[Picture of Bridge]
Colonial Insured
Municipal Fund
Annual Report
November 30, 1999
<PAGE>
President's Message
Dear Shareholder:
I am pleased to welcome you as shareholders of the Colonial Insured Municipal
Fund. This is the first Annual Report for the Fund, covering the brief period
from the Fund's inception on October 29, 1999 through the end of its fiscal
year on November 30, 1999.
This Fund draws on Colonial's long-standing reputation for managing municipal
bond portfolios. The Fund is designed to generate an attractive tax-exempt
yield. To accomplish this, the Fund issued preferred shares on December 20,
1999. Preferred shares are designed to enhance the portfolio's income.
In November, 1999, the U.S. bond market continued to fight an uphill battle
against the rising interest rates that have characterized 1999. During the
summer, the Federal Reserve Board (the "Fed") became concerned about the
combination of a robust economy, high stock prices and tight labor markets--and
the effects of these factors on inflation. To slow the economy, the Fed made
three quarter-point (0.25%) increases in short-term interest rates--in June,
August and finally in mid-November.
In the bond market, rising interest rates can hurt performance because as rates
rise, prices fall. However, the current reporting period was so short that the
Fund's performance was not really affected by market factors. We remain focused
on the long term, managing our fixed-income portfolios for both income and
price appreciation.
Thank you for choosing Liberty Funds and for giving us the opportunity to serve
your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
January 12, 2000
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
- ---------|-------------------
| May Lose Value
Not FDIC | -----------------
Insured | No Ban Guaranteed
- ---------|-------------------
<PAGE>
- -------------------------------------------------------------------------------
Highlights
- -------------------------------------------------------------------------------
> The Fund is fully invested in a diverse portfolio of municipal bonds
Since the Fund's inception, we have invested its assets in a diverse
portfolio of tax-exempt municipal securities. The Fund has over 71% of
its investments in AAA-rated bonds, and is invested in a broad range of
traditional municipal sectors, including hospitals, water and sewer,
airport bonds, and education. We will continue to seek bonds that can
provide as high a level of income as is consistent with our objectives,
while also providing opportunities for total return.
> Portfolio manager's commentary
During the brief period since the Fund's inception, its total return was
negative 0.21% based on net asset value and 0.00% based on market price.
From its inception on October 29, 1999 through November 30, 1999, the
bond market experienced declines as a result of generally rising interest
rates. During this time, we invested the majority of the Fund's assets in
investment-grade (BBB-rated or better) municipal bonds. The Fund's
performance was not affected by the bond market's volatility. Our
longer-term outlook is for the U.S. economy to slow down somewhat and for
interest rates to stabilize. However, we will continue to monitor
economic and financial developments and make adjustments to the portfolio
as conditions change.
-William Loring and Brian Hartford
A Difficult Year for the Bond Market:
Total Return for the
Lehman Brothers Municipal Bond Index, 11/30/98 to 11/30/99
[Begin Mountain Chart]
11/98 10,000
12/98 10,025
1/99 10,144
2/99 10,100
3/99 10,114
4/99 10,139
5/99 10,080
6/99 9,935
7/99 9,971
8/99 9,891
9/99 9,895
10/99 9,788
11/99 9,892
(1.08)%
[End Mountain Chart]
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. Unlike mutual funds,
indexes are not investments and do not incur fees or expenses. It is not
possible to invest directly in an index.
Cumulative total return from
10/29/1999 to 11/30/1999:
<TABLE>
<S> <C>
NAV (0.21)%
- ---------------------------
Market price 0.00%
- ---------------------------
</TABLE>
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale.
Price per share as of
11/30/1999:
<TABLE>
<S> <C>
NAV $ 14.30
- ---------------------------
Market price $ 15.00
- ---------------------------
</TABLE>
A portion of the Fund's income may be subject to the alternative minimum tax.
The Fund may at times purchase tax-exempt securities at a discount. Some or all
of this discount may be included in the Fund's ordinary income, and is taxable
when distributed.
