Sinai Hospital:
Series 2000 C,
5.500% 07/01/26 850,000 864,671
Series 2000,
5.500% 07/01/26 400,000 406,904
OH Highland County Joint Township Series 1999,
6.750% 12/01/29 920,000 967,196
OH Lakewood Lakewood Hospital Association, Series 2003,
5.500% 02/15/14 600,000 646,548
OH Miami County Hospital Facilities Upper Valley Medical Center, Inc., Series 2006,
Authority 5.250% 05/15/18 450,000 484,231
OH Sandusky County Memorial Hospital, Series 1998,
5.150% 01/01/10 250,000 252,758
SC Jobs Economic Development Bon Secours-St. Francis Medical Center, Series 2002,
Authority 5.500% 11/15/23 1,750,000 1,877,365
SC Lexington County Health Lexington Medical Center, Series 2003,
Services 5.500% 11/01/23 750,000 804,735
SD Health & Educational Facilities Sioux Valley Hospital & Health System, Series 2004 A,
Authority 5.250% 11/01/34 800,000 847,936
TX Tyler Health Facilities Mother Frances Hospital, Series 2001,
Development Corp. 6.000% 07/01/31 1,000,000 1,078,440
VT Educational & Health Buildings Brattleboro Memorial Hospital, Series 1998,
Finance Agency 5.375% 03/01/28 1,075,000 1,081,504
WI Health & Educational Facilities Aurora Health Care, Inc., Series 2003,
Authority 6.400% 04/15/33 525,000 591,607
Fort HealthCare, Inc., Series 2004,
5.750% 05/01/29 1,000,000 1,099,900
Wheaton Franciscan Services, Series 2002,
5.750% 08/15/30 600,000 646,722
----------------------------------------------------- --------- ----------
Hospitals Total 35,982,174
See Accompanying Notes to Financial Statements.
8
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Health Care (continued)
Intermediate Care Facilities - 0.7%
IL Development Finance Authority Hoosier Care, Inc., Series 1999 A,
7.125% 06/01/34 1,175,000 1,217,323
IN Health Facilities Financing Hoosier Care, Inc., Series 1999 A,
Authority 7.125% 06/01/34 150,000 155,403
--------------------------------------------------- --------- ----------
Intermediate Care Facilities Total 1,372,726
Nursing Homes - 7.0%
AK Juneau St. Ann's Care Center, Inc., Series 1999,
6.875% 12/01/25 1,215,000 1,222,885
CO Health Facilities Authority American Housing Foundation I, Inc., Series 2003 A,
8.500% 12/01/31 460,000 491,666
Evangelical Lutheran Good Samaritan Foundation,
Series 2005,
5.000% 06/01/35 375,000 389,250
Pioneer Health Care, Series 1989,
10.500% 05/01/19 1,730,000 1,543,904
Volunteers of America Care Facilities,
Series 1998 A:
5.450% 07/01/08 75,000 75,073
5.750% 07/01/20 865,000 893,943
Greystone Midwest Junior Lien 7.148% 08/01/36 (d) 1,032,236 922,327
IA Finance Authority Care Initiatives, Series 1998 B:
5.750% 07/01/18 550,000 567,853
5.750% 07/01/28 1,475,000 1,492,213
MA Development Finance Agency AHF/Woodlawn Manor, Inc.:
Series 2000 A,
7.750% 12/01/27 (e) 1,509,135 603,654
Series 2000 B,
10.250% 06/01/27 (d)(e) 475,907 14,277
Alliance Health Care Facilities, Series 1999 A,
7.100% 07/01/32 1,250,000 1,284,488
MN Sartell Foundation for Health Care, Series 1999 A,
6.625% 09/01/29 1,145,000 1,187,331
PA Chester County Industrial Series 2002,
Development Authority 8.500% 05/01/32 1,560,000 1,632,696
PA Washington County Industrial AHF Project, Series 2003,
Development Authority 7.750% 01/01/29 1,211,000 1,276,224
TN Metropolitan Government
Nashville & Davidson County AHF Project, Series 2003,
Health & Education Board 7.750% 01/01/29 1,141,000 1,202,454
--------------------------------------------------- --------- ----------
Nursing Homes Total 14,800,238
Health Care Total 93,911,287
See Accompanying Notes to Financial Statements.
9
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Housing - 16.9%
Assisted Living/Senior - 3.1%
DE Kent County Heritage at Dover, Series 1999, AMT,
7.625% 01/01/30 1,640,000 1,530,743
GA Columbus Housing Authority Calvary Community, Inc., III, Series 1999,
7.000% 11/15/19 470,000 472,689
MN Roseville Care Institute, Inc., Series 1993,
7.750% 11/01/23 1,740,000 1,529,199
NC Medical Care Commission DePaul Community Facilities, Inc., Series 1999,
7.625% 11/01/29 1,400,000 1,475,404
NY Huntington Housing Authority Gurwin Jewish Senior Center, Series 1999 A:
5.875% 05/01/19 700,000 721,329
6.000% 05/01/29 775,000 800,846
-------------------------------------------------- --------- ---------
Assisted Living/Senior Total 6,530,210
Multi-Family - 8.8%
DC Housing Finance Agency Henson Ridge, Series 2004 E, AMT, Insured: FHA
5.100% 06/01/37 1,000,000 1,042,970
DE Wilmington Electra Arms Senior Association, Series 1998, AMT,
6.250% 06/01/28 890,000 890,178
FL Broward County Housing Finance Chaves Lake Apartments Ltd., Series 2000 A, AMT,
Authority 7.500% 07/01/40 750,000 800,280
FL Capital Trust Agency Atlantic Housing Foundation, Inc., Series 2005 C,
5.875% 01/01/28 775,000 794,941
FL Clay County Housing Finance Breckenridge Commons Ltd., Series 2000 A, AMT,
Authority 7.450% 07/01/40 720,000 763,776
MA Housing Finance Agency Series 2004 A, AMT, Insured: FSA
5.250% 07/01/25 3,000,000 3,107,880
Series 2005 E, AMT,
5.000% 12/01/28 500,000 520,055
MN Minneapolis Student Housing Riverton Community Housing, Inc., Series 2006 A,
5.700% 08/01/40 750,000 759,668
MN Washington County Housing & Cottages of Aspen, Series 1992, AMT,
Redevelopment Authority 9.250% 06/01/22 940,000 959,909
MN White Bear Lake Birch Lake Townhomes:
Series 1989 A, AMT, 2,200,000 2,086,700
10.250% 07/15/19
Series 1989 B, AMT,
(a) 07/15/19 688,000 206,400
NC Medical Care Commission ARC Project, Series 2004 A,
5.800% 10/01/34 750,000 819,030
See Accompanying Notes to Financial Statements.
10
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Housing (continued)
Multi-Family (continued)
NM Mortgage Finance Authority Series 2005 E, AMT, Insured: FHA
4.800% 09/01/40 1,250,000 1,250,300
NY New York City Housing Series 2005 F-1,
Development Corp. 4.650% 11/01/25 1,000,000 1,030,900
OH Montgomery County Heartland of Centerville LLC, Series 2005, AMT,
Insured: FHLMC
4.950% 11/01/35 500,000 512,960
Resolution Trust Corp. Pass-Through Certificates, Series 1993 A,
8.500% 12/01/16 (f) 546,075 545,168
TX Department of Housing & Pebble Brooks Apartments, Series 1998, AMT,
Community Affairs Guarantor: FNMA
5.500% 12/01/18 1,000,000 1,038,110
TX El Paso County Housing Finance American Village Communities:
Corp. Series 2000 C,
8.000% 12/01/32 375,000 388,676
Series 2000 D,
10.000% 12/01/32 405,000 422,229
WA Seattle Housing Authority High Rise Rehabilitation Phase I LP, Series 2005, AMT,
Insured: FSA
5.000% 11/01/25 500,000 513,740
------------------------------------------------------ --------- ----------
Multi-Family Total 18,453,870
Single-Family - 5.0%
MA Housing Finance Agency Series 2005 118, AMT,
4.850% 12/01/35 1,750,000 1,768,042
Series 2005,
5.000% 06/01/30 500,000 519,640
ME Housing Authority Series 2005 D-2, AMT,
4.800% 11/15/36 1,000,000 1,014,380
MN Minneapolis St. Paul Housing Series 2006 A2, AMT, Insured: GNMA
Finance Board 5.000% 12/01/38 1,000,000 1,034,050
ND Housing Finance Agency Series 2006 A, AMT,
4.850% 07/01/21 1,240,000 1,277,808
OK Housing Finance Agency Series 2006 C, AMT, Insured: GNMA
5.000% 09/01/26 1,420,000 1,464,574
PA Pittsburgh Urban Series 2006 C, Insured: GNMA
Redevelopment Authority 4.800% 04/01/28 2,000,000 2,037,380
WI Housing & Economic Series 2005 C, AMT,
Development Authority 4.875% 03/01/36 1,445,000 1,468,683
------------------------------------------------------ --------- ----------
Single-Family Total 10,584,557
Housing Total 35,568,637
See Accompanying Notes to Financial Statements.
11
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Industrials - 7.3%
Food Products - 1.6%
GA Cartersville Development Anheuser Busch Companies, Inc., Series 2002, AMT,
Authority 5.950% 02/01/32 1,000,000 1,090,480
LA Southern Louisiana Port Cargill, Inc., Series 1997,
Commission 5.850% 04/01/17 1,000,000 1,023,570
MI Strategic Fund Imperial Holly Corp., Series 1998 A,
6.250% 11/01/15 1,250,000 1,291,325
---------------------------------------------------- --------- ---------
Food Products Total 3,405,375
Forest Products & Paper - 2.8%
AL Camden Industrial Development Weyerhaeuser Co., Series 2003 B, AMT,
Board 6.375% 12/01/24 550,000 606,155
AL Courtland Industrial Series 2003 B, AMT,
Development Board 6.250% 08/01/25 1,000,000 1,099,190
AL Phenix City Industrial Meadwestvaco Corp., Series 2002 A, AMT,
Development Board GTY AGMT: Meadwestvaco Corp.
6.350% 05/15/35 550,000 593,010
AR Camden Environmental International Paper Co., Series 2004 A, AMT,
Improvement Authority 5.000% 11/01/18 250,000 257,703
GA Rockdale County Development Visy Paper, Inc., Series 1993, AMT,
Authority 7.500% 01/01/26 1,800,000 1,801,386
MS Lowndes County Weyerhaeuser Co., Series 1992,
6.700% 04/01/22 850,000 1,031,619
VA Bedford County Industrial Nekoosa Packaging Corp., Series 1998, AMT,
Development Authority 5.600% 12/01/25 400,000 406,080
---------------------------------------------------- --------- ---------
Forest Products & Paper Total 5,795,143
Manufacturing - 0.4%
IL Will-Kankakee Regional
Development Authority Flanders Corp., Series 1997, AMT,
6.500% 12/15/17 740,000 754,637
---------------------------------------------------- --------- ---------
Manufacturing Total 754,637
Metals & Mining - 0.6%
NV Department of Business & Wheeling-Pittsburgh Steel Corp., Series 1999 A, AMT,
Industry 8.000% 09/01/14 770,000 804,842
VA Greensville County Industrial Wheeling-Pittsburgh Steel Corp., Series 1999 A, AMT,
Development Authority 7.000% 04/01/14 425,000 425,047
---------------------------------------------------- --------- ---------
Metals & Mining Total 1,229,889
Oil & Gas - 1.2%
NJ Middlesex County Pollution Amerada Hess Corp., Series 2004,
Control Authority 6.050% 09/15/34 285,000 314,047
See Accompanying Notes to Financial Statements.
12
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Industrials (continued)
Oil & Gas (continued)
TX Gulf Coast Industrial Citgo Petroleum Corp., Series 1998, AMT,
Development Authority 8.000% 04/01/28 500,000 569,035
VI Virgin Islands Public Finance Hovensa LLC:
Authority Series 2003, AMT,
6.125% 07/01/22 525,000 583,984
Series 2004, AMT,
5.875% 07/01/22 600,000 661,614
VI Virgin Islands Hovensa LLC, Series 2002, AMT,
6.500% 07/01/21 375,000 425,078
--------------------------------------------------- --------- ----------
Oil & Gas Total 2,553,758
Other Industrial Development Bonds - 0.7%
NJ Economic Development GMT Realty LLC, Series 2006 B, AMT,
Authority 6.875% 01/01/37 (c) 1,500,000 1,529,610
--------------------------------------------------- --------- ----------
Other Industrial Development Bonds Total 1,529,610
Industrials Total 15,268,412
Other - 22.0%
Other - 0.4%
PR Commonwealth of Puerto Rico Series 2006 B,
Government Development Bank 5.000% 12/01/15 700,000 758,653
--------------------------------------------------- --------- ----------
Other Total 758,653
Pool/Bond Bank - 0.8%
MI Municipal Bond Authority Series 2001 A, Insured: AMBAC
5.375% 11/01/17 750,000 807,758
OH Cleveland - Cuyahoga County Columbia National Group, Inc., Series 2005 D, AMT,
Port Authority 5.000% 05/15/20 800,000 808,968
--------------------------------------------------- --------- ----------
Pool/Bond Bank Total 1,616,726
Refunded/Escrowed(g) - 17.5%
CA ABAG Finance Authority for Eskaton Gold River Lodge, Series 1998,
Nonprofit Corps. Pre-refunded 11/15/08:
6.375% 11/15/15 570,000 599,646
6.375% 11/15/28 550,000 589,237
CA Golden State Tobacco Series 2003 B, Pre-refunded 06/01/13:
Securitization Corp. 5.500% 06/01/43 750,000 833,798
Insured: AMBAC
5.000% 06/01/43 3,500,000 3,790,290
CA Orange County Community Ladera Ranch, Series 1999 1, Pre-refunded 08/15/09,
Facilities District 6.700% 08/15/29 500,000 550,010
CA Statewide Communities Eskaton Village - Grass Valley, Series 2000,
Development Authority Pre-refunded 11/15/10,
8.250% 11/15/31 985,000 1,149,554
See Accompanying Notes to Financial Statements.
