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 811-9533
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COLONIAL INSURED MUNICIPAL FUND
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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)
Russell L. Kane, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-426-3363
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Date of fiscal year end: November 30, 2003
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Date of reporting period: May 31, 2003
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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. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
COLONIAL INSURED
MUNICIPAL FUND
[photo of bridge]
SEMIANNUAL REPORT
MAY 31, 2003
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The US bond market continued to reward investors with solid returns for the
period covered by this report. As key economic indicators sent mixed signals,
the US economy continued to struggle and interest rates declined. The Federal
Reserve Board lowered a key short-term interest rate--the federal funds rate--in
November, to 1.25%--a new record low.1 The yield on the 10-year US Treasury bond
fell to a 45-year low of 3.3% near the end of the period. Although the
environment was favorable to bonds, declining interest rates and relatively low
inflation raised the fear of deflation for the first time since the 1930s.
Bonds reported gains across all sectors. Leadership rotated from higher quality
bonds, which were the top performers in the previous period, to lower quality
bonds. However, in the municipal sector, higher quality bonds outperformed
high-yield issues.
The following report will provide you with more detailed information about the
fund's performance and the investment strategies used by portfolio manager Paul
Aston. For more information, please contact your financial advisor.
CONSOLIDATION AND A NEW NAME: COLUMBIA
On April 1, 2003, six of the asset management firms brought together when
Columbia Management Group, Inc. was formed were consolidated and renamed
Columbia Management Advisors, Inc. (Columbia Management). This consolidation
does not affect the management or investment objectives of your fund and is the
next step in our efforts to create a consistent identity and to streamline our
organization. Although the name of the asset manager familiar to you has
changed, what hasn't changed is the commitment of our specialized investment
teams to a multi-disciplined approach to investing, focused on our goal of
offering shareholders the best products and services.
As always, we thank you for choosing Colonial Insured Municipal Fund and for
giving us the opportunity to help you build a strong financial future.
Sincerely,
/s/ Joseph R. Palombo
Joseph R. Palombo
President
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MEET THE NEW PRESIDENT
Joseph R. Palombo, president and chairman of the Board of Trustees for Liberty
Funds, is also chief operating officer and executive vice president of Columbia
Management. Mr. Palombo has over 19 years of experience in the financial
services industry. Prior to joining Columbia Management, he was chief operating
officer and chief compliance officer for Putnam Mutual Funds. Prior to that, he
was a partner at Coopers & Lybrand. Mr. Palombo received his degree in
economics/accounting from the College of the Holy Cross, where he was a member
of Phi Beta Kappa. He earned his master's degree in taxation from Bentley
College and participated in the Executive Program at the Amos B. Tuck School at
Dartmouth College.
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NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
1 On June 25, 2003, the Federal Reserve Board cut the federal funds rate to
1.00%.
Economic and market conditions change frequently. There is no assurance that the
trends described in this report will continue or commence.
PORTFOLIO MANAGER'S REPORT
For the six-month period ended May 31, 2003, Colonial Insured Municipal Fund
generated a total return of 8.42%, based on net asset value. The fund's peer
group, the Lipper Insured Municipal Debt Funds (Leveraged), averaged a 9.76%
return.1 The fund's investment in airline and single-family housing bonds
hampered relative performance. In particular, United Airlines bonds (0.1% of net
assets)2 detracted from the fund's income as the airline declared bankruptcy and
ceased payments to bondholders. Also, deterring performance to some extent were
short positions in US Treasury futures contracts, which are employed to reduce
the overall duration of the fund.
The fund, however, benefited as municipal bonds rallied amid strong demand and
record issuance. Our strategic focus on income led us to own bonds with higher
coupons (or stated interest rates) and longer maturities than many of our peers.
These bonds did especially well as interest rates declined during the six-month
period. Low short-term interest rates also boosted income through the leverage
of the fund's preferred shares, which paid out a variable rate that was well
below what the fund earned through investing in longer-term securities.