Top Industry Sectors
<TABLE>
<S> <C>
Hospitals 14.6%
- -----------------------------------
Water & Sewer 9.8%
- -----------------------------------
Airport 8.7%
- -----------------------------------
Special Non Property 7.9%
- -----------------------------------
Ports 7.3%
- -----------------------------------
Single Family Housing 6.7%
- -----------------------------------
Education 6.5%
- -----------------------------------
</TABLE>
Quality Breakdown
as of 11/30/1999
<TABLE>
<S> <C>
AAA 71.9%
- ------------------------------
AA 11.6%
- ------------------------------
A 7.5%
- ------------------------------
BBB 4.2%
- ------------------------------
BB 1.2%
- ------------------------------
Non-rated 2.8%
- ------------------------------
Cash equivalents 0.8%
- ------------------------------
</TABLE>
Quality and sector breakdowns are calculated as a percentage of total
investments, including short-term obligations. Ratings shown in the Quality
Breakdown represent the highest rating assigned to a particular bond by one of
the following respected rating agencies: Standard & Poor's Corporation, Moody's
Investors Service, Inc. or Fitch Investors Service, Inc.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to maintain this quality breakdown or invest in these sectors in the
future. Industry sectors in the following financial statements are based upon
the standard industrial classifications (SIC) published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon Colonial's defined criteria as used in the investment process.
1
<PAGE>
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Schedule of Investments
- -------------------------------------------------------------------------------
November 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Municipal Bonds - 108.4% Par Value
- -------------------------------------------------------------------------
<S> <C> <C>
EDUCATION--10.8%
Education--7.1%
DC Catholic University of America,
Series 1999, 5.625% 10/01/29 $2,000 $ 1,870
IL Northern Illinois University, Series 1999,
6.000% 04/01/29 2,000 1,997
-------
3,867
-------
Student Loan--3.7%
MT State Higher Education Student Assistance
Corp., Series 1999-B, 6.400% 12/01/32 (a) 2,000 2,001
-------
- ----------------------------------------------------------------------------
HEALTHCARE--21.3%
Congregate Care Retirement--1.7%
NY Suffolk County Industrial Development
Agency, Jefferson Ferry, Series 1999-A,
7.200% 11/01/19 (a) 550 548
WA Clackamas County Hospital Facilities
Authority, Willamette View, Series 1999-A,
7.500% 11/01/29 (a) 400 387
-------
935
-------
Health Services--3.6%
WI State Health & Educational Facilities
Authority, Marshfield Clinic, Series 1999,
6.250% 02/15/29 2,000 1,963
-------
Hospital--16.0%
CA State Health Facilities Financing Authority,
Cedars-Sinai Medical Center,
Series 1999-A, 6.125% 12/01/30 2,000 1,958
IA State Finance Authority, Mercy Medical
Center, Series 1999, 5.750% 08/15/29 2,000 1,889
MI State Hospital Finance Authority,
Series 1999-A:
5.750% 05/15/29 (a) 2,000 1,902
6.125% 11/15/26 2,000 1,960
NV Henderson, Catholic Healthcare West,
Series 1999-A, 6.750% 07/01/20 (a) 1,000 998
-------
8,707
-------
- ----------------------------------------------------------------------------
HOUSING--8.7%
Assisted Living/Senior--1.4%
DE Kent County, Heritage at Dover,
Series 1999, 7.625% 01/01/30 250 248
NC State Medical Care Commission, DePaul
Community Facilities Project, Series 1999,
7.625% 11/01/29 (a) 500 500
-------
748
-------
Single Family--7.3%
AK State Housing Finance Corp., Series 1999
A-1, 6.150% 06/01/39 2,000 1,961
CO State Housing Finance Authority,
Series 1998 D-2, 6.350% 11/01/29 2,000 2,009
-------
3,970
-------
</TABLE>
<TABLE>
<CAPTION>
Par Value
- ---------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL--1.3%
Forest Products--0.9%
AR Camden, International Paper Co.,
Series 1999-A, 6.500% 11/15/23 $ 500 $ 502
-------
Metals & Mining--0.4%
IN State Development Finance Authority, Inland
Steel Co., Series 1996, 7.250% 11/01/11 250 246
-------
- ---------------------------------------------------------------------------
OTHER--5.4%
Other
AL State Incentives Financing Authority,