13
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Other (continued)
Refunded/Escrowed(g) (continued)
CO Denver City & County Airport Series 1992 C, AMT,
Escrowed to Maturity,
6.125% 11/15/25 2,280,000 2,829,229
Series C, Unrefunded Balance,
6.125% 11/15/25 2,840,000 2,845,907
CO E-470 Public Highway Authority Series 2000 B, Pre-refunded 09/01/10,
(a) 09/01/35 8,750,000 1,163,575
CT Development Authority Sewer New Haven Residuals LP, Series 1996, AMT,
Sludge Disposal Facilities Escrowed to Maturity,
8.250% 12/01/06 200,000 200,000
FL Northern Palm Beach County Series 1999, Pre-refunded 08/01/09, Insured: MBIA
Improvement District 6.000% 08/01/29 750,000 804,180
FL Orange County Health Facilities Orlando Regional Healthcare System, Series 2002,
Authority Pre-refunded 12/01/12,
5.750% 12/01/32 200,000 222,344
GA Forsyth County Hospital Baptist Health Care System, Series 1998,
Authority Escrowed to Maturity,
6.000% 10/01/08 330,000 339,359
IA Finance Authority Care Initiatives, Series 1996, Pre-refunded 07/01/11,
9.250% 07/01/25 935,000 1,161,709
ID Health Facilities Authority IHC Hospitals, Inc., Series 1992, Escrowed to Maturity,
6.650% 02/15/21 1,750,000 2,273,722
IL Development Finance Authority Latin School of Chicago, Series 1998,
Pre-refunded 08/01/08,
5.650% 08/01/28 230,000 237,296
IL Health Facilities Authority Lutheran Senior Ministries, Series 2001 A,
Pre-refunded 08/15/11,
7.375% 08/15/31 900,000 1,052,235
Swedish American Hospital, Series 2000,
Pre-refunded 05/15/10,
6.875% 11/15/30 500,000 551,640
IL University of Illinois Series 2001 A, Pre-refunded 08/15/11, Insured: AMBAC
5.500% 08/15/17 685,000 742,410
MA Development Finance Agency Western New England College, Series 2002,
Pre-refunded 12/01/12,
6.125% 12/01/32 300,000 342,900
MN Robbinsdale Economic Series 1999 A, Pre-refunded 01/01/10,
Development Authority 6.875% 01/01/26 500,000 547,055
NC Lincoln County Lincoln County Hospital, Series 1991, Escrowed to Maturity,
9.000% 05/01/07 65,000 66,373
NH Health & Educational Facilities Catholic Medical Center, Series 2002 A,
Authority Pre-refunded 7/01/12,
6.125% 07/01/32 350,000 394,846
See Accompanying Notes to Financial Statements.
14
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Other (continued)
Refunded/Escrowed(g) (continued)
NM Red River Sports Facility Red River Ski Area, Series 1998,
6.450% 06/01/07 215,000 215,000
NV Henderson St. Rose Dominican Hospital, Series 1998 A,
Pre-refunded 07/01/08,
5.375% 07/01/26 115,000 118,680
NY Convention Center Operating Yale Building Project, Series 2003, Escrowed to Maturity,
Corp. (a) 06/01/08 1,700,000 1,611,345
NY New York City Series 1997 H, Pre-refunded: 08/01/07,
6.000% 08/01/17 915,000 938,936
PA Delaware County Authority Mercy Health Corp., Series 1996, Escrowed to Maturity:
6.000% 12/15/16 1,400,000 1,430,660
6.000% 12/15/26 1,000,000 1,021,970
PA Lancaster Industrial Garden Spot Village, Series 2000 A,
Development Authority Pre-refunded 05/01/10,
7.625% 05/01/31 500,000 568,190
PA Philadelphia Authority for Starwood Hotels & Resorts, Series 1997 A,
Industrial Development Pre-refunded 02/01/07,
6.500% 10/01/27 1,000,000 1,024,280
PR Commonwealth of Puerto Rico Series 2002 E, Escrowed to Maturity,
Public Finance Corp. 6.000% 08/01/26 155,000 198,888
TN Shelby County Health, Open Arms Development Centers:
Educational & Housing Facilities Series 1992 A, Pre-refunded 08/01/07,
Board 9.750% 08/01/19 750,000 814,230
Series 1992 C, Pre-refunded 08/01/07,
9.750% 08/01/19 730,000 792,517
TX Board of Regents University of Texas, Series 2001 B,
Escrowed to Maturity,
5.375% 08/15/18 650,000 698,939
VT Educational & Health Buildings Norwich University, Series 1998,
Finance Agency Pre-refunded 07/01/08,
5.500% 07/01/21 1,500,000 1,556,025
WA Health Care Facilities Authority Kadlec Medical Center, Series 2001,
Pre-refunded 12/01/10, Insured: RAD
5.875% 12/01/21 600,000 650,694
WI Health & Educational Facilities Attic Angel Obligated Group, Series 1998,
Authority Pre-refunded 11/17/08,
5.750% 11/15/27 1,000,000 1,055,610
WV Hospital Finance Authority Charleston Area Medical Center, Series 2000,
Pre-refunded 09/01/10,
6.750% 09/01/30 805,000 899,950
--------------------------------------------------------- --------- ----------
Refunded/Escrowed Total 36,883,229
See Accompanying Notes to Financial Statements.
15
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Other (continued)
Tobacco - 3.3%
CA County Tobacco Securitization Series 2006,
Agency (a) 06/01/46 6,500,000 507,390
CA Golden State Tobacco Series 2003 A-1,
Securitization Corp. 6.250% 06/01/33 1,800,000 2,018,952
CA Tobacco Securitization Authority San Diego County Tobacco, Series 2006,
(a) 06/01/46 8,520,000 788,100
NJ Tobacco Settlement Financing Series 2003,
Corp. 6.750% 06/01/39 1,500,000 1,724,895
NY Nassau County Tobacco Series 2006,
Settlement Corp. (a) 06/01/60 15,000,000 530,850
NY TSASC, Inc. Series 2006 1,
5.125% 06/01/42 1,000,000 1,031,500
WA Tobacco Settlement Authority Series 2002,
6.625% 06/01/32 250,000 280,412
-------------------------------------- ---------- ----------
Tobacco Total 6,882,099
Other Total 46,140,707
Other Revenue - 4.0%
Hotels - 1.5%
MD Economic Development Corp. Series 2006 A,
5.000% 12/01/31 1,000,000 1,010,840
NJ Middlesex County Improvement Heldrich Associates LLC:
Authority Series 2005 B,
6.250% 01/01/37 1,250,000 1,301,475
Series 2005 C,
8.750% 01/01/37 900,000 917,955
-------------------------------------- ---------- ----------
Hotels Total 3,230,270
Recreation - 2.2%
CA Agua Caliente Band of Cahuilla Series 2003,
Indians 5.600% 07/01/13 1,000,000 1,045,820
CA Cabazon Band Mission Indians Series 2004:
8.375% 10/01/15 (f) 240,000 248,506
8.750% 10/01/19 (f) 895,000 936,224
CT Mashantucket Western Pequot Series 1999 B,
(a) 09/01/16 (f) 1,000,000 621,480
CT Mohegan Tribe Gaming Authority Series 2001,
6.250% 01/01/31 (f) 275,000 293,155
NY Liberty Development Corp. National Sports Museum, Series 2006 A,
6.125% 02/15/19 (f) 600,000 625,362
See Accompanying Notes to Financial Statements.
16
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Other Revenue (continued)
Recreation (continued)
OR Cow Creek Band Umpqua Tribe Series 2006 C,
of Indians 5.625% 10/01/26 (f) 800,000 820,160
--------------------------------------------------- --------- ---------
Recreation Total 4,590,707
Retail - 0.3%
OH Lake County North Madison Properties, Series 1993,
8.819% 09/01/11 555,000 561,249
--------------------------------------------------- --------- ---------
Retail Total 561,249
Other Revenue Total 8,382,226
Resource Recovery - 2.5%
Disposal - 0.9%
CA Pollution Control Financing Republic Services, Inc., Series 2002 C, AMT,
Authority 5.250% 06/01/23 500,000 539,470
FL Lee County Solid Waste Systems Series 2006 A, AMT, Insured: AMBAC
5.000% 10/01/17 600,000 650,394
UT Carbon County Laidlaw Environmental:
Series 1995 A, AMT,
7.500% 02/01/10 250,000 250,775
Series 1997 A, AMT,
7.450% 07/01/17 500,000 518,430
--------------------------------------------------- --------- ---------
Disposal Total 1,959,069
Resource Recovery - 1.6%
MA Development Finance Agency Ogden Haverhill Associates, Series 1999 A, AMT,
6.700% 12/01/14 250,000 269,405
MA Industrial Finance Agency Ogden Haverhill Associates, Series 1998 A, AMT:
5.500% 12/01/13 500,000 520,235
5.600% 12/01/19 500,000 520,185
PA Delaware County Industrial American REF-Fuel Co., Series 1997 A,
Development Authority 6.200% 07/01/19 2,000,000 2,078,620
--------------------------------------------------- --------- ---------
Resource Recovery Total 3,388,445
Resource Recovery Total 5,347,514
Tax-Backed - 26.9%
Local Appropriated - 1.1%
CA Compton Civic Center & Capital Improvements, Series 1997 A,
5.500% 09/01/15 1,000,000 1,031,570
SC Dorchester County School Series 2004,
District No. 2 5.250% 12/01/29 650,000 693,251
SC Newberry County School District Series 2005,
5.000% 12/01/30 500,000 520,970
--------------------------------------------------- --------- ---------
Local Appropriated Total 2,245,791
See Accompanying Notes to Financial Statements.
17
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Tax-Backed (continued)
Local General Obligations - 7.3%
CA Los Angeles Unified School Series 2002 E, Insured: MBIA
District 5.750% 07/01/16 700,000 822,003
CA Montebello Unified School Series 2001, Insured: FSA:
District (a) 08/01/21 1,435,000 775,445
(a) 08/01/23 1,505,000 741,739
CO Northwest Metropolitan Series 2005,
District No. 3 6.250% 12/01/35 500,000 534,580
IL Chicago Board of Education Series 1997 A, Insured: AMBAC
5.250% 12/01/30 (h) 8,000,000 8,269,520
NJ Bergen County Improvement Series 2005,
Authority 5.000% 11/15/24 1,210,000 1,377,331
NY New York City Series 1997 A,
7.000% 08/01/07 595,000 605,466
Series 1997 H,
6.000% 08/01/17 485,000 497,077
TX Dallas County Flood Control Series 2002,
District 7.250% 04/01/32 1,000,000 1,073,770
TX Irving Independent School Series 1997, Insured: PSFG
District (a) 02/15/18 1,000,000 631,040
------------------------------- ---------- ----------
Local General Obligations Total 15,327,971
Special Non-Property Tax - 5.7%
CA San Diego Redevelopment Series 2001, Insured: FSA:
Agency (a) 09/01/19 1,910,000 1,124,150
(a) 09/01/22 1,910,000 978,684
IL Bolingbrook Series 2005,
(i) 01/01/24
(6.250% 01/01/08) 750,000 736,672
IL Metropolitan Pier & Exposition Series 1993 A, Insured: FGIC
Authority (a) 06/15/16 10,000,000 6,849,800
KS Wyandotte County Series 2005 B,
5.000% 12/01/20 325,000 340,597
Series 2006,
4.875% 10/01/28 800,000 804,408
NJ Economic Development Series 2004:
Authority 5.500% 06/15/31 150,000 160,519
5.750% 06/15/29 1,000,000 1,092,730
------------------------------- ---------- ----------
Special Non-Property Tax Total 12,087,560
See Accompanying Notes to Financial Statements.
18
Colonial High Income Municipal Trust,
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Tax-Backed (continued)
Special Property Tax - 9.8%
CA Carson Improvement Bond Act Series 1992,
1915 7.375% 09/02/22 35,000 35,333
CA Huntington Beach Community Series 2001-1,
Facilities District 6.450% 09/01/31 750,000 811,537
CA Lincoln Community Facilities Series 2004,
District No. 2003-1 5.900% 09/01/24 455,000 473,236
CA Oakdale Public Financing Series 2004,
Authority 5.375% 06/01/33 1,375,000 1,457,170
CA Orange County Improvement Phase IV, No. 01-1-B, Series 2003,
Bond Act 1915 5.750% 09/02/33 500,000 515,705
CA Placer Unified High School Series 2000 A, Insured: FGIC
District (a) 08/01/19 1,700,000 1,006,519
CA Redwood City Community Series 2003 B,
Facilities District No. 1 5.950% 09/01/28 600,000 633,180
CA Riverside County Public Series 1997,
Financing Authority 5.500% 10/01/22 120,000 122,425
CA Temecula Valley Unified School Series 2003,
District No. 1 6.125% 09/01/33 400,000 408,960
FL Celebration Community Series 2003 A,
Development District 6.400% 05/01/34 975,000 1,044,771
FL Colonial Country Club Series 2003,
Community Development District 6.400% 05/01/33 720,000 777,168
FL Double Branch Community Series 2002 A,
Development District 6.700% 05/01/34 680,000 751,822
FL Islands at Doral Southwest Series 2003,
Community Development District 6.375% 05/01/35 375,000 403,669
FL Lexington Oaks Community Series 1998 A,
Development District 6.125% 05/01/19 345,000 346,546
Series 2000 A,
7.200% 05/01/30 275,000 282,466
Series 2002 A,
6.700% 05/01/33 250,000 267,630
FL Orlando Series 1998 A:
5.500% 05/01/10 130,000 132,649
5.800% 05/01/26 300,000 307,980
FL Seven Oaks Community Series 2004 A,
Development District II 5.875% 05/01/35 290,000 301,409
Series 2004 B,
5.000% 05/01/09 720,000 722,534
See Accompanying Notes to Financial Statements.
19
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Tax-Backed (continued)
Special Property Tax (continued)
FL Stoneybrook Community Series 1998 A,
Development District 6.100% 05/01/19 275,000 276,249
FL West Villages Improvement Series 2006,
District 5.500% 05/01/37 750,000 762,990
FL Westchester Community Series 2003,
Development District No.1 6.125% 05/01/35 425,000 454,631
FL Westridge Community Series 2005,
Development District 5.800% 05/01/37 1,250,000 1,292,250
GA Atlanta Series 2005 A, AMT,
5.625% 01/01/16 600,000 623,418
IL Chicago Pilsen Redevelopment, Series 2004 B,
6.750% 06/01/22 450,000 491,391
IL Du Page County Special Service Series 2006,
Area No. 31 5.625% 03/01/36 250,000 263,455
IL Lincolnshire Special Services Series 2004,
Area No. 1 6.250% 03/01/34 500,000 533,295
IL Plano Special Service Area No. 4 Series 2005 5-B,
6.000% 03/01/35 2,000,000 2,028,440
IL Volo Village Special Service Area Series 2006 1,
No. 3 6.000% 03/01/36 750,000 773,452
IN Portage Series 2006,
5.000% 07/15/23 300,000 309,231
MI Pontiac Tax Increment Finance Development Area No. 3, Series 2002,
Authority 6.375% 06/01/31 550,000 593,896
MI Taylor Tax Increment Finance Series 2001, Insured: FSA
Authority 5.375% 05/01/17 1,220,000 1,305,144
------------------------------------ --------- ----------
Special Property Tax Total 20,510,551
State Appropriated - 2.8%
CA Public Works Board Series 2004 A,
5.500% 06/01/19 1,000,000 1,117,400
LA Military Department Series 2006,
5.000% 08/01/24 1,500,000 1,576,200
NY Urban Development Corp. Series 1995,
5.875% 01/01/21 1,000,000 1,203,990
PR Commonwealth of Puerto Rico Series 2002 E,
Public Finance Corp. 6.000% 08/01/26 1,645,000 2,018,382
------------------------------------ --------- ----------
State Appropriated Total 5,915,972
See Accompanying Notes to Financial Statements.