Other positive contributors to performance included prerefunded bonds such as
those issued by the New York City Metropolitan Transportation Authority and City
of Pittsburgh (1.7% and 1.4% of net assets, respectively). Prerefunding occurs
when an issuer sells new bonds and invests the proceeds in US Treasury
securities, which are pledged to pay off the older debt. This improves the
bond's quality and boosts the value of the older bonds. Selling
weaker-performing general obligation, health care and education bonds, as well
as lower coupon bonds with significant call risk, also aided performance. In
addition, some single family housing bonds were called as a result of increased
mortgage prepayment activity. During the period, we also bought and sold options
on US Treasury futures contracts in order to hedge the fund's exposure to
interest rate volatility.
1 Lipper, Inc., a widely respected data provider in the industry, calculates
an average return for mutual funds with similar investment objectives as
the fund.
2 Holdings are disclosed as of May 31, 2003 and are subject to change.
PRICE PER SHARE AS OF 5/31/03 ($)
Net asset value 15.63
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Market price 16.27
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SIX MONTH TOTAL RETURNS
AS OF 5/31/03 (%)
Net asset value 8.42
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Market price 11.66
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DISTRIBUTIONS DECLARED
PER COMMON SHARE
12/1/02-5/31/03 ($)
0.53
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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 from their original
issue price. Some or all of this discount
may be included in the fund's ordinary
income, and any market discount is taxable
when distributed.
TOP 10 INDUSTRY SECTORS
AS OF 5/31/03 (%) (UNAUDITED)
Local general obligations 12.7
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Hospitals 8.7
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Airports 7.7
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Ports 6.7
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Water & sewer 6.6
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Refunded/escrowed 6.1
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Investor owned utility 5.3
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Single family 4.8
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State appropriated 4.5
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Air transportation 4.4
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QUALITY BREAKDOWN
AS OF 5/31/03 (%) (UNAUDITED)
AAA 79.4
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AA 5.7
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A 4.4
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BBB 4.7
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BB 0.8
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CCC 0.1
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CC 0.1
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Non-rated 3.7
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Cash Equivalents 1.1
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Quality 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 nationally-recognized rating
agencies: Standard & Poor's Corporation,
Moody's Investors Service, Inc. or Fitch
Investors Service, Inc. Sector breakdowns are
calculated as a percentage of net assets.
Because the fund is actively managed, there
can be no guarantee that the fund will
continue to maintain this quality breakdown
or invest in these sectors in the future.
1
PORTFOLIO MANAGER'S REPORT (CONTINUED)
Overall, we expect many states will continue to issue a large amount of debt in
order to fund services and balance their budgets. While this might be considered
a potentially negative factor, we believe municipal issues will benefit from a
continued strong demand for high quality, tax-advantaged income. Our strategy
will remain focused on income as we look for opportunities to add high-quality
securities at advantageous prices.
/s/ Paul A. Aston
Paul A. Aston is the head of Columbia Management Group's tax-exempt fixed income
quantitative strategy department and portfolio manager of Colonial Insured
Municipal Fund. Mr. Aston joined CMG in 2002. Prior to January 1, 2003, Maureen
G. Newman was the fund's manager.
Past performance is no guarantee of future investment results. The principal
value and investment return will fluctuate, resulting in a gain or loss on sale.
Tax-exempt investing offers current tax-free income, but it also involves
certain risks. The value of the fund shares will be affected by interest rate
changes and the creditworthiness of issues held in the funds. Investing in high
yield securities offers the potential for high current income and attractive
total return, but involves certain risks. Lower-rated bond risks include default
of the issuer and rising interest rates. Interest income from certain tax-exempt
bonds may be subject to the federal alternative minimum tax for individuals and
corporations.
