[LIBERTY LOGO]
Colonial California
Insured Municipal Fund
Semiannual Report
May 31, 2000
<PAGE>
President's Message
Dear Shareholder:
On May 31, 2000, Colonial California Insured Municipal Fund completed its first
full six months of operations. I am pleased to report that, during the half-year
period, the Fund's management team successfully invested the majority of the
Fund's assets and was able to generate income distributions of $0.467 per common
share.(1)
During the six-month period, the economy of California, like that of the nation,
remained very strong. In an attempt to restrain this robust economic growth and
stem a rise in the rate of inflation, the Federal Reserve continued a program of
interest rate increases begun in mid-1999. Rate hikes in February 2000 and again
in March generally hurt performance in the municipal bond markets because, as
rates rise, bond prices fall.
In May 2000, the Fed pushed short-term rates up another 0.50%, demonstrating
just how determined it was to curb inflationary pressures. Investors took this
as a sign that such pressures would eventually come under control, and municipal
bond yields came down, creating a rally in municipal bond prices toward the end
of the period. The Fund's management team also foresaw a more moderate economic,
inflation, and interest rate environment in the future and positioned the fund
for this scenario.
Thank you for choosing Colonial California Insured Municipal Fund and for giving
us the opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
-----------------------
Stephen E. Gibson
President
July 17, 2000
(1) 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.
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.
--------------------------------
Not FDIC May Lose Value
----------------
Insured No Bank Guarantee
--------------------------------
<PAGE>
Highlights
> Fund is invested primarily in AAA-rated, long-term securities.
During this period of volatility, we were cautious in structuring the
Fund's initial portfolio and focused largely on highly rated bonds with
maturities of 20 years or longer, including a sizable number of
essential-services revenue bonds. These bonds are backed by revenues from
core infrastructure projects, such as water, sewer and energy plants.
> High-yield bonds added to current yield.
To complete the initial portfolio, we selectively invested a small
percentage in nonrated bonds. The relative yield advantage of high-yield
bonds (compared to comparable-maturity insured municipal bonds) was on the
increase as the period began, so adding them to the portfolio gave a boost
to the Fund's current yield.
> Portfolio manager's commentary.
For the six months ended May 31, 2000, the Fund posted a total return of
0.50% based on net asset value and negative 2.21% based on market price.
The Lehman Brothers Municipal Bond Index outperformed the Fund, returning
1.02% for the same period.
During most of this period, the California municipal bond market
experienced higher yields and lower prices. As the period drew to an end,
we saw the first signs--in housing, retail and manufacturing activity
reports--that the U.S. economy may be slowing. Since California's economy
is quite diversified these days and behaves much like the national economy,
this would bode well for the California municipal markets. Thus, we have
positioned the Fund for a more favorable long-term environment. We believe
that if the economy loses some of its vigor, interest rates would fall,
allowing bond prices to rally. The gains would be greatest for longer-term
securities, so will be looking for an opportune time to increase our
commitment to securities at the long-end of the maturity spectrum.
--William Loring and Brian Hartford,
Portfolio Co-managers
Tax-exempt investing offers current tax-free income but also involves certain
risks. The value of the Fund will be affected by interest rate changes and the
creditworthiness of issues held in the Fund. The municipal bond management team
identifies problems and opportunities and reacts quickly to market changes.
[Begin sidebar]
Six-month cumulative total returns, for the period ended 5/31/2000:
<TABLE>
<S> <C>
NAV 0.50%
Market price (2.21)%
</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 5/31/2000:
<TABLE>
<S> <C>
NAV $13.89
Market price $14.187
</TABLE>
Top Industry Sectors as of 5/31/2000:
<TABLE>
<S> <C>
Water & Sewer 12.7%
Special Property Tax 12.4%
Local Appropriated 10.8%
Hospitals 7.7%
Municipal Electric 6.6%
Local General Obligations 6.5%
Education 6.3%
Special Nonproperty 6.0%
State General-Obligations 5.4%
</TABLE>
Quality Breakdown
as of 5/31/2000:
<TABLE>
<S> <C>
AAA 82.2%
AA 4.3%
A 5.3%
BBB 6.5%
Nonrated 1.1%
Cash equivalents 0.6%
</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 agencies: Standard & Poor's Corp., Moody's Investors
Service, Inc. or Fitch Investors Service.