Series 1999-A, 6.000% 10/01/29 2,000 1,986
NY TSASC, Inc., Series 1999, 6.250% 07/15/34 1,000 970
-------
2,956
-------
- --------------------------------------------------------------------------
TAX-BACKED--21.8%
Local Appropriated--1.8%
OK Grady County Correctional Facility,
Series 1999, 6.000% 11/01/29 (a) 1,000 976
-------
Local General Obligations--3.6%
MI Jonesville Community Schools, Series 1999,
5.750% 05/01/20 (b) 2,000 1,962
-------
Special Non-Property Tax--8.6%
IL Metropolitan Pier & Exposition Authority,
McCormick Place Expansion Project,
Series 1999, 5.500% 12/15/24 (b) 2,000 1,871
TX Austin Hotel Occupancy Tax, 5.500%
11/15/29 2,500 2,311
VI Virgin Islands Public Finance Authority,
Series 1999, 6.500% 10/01/24 500 501
-------
4,683
-------
Special Property Tax--0.9%
CA Pittsburg Redevelopment Agency, Los
Medanos Project, Series 1999, (c) 08/01/26 2,500 489
-------
State Appropriated--6.9%
IL State Department of Central Management
Services, Series 1999, 5.850% 07/01/19 (b) 2,000 1,967
NY Metropolitan Transportation Authority,
Series 1998-A, 5.250% 07/01/28 2,000 1,794
-------
3,761
-------
- --------------------------------------------------------------------------
TRANSPORTATION--21.1%
Air Transportation--3.6%
FL Miami-Dade County Industrial
Development Authority, Airis Miami II,
L.L.C., Series 1993-A, 6.000% 10/15/25 1,000 996
NJ State Economic Development Authority,
Continental Airlines, Inc., Series 1999,
6.250% 09/15/29 500 472
TX Dallas-Fort Worth International Airport,
American Airlines, Inc., Series 1999,
6.375% 05/01/35 500 483
-------
1,951
-------
</TABLE>
2
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Investments
- -------------------------------------------------------------------------------
November 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Municipal Bonds (continued) Par Value
- -----------------------------------------------------------------------
<S> <C> <C>
Airports--9.5%
MA State Port Authority, Series 1999,
7.750% 07/01/29 (b)(d) $2,000 $ 1,935
NC Charlotte Airport Authority, Series 1999,
8.295% 06/15/22 (a)(d) 1,000 976
TN Memphis-Shelby County, Airport
Authority, Series 1999-D,
6.000% 03/01/24 (b) 2,280 2,245
-------
5,156
-------
Ports--8.0%
AL State Docks Department, Series 1998,
5.500% 10/01/22 (b) 2,500 2,366
WA Seattle Special Port Authority,
Series 1999-A, 6.000% 09/01/29 2,000 1,983
-------
4,349
-------
- --------------------------------------------------------------------------
UTILITY--18.0%
Investor Owned--3.7%
HI State Department of Budget & Finance,
Hawaiian Electric Co., Series 1999-C,
6.200% 11/01/29 2,000 2,005
-------
Joint Power Authority--0.9%
NC Eastern Municipal Power Agency,
Series 1999-D, 6.700% 01/01/19 500 503
-------
Municipal Electric--2.6%
TX Lower Colorado River Authority,
Series 1999-A, 5.500% 05/15/21 1,500 1,417
-------
Water & Sewer--10.8%
AL Jefferson County Sewer Authority,
Series 1999-A, 5.750% 02/01/38 2,000 1,908
NY NYC Municipal Water Authority,
5.750% 06/15/31 2,000 1,927
SC Lugoff-Elgin Water Authority, Series 1999,
6.050% 11/01/31 (a) 2,000 2,017
-------
5,852
-------
Total Municipal Bonds
(cost of $59,207) (e) 58,999
-------
Short-Term Obligations - 0.9%
- --------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
MN Minneapolis Convention Center,
Series 1999, 3.750% 12/01/18 100 100
NY Long Island Power Authority,
Sub-Series 1998, 3.600% 05/01/33 400 400
-------
Total Short-Term Obligations 500
-------
Other Assets & Liabilities, Net--(9.3)% (5,077)
-------
Net Assets--100.0% $54,422
=======
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) These securities have been purchased on a delayed delivery basis for
settlement at a future date beyond the customary settlement date.
(b) These securities, or a portion thereof, with a total market value of
$11,879 are being used to collateralize the delayed purchases indicated in
note (a) above.
(c) Zero coupon bond.
(d) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At November 30,
1999, the value of these securities amounted to $2,911 or 5.3% of net
assets.
(e) Cost for federal income tax purposes is the same.
(f) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of November 30,
1999.