2
INVESTMENT PORTFOLIO
May 31, 2003 (Unaudited)
MUNICIPAL BONDS - 97.5% PAR VALUE
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EDUCATION - 4.1%
EDUCATION - 1.5%
DC Catholic University of America,
Series 1999,
5.625% 10/01/29 $1,000,000 $ 1,108,120
MA State Health & Educational
Facilities Authority,
Brandeis University, Series 1998 I,
4.750% 10/01/28 500,000 509,775
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1,617,895
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STUDENT LOAN - 2.6%
MA Educational Loan Authority,
Issue G, Series 2000 A,
5.950% 12/01/15 470,000 546,756
MT Higher Education Student
Assistance Corp., Series 1999 B,
6.400% 12/01/32 2,000,000 2,133,260
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2,680,016
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HEALTH CARE - 12.0%
CONGREGATE CARE RETIREMENT - 1.1%
NY Dormitory Authority,
Miriam Osborn Memorial Home,
Series 2000 B,
6.875% 07/01/19 500,000 579,635
NY Suffolk County Industrial
Development Agency, Jeffersons Ferry,
Series 1999 A,
7.200% 11/01/19 550,000 586,801
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1,166,436
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HEALTH SERVICES - 2.2%
WI Health & Educational Facilities
Authority, Marshfield Clinic,
Series 1999,
6.250% 02/15/29 2,000,000 2,283,320
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HOSPITALS - 8.7%
CO Health Facilities Authority,
Parkview Medical Center, Inc.,
Series 2001,
6.600% 09/01/25 400,000 437,936
IA Finance Authority,
Mercy Medical Center,
Series 1999,
5.750% 08/15/29 1,000,000 1,108,800
IL Health Facilities Authority,
Swedish American Hospital,
Series 2000,
6.875% 11/15/30 500,000 552,015
ME Health & Higher Educational
Facilities Authority,
Series 1999 B,
6.000% 07/01/29 1,500,000 1,719,600
PAR VALUE
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MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1998 B,
5.375% 07/01/28 $ 400,000 $ 334,364
NV Henderson, Catholic Healthcare
West, Series 1999 A,
6.750% 07/01/20 500,000 541,170
OH Jackson,
Consolidated Health Systems,
Series 1999,
6.250% 10/01/29 1,500,000 1,733,895
OK Industrial Authority,
Series 1999 A,
5.750% 08/15/29 2,000,000 2,217,600
WA Health Care Facilities Authority,
Kadlec Medical Center,
Series 2001,
5.875% 12/01/21 300,000 328,617
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8,973,997
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HOUSING - 6.0%
ASSISTED LIVING/SENIOR - 0.7%
DE Kent County,
Heritage at Dover,
Series 1999,
7.625% 01/01/30 250,000 218,665
NC Medical Care Commission,
DePaul Community Facilities Project,
Series 1999,
7.625% 11/01/29 495,000 515,042
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733,707
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MULTI-FAMILY - 0.5%
FL Broward County Housing Finance
Authority, Chaves Lake Apartment
Project, Series 2000 A,
7.500% 07/01/40 250,000 256,585
FL Clay County Housing Finance
Authority, Madison Commons
Apartments, Series 2000 A,
7.450% 07/01/40 250,000 256,600
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513,185
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SINGLE FAMILY - 4.8%
AK Housing Finance Corp.,
Series 1999 A-1,
6.150% 06/01/39 1,575,000 1,695,109
CA Rural Home Mortgage Finance
Authority, Series 1998 A,
6.350% 12/01/29 730,000 864,546
CO Housing Finance Authority:
Series 1998 D-2,
6.350% 11/01/29 1,215,000 1,278,022
Series 2000 B-2,
7.250% 10/01/31 230,000 243,522
See notes to investment portfolio.