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.
1
<PAGE>
Schedule of Investments
May 31, 2000 (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Municipal Bonds - 99.0% Par Value
--------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION--6.3%
Education
State Community College Financing Authority,
West Valley Mission Community College,
Series 1997, 5.625% 5/1/22 $2,500 $2,410
State Educational Facilities Authority:
La Verne University,
Series 2000, 6.625% 6/1/20 250 249
Stanford University,
Series 1998 O, 5.125% 1/1/31 1,500 1,313
------
3,972
------
--------------------------------------------------------------------------------
HEALTHCARE--7.7%
Hospital
Oakland, Harrison Foundation,
Series 1999 A, 6.000% 1/1/29 (a) 1,000 997
State Health Facilities Financing Authority,
Cedars-Sinai Medical Center,
Series 1999 A, 6.125% 12/1/30 1,500 1,455
Statewide Communities Development Authority:
Sutter Health,
Series 1999, 5.500% 8/15/31 1,000 927
Catholic Healthcare West,
Series 1999, 6.500% 7/1/20 1,500 1,465
------
4,844
------
--------------------------------------------------------------------------------
HOUSING--12.4%
Assisted Living/Senior--4.0%
Abag Finance Authority for Nonprofit Corps.:
Odd Fellows Home,
Series 1999, 6.000% 8/15/24 2,000 2,006
6.200% 11/1/29 500 486
------
2,492
------
Multi-Family--3.8%
Abag Finance Authority for Nonprofit Corps.;
Civic Center Drive Apartments,
Series 1999 A, 5.875% 3/1/32 2,500 2,411
------
Single Family--4.6%
State Housing Finance Agency,
Series 1997 I, 5.750% 2/1/29 1,000 939
State Rural Home Mortgage Finance Authority:
Series 1998 A, 6.350% 12/1/29 1,000 1,039
Series 1998 B-4, 6.350% 12/1/29 910 936
------
2,914
------
--------------------------------------------------------------------------------
RESOURCE RECOVERY--2.0%
Disposal
Sacramento City Financing Authority,
Series 1999, 5.875% 12/1/29 1,250 1,232
------
</TABLE>
<TABLE>
<CAPTION>
Par Value
--------------------------------------------------------------------------------
<S> <C> <C>
TAX-BACKED--45%
Local Appropriated--10.8%
Del Norte County,
Series 1999, 5.400% 6/1/29 $1,500 $1,377
Los Angeles County,
Series 1999 A, (b) 8/1/23 2,220 537
Pacifica,
Series 1999, 5.875% 11/1/29 1,500 1,455
San Bernardino County, Medical Center
Financing Project, 5.500% 8/1/17 2,500 2,451
San Leandro,
Series 1999, 5.750% 11/1/29 1,000 971
------
6,791
------
Local General Obligations--6.5%
Brea-Olinda Unified School District,
Series 1999 A, 5.600% 8/1/20 (a) 1,000 970
Inglewood Unified School District,
Series 1999 A, 5.600% 10/1/24 1,185 1,138
Pomona Unified School District,
Series 2000, 6.550% 8/1/29 1,000 1,090
Union Elementary School District,
Series 1999 A, (b) 9/1/18 1,630 551
PR Commonwealth of Puerto Rico
Municipal Finance Agency,
Series 1999 A, 5.500% 8/1/23 350 334
------
4,083
------
Special Non-Property Tax--6.0%
PR Commonwealth of Puerto Rico Highway &
Transportation Authority,
Series 1996 Y, 5.500% 7/1/36 2,500 2,301
VI Virgin Islands Public Finance Authority,
Series 1999, 6.500% 10/1/24 1,500 1,494
------
3,795
------
Special Property Tax--12.4%
Fairfield-Suisan Unified School District,
Series 1999, 5.375% 8/15/29 1,500 1,375
Orange County Community Facilities District,
Ladera Ranch,
Series 1999 A, 6.700% 8/15/29 200 196
Palmdale Elementary School District,
Community Facilities District No.90-1,
Series 1999, 5.800% 8/1/29 1,500 1,467
Pittsburg Redevelopment Agency,
Los Medanos Project,
Series 1999, (b) 8/1/21 2,575 713
Rancho Cucamonga Redevelopment Agency,
Series 1999, 5.250% 9/1/20 1,000 926
Ridgecrest, Ridgecrest Civic Center,
Series 1999, 6.250% 6/30/26 500 477
San Clemente, Act of 1915,
Series 1999, 6.050% 9/2/28 300 275
</TABLE>
2 See notes to investment portfolio.
<PAGE>
Schedule of Investments
May 31, 2000 (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Par Value
--------------------------------------------------------------------------------
<S> <C> <C>
Special Property Tax--(Continued)
San Jose Redevelopment Agency,
Series 1997, 5.625% 8/1/25 $1,250 $1,202
Santa Clara Redevelopment Agency, Bayshore
North Project, Series 1999 A, 5.500% 6/1/23 1,000 950
Santa Margarita Water District,
Series 1999, 6.250% 9/1/29 225 209
------
7,790
------
State Appropriated--3.9%
State Public Works Board,
Department of Health Services,
Series 1999 A, 5.750% 11/1/24 2,500 2,445
------
State General Obligations--5.4%
State, Series 1999, 5.750% 12/1/29 1,500 1,461
PR Commonwealth of Puerto Rico,
Series 1997, 5.375% 7/1/25 2,100 1,946
------
3,407
------
--------------------------------------------------------------------------------
TRANSPORTATION--3.7%
Air Transportation--0.7%
Statewide Communities Development
Authority, Series 1997 A, 5.700% 10/1/33 500 413
------
Airport--1.5%
Port of Oakland, Series 2000 K, 5.750% 11/1/29 1,000 929
------
Transportation--1.5%
San Francisco Bay Area Rapid Transit District,
Series 1999, 5.500% 7/1/34 (a) 1,000 934
------
--------------------------------------------------------------------------------
UTILITY--21.9%
Independent Power Producer--0.4%
PR Commonwealth of Puerto Rico Industrial,
Educational, Medical & Environmental
Cogeneration Facilities, AES Project,
Series 2000, 6.625% 6/1/26 250 251
------
Investor Owned--2.2%
State Pollution Control Financing Authority,
Southern California Edison Co.,
Series 1999 B, 5.450% 9/1/29 1,500 1,394
------
Municipal Electric--6.6%
Lodi, Series 1999 A, 5.750% 1/15/27 1,000 973
GM Guam Power Authority,
Series 1999 A, 5.125% 10/1/29 1,000 872
PR Puerto Rico Electric Power Authority,
Series 1997 AA, 5.375% 7/1/27 2,500 2,309
------
4,154
------
Water & Sewer--12.7%
Culver City, Series 1999 A, 5.700% 9/1/29 1,500 1,450
Los Angeles Department of Water & Power,
Series 1999, 6.100% 10/15/39 1,500 1,512
</TABLE>
<TABLE>
<CAPTION>
Par Value
--------------------------------------------------------------------------------
<S> <C> <C>
Metropolitan Water District,
Series 1997 A, 5.000% 7/1/37 1,500 1,256
Water & Sewer--(Continued)
Pico Rivera Water Authority,
Series 1999 A, 5.500% 5/1/29 $2,000 $1,879
Placer County Water Agency,
Series 1999, 5.500% 7/1/29 1,000 937
Pomona Public Financing Authority,
Series 1999 AC, 5.500% 5/1/29 (a) 1,000 939
------
7,973
------
Total Municipal Bonds
(cost of $62,405) 62,224
------
</TABLE>
<TABLE>
<CAPTION>
Options - 0.2% Contracts
--------------------------------------------------------------------------------
<S> <C> <C>
September 2000 Treasury Bond Put,
Strike price $92, Expiration 9/22/00 9,000 49
September 2000 Treasury Bond Call,
Strike price $96, Expiration 9/22/00 3,600 56
September 2000 Treasury Bond Call,
Strike price $98, Expiration 9/22/00 2,900 23
------
Total Options
(cost of $179) 128
------
Total Investments
(cost of $62,584)(c) 62,352
------
</TABLE>
<TABLE>
<CAPTION>
Short-Term Obligations - 0.6% Par
--------------------------------------------------------------------------------
<S> <C> <C>
VARIABLE RATE DEMAND NOTES (d)
State Educational Facilities Authority,
Foundation for Educational Achievement,
Series 1996, 4.200% 7/1/26 $400 400
------
Other Assets & Liabilities, Net--0.2% 118
------
Net Assets--100% $62,870
-------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) These securities, or a portion thereof, with a total market value of $3,840,
are being used to collateralize open futures contracts.