See notes to financial statements. 3
<PAGE>
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
November 30, 1999
(in thousands except for per share amount)
<TABLE>
<S> <C> <C>
Assets
Investments at value (cost $59,207) $58,999
Short-term obligations 500
-------
59,499
Cash $ 58
Receivable for:
Investments sold 6,900
Interest 498
Expense reimbursement due from
Advisor 31 7,487
------ -------
Total Assets 66,986
Liabilities
Payable for:
Investments purchased 12,393
Accrued:
Management fee 17
Bookkeeping fee 1
Other 153
------
Total Liabilities 12,564
-------
Net Assets at value for 3,807 shares of
beneficial interest outstanding $54,422
-------
Net asset value per share $ 14.30
-------
Composition of Net Assets
Capital paid in $54,421
Undistributed net investment income 209
Net unrealized depreciation (208)
-------
$54,422
-------
</TABLE>
- -------------------------------------------------------------------------------
Statement of Operations
- -------------------------------------------------------------------------------
For the Period Ended November 30, 1999 (a)
(in thousands)
<TABLE>
<S> <C> <C>
Investment Income
Interest $235
Expenses
Management fee $ 17
Transfer agent fee 6
Bookkeeping fee 2
Trustees fee 1
Custodian fee 1
Audit fee 20
Legal fee 4
Reports to shareholders 4
Other 2
-----
57
Fees and expenses waived or borne by
the Advisor (31) 26
----- ----
Net Investment Income 209
Net Unrealized Loss on Portfolio
Positions
Net Change in Unrealized
Appreciation/Depreciation during
the period (208)
----
Increase in Net Assets from Operations $ 1
----
</TABLE>
(a) The Fund commenced investment operations on October 29, 1999.
4 See notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Period ended
November 30,
Increase (Decrease) in Net Assets 1999(a)
- -------------------------------------------------------------------
<S> <C>
Operations:
Net investment income $ 209
Net change in unrealized appreciation/depreciation (208)
-------
Net Increase from Operations 1
Fund Share Transactions:
Receipts for shares sold 54,421
-------
Total Increase 54,422
Net Assets
Beginning of period --
-------
End of period (including undistributed net
investment income of $209) $54,422
-------
Number of Fund Shares
Outstanding 3,807
-------
</TABLE>
(a) The Fund commenced investment operations on October 29, 1999.
See notes to financial statements. 5
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
- -------------------------------------------------------------------------------
November 30, 1999
Note 1. Accounting Policies
Organization:
Colonial Insured Municipal Fund (the Fund) is a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended as a
nondiversified closed-end, management investment company. The Fund's investment
objective is to provide current income exempt from ordinary federal income tax.
The Fund authorized an unlimited number of shares.
On October 29, 1999 the Fund completed the offering of 3,800,000 common shares
at a price of $15.00 per share, raising $54,321,000, net of underwriting and
offering costs.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies that are consistently followed by the Trust in
the preparation of its financial statements.
Security valuation and transactions:
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar
securities. When management deems it appropriate, an over-the-counter or
exchange bid quotation is used.
Futures contracts are valued based on the difference between the last sale
price and the opening price of the contract.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
Federal income taxes:
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable and tax-exempt income, no federal income
tax has been accrued.
Interest income, debt discount and premium:
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of a security with a corresponding
increase in the cost basis; market discount is not accreted. Premium is
amortized against interest income with a corresponding decrease in the cost
basis.
Distributions to shareholders:
Distributions to shareholders are recorded on the ex-date.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Trust's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Note 2. Fees and Compensation Paid to Affiliates
Management fee:
Colonial Management Associates, Inc. (the Advisor) is the investment Advisor of
the Fund and furnishes accounting and other services and office facilities for
a monthly fee equal to 0.65% annually of the Fund's average weekly net assets.
The Advisor has voluntarily agreed to waive a portion of the fee so that it
will not exceed 0.35% annually for the first five years of the Fund's
operations.
Bookkeeping fee:
The Advisor provides bookkeeping and pricing services for $18,000 per year plus
0.0233% annually of the Fund's average weekly net assets over $50 million.
Expense Limits:
The Advisor has agreed, until further notice, to waive fees and bear certain
Fund expenses to the extent that total expenses (exclusive of management fees,
brokerage commissions, interest, preferred dividends, taxes and extraordinary
expenses, if any) exceed 0.20% annually of the Fund's average net assets.
Other:
The Fund pays no compensation to its officers, all of whom are employees of the
Advisor.
The Fund'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 Fund's assets.