3
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2003 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR VALUE
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HOUSING (CONTINUED)
SINGLE FAMILY (CONTINUED)
OK Housing Finance Agency,
Series 2000 C-2,
7.550% 09/01/28 $ 780,000 $ 889,504
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4,970,703
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INDUSTRIAL - 0.5%
FOREST PRODUCTS - 0.5%
MN International Falls,
Boise Cascade Corp.,
Series 1999,
6.850% 12/01/29 500,000 507,870
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OTHER - 9.4%
OTHER - 2.3%
AL Incentives Financing Authority,
Series 1999 A,
6.000% 10/01/29 2,000,000 2,363,180
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POOL/BOND BANK - 1.0%
UT Water Finance Agency,
Series 2002 B,
5.125% 07/01/23 1,000,000 1,069,390
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REFUNDED/ESCROWED (a) - 6.1%
AL Jefferson County Sewer Authority,
Series 1999 A,
5.750% 02/01/38 2,000,000 2,378,300
NY Metropolitan Transportation
Authority, Series 1998 A,
5.250% 07/01/28 1,500,000 1,763,055
PA Pittsburgh,
Series 1999 A,
5.750% 09/01/21 1,250,000 1,494,712
WV Hospital Finance Authority,
Charleston Area Medical Center,
Series 2000,
6.750% 09/01/30 500,000 637,420
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6,273,487
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OTHER REVENUE - 0.1%
RECREATION - 0.1%
CT Gaming Authority, Mohegan
Tribe Indians, Series 2001,
6.250% 01/01/31 100,000 107,641
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RESOURCE RECOVERY - 0.8%
DISPOSAL - 0.8%
CA Solid Waste Authority, Salinas Valley,
Series 2002,
5.125% 08/01/22 750,000 787,732
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PAR VALUE
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TAX-BACKED - 26.2%
LOCAL APPROPRIATED - 3.3%
CA Sacramento City Financing
Authority, City Hall &
Redevelopment, Series 2002 A,
5.000% 12/01/32 $1,000,000 $ 1,055,010
OK Grady County Correctional
Facility, Series 1999,
6.000% 11/01/29 1,000,000 1,181,910
TX Houston, Series 2000,
6.400% 06/01/27 1,000,000 1,153,370
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3,390,290
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LOCAL GENERAL OBLIGATIONS - 12.7%
CA Centinela Valley Unified School
District, Series 2002 A,
5.250% 02/01/22 730,000 841,851
CA Empire Unified School District,
No. 1987-1-A, Series 2002,
(b) 10/01/18 1,665,000 854,145
CA Morgan Hill Unified School
District, Series 2002,
(b) 08/01/21 1,000,000 431,480
CA Union Elementary School District,
Series 1999 A,
(b) 09/01/16 1,400,000 807,044
CA Vallejo Unified School District,
Series 2002 A,
5.800% 02/01/21 500,000 619,505
CA West Covina Unified School District,
Series 2002 A,
5.800% 02/01/21 320,000 392,458
CT East Hartford,
Series 2003,
5.000% 05/01/11 1,000,000 1,149,370
IL Chicago,
Series 1998,
5.250% 01/01/28 165,000 174,902
IL Coles & Cumberland Counties
Unified School District,
Series 2000,
(b) 12/01/14 2,080,000 1,332,365
MI Jonesville Community Schools,
Series 1999,
5.750% 05/01/20 2,000,000 2,284,560
PA Philadelphia,
Series 1999 C,
5.750% 03/01/29 1,750,000 1,985,655
RI North Kingstown,
Series 1999,
5.875% 10/01/25 2,000,000 2,319,660
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13,192,995
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See notes to investment portfolio.
4
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2003 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR VALUE
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TAX-BACKED (CONTINUED)
SPECIAL NON-PROPERTY TAX - 4.1%
IL Metropolitan Pier & Exposition
Authority, McCormick Place
Expansion Project,
Series 1999,
5.500% 12/15/24 (c) $2,000,000 $ 2,212,360
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series 2002 E:
5.500% 07/01/21 250,000 299,375
5.500% 07/01/23 1,000,000 1,191,840
VI Virgin Islands Public Finance