20
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Tax-Backed (continued)
State General Obligations - 0.2%
CA State Series 2003,
5.250% 02/01/23 380,000 434,667
------------------------------------------------- --------- ----------
State General Obligations Total 434,667
Tax-Backed Total 56,522,512
Transportation - 7.5%
Air Transportation - 4.0%
CA Los Angeles Regional Airport LAXfuel Corp., Series 2001, AMT, Insured: AMBAC
5.250% 01/01/23 750,000 781,170
CO Denver City & County Airport United Air Lines, Inc., Series 1992 A,
6.875% 10/01/32 1,000,000 1,037,580
FL Capital Trust Agency Air Cargo-Orlando, Series 2003, AMT,
6.750% 01/01/32 500,000 542,935
IN Indianapolis Airport Authority Series 2004, AMT, GTY AGMT: Federal Express Corp.
5.100% 01/15/17 250,000 266,435
NC Charlotte/Douglas International US Airways, Inc.:
Airport Series 1998, AMT,
5.600% 07/01/27 250,000 252,725
Series 2000, AMT,
7.750% 02/01/28 750,000 810,847
NJ Economic Development Continental Airlines, Inc.:
Authority Series 1999, AMT,
6.250% 09/15/29 485,000 503,576
Series 2003, AMT,
9.000% 06/01/33 750,000 931,770
NY New York City Industrial American Airlines, Inc., Series 2005, AMT,
Development Agency GTY AGMT: AMR Corp.
7.750% 08/01/31 500,000 600,965
Terminal One Group Association, Series 2005, AMT,
5.500% 01/01/21 750,000 823,582
TX Dallas-Fort Worth International American Airlines, Inc., Series 2000 A, AMT,
Airport 9.000% 05/01/29 1,000,000 1,221,380
TX Houston Industrial Development United Parcel Service, Series 2002, AMT,
Corp. 6.000% 03/01/23 700,000 745,206
------------------------------------------------- --------- ----------
Air Transportation Total 8,518,171
Airports - 0.1%
GA Augusta Airport Series 2005 C, AMT,
5.450% 01/01/31 250,000 266,988
------------------------------------------------- --------- ----------
Airports Total 266,988
Toll Facilities - 2.9%
CO E-470 Public Highway Authority Series 2000 B, Insured: MBIA
(a) 09/01/18 3,000,000 1,851,240
See Accompanying Notes to Financial Statements.
21
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Transportation (continued)
Toll Facilities (continued)
CO Northwest Parkway Public Series 2001 D,
Highway Authority 7.125% 06/15/41 1,250,000 1,308,825
PR Commonwealth of Puerto Rico Series 2003 AA, Insured: MBIA
Highway & Transportation Authority 5.500% 07/01/18 500,000 581,090
VA Richmond Metropolitan Series 1998, Insured: FGIC
Authority 5.250% 07/15/22 2,000,000 2,316,140
------------------------------------------------- --------- ----------
Toll Facilities Total 6,057,295
Transportation - 0.5%
NV Department of Business & Las Vegas Monorail Co., Series 2000,
Industry 7.375% 01/01/40 1,000,000 1,023,900
------------------------------------------------- --------- ----------
Transportation Total 1,023,900
Transportation Total 15,866,354
Utilities - 17.5%
Independent Power Producers - 2.4%
NY Port Authority of New York & KIAC Partners, Series 1996 IV, AMT,
New Jersey 6.750% 10/01/11 2,000,000 2,029,440
NY Suffolk County Industrial Nissequogue Cogeneration Partners Facilities,
Development Agency Series 1998, AMT,
5.500% 01/01/23 550,000 550,385
OR Western Generation Agency Series 2006 A,
5.000% 01/01/21 500,000 519,950
PA Carbon County Industrial Panther Creek Partners, Series 2000, AMT,
Development Authority 6.650% 05/01/10 215,000 225,885
PA Economic Development Series 1994 A, AMT,
Financing Authority 6.500% 01/01/13 1,000,000 1,018,080
PR Commonwealth of Puerto Rico
Industrial, Tourist, Educational,
Medical & Environmental AES Project, Series 2000, AMT,
Cogeneration Facilities 6.625% 06/01/26 645,000 702,528
------------------------------------------------- --------- ----------
Independent Power Producers Total 5,046,268
Investor Owned - 10.6%
AZ Pima County Industrial Tucson Electric Power Co., Series 1997 A, AMT,
Development Authority 6.100% 09/01/25 750,000 752,978
CA Chula Vista Industrial San Diego Gas & Electric Co., Series 1996 B, AMT,
Development Authority 5.500% 12/01/21 625,000 691,969
FL Polk County Industrial Tampa Electric Co., Series 1996, AMT,
Development Authority 5.850% 12/01/30 1,200,000 1,224,972
See Accompanying Notes to Financial Statements.
22
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Utilities (continued)
Investor Owned (continued)
IL Bryant Central Illinois Light Co., Series 1993,
5.900% 08/01/23 2,650,000 2,673,320
IN Petersburg Indianapolis Power & Light Co., Series 1995,
6.625% 12/01/24 1,000,000 1,000,080
LA Calcasieu Parish Industrial Entergy Gulf States, Inc., Series 1999,
Development Board 5.450% 07/01/10 500,000 500,835
LA West Feliciana Parish Entergy Gulf States, Inc., Series 1999 B,
6.600% 09/01/28 500,000 501,300
MS Business Finance Corp. Systems Energy Resources, Inc., Series 1998,
5.875% 04/01/22 2,000,000 2,006,680
MT Forsyth Northwestern Corp., Series 2006, Insured: AMBAC
4.650% 08/01/23 1,500,000 1,547,565
Portland General, Series 1998 A,
5.200% 05/01/33 300,000 307,518
NH Business Finance Authority Public Service Co., Series 2006 B, AMT, Insured: MBIA
4.750% 05/01/21 250,000 258,520
NV Clark County Industrial Nevada Power Co., Series 1995 B, AMT,
Development Authority 5.900% 10/01/30 1,250,000 1,253,837
OH Air Quality Development Cleveland Electric Illuminating Co., Series 2002 A,
Authority 6.000% 12/01/13 900,000 924,993
PA Economic Development Reliant Energy, Inc., Series 2001 A, AMT,
Financing Authority 6.750% 12/01/36 600,000 652,230
TX Brazos River Authority TXU Energy Co., LLC:
Series 2001 C, AMT,
5.750% 05/01/36 280,000 298,178
Series 2003 C, AMT,
6.750% 10/01/38 645,000 728,811
VA Pittsylvania County Industrial Virginia Electric & Power Co., Series 1994 A, AMT,
Development Authority 7.450% 01/01/09 700,000 708,876
WV Pleasant County Western Pennsylvania Power Co., Series 1999 E, AMT,
Insured: AMBAC
5.500% 04/01/29 4,750,000 4,956,910
WY Campbell County Black Hills Power, Inc., Series 2004,
5.350% 10/01/24 1,250,000 1,318,962
----------------------------------------------------- --------- ----------
Investor Owned Total 22,308,534
Joint Power Authority - 0.4%
NC Eastern Municipal Power Series 1999 D,
Agency 6.700% 01/01/19 500,000 543,685
Series 2003 F,
5.500% 01/01/16 285,000 307,561
----------------------------------------------------- --------- ----------
Joint Power Authority Total 851,246
See Accompanying Notes to Financial Statements.
23
Colonial High Income Municipal Trust
November 30, 2006
Municipal Bonds (continued)
Par ($) Value ($)
Utilities (continued)
Municipal Electric - 3.2%
PR Commonwealth of Puerto Rico Series 1998 II, Insured: FSA
Electric Power Authority 5.125% 07/01/26 2,000,000 2,143,160
WA Chelan County Public Utility Columbia River Rock Hydroelectric,
District No. 1 Series 1997, Insured: MBIA
(a) 06/01/14 5,000,000 3,729,200
WA Seattle Light & Power Series 2001, Insured: FSA
5.500% 03/01/17 750,000 802,020
----------------------------------------------- --------- -----------
Municipal Electric Total 6,674,380
Water & Sewer - 0.9%
Guam Government Waterworks Series 2005,
Authority 5.875% 07/01/35 1,125,000 1,214,111
MS V Lakes Utility District Series 1994,
8.250% 07/15/24 (e) 480,000 373,426
NH Industrial Development Pennichuck Water Works, Inc., Series 1988, AMT,
Authority 7.500% 07/01/18 375,000 423,776
----------------------------------------------- --------- -----------
Water & Sewer Total 2,011,313
Utilities Total 36,891,741
Total Municipal Bonds (Cost of $303,734,587) 320,135,545
Municipal Preferred Stocks - 3.1%
Housing - 3.1%
Multi-Family - 3.1%
Charter Mac Equity Issuer Trust AMT,
6.300% 04/30/19 (f) 1,000,000 1,130,630
Series 1999, AMT,
6.625% 06/30/09 (f) 2,000,000 2,105,460
GMAC Municipal Mortgage Trust AMT,
5.600% 10/31/39 (f) 1,000,000 1,079,670
Munimae TE Bond Subsidiary LLC Series 2000 B, AMT,
7.750% 06/30/50 (f) 2,000,000 2,235,440
----------------------------------------------- --------- -----------
Multi-Family Total 6,551,200
Housing Total 6,551,200
Total Municipal Preferred Stocks (Cost of $6,000,000) 6,551,200
Shares
Investment Company - 0.0%
Dreyfus Tax-Exempt Cash Management Fund 5,116 5,116
----------------------------------------------- --------- -----------
Total Investment Company (Cost of $5,116) 5,116
See Accompanying Notes to Financial Statements.
24
Colonial High Income Municipal Trust
November 30, 2006
Par ($) Value ($)
Short-Term Obligations - 1.3%
Variable Rate Demand Notes(j) - 1.3%
MS Jackson County Pollution Chevron Corp., Series 1993,
Control 3.570% 06/01/23 300,000 300,000
NE Lancaster County Hospital Bryanlgh Medical Center, Series 2002, Insured: AMBAC
Authority No. 1 3.570% 06/01/18 600,000 600,000
NY New York City Municipal Water Series 1992 C, Insured: FGIC
Finance Authority 3.510% 06/15/22 400,000 400,000
TX Harris County Health Facilities Texas Medical Center, Series 2001, Insured: MBIA
Development Corp. 3.570% 09/01/31 100,000 100,000
WI Health & Educational Facilities Gundersen Clinic Ltd., Series 2000 A, Insured: FSA,
Authority SPA: Dexia Credit Local
3.570% 12/01/15 200,000 200,000
WY Uinta County Pollution Control Chevron Corp.:
Revenue Series 1992,
3.570% 12/01/22 700,000 700,000
Series 1993,
3.570% 08/15/20 400,000 400,000
---------------------------------------------------- ------- ------------
Variable Rate Demand Notes Total 2,700,000
---------------------------------------------------- ------- ------------
Total Short-Term Obligations (Cost of $2,700,000) 2,700,000
---------------------------------------------------- ------- ------------
Total Investments - 156.7%
(Cost of $312,439,703)(k) 329,391,861
---------------------------------------------------- ------- ------------
Auction Preferred Shares Plus Cumulative Unpaid
Distributions - (57.1)% (120,016,930)
---------------------------------------------------- ------- ------------
Other Assets & Liabilities, Net - 0.4% 772,789
---------------------------------------------------- ------- ------------
Net Assets - 100.0% 210,147,720
Notes to Investment Portfolio:
(a)Zero coupon bond.
(b)Denotes a restricted security, which is subject
to registration with the SEC or is required to be
exempt from such registration prior to resale. At
November 30, 2006, the value of this security
represents 0.6% of net assets.
Additional information on this restricted
security is as follows:
Acquisition Acquisition
Security Date Cost
-------- ----------- -----------
CA Statewide Communities Development Authority, Crossroads School for Arts &
Sciences, Series 1998, 6.000% 08/01/28 08/21/98 $1,230,000
(c)Security purchased on a delayed delivery basis.
(d)Represents fair value as determined in good faith
under procedures approved by the Board of
Trustees.
(e)The issuer is in default of certain debt
covenants. Income is not being accrued. At
November 30, 2006, the value of these securities
amounted to $991,357, which represents 0.5% of
net assets.
(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 November 30, 2006, these
securities, which are not illiquid, except for
the following, amounted to $10,641,255, which
represents 5.1% 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 $545,168
See Accompanying Notes to Financial Statements.
25
Colonial High Income Municipal Trust
November 30, 2006
(g)The Trust has been informed that each issuer has
placed direct obligations of the U.S. Government
in an irrevocable trust, solely for the payment
of principal and interest.
(h)A portion of this security with a market value of
$3,111,407 is pledged as collateral for open
futures contracts.
(i)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.
(j)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
November 30, 2006.
(k)Cost for federal income tax purposes is
$312,182,696.
At November 30, 2006, the Trust held the
following open short futures contracts:
Number of Aggregate Expiration Unrealized
Type Contracts Value Face Value Date Depreciation
---- --------- ----- ---------- ---------- ------------
10-Year U.S. Treasury Notes 136 $14,849,500 $14,785,308 Mar-2007 $(64,192)
At November 30, 2006, the Trust held the
following forward swap contract:
Effective Expiration Receive Fixed Variable Unrealized
Notional Amount Date Date Counterparty (Pay) Rate Rate Depreciation
--------------- --------- ---------- ------------ ------- ----- -------- ------------
$13,000,000 02/03/07 02/03/27 JPMorgan (Pay) 3.857% BMA $(121,266)
Chase Bank Index
At November 30, 2006, the composition of the
Trust by revenue source is as follows:
Holdings by Revenue Source (Unaudited) % of Net Assets
-------------------------------------- ---------------
Health Care 44.7%
Tax-Backed 26.9
Other 22.0
Housing 20.0
Utilities 17.5
Transportation 7.5
Industrials 7.3
Other Revenue 4.0
Education 3.0
Resource Recovery 2.5
-----
155.4
Investment Company 0.0*
Auction Preferred Shares Plus Cumulative Unpaid Distributions (57.1)
Short-Term Obligations 1.3
Other Assets & Liabilities, Net 0.4
-----
100.0%
=====
* Rounds to less than 0.1%.