Note 3. Portfolio Information
Investment activity:
During the period ended November 30, 1999, purchases and sales of investments,
other than short-term obligations, were $61,194,707 and $1,989,040,
respectively.
Unrealized appreciation (depreciation) at November 30, 1999, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 87,481
Gross unrealized depreciation (295,560)
---------
Net unrealized depreciation $(208,079)
---------
</TABLE>
Other:
The Fund had greater than 10% of its net assets at November 30, 1999 invested
in Alabama, Illinois, Michigan and New York.
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on
their obligations.
6
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- -------------------------------------------------------------------------------
November 30, 1999
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a trust that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Trust will invest in these
instruments to hedge against the effects of changes in the value of portfolio
securities due to anticipated changes in interest rates and/or market
conditions, for duration management, or when the transactions are economically
appropriate to the reduction of risk inherent in the management of the Trust
and not for trading purposes. The use of futures contracts and options involves
certain risks which include (1) imperfect correlation between the price
movement of the instruments and the underlying securities, (2) inability to
close out a position due to different trading hours, or the temporary absence
of a liquid market for either the instrument or the underlying securities or
(3) an inaccurate prediction by the Advisor of the future direction of interest
rates. Any of these risks may involve amounts exceeding the variation margin
recorded in the Trust's Statement of Assets and Liabilities at any given time.
Note 4. Subsequent Event
On December 10, 1999 the Fund offered 420,000 common shares at a purchase price
of $15 per share, raising $6,003,900, net of underwriting and offering costs.
Additionally, on December 20, 1999 the Fund offered 1,492 shares of Series TH
Municipal Preferred at a purchase price of $25,000 per share, raising
$36,927,000, net of underwriting costs. For the offering of the preferred
shares, the Fund expects to incur approximately $80,000 of offering costs.
7
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
<TABLE>
<CAPTION>
Period ended
November 30
1999 (b)
- -----------------------------------------------------------------------------------------------
<S> <C>
Net asset value--Beginning of period $ 14.330
--------
Income From Investment Operations:
Net investment income (a) 0.055
Offering costs (0.030)
Net realized and unrealized loss (0.055)
--------
Total from Investment Operations (0.030)
--------
Net Asset Value, End of Period $ 14.300
--------
Market price per share $ 15.000
--------
Total return--based on market value (c)(d)(e) 0.00%
--------
Ratios to Average Net Assets:
Expenses (f)(g) 0.55%
Net Investment Income (f)(g) 4.38%
Portfolio turnover (e) 7%
Net assets at end of period (000) $ 54,422
$ 0.008
</TABLE>
(a) Net of fees and expenses waived or borne by the Advisor which amounted to:
(b) The Fund commenced investment operations on October 29, 1999.
(c) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
8
<PAGE>
- -------------------------------------------------------------------------------
Report of Independent Accountants
- -------------------------------------------------------------------------------
To the Shareholders and the Trustees of
Colonial Insured Municipal Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations, changes in
net assets and the financial highlights present fairly, in all material
respects, the financial position of Colonial Insured Municipal Fund (the
"Fund") at November 30, 1999, the results of its operations, the changes in its
net assets and the financial highlights for the period from October 29, 1999
(commencement of operations) through November 30, 1999, in conformity with
generally accepted accounting principles. These financial statements and the
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit, which included confirmation of portfolio positions at November 30,
1999 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 12, 2000
9
<PAGE>
- -------------------------------------------------------------------------------
Dividend Reinvestment Plan
- -------------------------------------------------------------------------------
1. You, BankBoston, NA, will act as Agent for me, and will open an account
for me under the Dividend Reinvestment Plan with the same registration as
my shares of the Fund are currently registered. You will effect the
dividend reinvestment option on my behalf as of the first record date for
an income dividend or capital gain distribution ("distribution"),
separately or collectively, after you receive the authorization duly
executed by me.