Authority, Series 1999,
6.500% 10/01/24 500,000 575,610
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4,279,185
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SPECIAL PROPERTY TAX - 1.0%
CA Pittsburg Redevelopment Agency,
Los Medanos Project,
Series 1999,
(b) 08/01/26 2,500,000 802,675
FL Lexington Oaks Community
Development District,
Series 2000 A,
7.200% 05/01/30 185,000 196,420
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999,095
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STATE APPROPRIATED - 4.5%
IL Department of Central
Management Services,
Series 1999,
5.850% 07/01/19 2,000,000 2,308,580
NY Dormitory Authority,
Series 1999 C,
5.500% 07/01/29 2,055,000 2,303,922
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4,612,502
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STATE GENERAL OBLIGATION - 0.6%
CA California, Series 2002,
6.000% 04/01/16 500,000 621,870
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TRANSPORTATION - 22.0%
AIR TRANSPORTATION - 4.4%
FL Miami-Dade County Industrial
Development Authority, Airis
Miami II, LLC, Series 1999 A,
6.000% 10/15/25 1,000,000 1,143,980
IL Chicago O'Hare International Airport,
United Airlines, Inc.,
Series 2000 A,
6.750% 11/01/11 (d) 500,000 64,610
KY Kenton County Airport Board,
Delta Airlines, Inc.,
Series 1992 A,
7.500% 02/01/20 100,000 81,753
PAR VALUE
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MA Port Authority,
US Airways, Inc.,
Series 1999,
6.000% 09/01/21 (e) $2,500,000 $ 2,662,050
MN Minneapolis & St. Paul
Metropolitan Airport Commission,
Northwest Airlines Corp.,
Series 2001 A,
7.000% 04/01/25 250,000 179,370
NC Charlotte/Douglas International
Airport, US Airways, Inc.:
Series 1998,
5.600% 07/01/27 (e) 200,000 140,790
Series 2000,
7.750% 02/01/28 (e) 250,000 183,232
TX Dallas-Fort Worth International
Airport, American Airlines, Inc.,
Series 1999,
6.375% 05/01/35 250,000 94,365
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4,550,150
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AIRPORTS - 7.7%
NY Niagara Frontier Transportation
Authority, Series 1999 A,
5.625% 04/01/29 2,000,000 2,162,800
TN Memphis-Shelby County, Airport
Authority, Series 1999 D,
6.000% 03/01/24 5,280,000 5,843,693
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8,006,493
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PORTS - 6.7%
AL Docks Department,
Series 1998,
5.500% 10/01/22 3,000,000 3,355,470
WA Seattle Special Port Authority,
Terminal 18, Series 1999 A,
6.000% 09/01/29 3,000,000 3,528,840
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6,884,310
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TOLL FACILITIES - 0.4%
CO Northwest Parkway Public
Highway Authority,
Series 2001 D,
7.125% 06/15/41 200,000 209,202
NY Triborough Bridge & Tunnel
Authority, Series 2002,
5.500% 11/15/20 200,000 241,094
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450,296
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TRANSPORTATION - 2.8%
NV Department of Business & Industry,
Las Vegas Monorail Project,
Series 2000,
7.375% 01/01/40 250,000 229,830
NY Metropolitan Transportation
Authority, Series 2002 A,
5.000% 11/15/30 1,500,000 1,576,110
See notes to investment portfolio.
5
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2003 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR VALUE
- -----------------------------------------------------------
TRANSPORTATION (CONTINUED)
TRANSPORTATION (CONTINUED)
OH Toledo-Lucas County Port
Authority, CSX Transportation, Inc.,
Series 1992,
6.450% 12/15/21 $1,000,000 $ 1,085,130
-----------
2,891,070
-----------
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UTILITY - 16.4%
INDEPENDENT POWER PRODUCER - 1.3%
MI Midland County Economic
Development Corp.,
Series 2000,
6.875% 07/23/09 500,000 511,865
PR Commonwealth of Puerto Rico
Industrial, Educational, Medical &
Environmental Cogeneration
Facilities, AES Project, Series 2000,
6.625% 06/01/26 300,000 316,218