Acronym Name
------- ----
AMBAC Ambac Assurance Corp.
AMT Alternative Minimum Tax
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Administration
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
GTY AGMT Guaranty Agreement
HFDC Health Facility Development Corporation
MBIA MBIA Insurance Corp.
PSFG Permanent School Fund Guarantee
RAD Radian Asset Assurance, Inc.
SPA Stand-by Purchase Agreement
See Accompanying Notes to Financial Statements.
26
Statement of Assets and Liabilities - Colonial High Income Municipal Trust
November 30, 2006
($)
Assets Investments, at cost 312,439,703
-----------
Investments, at value 329,391,861
Cash 36,850
Receivable for interest 5,030,140
Deferred Trustees' compensation plan 27,817
------------------------------------------------------------------------ -----------
Total Assets 334,486,668
Liabilities Net unrealized depreciation on swap contracts 121,266
Payable for:
Investments purchased on a delayed delivery basis 2,865,819
Futures variation margin 55,250
Distributions -- common shares 936,967
Distributions -- preferred shares 16,930
Investment advisory fee 200,845
Pricing and bookkeeping fees 9,531
Trustees' fees 872
Custody fee 878
Audit fee 34,800
Reports to shareholders 55,954
Preferred shares remarketing commissions 1,234
Chief compliance officer expenses 758
Deferred Trustees' fees 27,817
Other liabilities 10,027
------------------------------------------------------------------------ -----------
Total Liabilities 4,338,948
------------------------------------------------------------------------ -----------
Auction Preferred Shares 4,800 shares issued and outstanding at $25,000 per share 120,000,000
------------------------------------------------------------------------ -----------
Composition of Net Assets Paid-in capital -- common shares 256,582,674
Applicable to Common Shares Undistributed net investment income 308,165
Accumulated net realized loss (63,509,819)
Net unrealized appreciation (depreciation) on:
Investments 16,952,158
Swap contracts (121,266)
Futures contracts (64,192)
------------------------------------------------------------------------ -----------
Net assets at value applicable to 31,232,248 common shares of beneficial
interest outstanding 210,147,720
------------------------------------------------------------------------ -----------
Net asset value per common share 6.73
See Accompanying Notes to Financial Statements.
27
Statement of Operations - Colonial High Income Municipal Trust
For the Year Ended November 30, 2006
($)
Investment Income Interest 19,488,392
Dividends 4,266
-------------------------------------------------------- -----------
Total Investment Income 19,492,658
Expenses Investment advisory fee 2,437,948
Transfer agent fee 53,102
Pricing and bookkeeping fees 94,187
Trustees' fees 21,242
Preferred shares remarketing commissions 300,343
Custody fee 10,636
Chief compliance officer expenses 4,778
Other expenses 238,040
-------------------------------------------------------- -----------
Total Expenses 3,160,276
-------------------------------------------------------- -----------
Custody earnings credit (3,695)
-------------------------------------------------------- -----------
Net Expenses 3,156,581
-------------------------------------------------------- -----------
Net Investment Income 16,336,077
Net Realized and Unrealized Gain Net realized gain (loss) on:
(Loss) on Investments, Futures Investments (10,060,487)
Contracts and Swap Contracts Futures contracts 478,419
-------------------------------------------------------- -----------
Net realized loss (9,582,068)
Net change in unrealized appreciation (depreciation) on:
Investments 18,068,788
Swap contracts (121,266)
Futures contracts (71,215)
-------------------------------------------------------- -----------
Net change in unrealized appreciation (depreciation) 17,876,307
-------------------------------------------------------- -----------
Net Gain 8,294,239
-------------------------------------------------------- -----------
Net Increase Resulting from Operations 24,630,316
Less Distributions Declared to
Preferred Shareholders From net investment income (4,016,026)
-------------------------------------------------------- -----------
Net Increase Resulting from Operations Applicable to
Common Shares 20,614,290
See Accompanying Notes to Financial Statements.
28
Statement of Changes in Net Assets - Colonial High Income Municipal Trust
Year Ended November 30,
Increase (Decrease) in Net Assets 2006 ($) 2005 ($)
Operations Net investment income 16,336,077 16,604,193
Net realized gain (loss) on investments and futures
contracts (9,582,068) 3,346,659
Net change in unrealized appreciation (depreciation)
on investments, futures contracts and swap
contracts 17,876,307 (590,198)
----------------------------------------------------- ----------- -----------
Net Increase Resulting from Operations 24,630,316 19,360,654
Less Distributions Declared to
Preferred Shareholders From net investment income (4,016,026) (2,628,702)
----------------------------------------------------- ----------- -----------
Increase Resulting from Operations Applicable to
Common Shares 20,614,290 16,731,952
Less Distributions Declared to
Common Shareholders From net investment income: (12,546,482) (14,274,618)
Share Transactions Distributions reinvested 413,954 110,419
----------------------------------------------------- ----------- -----------
Net Increase in Net Assets Applicable to Common
Shares 8,481,762 2,567,753
Net Assets Applicable to
Common Shares Beginning of period 201,665,958 199,098,205
End of period (including undistributed net investment
income of $308,165 and $572,831, respectively) 210,147,720 201,665,958
----------------------------------------------------- ----------- -----------
Number of Trust Shares
Common Shares
Issued for distributions reinvested 63,225 16,963
Outstanding at:
Beginning of period 31,169,023 31,152,060
End of period 31,232,248 31,169,023
----------------------------------------------------- ----------- -----------
Preferred Shares
Outstanding at end of period 4,800 4,800
See Accompanying Notes to Financial Statements.
29
Financial Highlights - Colonial High Income Municipal Trust
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise stated):
Year Ended November 30,
-----------------------------------------------
2006 2005 2004 2003
--------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 6.47 $ 6.39 $ 6.57 $ 6.52
Income from Investment Operations:
Net investment income 0.52(a) 0.53(a) 0.52(a) 0.54(a)
Net realized and unrealized gain (loss) on investments, futures contracts
and swap contracts 0.27 0.09 (0.18) 0.04
-------- -------- -------- --------
Total from Investment Operations 0.79 0.62 0.34 0.58
Less Common Share Equivalent of Distributions Declared
to Preferred Shareholders:
From net investment income (0.13) (0.08) (0.04) (0.04)
-------- -------- -------- --------
Total from Investment Operations Applicable to Common Shareholders 0.66 0.54 0.30 0.54
Less Distributions Declared to Common Shareholders:
From net investment income (0.40) (0.46) (0.48) (0.49)
-------- -------- -------- --------
Net Asset Value, End of Period $ 6.73 $ 6.47 $ 6.39 $ 6.57
-------- -------- -------- --------
Market price per share -- common shares $ 6.62 $ 6.42 $ 6.43 $ 6.45
-------- -------- -------- --------
Total return -- based on market value -- common shares (b) 9.63% 7.18% 7.44% 11.17%
Ratios to Average Net Assets/Supplemental Data:
Expenses (c)(d) 1.54% 1.55% 1.58% 1.54%
Net investment income before preferred stock dividend (c)(d) 7.97% 8.17% 8.04% 8.30%
Net investment income after preferred stock dividend (c)(d) 6.01% 6.88% 7.39% 7.72%
Portfolio turnover rate 32% 15% 13% 14%
Net assets, end of period (000's) -- common shares $210,148 $201,666 $199,098 $204,506
---------
2002
-------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 6.93
Income from Investment Operations:
Net investment income 0.57(a)
Net realized and unrealized gain (loss) on investments, futures contracts
and swap contracts (0.42)
--------
Total from Investment Operations 0.15
Less Common Share Equivalent of Distributions Declared
to Preferred Shareholders:
From net investment income (0.06)
--------
Total from Investment Operations Applicable to Common Shareholders 0.09
Less Distributions Declared to Common Shareholders:
From net investment income (0.50)
--------
Net Asset Value, End of Period $ 6.52
--------
Market price per share -- common shares $ 6.26
--------
Total return -- based on market value -- common shares (b) 5.81%
Ratios to Average Net Assets/Supplemental Data:
Expenses (c)(d) 1.49%
Net investment income before preferred stock dividend (c)(d) 8.36%
Net investment income after preferred stock dividend (c)(d) 7.53%
Portfolio turnover rate 15%
Net assets, end of period (000's) -- common shares $202,765
(a)Per share data was calculated using the average shares outstanding during
the period.
(b)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(c)The benefits derived from custody credits had an impact of less than 0.01%.
(d)Ratios reflect average net assets available to common shares only.
See Accompanying Notes to Financial Statements.
30
Asset Coverage Requirements - Colonial High Income Municipal Trust
Involuntary Average
Asset Liquidating Market
Total Amount Coverage Preference Value
Outstanding Per Share* Per Share Per Share
--------------------------------------------------------------
11/30/06 $120,000,000 $68,781 $25,004 $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 Auction Preferred
Shares outstanding.
**On August 26, 1999, the Trust began offering Auction Preferred Shares.
See Accompanying Notes to Financial Statements.
31
Notes to Financial Statements - Colonial High Income Municipal Trust
November 30, 2006
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
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 reliable, 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.
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements ("SFAS 157"), was issued. SFAS 157 is effective for fiscal
years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management has recently begun to evaluate the impact
the application of SFAS 157 will have on the Trust's financial statement
disclosures.
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 futures contracts 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
32
Colonial High Income Municipal Trust
November 30, 2006
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 recognizes a
realized gain or loss when the contract is closed or expires.
Swap Contracts
The Trust may engage in swap transactions such as interest rate and forward
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 Statement 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. Original issue discount is
accreted to interest income over the life of the security with a corresponding
increase in the cost basis. Premium and discount are amortized and accreted,
respectively, on all debt securities. Corporate actions and dividend income are
recorded on the ex-date.
Federal Income Tax Status
The Trust intends to qualify each year as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, as amended, and will
distribute substantially all of its tax exempt or taxable income, if any, for
its tax year, and as such will not be subject to federal income taxes. In
addition, the Trust intends to distribute in each calendar year substantially
all of its net investment income, capital gains and certain other amounts, if
any, such that the Trust should not be subject to federal excise tax.
Therefore, no federal income or excise tax provision is recorded.
33
Colonial High Income Municipal Trust
November 30, 2006
Distributions to Shareholders
Distributions to common shareholders are recorded on the ex-date. Distributions
to Auction Preferred shareholders are recorded daily and payable at the end of
each dividend period. Each dividend payment period for the APS is generally
seven days. The applicable dividend rate for the APS on November 30, 2006, was
3.35% for Series T and 3.60% for Series W. For the year ended November 30,
2006, the Trust declared dividends to Auction Preferred shareholders amounting
to $4,016,026 representing an average dividend rate of 3.35% per APS.
Indemnification
In the normal course of business, the Trust enters into contracts that contain
a variety of representations and warranties and which provide general
indemnities. The Trust's maximum exposure under these arrangements is unknown,
as this would involve future claims against the Trust. Also, under the Trust's
organizational documents and by contract, the Trustees and Officers of the
Trust are indemnified against certain liabilities that may arise out of their
duties to the Trust. However, based on experience, the Trust expects the risk
of loss due to these warranties and indemnities to be minimal.
Note 3. Federal Tax Information
The timing and character of income and capital gain distributions are
determined in accordance with income tax regulations, which may differ from
GAAP. Reclassifications are made to the Trust's capital accounts for permanent
tax differences to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
For the year ended November 30, 2006, permanent book and tax basis differences
resulting primarily from differing treatments for discount accretion/premium
amortization on debt securities were identified and reclassified among the
components of the Trust's net assets as follows:
Undistributed Accumulated
Net Investment Net Realized Paid-In
Income Loss Capital
$(38,235) $38,235 $--
Net investment income and net realized gains (losses), as disclosed on the
Statement of Operations, and net assets were not affected by this
reclassification.
The tax character of distributions paid during the years ended November 30,
2006 and November 30, 2005 was as follows:
November 30,
2006 2005
Distributions paid from:
Tax-Exempt Income $16,446,102 $16,903,320
Ordinary Income * 116,406 --
Long-Term Capital Gains -- --
*For tax purposes short-term capital gains distributions, if any, are
considered ordinary income distributions.
As of November 30, 2006, the components of distributable earnings on a tax
basis were as follows:
Undistributed Undistributed
Tax-Exempt Long-term Net Unrealized
Income Capital Gains Appreciation*
$1,571,770 $-- $17,209,165
*The differences between book-basis and tax-basis net unrealized
appreciation/depreciation are primarily due to discount accretion/premium
amortization on debt securities.
Unrealized appreciation and depreciation at November 30, 2006, based on cost of
investments for federal income tax purposes, was:
Unrealized appreciation $22,844,131
Unrealized depreciation (5,634,966)
Net unrealized appreciation $17,209,165
The following capital loss carryforwards, determined as of November 30, 2006,
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 Expiration Capital Loss 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
2014 9,352,747
Total $53,631,541
34
Colonial High Income Municipal Trust
November 30, 2006
Under current tax rules, certain capital losses realized after October 31 may
be deferred and treated as occurring on the first day of the following fiscal
year. As of November 30, 2006, post-October capital losses of $893,924
attributed to security transactions were deferred to December 1, 2006.
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
an Interpretation of FASB Statement No. 109 (the "Interpretation"). This
Interpretation is effective for fiscal years beginning after December 15, 2006
and is to be applied to open tax positions upon initial adoption.
This Interpretation prescribes a minimum recognition threshold and measurement
method for the financial statement recognition of tax positions taken or
expected to be taken in a tax return and also requires certain expanded
disclosures. Management has recently begun to evaluate the application of this
Interpretation to the Trust and has not at this time quantified the impact, if
any, resulting from the adoption of this Interpretation on the Trust's
financial statements.
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 certain functions to
State Street Bank & Trust Company ("State Street"). As a result, the total fees
payable under the pricing and bookkeeping agreement (other than certain
reimbursements paid to Columbia and discussed below) are paid to State Street.
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 year ended November 30, 2006, the effective pricing and
bookkeeping fee rate for the Trust, inclusive of out-of-pocket expenses, was
0.029% 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 Office of 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 year ended November 30, 2006, the Trust paid $2,550 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
35
Colonial High Income Municipal Trust
November 30, 2006
Note 5. Portfolio Information
For the year ended November 30, 2006, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $118,009,492 and
$101,244,972, respectively.