2. Whenever the Fund declares a distribution payable in the Fund's shares of
beneficial interest ("shares") or cash at the option of the shareholder,
I hereby elect to take such distribution entirely in shares, subject to
the terms of this Plan. If on the valuation date the Fund's net asset
value per share is less than the market price (including estimated
brokerage commissions), you shall on the payable date automatically
receive for my account from the Fund that number of newly-issued shares
that the cash otherwise receivable by me would purchase if the purchase
price per share equaled the higher of: (a) net asset value per share on
the valuation date, or (b) 95% of market price (not including estimated
brokerage commission) on the payable date; except if the market price
(not including estimated brokerage commissions) on the payable date is
less than 95% of the net asset value per share on the valuation date, you
shall receive a distribution of cash from the Fund and shall apply the
amount of such distribution to the purchase in the open market of shares
of my account, commencing on the business day after the payable date,
subject to the condition that such purchases must be made at a "discount"
during the remainder of the "buying period." "Discount" is defined as a
market price per share (including estimated brokerage commissions) which
is lower than the most recently determined net asset value per share (as
calculated from time to time). "Buying period" shall mean the period
commencing the first business day after the valuation date and ending at
the close of business on the business day preceding the "ex" date for the
next distribution. The valuation date will be the last business day of
the week preceding the week of the payable date.
3. Should the Fund's net asset value per share exceed the market price
(including estimated brokerage commissions) on the valuation date for a
distribution, you shall receive for my account a distribution in cash
from the Fund and shall apply the amount of such distribution on my
shares to the purchase in the open market of shares for my account
commencing on the first business day after the valuation date, subject to
the condition that such purchases must be made at a discount during the
buying period.
4. In the event you are instructed to purchase shares in the open market
pursuant to paragraph 2 or 3 hereof, and you are unable for any reason to
invest the full amount of the distribution in shares acquired in
open-market purchases at a discount during the buying period, you will
invest the uninvested portion of such distribution in newly-issued shares
at the close of business at the end of such buying period at the higher
of: (a) net asset value determined at such close, or (b) 95% of the
market price (not including estimated brokerage commissions) at such
close.
5. You may not acquire newly-issued shares after the valuation date unless
you have received a legal opinion that registration of such shares is not
required under the Securities Act of 1993, as amended, or unless the
shares to be issued are registered under such an Act.
6. For all purposes of the Plan: (a) the market price of the shares on a
particular date shall be the last sales price on the New York Stock
Exchange on that date, or if there is no sale on such Exchange on that
date, then the mean between the closing bid and asked quotations for such
shares on such Exchange on such date (in either case including or not
including estimated brokerage commissions as provided above) and (b) net
asset value per share of the shares on a particular date shall be as
determined by or on behalf of the Fund.
7. Open-market purchases provided for above may be made on any securities
exchange where the shares are traded, in the over-the-counter market or
in negotiated transactions and may be on such terms as to price, delivery
and otherwise as you shall determine. My cash funds held by you
uninvested will not bear interest and it is understood that, in any
event, you shall have no liability in connection with any inability to
purchase shares within 30 days after the initial date of such purchase as
herein provided, or with the timing of any purchases effected. You shall
have no responsibility as to the value of the shares acquired for my
account. For the purposes of open-market purchases with respect to the
Plan you may commingle my funds with those of other shareholders of the
Fund for whom you similarl act as Agent, and the average price (including
brokerage commissions) of all shares purchased by you as Agent shall be
the price per share allocated to me in connection therewith.
8. You may hold my shares acquired pursuant to my authorization, together
with the shares of other shareholders of the Fund acquired pursuant to
similar authorizations, in non-certificate form in your name or that of
your nominee. You will forward to me any proxy solicitation material and
will vote any shares so held for me only in accordance with the proxy
returned by me to the Fund. Upon my written request, you will deliver to
me, without charge, a certificate or certificates for the full shares.
9. You will confirm to me each investment made for my account as soon as
practicable but not later than 60 days after the date thereof. Although I
may from time to time have an undivided fractional interest (computed to
three decimal places) in a share, no certificates for a fractional share
will be issued. However, distributions on fractional shares will be
credited to my account. In the event of termination of my account under
the Plan, you will sell such undivided fractional interests at the market
value of the shares at the time of termination and send the net proceeds
to me.
10
<PAGE>
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Dividend Reinvestment Plan
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10. Any stock dividends or split shares distributed by the Fund on shares
held by you for me will be credited to my account. In the event that the
Fund makes available to its shareholders rights to purchase additional
shares or other securities, the shares held for me under the Plan will be
added to other shares held by me in calculating the number of rights to
be issued to me.
11. Your fee for service described in this Plan will be paid by the Fund. I
will be charged a pro rata share of brokerage commission on all
open-market purchases.