(b) Zero coupon bond.
(c) Cost for federal income tax purposes is the same.
(d) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specific dates. These securities are payable on
demand and are secured by either letters of credit or other credit support
agreements from banks. The rates listed are as of May 31, 2000.
Short futures contracts open at May 31, 2000:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 05/31/00
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury Bond 3,500 September $ (60)
Municipal Bond 11,000 September (103)
------
$(163)
------
</TABLE>
See notes to financial statements. 3
<PAGE>
Statement of Assets and Liabilities
May 31, 2000 (Unaudited)
(In thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
Assets
Investments at value (cost $62,584) $62,352
Short-term obligations 400
-------
62,752
Receivable for:
Interest $1,153
Investments sold 974
Other 72 2,199
------ -------
Total Assets 64,951
Liabilities
Payable for:
Investments purchased 1,461
Distributions--common shares 217
Distributions--preferred shares 18
Expense reimbursement due to
Advisor 75
Variation on margin futures 61
Accrued:
Management fee 21
Bookkeeping fee 2
Other 226
------
Total Liabilities 2,081
-------
Net Assets $62,870
=======
Composition of Net Assets
Auction Preferred shares
(1 share issued and outstanding at
$25,000 per share) $24,450
Capital paid in 39,257
Overdistributed net investment income (4)
Accumulated net realized loss (438)
Net unrealized depreciation on:
Investments (232)
Open futures contracts (163)
--------
$62,870
========
Net Assets at value for 2,767 common
shares of beneficial interest
outstanding $38,420
========
Net Asset Value per common share $ 13.89
========
Net Assets at Value including accrued
dividends for 1 preferred share
outstanding $24,468
========
<PAGE>
</TABLE>
Statement of Operations
For the Six Months Ended May 31, 2000 (Unaudited)
(In thousands)
<TABLE>
<S> <C> <C>
Investment Income
Interest $ 1,785
Expenses
Management fee $ 106
Bookkeeping fee 10
Transfer agent fee 28
Trustees fee 4
Custodian fee 3
Audit fee 22
Legal fee 35
Reports to shareholders 7
Preferred share remarketing
commissions 26
Other 47
-----
288
Fees and expenses waived or borne by
the Advisor (122) 166
------ --------
Net Investment Income 1,619
--------
Net Realized & Unrealized Loss on
Portfolio Positions
Net realized loss on:
Investments (59)
Closed futures contracts (379)
------
Net Realized Loss (438)
Net change in unrealized appreciation/
depreciation during the period on:
Investments (82)
Open futures contracts (163)
------
Net Change in Unrealized
Appreciation/Depreciation (245)
--------
Net Loss (683)