Note 6. Preferred Shares
The Trust currently has outstanding 4,800 APS (2,400 shares each of Series T
and W). The APS have a liquidation preference of $25,000 per APS plus
accumulated but unpaid dividends and have certain class specific preferences
over the common shares. The dividend rate on the APS is set, typically every
seven days, through an auction process. Dividends on the APS are cumulative.
Each holder of the APS is entitled to one vote per APS. Unless otherwise
required by law or under the terms of the bylaws, each holder of APS has the
same voting rights as common shareholders and will vote together with common
shareholders as a single class. The holders of APS, voting as a separate class,
have the right to: (a) elect at least two Trustees, (b) elect a majority of the
Trustees at any time when dividends on the APS are due and unpaid for two full
years, and (c) vote on certain matters affecting the rights of the APS.
Under the Act, the Trust is required to maintain asset coverage of at least
200% with respect to the APS as of the last business day of each month in which
any APS are outstanding. Additionally, the Trust is required to meet more
stringent asset coverage requirements under the terms of the APS agreement and
in accordance with the guidelines prescribed by the APS' rating agencies.
Should these requirements not be met, or should dividends accrued on the APS
not be paid, the Trust may be restricted in its ability to declare dividends to
common shareholders or may be required to redeem certain APS. At November 30,
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. ("Moody's") or rated AAA by Standard & Poor's
except for Radian Asset Assurance, Inc., which is rated Aa3 and AA by Moody's
and Standard & Poor's, respectively. At November 30, 2006, investments
supported by private insurers that represent greater than 5% of the total
investments of the Trust were as follows:
% of Total
Insurer Investments
Ambac Assurance Corp. 6.7%
Geographic Concentration
The Trust has greater than 5% of its total investments at November 30, 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
36
Colonial High Income Municipal Trust
November 30, 2006
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 released the proposed plan of distribution for public
notice and comment but has not yet approved a final plan of distribution.
As a result of these matters or any adverse publicity or other developments
resulting from them, the market price of trust 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 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. 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 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.
On April 4, 2006, the plaintiffs and the Columbia defendants named in the MDL,
including the Columbia Funds, entered into a term sheet containing the
principal terms of a stipulation of settlement that would settle all Columbia-
37
Colonial High Income Municipal Trust
November 30, 2006
related claims in the MDL described above, including the
CDSC Lawsuit. On April 6, 2006, the U.S. District Court for the District of
Maryland stayed all actions with respect to these Columbia-related claims.
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 purposes. 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 naming the Columbia Funds as nominal defendants. 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 to the United
States Court of Appeals for the First Circuit on December 30, 2005; this appeal
is currently pending. The parties have advised the appellate court that they
are engaged in settlement discussions and the court has, accordingly, deferred
the briefing schedule for the appeal. The settlement has not yet been
finalized. Any settlement ultimately agreed by the parties will be subject to
court approval.
This matter is ongoing. Accordingly, no estimate can be made of the financial
impact, if any, of this litigation on any fund.
38
Report of Independent Registered Public Accounting Firm
To the Trustees and the Shareholders of Colonial High Income Municipal Trust
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial High Income Municipal
Trust (the "Trust") at November 30, 2006, and the results of its operations,
the changes in its net assets and its financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at November 30, 2006 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 25, 2007
39
Unaudited Information - Colonial High Income Municipal Trust
Federal Income Tax Information
99.30% of distributions from net investment income will be treated as exempt
income for federal income tax purposes.
For the calendar year ended December 31, 2006, 22.62% of distributions from net
investment income is subject to the alternative minimum tax.
40
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.
41
Fund Governance - Colonial High Income Municipal Trust
The Trustees serve terms of indefinite duration. The names, addresses and ages
of the Trustees and officers of the Funds in the Columbia Funds Complex, the
year each was first elected or appointed to office, their principal business
occupations during at least the last five years, the number of portfolios
overseen by each Trustee and other directorships they hold are shown below.
Each officer listed below serves as an officer of each Fund in the Columbia
Funds Complex.
Independent Trustees
Name, address and year of birth, Principal occupation(s) during past five years, Number
Position with Funds, Year first of portfolios in Columbia Funds Complex overseen by
elected or appointed to office/(1)/ Trustee, Other directorships held
Douglas A. Hacker (Born 1955)
-------------------------------------------------------------------------------------------
c/o Columbia Management Independent business executive since May, 2006;
Advisors, LLC Executive Vice President-Strategy of United Airlines
One Financial Center (airline) from December, 2002 to May, 2006; President
Boston, MA 02111 of UAL Loyalty Services (airline marketing company)
Trustee (since 1996) from September, 2001 to December, 2002; Executive Vice
President and Chief Financial Officer of United
Airlines from July, 1999 to September, 2001. Oversees
81, Nash Finch Company (food distributor); Aircastle
Limited (aircraft leasing)
Janet Langford Kelly (Born 1957)
-------------------------------------------------------------------------------------------
c/o Columbia Management Deputy General Counsel-Corporate Legal Services,
Advisors, LLC ConocoPhillips (integrated petroleum company) since
One Financial Center August, 2006; Partner, Zelle, Hofmann, Voelbel, Mason&
Boston, MA 02111 Gette LLP (law firm) from March, 2005 to July,
Trustee (since 1996) 2006;Adjunct Professor of Law, Northwestern
University, from September, 2004 to June, 2006,
Director, UAL Corporation (airline) from February,
2006 to July, 2006; Chief Administrative Officer and
Senior Vice President, Kmart Holding Corporation
(consumer goods), from September, 2003 to March, 2004;
Executive Vice President-Corporate Development and
Administration, General Counsel and Secretary, Kellogg
Company (food manufacturer), from September, 1999 to
August, 2003. Oversees 81, None
Richard W. Lowry (Born 1936)
-------------------------------------------------------------------------------------------
c/o Columbia Management Private Investor since August, 1987 (formerly Chairman
Advisors, LLC and Chief Executive Officer, U.S. Plywood Corporation
One Financial Center (building products manufacturer) until 1987). Oversees
Boston, MA 02111 81, None
Trustee (since 1995)
Charles R. Nelson (Born 1943)
-------------------------------------------------------------------------------------------
c/o Columbia Management Professor of Economics, University of Washington,
Advisors, LLC since January, 1976; Ford and Louisa Van Voorhis
One Financial Center Professor of Political Economy, University of
Boston, MA 02111 Washington, since September, 1993; Director, Institute
Trustee (since 1981) for Economic Research, University of Washington from
September, 2001 to June, 2003; Adjunct Professor of
Statistics, University of Washington, since September,
1980; Associate Editor, Journal of Money Credit and
Banking, since September, 1993; Consultant on
econometric and statistical matters. Oversees 81, None
/(1)/In December 2000, the boards of each of the former Liberty Funds and
former Stein Roe Funds were combined into one board of trustees
responsible for the oversight of both fund groups (collectively, the
"Liberty Board"). In October 2003, the trustees on the Liberty Board were
elected to the boards of the Columbia Funds (the "Columbia Board") and of
the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that
election, Patrick J. Simpson who had been a director on the Columbia Board
and trustee on the CMG Funds Board, was appointed to serve as trustee of
the Liberty Board. The date shown is the earliest date on which a
trustee/director was elected or appointed to the board of a Fund in the
Columbia Funds Complex.
42
Fund Governance (continued) - Colonial High Income Municipal Trust
Name, address and year of birth, Principal occupation(s) during past five years, Number
Position with Funds, Year first of portfolios in Columbia Funds Complex overseen by
elected or appointed to office/(1)/ Trustee, Other directorships held
John J. Neuhauser (Born 1942)
-------------------------------------------------------------------------------------------
c/o Columbia Management University Professor, Boston College since November,
Advisors, LLC 2005; Academic Vice President and Dean of Faculties,
One Financial Center Boston College from August, 1999 to October, 2005.
Boston, MA 02111 Oversees 81, None
Trustee (since 1985)
Patrick J. Simpson (Born 1944)
-------------------------------------------------------------------------------------------
c/o Columbia Management Partner, Perkins Coie LLP (law firm). Oversees 81, None
Advisors, LLC
One Financial Center
Boston, MA 02111
Trustee (since 2000)
Thomas E. Stitzel (Born 1936)
-------------------------------------------------------------------------------------------
c/o Columbia Management Business Consultant since 1999; Chartered Financial
Advisors, LLC One Financial Center Analyst. Oversees 81, None
Boston, MA 02111
Trustee (since 1998)
Thomas C. Theobald (Born 1937)
-------------------------------------------------------------------------------------------
c/o Columbia Management Partner and Senior Advisor, Chicago Growth Partners
Advisors, LLC (private equity investing) since September, 2004;
One Financial Center Managing Director, William Blair Capital Partners
Boston, MA 02111 (private equity investing) from September, 1994 to
Trustee and Chairman of the September, 2004. Oversees 81, Anixter International
Board/(2)/ (since 1996) (network support equipment distributor); Ventas, Inc.
(real estate investment trust); Jones Lang LaSalle
(real estate management services); Ambac Financial
Group (financial guaranty insurance)
Anne-Lee Verville (Born 1945)
-------------------------------------------------------------------------------------------
c/o Columbia Management Retired since 1997 (formerly General Manager, Global
Advisors, LLC Education Industry, IBM Corporation (computer and
One Financial Center technology) from 1994 to 1997). Oversees 81, None
Boston, MA 02111
Trustee (since 1998)
Interested Trustee
William E. Mayer (Born 1940)
------------------------------------------------------------------------------------
c/o Columbia Management Partner, Park Avenue Equity Partners (private equity)
Advisors, LLC since February, 1999; Dean and Professor, College of
One Financial Center Business, University of Maryland, 1992 to 1997.
Boston, MA 02111 Oversees 81, Lee Enterprises (print media), WR
Trustee/(3)/ (since 1994) Hambrecht + Co. (financial service provider); Reader's
Digest (publishing)
/(2)/Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
/(3)/Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co.
43
Fund Governance (continued) - Colonial High Income Municipal Trust
The Statement of Additional Information includes additional information about
the Trustees of the Funds and is available, without charge, upon request by
calling 800-426-3750.
Officers
Name, address and year of birth, Principal occupation(s) during past five years
Position with Columbia Funds, year
first elected or appointed to office
Christopher L. Wilson (Born 1957)
--------------------------------------------------------------------------------------------
One Financial Center Head of Mutual Funds since August, 2004 and Managing
Boston, MA 02111 Director of Columbia Management Advisors, LLC ("the
President (since 2004) Advisor") since September, 2005; President and Chief
Executive Officer, CDC IXIS Asset Management Services,
Inc. (investment management) from September, 1998 to
August, 2004.
James R. Bordewick, Jr. (Born 1959)
--------------------------------------------------------------------------------------------
One Financial Center Associate General Counsel, Bank of America since
Boston, MA 02111 April, 2005; Senior Vice President and Associate
Senior Vice President, Secretary General Counsel, MFS Investment Management (investment
and Chief Legal Officer (since 2006) management) prior to April, 2005.
J. Kevin Connaughton (Born 1964)
--------------------------------------------------------------------------------------------
One Financial Center Managing Director of the Advisor since February, 1998.
Boston, MA 02111
Senior Vice President, Chief
Financial Officer and Treasurer
(since 2000)
Linda J. Wondrack (Born 1964)
--------------------------------------------------------------------------------------------
One Financial Center Director (Columbia Management Group LLC and Investment
Boston, MA 02111 Product Group Compliance), Bank of America since June
Senior Vice President, Chief 2005; Director of Corporate Compliance and Conflicts
Compliance Officer (since 2007) Officer, MFS Investment Management (investment
management), August 2004 to May 2005; Managing
Director, Deutsche Asset Management (investment
management) prior to August 2004.
Michael G. Clarke (Born 1969)
--------------------------------------------------------------------------------------------
One Financial Center Director of Fund Administration of the Advisor since
Boston, MA 02111 January, 2006; Managing Director of the Advisor
Chief Accounting Officer and September, 2004 to December, 2005; Vice President Fund
Assistant Treasurer (since 2004) Administration of the Advisor June, 2002 to September,
2004. Vice President Product Strategy and Development
of the Advisor from February, 2001 to June, 2002.
Jeffrey R. Coleman (Born 1969)
--------------------------------------------------------------------------------------------
One Financial Center Director of Fund Administration of the Advisor since
Boston, MA 02111 January, 2006; Fund Controller of the Advisor from
Deputy Treasurer (since 2006) October 2004 to January 2006; Vice President of CDC
IXIS Asset Management Services, Inc. (investment
management) from August, 2000 to September, 2004.
Joseph F. DiMaria (Born 1968)
--------------------------------------------------------------------------------------------
One Financial Center Director of Fund Administration of the Advisor since
Boston, MA 02111 January, 2006; Head of Tax/Compliance and Assistant
Deputy Treasurer (since 2006) Treasurer of the Advisor from November, 2004 to
December, 2005; Director of Trustee Administration
(Sarbanes-Oxley) of the Advisor from May, 2003 to
October, 2004; Senior Audit Manager,
PricewaterhouseCoopers (independent registered public
accounting firm) from July, 2000 to April, 2003.
44
Fund Governance (continued) - Colonial High Income Municipal Trust
Name, address and year of birth, Principal occupation(s) during past five years
Position with Columbia Funds, year
first elected or appointed to office
Ty S. Edwards (Born 1966)
--------------------------------------------------------------------------------------------
One Financial Center Director of Fund Administration of the Advisor since
Boston, MA 02111 January, 2006; Vice President of the Advisor from
Deputy Treasurer (since 2006) July, 2002 to December, 2005; Assistant Vice president
and Director, State Street Corporation (financial
services) prior to 2002.
Barry S. Vallan (Born 1969)
--------------------------------------------------------------------------------------------
One Financial Center Vice President-Fund Treasury of the Advisor since
Boston, MA 02111 October, 2004; Vice President- Trustee Reporting of
Controller (since 2006) the Advisor from April, 2002 to October, 2004;
Management Consultant, PricewaterhouseCoopers
(independent registered public accounting firm) prior
to October, 2002.
45
Board Consideration and Approval of Investment Advisory Agreements
The Advisory Fees and Expenses Committee of the Board of Trustees meets one or
more times annually to review the advisory agreements (collectively, the
"Agreements") of the funds for which the Trustees serve as trustees (each a
"fund") and determine whether to recommend that the full Board approve the
continuation of the Agreements for an additional one-year period. After the
Committee has made its recommendation, the full Board, including the
Independent Trustees, determines whether to approve the continuation of the
Agreements. In addition, the Board, including the Independent Trustees,
considers matters bearing on the Agreements at most of its other meetings
throughout the year and meets regularly with the heads of each investment area
within Columbia. Through the Board's Investment Oversight Committees, Trustees
also meet with selected fund portfolio managers at various times throughout the
year.