12. I may terminate my account under the Plan by notifying you in writing.
Such termination will be effective immediately if my notice is received
by you prior to the record date of subsequent distributions. The Plan may
be terminated by you or the Fund upon notice in writing mailed to me at
least 30 days prior to any record date for the payment of any
distribution of the Fund. Upon any termination you will cause a
certificate or certificates for the full shares held for me under the
Plan and the proceeds from the sales of any fractional shares to be
delivered to me without charge. If I elect by notice to you in writing in
advance of such termination to have you sell part or all of my shares and
remit the proceeds to me, you are authorized to deduct brokerage
commission for this transaction from the proceeds.
If I decide to terminate my account under the Plan, I may request that
all my Plan shares, both full and fractional, be sold. The per share
price may fall during the period between my request for sale and the sale
in the open market which will be made within ten trading days after the
Agent receives my request. The proceeds of the sale less a $2.50 service
fee, plus any brokerage commission will be mailed to me after the
settlement of funds from the brokerage firm. The settlement is three
business days after the sale of shares.
13. These Terms and Conditions may be amended or supplemented by you or the
Fund at any time or times but, except when necessary or appropriate to
comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to
me appropriate written notice at least 30 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted
by me unless, prior to the effective date thereof, you receive written
notice of the termination of my account under the Plan. Any such
amendment may include an appointment by you in your place and stead of
successor Agent under these Terms and Conditions, with full power and
authority to perform all or any of the acts to be performed by the Agent
under these Terms and Conditions. Upon any such appointment of any Agent
for the purpose of receiving distributions, the Fund will be authorized
to pay to such successor Agent, for my account, all distributions payable
on shares held in my name or under the Plan for retention or application
by such successor Agent as provided in these Terms and Conditions.
14. You shall at all times act in good faith and agree to use your best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement and to comply with applicable law, but
assume no responsibility and shall not be liable for loss or damage due
to errors unless such error is caused by your negligence, bad faith or
willful misconduct, or that of your employees. 15....These Terms and
Conditions shall be governed by the laws of the Commonwealth of
Massachusetts.
15. This Terms and Conditions shall be governed by the laws of the
Commonwealth of Massachusetts.
11
<PAGE>
Transfer Agent
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Important Information About This Report
The Transfer Agent for Colonial Insured Municipal Fund is:
BankBoston, NA
100 Federal Street
Boston, MA 02110
1-800-730-6001
The Fund mails one shareholder report to each shareholder address. If you
would like more than one report, please call 1-800-426-3750 and additional
reports will be sent to you.
This report has been prepared for shareholders of Colonial Insured
Municipal Fund.
<PAGE>
Trustees
Robert J. Birnbaum
Consultant (formerly Special Counsel,
Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock
Exchange, Inc.; President, American Stock
Exchange Inc.)
Tom Bleasdale
Retired (formerly Chairman of the Board and
Chief Executive Officer, Shore Bank & Trust
Company)
John V. Carberry
Senior Vice President of Liberty Financial
Companies, Inc. (formerly Managing
Director, Salomon Brothers)
Lora S. Collins
Attorney (formerly Attorney, Kramer, Levin,
Naftalis & Frankel)
James E. Grinnell
Private Investor (formerly Senior Vice
President-DOperations, The Rockport
Company)
Richard W. Lowry
Private Investor (formerly Chairman and
Chief Executive Officer, U.S. Plywood
Corporation)
Salvatore Macera
Private Investor (formerly Executive Vice
President of Itek Corp. and President of Itek
Optical & Electronic Industries, Inc.)
William E. Mayer
Partner, Development Capital, LLC (formerly
Dean, College of Business and Management,
University of Maryland; Dean, Simon Graduate
School of Business, University of Rochester;
Chairman and Chief Executive Officer, CS First
Boston Merchant Bank; and President and Chief
Executive Officer, The First Boston Corporation)
James L. Moody, Jr.
Retired (formerly Chairman of the Board,
Chief Executive Officer and Director
Hannaford Bros. Co.)
John J. Neuhauser
Academic Vice President and Dean of Faculties,
Boston College (former Dean, Boston College
School of Management)
Thomas E. Stitzel
Professor of Finance, College of Business, Boise
State University; Business Consultant and Author
Robert L. Sullivan
Retired Partner, KPMG LLP (formerly
Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and
International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
Anne-Lee Verville
Consultant (formerly General Manager,
Global Education Industry, and President,
Applications Solutions Divisions, IBM
Corporation)
COLONIAL INSURED MUNICIPAL FUND Annual Report
ID-02/269I-1199 (1/00) 99/1610