VA Pittsylvania County Industrial
Development Authority,
Multi-trade of Pittsylvania, L.P.,
Series 1994 A,
7.500% 01/01/14 500,000 513,130
-----------
1,341,213
-----------
INVESTOR OWNED - 5.3%
CA Pollution Control Finance Authority,
San Diego Gas & Electric Co.,
Series 1991 A,
6.800% 06/01/15 500,000 580,300
HI Department of Budget & Finance,
Hawaiian Electric Co.,
Series 1999 C,
6.200% 11/01/29 2,000,000 2,332,800
TX Brazos River Authority:
Houston Industries, Inc.,
Series 1998 A,
5.125% 05/01/19 2,100,000 2,282,952
TXU Electric Co.,
Series 2001 C,
5.750% 05/01/36 300,000 306,201
-----------
5,502,253
-----------
JOINT POWER AUTHORITY - 0.5%
NC Eastern Municipal Power Agency,
Series 1999 D,
6.700% 01/01/19 500,000 561,850
-----------
MUNICIPAL ELECTRIC - 2.7%
CA Department of Water &
Power Supply, Series 2002 A,
5.500% 05/01/14 1,000,000 1,172,000
TX Lower Colorado River Authority,
Series 1999 A,
5.500% 05/15/21 1,500,000 1,675,500
-----------
2,847,500
-----------
PAR VALUE
- -----------------------------------------------------------
WATER & SEWER - 6.6%
SC Lugoff-Elgin Water Authority,
Series 1999,
6.050% 11/01/31 $1,500,000 $ 1,765,185
TX Houston:
Series 1997 A,
5.375% 12/01/27 3,000,000 3,246,960
Series 1999 A,
4.750% 12/01/24 1,750,000 1,781,343
-----------
6,793,488
-----------
TOTAL MUNICIPAL BONDS
(cost of $88,620,234) 100,973,119
-----------
MUNICIPAL PREFERRED STOCK - 0.5% SHARES
- -----------------------------------------------------------
HOUSING - 0.5%
MULTI-FAMILY - 0.5%
Charter Mac Equity Issue Trust,
7.100% 06/30/09 (f)
(cost of $500,000) 500,000 549,085
-----------
PURCHASED PUT OPTION - 0.2% PAR
- -----------------------------------------------------------
U.S. Treasury Notes,
Strike Price $116.00,
Expires 08/31/03
(cost of $245,342) $ 244,000 167,750
-----------
SHORT-TERM OBLIGATIONS - 1.0%
- -----------------------------------------------------------
VARIABLE RATE DEMAND NOTES (g) - 1.0%
CO Denver Health & Hospital Authority,
Series 2001 B,
1.350% 12/01/31 600,000 600,000
MN Minneapolis,
Series 1998 B,
1.250% 12/01/16 200,000 200,000
NY New York,
Series 1993 A-7,
1.250% 12/01/20 300,000 300,000
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TOTAL SHORT-TERM OBLIGATIONS
(cost of $1,100,000) 1,100,000
-----------
TOTAL INVESTMENTS - 99.2%
(cost of $90,465,576)(h) 102,789,954
-----------
OTHER ASSETS & LIABILITIES, NET - 0.8% 801,408
- -----------------------------------------------------------
NET ASSETS* - 100.0% $103,591,362
============
See notes to investment portfolio.
6
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2003 (Unaudited)
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) The Fund 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.
(b) Zero coupon bond.
(c) This security, or a portion thereof with a market value of $702,424, is
being used to collateralize open futures contracts and written options.
(d) As of May 31, 2003, the Fund held a security of an issuer that filed for
bankruptcy protection under Chapter 11, representing 0.1% of net assets.
This issuer is in default of certain debt covenants. Income is not being
accrued.
(e) This issuer is in default of certain debt covenants. Income is being fully
accrued as these securities are collateralized by certain assets of the
issuer.
(f) This security is exempt from registration under Rule 144A of the Securities
Act of 1933 and may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At May 31, 2003, the value of
this security amounted to $549,085, which represents 0.5% of net assets.
(g) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of May 31, 2003.
(h) Cost for federal income tax purposes is $90,380,771.
Short futures contracts open at May 31, 2003:
Unrealized
Par Value Appreciation
Covered by Expiration (Depreciation)
Type Contracts Month at 05/31/03
- --------------------------------------------------------------
10 Year Municipal
Note Index $ 800,000 Jun - 03 $(35,044)