The Trustees receive and review all materials that they, their legal counsel or
Columbia, the funds' investment adviser, believe to be reasonably necessary for
the Trustees to evaluate the Agreements and determine whether to approve the
continuation of the Agreements. Those materials generally include, among other
items, (i) information on the investment performance of each fund relative to
the performance of peer groups of mutual funds and the fund's performance
benchmarks, (ii) information on each fund's advisory fees and other expenses,
including information comparing the fund's expenses to those of peer groups of
mutual funds and information about any applicable expense caps and fee
"breakpoints," (iii) information about the profitability of the Agreements to
Columbia, including potential "fall-out" or ancillary benefits that Columbia
and its affiliates may receive as a result of their relationships with the
funds and (iv) information obtained through Columbia's response to a
questionnaire prepared at the request of the Trustees by counsel to the funds
and independent legal counsel to the Independent Trustees. The Trustees also
consider other information such as (v) Columbia's financial results and
financial condition, (vi) each fund's investment objective and strategies and
the size, education and experience of Columbia's investment staffs and their
use of technology, external research and trading cost measurement tools,
(vii) the allocation of the funds' brokerage, if any, and the use of "soft"
commission dollars to pay for research products and services, (vii) Columbia's
resources devoted to, and its record of compliance with, the funds' investment
policies and restrictions, policies on personal securities transactions and
other compliance policies, (ix) Columbia's response to various legal and
regulatory proceedings since 2003 and (x) the economic outlook generally and
for the mutual fund industry in particular. In addition, the Advisory Fees and
Expenses Committee confers with the funds' independent fee consultant and
reviews materials relating to the funds' relationships with Columbia provided
by the independent fee consultant. Throughout the process, the Trustees have
the opportunity to ask questions of and request additional materials from
Columbia and to consult with independent legal counsel to the Independent
Trustees and the independent fee consultant.
The Board of Trustees most recently approved the continuation of the Agreements
at its October, 2006 meeting, following meetings of the Advisory Fees and
Expenses Committee held in August, September and October, 2006. In considering
whether to approve the continuation of the Agreements, the Trustees, including
the Independent Trustees, did not identify any single factor as determinative,
and each weighed various factors as he or she deemed appropriate. The Trustees
considered the following matters in connection with their approval of the
continuation of the Agreements:
The nature, extent and quality of the services provided to the funds under the
Agreements. The Trustees considered the nature, extent and quality of the
services provided by Columbia and its affiliates to the funds and the resources
dedicated to the funds by Columbia and its affiliates. Among other things, the
Trustees considered (i) Columbia's ability (including its personnel and other
resources, compensation programs for personnel involved in fund management,
reputation and other attributes) to attract and retain highly qualified
research, advisory and supervisory investment professionals; (ii) the portfolio
management services provided by those investment professionals; and (iii) the
trade execution services provided on behalf of the funds. For each fund, the
Trustees also considered the benefits to shareholders of investing in a mutual
fund that is part of a family of funds offering exposure to a variety of asset
classes and investment disciplines and providing a variety of fund and
shareholder services. After reviewing those and related factors, the Trustees
concluded, within the context of their overall conclusions regarding each of
the Agreements, that the nature, extent and quality of services provided
supported the continuation of the Agreements.
46
Investment performance of the funds and Columbia. The Trustees reviewed
information about the performance of each fund over various time periods,
including information prepared by an independent third party that compared the
performance of each fund to the performance of peer groups of mutual funds and
performance benchmarks. The Trustees also reviewed a description of the third
party's methodology for identifying each fund's peer group for purposes of
performance and expense comparisons. The Trustees also considered additional
information that the Advisory Fees and Expenses Committee requested from
Columbia relating to funds that presented relatively weaker performance and/or
relatively higher expenses.
In the case of each fund whose performance lagged that of a relevant peer group
for certain (although not necessarily all) periods, the Trustees concluded that
other factors relevant to performance were sufficient, in light of other
considerations, to warrant continuation of the fund's Agreements. Those factors
varied from fund to fund, but included one or more of the following: (i) that
the fund's performance, although lagging in certain recent periods, was
stronger over the longer term; (ii) that the underperformance was attributable,
to a significant extent, to investment decisions that were reasonable and
consistent with the fund's investment strategy and policies and that the fund
was performing as expected, given these investment decisions, market conditions
and the fund's investment strategy; (iii) that the fund's performance was
competitive when compared to other relevant performance benchmarks or peer
groups; (iv) that Columbia had taken or was taking steps designed to help
improve the fund's investment performance, including, but not limited to,
replacing portfolio managers or modifying investment strategies; and (v) that
the fund was proposed to be reorganized into another fund, and that such
reorganization would result in a reduction in fund expenses.
The Trustees also considered Columbia's performance and reputation generally,
the funds' performance as a fund family generally, and Columbia's historical
responsiveness to Trustee concerns about performance and Columbia's willingness
to take steps intended to improve performance.
After reviewing those and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
performance of each fund and Columbia was sufficient, in light of other
considerations, to warrant the continuation of the Agreement(s) pertaining to
that fund.
The costs of the services provided and profits realized by Columbia and its
affiliates from their relationships with the funds. The Trustees considered the
fees charged to the funds for advisory services as well as the total expense
levels of the funds. That information included comparisons (provided by
management and by an independent third party) of each fund's advisory fees and
total expense levels to those of the fund's peer groups and information about
the advisory fees charged by Columbia to comparable institutional accounts. In
considering the fees charged to those accounts, the Trustees took into account,
among other things, management's representations about the differences between
managing mutual funds as compared to other types of accounts, including
differences in the services provided, differences in the risk profile of such
business for Columbia, and the additional resources required to manage mutual
funds effectively. In evaluating each fund's advisory fees, the Trustees also
took into account the demands, complexity and quality of the investment
management of the fund. The Trustees considered existing advisory fee
breakpoints, and Columbia's use of advisory fee waivers and expense caps, which
benefited a number of the funds. The Trustees also noted management's stated
justification for the fees charged to the funds, which included information
about the investment performance of the funds and the services provided to the
funds.
The Trustees also considered the compensation directly or indirectly received
by Columbia and its affiliates from their relationships with the funds. The
Trustees reviewed information provided by management as to the profitability to
Columbia and its affiliates of their relationships with each fund, and
information about the allocation of expenses used to calculate profitability.
When reviewing profitability, the Trustees also considered court cases in which
adviser profitability was an issue in whole or in part, the performance of the
relevant funds, the expense level of each fund, and whether Columbia had
implemented breakpoints and/or expense caps with respect to the fund.
After reviewing those and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
advisory fees charged to each fund, and the related profitability to Columbia
47
and its affiliates of their relationships with the fund, supported the
continuation of the Agreement(s) pertaining to that fund.
Economies of Scale. The Trustees considered the existence of any economies of
scale in the provision by Columbia of services to each fund, to groups of
related funds, and to Columbia's investment advisory clients as a whole and
whether those economies were shared with the funds through breakpoints in the
investment advisory fees or other means, such as expense waivers/reductions and
additional investments by Columbia in investment, trading and compliance
resources. The Trustees noted that many of the funds benefited from
breakpoints, expense caps, or both. In considering those issues, the Trustees
also took note of the costs of the services provided (both on an absolute and a
relative basis) and the profitability to Columbia and its affiliates of their
relationships with the funds, as discussed above.
After reviewing those and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
extent to which economies of scale were shared with the funds supported the
continuation of the Agreements.
Other Factors. The Trustees also considered other factors, which included but
were not limited to the following:
.. the extent to which each fund had operated in accordance with its investment
objective and investment restrictions, the nature and scope of the compliance
programs of the funds and Columbia and the compliance-related resources that
Columbia and its affiliates were providing to the funds;
.. the nature, quality, cost and extent of administrative and shareholder
services performed by Columbia and its affiliates, both under the Agreements
and under separate agreements for the provision of transfer agency and
administrative services;
.. so-called "fall-out benefits" to Columbia and its affiliates, such as the
engagement of its affiliates to provide distribution, brokerage and transfer
agency services to the funds, and the benefits of research made available to
Columbia by reason of brokerage commissions generated by the funds'
securities transactions, as well as possible conflicts of interest associated
with those fall-out and other benefits, and the reporting, disclosure and
other processes in place to disclose and monitor those possible conflicts of
interest; and
.. the draft report provided by the funds' independent fee consultant, which
included information about and analysis of the funds' fees, expenses and
performance.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel and the independent fee consultant, the Trustees, including
the Independent Trustees, approved the continuance of each of the Agreements
through October 31, 2007.
48
Summary of Management Fee Evaluation by Independent Fee Consultant
INDEPENDENT FEE CONSULTANT'S EVALUATION OF THE PROCESS BY WHICH MANAGEMENT FEES
ARE NEGOTIATED FOR THE COLUMBIA MUTUAL FUNDS OVERSEEN BY THE COLUMBIA ATLANTIC
BOARD
Prepared Pursuant to the February 9, 2005 Assurance of Discontinuance between
the Office of Attorney General of New York State and Columbia Management
Advisors, Inc. and Columbia Funds Distributor, Inc. October 11, 2006
I. Overview
Columbia Management Advisors, LLC ("CMA") and Columbia Funds Distributors,
Inc./1/ ("CFD") agreed on February 9, 2005 to the New York Attorney General's
Assurance of Discontinuance ("AOD"). Among other things, the AOD stipulates
that CMA may manage or advise a Columbia Fund ("Fund" and together with all
such funds or a group of such funds as the "Funds") only if the Independent
Members of the Fund's Board of Trustees (such Independent Members of the Fund's
Board together with the other members of the Fund's Board, referred to as the
"Trustees") appoint a Senior Officer or retain an Independent Fee Consultant
("IFC") who is to manage the process by which proposed management fees are
negotiated. The AOD further stipulates that the Senior Officer or IFC is to
prepare a written annual evaluation of the fee negotiation process.
On September 14, 2006, the Independent Members of the Funds' Boards retained me
as IFC for the Funds. In this capacity, I have prepared the second annual
written evaluation of the fee negotiation process. I am successor to the first
IFC, Erik Sirri, who prepared the annual evaluation in 2005 and who contributed
to the second annual written evaluation until his resignation as IFC in August
2006 to become Director of the Division of Market Regulation at the U.S.
Securities and Exchange Commission./2/
A. Role of the Independent Fee Consultant
The AOD charges the IFC with "managing the process by which proposed management
fees...to be charged the Columbia Fund are negotiated so that they are
negotiated in a manner which is at arms' length and reasonable and consistent
with this Assurance of Discontinuance." In this role, the IFC does not replace
the Trustees in negotiating management fees with CMA, and the IFC does not
substitute his or her judgment for that of the Trustees about the
reasonableness of proposed fees. As the AOD states, CMA "may manage or advise a
Columbia Fund only if the reasonableness of the proposed management fees is
determined by the Board of Trustees...using...an annual independent written
evaluation prepared by or under the direction of...the Independent Fee
Consultant."
B. Elements Involved in Managing the Fee Negotiation Process
Managing the fee negotiation process has three elements. One involves reviewing
the information provided by CMG to the Trustees for evaluating the proposed
management fees and augmenting that information, as necessary, with additional
information from CMG or other sources and with further analyses of the
information and data. The second element involves reviewing the information and
analysis relative to at least the following six factors set forth in the AOD:
1.The nature and quality of CMA's services, including the Fund's performance;
2.Management fees (including any components thereof) charged by other mutual
fund companies for like services;
3.Possible economies of scale as the Fund grows larger;
/1/CMA and CFD are subsidiaries of Columbia Management Group, Inc. ("CMG"),
which also is the parent of Columbia Management Services, Inc. ("CFS"), the
Funds' transfer agent. Before the date of this report, CMA merged into an
affiliated entity, Banc of America Capital Management, LLC, which was
renamed Columbia Management Advisors, LLC and which carries on the business
of CMA. CFD also has been renamed Columbia Management Distributors, Inc.
/2/I am an independent economic consultant. From August 2005 until August 2006,
I provided support to Mr. Sirri as an independent consultant. From 1994 to
2004, I was Chief Economist at the Investment Company Institute. Earlier, I
was Section Chief and Assistant Director at the Federal Reserve Board and
Professor of Economics at Oklahoma State University. I have no material
relationship with Bank of America or CMG, aside from serving as IFC, and I
am aware of no material relationship with any of their affiliates. To assist
me with the report, I engaged NERA Economic Consulting, an independent
consulting firm that has had extensive experience in the mutual fund
industry. I also have
49
4.Management fees (including any components thereof) charged to institutional
and other clients of CMA for like services;
5.Costs to CMA and its affiliates of supplying services pursuant to the
management fee agreements, excluding any intra-corporate profit; and
6.Profit margins of CMA and its affiliates from supplying such services.
retained Willkie Farr & Gallagher LLP as counsel to advise me in connection
with the report.
The final element involves providing the Trustees with a written evaluation of
the above factors as they relate to the fee negotiation process.
C. Organization of the Annual Evaluation
The 2006 annual evaluation focuses on the six factors and contains a section
for each factor except that CMA's costs and profits from managing the Funds
have been combined into a single section. In each section, the discussion of
the factor considers and analyzes the available data and other information as
they bear upon the fee negotiation process. If appropriate, the discussion in
the section may point out certain aspects of the proposed fees that may warrant
particular attention from the Trustees. The discussion also may suggest other
data, information, and approaches that the Trustees might consider
incorporating into the fee negotiation process in future years.
In addition to a discussion of the six factors, the report reviews the status
of recommendations made in the 2005 IFC evaluation. The 2006 report also
summarizes the findings with regard to the six factors and contains a summary
of recommendations for possible enhancements to the process.
II. Status of 2005 Recommendations
The 2005 IFC evaluation contains recommendations aimed at enhancing the
evaluation of proposed management fees by Trustees. The section summarizes
those recommendations and includes my assessment of the response to the
recommendations.
1.Recommendation: Trustees should consider requesting more analytical work from
CMG in the preparation of future 15(c) materials.
Status: CMG has provided additional analyses to the Trustees on economies of
scale, a comparative analysis of institutional and retail management fees,
management fee breakpoints, risk-adjusted performance, fee waivers and expense
reimbursements, and CMG's costs and profitability.
2.Recommendation: Trustees may wish to consider whether CMG should continue
expanding the use of Morningstar or other third party data to supplement
CMG's fee and performance analysis that is now based primarily on Lipper
reports.