--------
Increase in Net Assets from Operations $ 936
========
</TABLE>
4 See notes to financial statements.
<PAGE>
Statement of Changes in Net Assets
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Six months Period
ended ended
May 31, November 30,
Increase (Decrease) in Net Assets 2000 1999(a)
--------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income $ 1,619 $ 124
Net realized loss (438) --
Net change in unrealized appreciation/
depreciation (245) (150)
-------- -------
Net Increase (Decrease) from
Operations 936 (26)
Distributions:
From net investment income-common (1,292) --
From net investment income-preferred (455) --
-------- -------
(811) (26)
-------- -------
Fund Share Transactions:
Receipts for shares sold--common 5,146 34,408
Value of distributions reinvested--
common 3 --
Preferred share offering
(net of $300 offering costs) 24,150 --
-------- -------
Net Increase from Fund Share Transactions 29,299 34,408
-------- -------
Total Increase 28,488 34,382
Net Assets
Beginning of period 34,382 --
------- -------
End of period (net of over-
distributed and including
undistributed net investment
income of $4 and $124,
respectively) $62,870 $34,382
------- -------
Number of Fund Shares
Common:
Sold 360 2,407
Issued for distributions reinvested (b) --
Outstanding at
Beginning of Period 2,407 --
------- -------
End of Period 2,767 2,407
------- -------
Preferred:
Issued in initial offering 1 --
Outstanding at
Beginning of Period -- --
------- -------
End of Period 1 --
------- -------
</TABLE>
(a) The Fund commenced investment operations on October 29, 1999
(b) Rounds to less than one.
See notes to financial statements. 5
<PAGE>
Notes to Financial Statements
May 31, 2000 (Unaudited)
Note 1. Interim Financial Statements
In the opinion of management of Colonial California Insured Municipal Fund (the
Fund) the accompanying financial statements contain all normal and recurring
adjustments necessary for the fair presentation of the financial position of the
Fund at May 31, 2000, and the results of its operations, the changes in its net
assets and the financial highlights for the six months then ended.
Note 2. Accounting Policies
Organization:
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 and California state personal income
tax. The Fund authorized an unlimited number of shares.
On October 29, 1999 and December 10, 1999 the Fund completed the offering of
2,400,000 and 360,000 common shares, respectively, at a price of $15.00 per
share, raising $34,308,000 and $5,146,200 respectively, 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 Fund in
the preparation of its financial statements.
Security valuation and transactions:
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar securities.
When management deems it appropriate, an over-the-counter or exchange bid
quotation is used.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Options are valued or the last reported sale price, or in the absence of a sale,
the mean between the last quoted bid and asking price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
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 Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
Distributions to preferred shareholders are recorded daily and are payable at
the end of each dividend period. Each dividend payment period for the Auction
Preferred Shares is generally seven days. The applicable dividend rate for the
Auction Preferred Shares on May 31, 2000 was 4.60%. For the six months ended May
31, 2000, the Fund paid dividends to Auction Preferred shareholders amounting to
$455,413 respresenting an average APS dividend rate for such period of 3.73%.
Note 3. 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 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.
6
<PAGE>
Notes to Financial Statements (continued)
May 31, 2000 (Unaudited)
Note 4. Portfolio Information
Investment activity:
During the six months ended May 31, 2000, purchases and sales of investments,
other than short-term obligations, were $33,574,433 and $7,126,568 respectively.
Unrealized appreciation (depreciation) at May 31, 2000, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 17,062
Gross unrealized depreciation (248,833)
---------
Net unrealized depreciation $(231,771)
---------
</TABLE>
Other:
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund 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 Fund and not for trading
purposes. The use of futures contracts and options involves certain risks, which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out positions due to
different trading hours, or the temporary absence of a liquid market, for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Advisor of the future direction of interest rates. Any of these risks may
involve amounts exceeding the amount recognized in the Fund's Statement of
Assets and Liabilities at any given time.
Note 5. Subsequent Event
On December 20, 1999, the Fund offered and currently has outstanding 978 Auction
Preferred shares. The Auction Preferred Shares are redeemable at the option of
the Fund on any dividend payment date at the redemption price of $25,000 per
share, plus an amount equal to any dividends accumulated on a daily basis unpaid
through the redemption date (whether or not such dividends have been declared).
Total proceeds of $24,150,145 net of underwriting and offering costs, were
received upon completion of the offering.
Costs incurred by the Trust in connection with the offering of the Auction
Preferred Shares totaling $299,855 were recorded as a reduction of capital paid
in excess of par applicable to common shares.
Under the Investment Company Act of 1940, the Fund is required to maintain asset
coverage of at least 200% with respect to the Auction Preferred Shares as of the
last business day of each month in which any Auction Preferred Shares are
outstanding. Additionally, the Fund is required to meet more stringent asset
coverage requirements under the terms of the Auction Preferred shares and in
accordance with the guidelines prescribed by the rating agencies. Should these
requirements not be met, or should dividends accrued on the Auction Preferred
Shares not be paid, the Fund may be restricted in its ability to declare
dividends to common shareholders or may be required to redeem certain of the
Auction Preferred Shares. At May 31, 2000 there were no such restrictions on the
Fund.