Status: CMG has used data from Morningstar Inc. to compare with data from
Lipper Inc. ("Lipper") in performing the Trustees' screening procedures.
3.Recommendation: Trustees should consider whether...the fund-by-fund
screen...should place comparable emphasis on both basis point and quintile
information in their evaluation of the funds...Also, the Trustees should
consider incorporating sequences of one-year performance into a fund-by-fund
screen.
Status: CMG has not provided Trustees with results of the screening process
using percentiles. CMG has provided Trustees with information on the changes
in performance and expenses between 2005 and 2006 and data on oneyear returns.
4.Recommendation: Given the volatility of fund performance, the Trustees may
want to consider whether a better method exists than th[e] fee waiver process
to deal with fund underperformance.
Status: It is my understanding that the Trustees have determined to address
fund underperformance not only through fee waivers and expense caps but also
through discussions with CMG regarding the sources of underperformance. CMG
has provided Trustees with an analysis of the relationship between
breakpoints, expense reimbursements, and fee waivers.
5.Recommendation: [Seventy-one] percent of funds [have] yet to reach their
first management fee breakpoint...Trustees may wish to consider whether the
results of my ongoing economies-of-scale work affects the underlying economic
assumptions reflected in the existing breakpoint schedules.
Status: CMG has prepared a memo for the Trustees discussing its views on the
nature and sharing of potential economies of scale. The memo discuses CMG's
view that economies of scale arise at the complex level rather than
50
the fund level. The memo also describes steps, including the introduction of
breakpoints, taken to share economies of scale with shareholders. CMG's
analysis, however, does not discuss specific sources of economies of scale and
does not link breakpoints to economies of scale that might be realized as the
Funds' assets increase.
6.Recommendation: Trustees should continue working with management to address
issues of funds that demonstrate consistent or significant underperformance
even if the fee levels for the funds are low.
Status: Trustees monitor performance on an ongoing basis.
III. Findings
A. General
1.Based upon my examination of the available information and the six factors, I
conclude that the Trustees have the relevant information necessary to
evaluate the reasonableness of the proposed management fees for the Funds.
CMG has provided the Trustees with relevant materials on the six factors
through the 15(c) contract renewal process and in materials prepared for
review at Board and Committee meetings.
2.In my view, the process by which the proposed management fees of the Funds
have been negotiated in 2006 thus far has been, to the extent practicable, at
arms' length and reasonable and consistent with the AOD.
B. Nature and Quality of Services, Including
Performance
3.The performance of the Funds has been relatively strong, especially that of
fixed-income Funds. For each of the 1-, 3-, 5- and 10-year performance
periods, over 60 percent of the funds have ranked in the top three
performance quintiles.
4.The performance of the equity Funds overall, though less concentrated in the
top two quintiles than the fixed-income Funds, improved in 2006 relative to
that in 2005. The fixedincome funds maintained the relatively high
performance level of 2005 in 2006.
5.The Funds' overall performance adjusted for risk was significantly stronger
than performance unadjusted for risk. Domestic and international equity
funds, in particular, moved to higher relative performance rankings after
adjusting for risk.
6.The procedure used to construct the performance universe in which each Fund's
performance is ranked relative to comparable funds may bias a Fund's ranking
upward within that universe. The bias occurs because the performance ranking
procedure includes all share classes of multi-class funds in the universe and
because the procedure ranks either no-load or A share classes of the Funds.
No-load and A share classes generally have lower total expenses than B and C
shares (owing to B and C shares having higher distribution/service fees) and
thus, given all else, would outperform many of B and C share classes included
in the universe. A preliminary analysis that adjusts for the bias results in
a downward movement in the relative performance for the Funds but does not
change the general finding that the Funds' performance has been strong
relative to comparable funds.
C. Management Fees Charged by Other
Mutual Fund Companies
7.The Funds' management fees and total expenses are generally low relative to
those of their peers. At least 56 percent of the Funds are in the first or
second quintiles with the lowest fees and expenses and nearly three-fourths
or more in the first three quintiles. Equity Funds are more highly
concentrated in the first three quintiles than fixedincome Funds.
8.The fee and expense rankings as whole are similar to those in 2005 in that
the majority of funds are ranked in the top quintiles. Nonetheless, a number
of individual funds experienced a change in ranking between 2005 and 2006.
This fund-level instability may reflect sensitivity of rankings to the
composition of the comparison groups, as the membership of the peer groups
typically changed substantially between the two years.
9.The Liberty Money Market Fund VS appears to have a higher management fee
structure than that of other Columbia money market funds of comparable asset
size.
D. Trustees' Fee and Performance Evaluation Process
10.The Trustees' evaluation process identified 21 funds in 2006 for further
review based upon their relative performance or expenses. Seventeen of these
funds had been subject to review in 2004 or 2005.
51
E. Potential Economies of Scale
11.CMG has prepared a memo for the Trustees containing its views on the sources
and sharing of potential economies of scale. CMG views economies of scale as
arising at the complex level and would regard estimates of scale economies
for individual funds as unreliable. CMG has not, however, identified
specific sources of economies of scale nor has it provided any estimates of
the magnitude of any economies of scale. In the memo, CMG also describes
measures taken by the Trustees and CMG that seek to share any potential
economies of scale through breakpoints in management fee schedules, expense
reimbursements, fee waivers, enhanced shareholder services, fund mergers,
and operational consolidation. These measures, although of significant
benefit to shareholders, have not been directly linked in the memo to the
existence, sources, and magnitude of economies of scale.
F. Management Fees Charged to Institutional Clients
12.CMG has provided Trustees with comparisons of mutual fund management fees
and institutional fees based upon standardized fee schedules and upon actual
fees. Based upon the information, institutional fees are generally lower
than the Funds' management fees. This pattern is consistent with the
economics of the two financial products. Data are not available, however, on
actual institutional fees at other money managers. Thus, it is not possible
to determine the extent to which differences between the Funds' management
fees and institutional fees are consistent with those seen generally in the
marketplace.
G. Revenues, Expenses, and Profits
13.The financial statements and the methodology underlying their construction
generally form a sufficient basis for Trustees to evaluate the expenses and
profitability of the Funds.
IV. Recommendations
A. Performance
1.Trustees may wish to consider incorporating risk-adjusted measures in their
evaluation of performance. CMG has begun to prepare reports for the Trustees
with risk adjustments, which could form the basis for formally including the
measures in the 15(c) materials. To this end, Trustees may wish to have CMG
prepare documents explaining risk adjustments and describing their advantages
and disadvantages.
2.Trustees may wish to consider having CMG evaluate the sensitivity of
performance rankings to the design of the universe. The preliminary analysis
contained in the evaluation suggests that the method employed by Lipper, the
source of performance rankings used by the Trustees, may bias performance
rankings upward.
B. Economies of Scale
3.Trustees may wish to consider having CMG extend its analysis of economies of
scale by examining the sources of such economies, if any. Identification of
the sources may enable the Trustees and CMG to gauge their magnitude. It also
may enable the Trustees and CMG to build upon past work on standardized fee
schedules so that the schedules themselves are consistent with any economies
of scale and their sources. Finally, an extension of the analysis may enable
the Trustees and CMG to develop a framework that coordinates the use of fee
waivers and expense caps with the standard fee schedules and with any
economies of scale and their sources.
C. Institutional Fees
4.Trustees may wish to consider encouraging CMG to build further upon its
expanded analysis of institutional fees by refining the matching of
institutional accounts with mutual funds, by dating the establishment of each
institutional account, and by incorporating other accounts, such as
subadvisory relationships, trusts, offshore funds, and separately managed
accounts into the analysis.
D. Profitability
5.Trustees may wish to consider requesting that CMG expand the reporting of
revenues and expenses to include more line-item detail for management and
administration, transfer agency, fund accounting, and distribution.
6.Trustees may wish to consider requesting that CMG provide a statement of its
operations in the 15(c) materials.
7.Trustees may wish to consider the treatment of the revenue sharing with the
Private Bank of Bank of America in their review of CMG's profitability.
Respectfully submitted,
John D. Rea
52
APPENDIX
SOURCES OF INFORMATION USED IN THE EVALUATION
The following list generally describes the sources and types of information
that were used in preparing this report.
1.Performance, management fees, and expense ratios for the Funds and comparable
funds from other fund complexes from Lipper and CMG. The sources of this
information were CMG and Lipper;
2.CMG's expenses and profitability obtained directly from CMG;
3.Information on CMG's organizational structure;
4.Profitability of publicly traded asset managers from Lipper;
5.Interviews with CMG staff, including members of senior management, legal
staff, heads of affiliates, portfolio managers, and financial personnel;
6.Documents prepared by CMG for Section 15(c) contract renewals in 2005 and
2006;
7.Academic research papers, industry publications, professional materials on
mutual fund operations and profitability, and SEC releases and studies of
mutual fund expenses
8.Interviews with and documents prepared by Ernst & Young LLP in its review of
the Private Bank Revenue Sharing Agreement;
9.Discussions with Trustees and attendance at Board and committee meetings
during which matters pertaining to the evaluation were considered.
In addition, I engaged NERA Economic Consulting ("NERA") to assist me in data
management and analysis. NERA has extensive experience in the mutual fund
industry that provides unique insights and special knowledge pertaining to my
independent analysis of fees, performance, and profitability. I have also
retained attorneys in the Washington, D.C. office of Willkie Farr & Gallagher
LLP as outside counsel to advise me in connection with my evaluation.
Finally, meetings and discussions with CMG staff were informative. My
participation in Board and committee meetings in which Trustees and CMG
management discussed issues relating to management contracts were of great
benefit to the preparation of the evaluation.
53
Important Information About This Report
Colonial High Income Municipal Trust
Transfer Agent
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.
54
[GRAPHIC]
COLONIAL HIGH INCOME MUNICIPAL TRUST
ANNUAL REPORT
SHC-42/115616-1106 (01/07) 07/33039
Item 2. Code of Ethics.
(a) The registrant has, as of the end of the period covered by this
report, adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party.
(b) The registrant's Board adopted, effective January 3, 2006, a revised
code of ethics described in 2(a) above. This revised code of ethics,
which is attached as an exhibit hereto, does not differ materially
from the code of ethics in effect for the year ended November 30, 2005.
(c) During the period covered by this report, there were no waivers,
including any implicit waivers, from a provision of the code of ethics
described in 2(a) above that relates to one or more of the items set
forth in paragraph (b) of this item's instructions.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that Douglas A. Hacker,
Thomas E. Stitzel and Anne-Lee Verville, each of whom are members of the
registrant's Board of Trustees and Audit Committee, each qualify as an audit
committee financial expert. Mr. Hacker, Mr. Stitzel and Ms. Verville are each
independent trustees, as defined in paragraph (a)(2) of this item's
instructions and collectively constitute the entire Audit Committee.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. Aggregate Audit Fees billed by the principal accountant for
professional services rendered during the fiscal years ended November 30, 2006
and November 30, 2005 are approximately as follows:
2006 2005
---- ----
$32,000 $29,000
Audit Fees include amounts related to the audit of the registrant's annual
financial statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements for those
fiscal years.
(b) Audit-Related Fees. Aggregate Audit-Related Fees billed to the registrant
by the principal accountant for professional services rendered during the
fiscal years ended November 30, 2006 and November 30, 2005 are approximately as
follows:
2006 2005
---- ----
$13,700 $13,200
Audit-Related Fees include amounts for assurance and related services by the
principal accountant that are reasonably related to the performance of the
audit of the registrant's financial statements and are not reported in Audit
Fees above. In both fiscal years 2006 and 2005, Audit-Related Fees include
agreed-upon procedures performed for semi-annual shareholder reports and rating
agency reviews.
During the fiscal years ended November 30, 2006 and November 30, 2005, there
were no Audit-Related Fees billed by the registrant's principal accountant to
the registrant's investment adviser (not including any sub-adviser whose role
is primarily portfolio management and is subcontracted with or overseen by
another investment adviser) and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the
registrant for an engagement that related directly to the operations and
financial reporting of the registrant.
(c) Tax Fees. Aggregate Tax Fees billed by the principal accountant to the
registrant for professional services rendered during the fiscal years ended
November 30, 2006 and November 30, 2005 are approximately as follows:
2006 2005
---- ----
$3,800 $3,100
Tax Fees consist primarily of the review of annual tax returns and include
amounts for professional services by the principal accountant for tax
compliance, tax advice and tax planning.
During the fiscal years ended November 30, 2006 and November 30, 2005, there
were no Tax Fees billed by the registrant's principal accountant to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser) and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant for
an engagement that related directly to the operations and financial reporting
of the registrant.
(d) All Other Fees. Aggregate All Other Fees billed by the principal accountant
to the registrant for professional services rendered during the fiscal years
ended November 30, 2006 and November 30, 2005 are approximately as follows:
2006 2005
---- ----
$0 $0
All Other Fees include amounts for products and services provided by the
principal accountant, other than the services reported in paragraphs
(a) through (c) above.
Aggregate All Other Fees billed by the registrant's principal accountant to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser) and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant for
an engagement that related directly to the operations and financial reporting
of the registrant during the fiscal years ended November 30, 2006 and
November 30, 2005 are approximately as follows:
2006 2005
---- ----
$505,500 $255,500
In both fiscal years 2006 and 2005, All Other Fees include internal control
reviews of the registrant's investment advisor.
(e)(1) Audit Committee Pre-Approval Policies and Procedures
The registrant's Audit Committee is required to pre-approve the engagement of
the registrant's independent accountants to provide audit and non-audit
services to the registrant and non-audit services to its investment adviser
(not including any sub-adviser whose role is primarily portfolio management and
is subcontracted with or overseen by another investment adviser) or any entity
controlling, controlled by or under common control with such investment adviser
that provides ongoing services to the registrant ("Adviser Affiliates"), if the
engagement relates directly to the operations and financial reporting of the
registrant.
The Audit Committee has adopted a Policy for Engagement of Independent
Accountants for Audit and Non-Audit Services ("Policy"). The Policy sets forth
the understanding of the Audit Committee regarding the engagement of the
registrant's independent accountants to provide (i) audit and permissible
audit-related, tax and other services to the registrant (collectively "Fund
Services"); (ii) non-audit services to the registrant's investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and Adviser
Affiliates, if the engagement relates directly to the operations or financial
reporting of a Fund (collectively "Fund-related Adviser Services"); and
(iii) certain other audit and non-audit services to the registrant's investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is
subcontracted with or overseen by another investment adviser) and Adviser
Affiliates. Unless a type of service receives general pre-approval under the
Policy, it requires specific pre-approval by the Audit Committee if it is to be
provided by the independent accountants. Pre-approval of non-audit services to
the registrant, the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser) and Adviser Affiliates may be
waived provided that the "de minimis" requirements set forth under paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X are met.
Under the Policy, the Audit Committee may delegate pre-approval authority to
any pre-designated member or members who are Independent Trustees/Directors.
The member(s) to whom such authority is delegated must report, for
informational purposes only, any pre-approval decisions to the Audit Committee
at its next regular meeting. The Audit Committee's responsibilities with
respect to the pre-approval of services performed by the independent
accountants may not be delegated to management.
The Policy requires the Fund Treasurer and/or Director of Board
Administration to submit to the Audit Committee, on an annual basis, a schedule
of the types of services that are subject to general pre-approval. The
schedule(s) provide a description of each type of service that is subject to
general pre-approval and, where possible, will provide estimated fee caps for
each instance of providing each service. The Audit Committees will review and
approve the types of services and review the projected fees for the next fiscal
year and may add to, or subtract from, the list of general pre-approved
services from time to time based on subsequent determinations. That approval
acknowledges that the Audit Committee is in agreement with the specific types
of services that the independent accountants will be permitted to perform.
The Fund Treasurer and/or Director of Board Administration shall report to the
Audit Committee at each of its regular meetings regarding all Fund Services or
Fund-related Adviser Services initiated since the last such report was
rendered, including a general description of the services, actual billed and
projected fees, and the means by which such Fund Services or Fund-related
Adviser Services were pre-approved by the Audit Committee.
*****
(e)(2) The percentage of services described in paragraphs (b) through (d) of
this Item approved pursuant to the "de minimis" exception under paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years ended
November 30, 2006 and November 30, 2005 was zero.
(f)Not applicable.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant for the fiscal years ended
November 30, 2006 and November 30, 2005 are approximately as follows:
2006 2005
---- ----
$523,000 $271,800
(h) The registrant's Audit Committee of the Board of Directors has considered
whether the provision of non-audit services that were rendered to the
registrant's adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X, is compatible with maintaining the principal
accountant's independence.
Item 5. Audit Committee of Listed Registrants.
The registrant has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C.
78c(a)(58)(A)). Douglas A. Hacker, Thomas E. Stitzel and Anne-Lee Verville are
each independent trustees and collectively constitute the entire Audit
Committee.
Item 6. Schedule of Investments
The registrant's "Schedule I - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form
N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
The Fund has delegated to Columbia Management Advisors, LLC (the "Advisor") the
responsibility to vote proxies relating to portfolio securities held by the
Fund. In deciding to delegate this responsibility to the Advisor, the Board of
Trustees of the Trust reviewed and approved the policies and procedures adopted
by the Advisor. These included the procedures that the Advisor follows when a
vote presents a conflict between the interests of the Fund and its shareholders
and the Advisor, its affiliates, its other clients or other persons.
The Advisor's policy is to vote all proxies for Fund securities in a manner
considered by the Advisor to be in the best interest of the Fund and its
shareholders without regard to any benefit to the Advisor, its affiliates, its
other clients or other persons. The Advisor examines each proposal and votes
against the proposal, if, in its judgment, approval or adoption of the proposal
would be expected to impact adversely the current or potential
market value of the issuer's securities. The Advisor also examines each
proposal and votes the proxies against the proposal, if, in its judgment, the
proposal would be expected to affect adversely the best interest of the Fund.
The Advisor determines the best interest of the Fund in light of the potential
economic return on the Fund's investment.
The Advisor addresses potential material conflicts of interest by having
predetermined voting guidelines. For those proposals that require special
consideration or in instances where special circumstances may require varying
from the predetermined guideline, the Advisor's Proxy Committee determines the
vote in the best interest of the Fund, without consideration of any benefit to
the Advisor, its affiliates, its other clients or other persons. The Advisor
may also address potential material conflicts of interest by delegating the
proxy to an independent third party voting agent.
The Advisor's Proxy Committee is composed of representatives of the Advisor's
investment management team, compliance, legal and fund administration
functions. In addition to the responsibilities described above, the Proxy
Committee has the responsibility to review, at least annually, the Advisor's
proxy voting policies to ensure consistency with internal and regulatory agency
policies and to develop additional predetermined voting guidelines to assist in
the review of proxy proposals.
The Proxy Committee may vary from a predetermined guideline if it determines
that voting on the proposal according to the predetermined guideline would be
expected to impact adversely the current or potential market value of the
issuer's securities or to affect adversely the best interest of the client.
References to the best interest of a client refer to the interest of the client
in terms of the potential economic return on the client's investment. In
determining the vote on any proposal, the Proxy Committee does not consider any
benefit other than benefits to the owner of the securities to be voted. A
member of the Proxy Committee is prohibited from voting on any proposal for
which he or she has a conflict of interest by reason of a direct relationship
with the issuer or other party affected by a given proposal. Persons making
recommendations to the Proxy Committee or its members are required to disclose
to the Committee any relationship with a party making a proposal or other
matter known to the person that would create a potential conflict of interest.
The Advisor has retained a third party vendor to implement its proxy voting
process. The vendor provides proxy analysis, record keeping services and vote
disclosure services.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) PORTFOLIO MANAGER
MAUREEN G. NEWMAN, a senior vice president of Columbia Management Advisors,
LLC, is the manager for the Fund and has managed the Fund since August 1998.
Ms. Newman has been associated with Columbia Management Advisors, LLC or its
predecessors since May 1996.
(2) OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGER
The following table shows the number and assets of other investment accounts
(or portions of investment accounts) that the Fund's portfolio manager managed
as of the Fund's fiscal year-end.
Other SEC-
registered open-end Other pooled
and closed-end funds investment vehicles Other accounts
---------------------- ------------------- ----------------------
Number of Number of Number of
Portfolio Manager accounts Assets accounts Assets accounts Assets
----------------- --------- ------------ --------- ------ --------- ------------
Maureen G. Newman 3 $1.2 billion 0 $0 10 $3.7 million
None of these accounts are subject to an advisory fee that is based on the
performance of the account.
POTENTIAL CONFLICTS OF INTEREST IN MANAGING MULTIPLE ACCOUNTS
Like other investment professionals with multiple clients, a portfolio manager
for the Fund may face certain potential conflicts of interest in connection
with managing both the Fund and other accounts at the same time. The paragraphs
below describe some of these potential conflicts, which Columbia Management
Advisors, LLC believes are faced by investment professionals at most major
financial firms. Columbia Management Advisors, LLC and the Trustees of the Fund
have adopted compliance policies and procedures that attempt to address certain
of these potential conflicts.
The management of accounts with different advisory fee rates and/or fee
structures, including accounts that pay advisory fees based on account
performance ("performance fee accounts"), may raise potential conflicts of
interest by creating an incentive to favor higher-fee accounts. These potential
conflicts may include, among others:
. The most attractive investments could be allocated to higher-fee
accounts or performance fee accounts.
. The trading of higher-fee accounts could be favored as to timing and/or
execution price. For example, higher-fee accounts could be permitted to
sell securities earlier than other accounts when a prompt sale is
desirable or to buy securities at an earlier and more opportune time.
. The trading of other accounts could be used to benefit higher-fee
accounts (front-running).
. The investment management team could focus their time and efforts
primarily on higher-fee accounts due to a personal stake in compensation.
Potential conflicts of interest may also arise when the portfolio managers have
personal investments in other accounts that may create an incentive to favor
those accounts. As a general matter and subject to limited exceptions, Columbia
Management Advisors, LLC's investment professionals do not have the opportunity
to invest in client accounts, other than the Columbia Funds.
A potential conflict of interest may arise when the Fund and other accounts
purchase or sell the same securities. On occasions when a portfolio manager
considers the purchase or sale of a security to be in the best interests of the
Fund as well as other accounts, Columbia Management Advisors, LLC 's trading
desk may, to the extent permitted by applicable laws and regulations, aggregate
the securities to be sold or purchased in order to obtain the best execution
and lower brokerage commissions, if any. Aggregation of trades may create the
potential for unfairness to the Fund or another account if one account is
favored over another in allocating the securities purchased or sold -- for
example, by allocating a disproportionate amount of a security that is likely
to increase in value to a favored account.
"Cross trades," in which one Columbia account sells a particular security to
another account (potentially saving transaction costs for both accounts), may
also pose a potential conflict of interest. Cross trades may be seen to involve
a potential conflict of interest if, for example, one account is permitted to
sell a security to another account at a higher price than an independent third
party would pay. Columbia Management Advisors, LLC and the Funds' Trustees have
adopted compliance procedures that provide that any transactions between the
Fund and another Columbia-advised account are to be made at an independent
current market price, as required by law.
Another potential conflict of interest may arise based on the different
investment objectives and strategies of the Fund and other accounts. For
example, another account may have a shorter-term investment horizon or
different investment objectives, policies or restrictions than the Fund.
Depending on another account's objectives or other factors, a portfolio manager
may give advice and make decisions that may differ from advice given, or the
timing or nature of decisions made, with respect to the Fund. In addition,
investment decisions are the product of many factors in addition to basic
suitability for the particular account involved. Thus, a particular security
may be bought or sold for certain accounts even though it could have been
bought or sold for other accounts at the same time. More rarely, a particular
security may be bought for one or more accounts managed by a portfolio manager
when one or more other accounts are selling the security (including short
sales). There may be circumstances when purchases or sales of portfolio
securities for one or more accounts may have an adverse effect on other
accounts.
The Fund's portfolio manager who is responsible for managing multiple funds
and/or accounts may devote unequal time and attention to the management of
those funds and/or accounts. As a result, the portfolio manager may not be able
to formulate as complete a strategy or identify equally attractive investment
opportunities for each of those accounts as might be the case if he or she were
to devote substantially more attention to the management of a single fund. The
effects of this potential conflict may be more
pronounced where funds and/or accounts overseen by a particular portfolio
manager have different investment strategies.
The Fund's portfolio managers may be able to select or influence the selection
of the brokers and dealers that are used to execute securities transactions for
the Fund. In addition to executing trades, some brokers and dealers provide
portfolio managers with brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934), which may
result in the payment of higher brokerage fees than might have otherwise be
available. These services may be more beneficial to certain funds or accounts
than to others. Although the payment of brokerage commissions is subject to the
requirement that the portfolio manager determine in good faith that the
commissions are reasonable in relation to the value of the brokerage and
research services provided to the fund, a portfolio manager's decision as to
the selection of brokers and dealers could yield disproportionate costs and
benefits among the funds and/or accounts that he or she manages.
Columbia Management Advisors, LLC or an affiliate may provide more services
(such as distribution or recordkeeping) for some types of funds or accounts
than for others. In such cases, a portfolio manager may benefit, either
directly or indirectly, by devoting disproportionate attention to the
management of fund and/or accounts that provide greater overall returns to the
investment manager and its affiliates.
The Fund's portfolio manager(s) may also face other potential conflicts of
interest in managing the Fund, and the description above is not a complete
description of every conflict that could be deemed to exist in managing both
the Fund and other accounts. In addition, the Fund's portfolio manager may also
manage other accounts (including their personal assets or the assets of family
members) in their personal capacity. The management of these accounts may also
involve certain of the potential conflicts described above. Investment
personnel at Columbia Management Advisors, LLC, including the Fund's portfolio
manager, are subject to restrictions on engaging in personal securities
transactions pursuant to Codes of Ethics adopted by the Columbia Management
Advisors, LLC and the Fund, which contain provisions and requirements designed
to identify and address certain conflicts of interest between personal
investment activities and the interests of the Fund.
(3) COMPENSATION
As of the Fund's most recent fiscal year end, the portfolio manager received
all of her compensation from Columbia Management Advisors, LLC and its parent
company, Columbia Management Group, in the form of salary, bonus, stock options
and restricted stock. A portfolio manager's bonus is variable and is generally
based on (1) an evaluation of the manager's investment performance and (2) the
results of a peer and/or management review of such individual, which takes into
account skills and attributes such as team participation, investment process,
communication and professionalism. In evaluating investment performance,
Columbia Management Advisors, LLC generally considers the one-, three- and
five-year performance of mutual funds and other accounts
under the portfolio manager's oversight relative to the benchmarks and peer
groups noted below, emphasizing the manager's three- and five-year performance.
Columbia Management Advisors, LLC may also consider the portfolio manager's
performance in managing client assets in sectors and industries assigned to the
manager as part of her investment team responsibilities, where applicable. For
portfolio managers who also have group management responsibilities, another
factor in their evaluation is an assessment of the group's overall investment
performance.
Portfolio Manager Performance Benchmark Peer Group
----------------- ------------------------ ------------------------
Maureen G. Newman Lehman Municipal Bond Lipper High Yield
Index Municipal Debt Funds
The size of the overall bonus pool each year is determined by Columbia
Management Group and depends in part on levels of compensation generally in the
investment management industry (based on market compensation data) and Columbia
Management Advisors, LLC 's profitability for the year, which is influenced by
assets under management.
(4) OWNERSHIP OF SECURITIES
The table below shows the dollar ranges of shares of the Fund beneficially
owned (as determined pursuant to Rule 16a-1(a)(2) under the Securities Exchange
Act of 1934, as amended) by the portfolio manager listed above at the end of
the Fund's most recent fiscal year:
Dollar Range of Equity Securities in the Fund
Portfolio Manager Beneficially Owned
----------------- ---------------------------------------------
Maureen G. Newman None
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 or Be Purchased Under
Period Purchased Per Share Programs the Plans or Programs
------ ------------ ---------- ------------------- ---------------------
06/01/06 through 06/30/06 0 $0.00 0 N/A
07/01/06 through 07/31/06 0 $0.00 0 N/A
08/01/06 through 08/31/06 0 $0.00 0 N/A
09/01/06 through 09/30/06 5,713 $6.48 5,713 N/A
10/01/06 through 10/31/06 5,758 $6.36 5,758 N/A
11/01/06 through 11/30/06 5,617 $6.67 5,617 N/A
------ ----- ------ ---
Total 17,088 $6.50 17,088 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 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 was no change in the registrant's internal control over
financial reporting that occurred during the registrant's second
fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
Item 12. Exhibits.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR
attached hereto as Exhibit 99.CODE ETH.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Colonial High Income Municipal Trust
------------------------------------
By (Signature and Title) /s/ Christopher L. Wilson
------------------------------------
Christopher L. Wilson, President
Date January 25, 2007
------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ Christopher L. Wilson
------------------------------------
Christopher L. Wilson, President
Date January 25, 2007
------------------------------------
By (Signature and Title) /s/ J. Kevin Connaughton
------------------------------------
J. Kevin Connaughton, Treasurer
Date January 25, 2007
------------------------------------