Note 6. Results of Annual Meeting of Shareholders
On May 24, 2000, the Annual Meeting of Shareholders of the Fund was held to
elect nine Trustees, (Bleasdale, Carberry, Collins, Grinnell, Lowry, Mayer,
Moody, Verville, Neuhauser) to be voted by the Common and Preferred shareholders
and to elect two Trustees, (Macera, Stitzel) to be voted solely by Preferred
shareholders, and to ratify the selection of PricewaterhouseCoopers LLP as
independent accountants for the fiscal year ending November 30, 2000. On March
1, 2000, the record date for the Meeting, the Fund had outstanding 2,766,666 of
Common shares and 978 of Preferred shares. The votes cast were as follows:
<TABLE>
<CAPTION>
Authority
For Withheld
----------- ----------
<S> <C> <C>
To elect a Board of Trustees:
Tom Bleasdale 2,655,657 29,513
John V. Carberry 2,655,657 29,513
Lora S. Collins 2,655,657 29,513
James E. Grinnell 2,655,657 31,513
Richard W. Lowry 2,655,657 30,513
William E. Mayer 2,655,657 30,513
James L. Moody 2,655,657 30,513
John J. Neuhauser 2,655,657 29,513
Anne-Lee Verville 2,655,657 29,513
Salvatore Macera 978 --
Thomas E. Stitzel 978 --
</TABLE>
To ratify the selection of PricewaterhouseCoopers LLP as independent accountants
for the fiscal year ending November 30, 2000:
<TABLE>
<CAPTION>
For Against Abstain
------- ------- ---------
<S> <C> <C>
2,658,482 668 26,020
</TABLE>
7
<PAGE>
Financial Highlights
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows (common shares unless otherwise noted):
<TABLE>
<CAPTION>
(Unaudited)
Six Months
ended Period ended
May 31, November 30,
2000 1999 (b)
-------------------- -------------
<S> <C> <C>
Net asset value--Beginning of period $14.290 $14.330
------- -------
Income From Investment Operations:
Net investment income (a) 0.411 0.052
Offering costs--common shares (0.030) (0.030)
Offering costs--preferred shares (0.109) --
Net realized and unrealized loss (0.039) (0.062)
------- -------
Total from Investment Operations 0.233 (0.040)
------- -------
Less Distributions Declared to Shareholders:
From net investment income--common (0.467) --
From net investment income--preferred (0.166) --
------- -------
Total Distributions Declared to Shareholders (0.633) --
------- -------
Net asset value--End of period $13.890 $14.290
------- -------
Market price per share $14.187 $15.000
------- -------
Total return--based on market value (c)(d)(e) (2.21)% 0.00%
------- -------
Ratios to Average Net Assets:
Expenses (f)(g) 0.86%(h) 0.55%
Net investment income (f)(g) 6.04%(h) 4.12%
Fees and expenses waived or borne by the Advisor (f)(g) 0.63%(h) --
Portfolio turnover (e) 12% 0%
Net assets at end of period (000) $62,870 $34,382
(a) Net of fees and expenses waived or borne by the Advisor which amounted to: $ 0.044 $ 0.014
</TABLE>
(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.
(h) Ratios reflect net assets available to common shares only; net investment
income ratio also reflects reduction for dividend payments to preferred
shareholders.
8
<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 similarly 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.
9
<PAGE>
Dividend Reinvestment Plan
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.
10
<PAGE>
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<PAGE>
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<PAGE>
Transfer Agent
--------------------------------------------------------------------------------
Important Information About This Report
The Transfer Agent for Colonial California 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 California Insured
Municipal Fund.
<PAGE>
Trustees
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-Operations, 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
Anne-Lee Verville
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
COLONIAL CALIFORNIA INSURED MUNICIPAL FUND Semiannual Report
IC-03/016-0600 (7/00) 00/1276