10 Year U.S.
Treasury Note 9,300,000 Sept - 03 (74,793)
U.S. Treasury Bond 1,400,000 Sept - 03 16,128
--------
$(93,709)
--------
Written options open at May 31, 2003:
# of
Type Contracts Premiums Value
- --------------------------------------------------------------
Call-U.S. Treasury Notes,
Strike Price $119.00,
Expires 08/31/03 183 $155,306 $231,609
Put-U.S. Treasury Notes,
Strike Price $114.00,
Expires 08/31/03 183 93,353 57,188
------ -------- --------
Total written options 366 $248,659 $288,797
------ -------- --------
Summary of securities by insurer:
% of Total
Insurer Investments
- --------------------------------------------------------------
MBIA Insurance Corp. 28.5%
Ambac Assurance Corp. 21.3
Financial Guaranty Insurance Corp. 17.6
Financial Security Assurance, Inc. 8.1
Radian Asset Assurance, Inc. 4.2
Federal Housing Administration 1.6
FNMA Collateralized 0.8
ACA Financial Guaranty Corp. 0.6
-----
82.7%
-----
* Net assets represent both Common Shares and Auction
Preferred Shares.
See notes to financial statements.
7
STATEMENT OF ASSETS & LIABILITIES
May 31, 2003 (Unaudited)
ASSETS:
Investments, at cost $ 90,465,576
------------
Investments, at value $102,789,954
Cash 84,080
Receivable for:
Interest 1,436,808
Futures variation margin 8,375
Expense reimbursement due from Advisor 2,416
Deferred Trustees' compensation plan 1,786
Other assets 3,143
------------
Total Assets 104,326,562
------------
LIABILITIES:
Written put options, at value
(premiums received $93,353) 57,188
Written call options, at value
(premiums received $155,306) 231,609
Payable for:
Distributions - common shares 377,546
Distributions - preferred shares 2,345
Management fee 30,144
Deferred Trustees' fees 1,786
Other liabilities 34,582
------------
Total Liabilities 735,200
------------
Auction Preferred Shares (1,492 shares issued
and outstanding at $25,000 per share) $ 37,300,000
------------
COMPOSITION OF NET ASSETS APPLICABLE
TO COMMON SHARES:
Paid-in capital - common shares $ 60,123,290
Undistributed net investment income 67,937
Accumulated net realized loss (6,090,396)
Net unrealized appreciation (depreciation) on:
Investments 12,324,378
Futures contracts (93,709)
Written options (40,138)
------------
Net assets at value applicable to 4,242,087
common shares of beneficial interest
outstanding $ 66,291,362
============
Net asset value per common share $ 15.63
============
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 2003 (Unaudited)
INVESTMENT INCOME:
Interest $ 2,738,901
------------
EXPENSES:
Management fee 328,615
Pricing and bookkeeping fees 30,159
Trustees' fees 2,981
Preferred shares remarketing commissions 46,550
Custody fee 2,420
Transfer agent fee 15,840
Reports to shareholders 13,327
Other expenses 19,983
------------
Total Expenses 459,875
Fees and expenses waived or
reimbursed by Advisor (181,506)
Custody earnings credit (302)
------------
Net Expenses 278,067
------------
Net Investment Income 2,460,834
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS, FUTURES CONTRACTS
AND WRITTEN OPTIONS:
Net realized gain (loss) on:
Investments 206,963
Futures contracts (1,988,370)
------------
Net realized loss (1,781,407)
------------
Net change in unrealized
appreciation/depreciation on:
Investments 5,026,471
Futures contracts (234,840)
Written options (40,138)
------------
Net change in unrealized
appreciation/depreciation 4,751,493
------------
Net Gain 2,970,086
------------
Net Increase in Net Assets from Operations 5,430,920
------------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (215,156)
------------
Net Increase in Net Assets from Operations
Applicable to Common Shares $ 5,215,764
------------
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,460,834 $ 5,127,680
Net realized loss on investments
and futures contracts (1,781,407) (1,205,544)
Net change in unrealized
appreciation/depreciation
on investments, futures contracts
and written options 4,751,493 148,321
------------ ------------
Net Increase from Operations 5,430,920 4,070,457
------------ ------------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (215,156) (520,629)
------------ ------------
Increase in Net Assets from
Operations Applicable to
Common Shares 5,215,764 3,549,828
------------ ------------
LESS DISTRIBUTIONS DECLARED TO
COMMON SHAREHOLDERS:
From net investment income (2,263,972) (4,706,303)
------------ ------------
SHARE TRANSACTIONS:
Distributions reinvested--
common shares 87,910 117,785
------------ ------------
Total Increase (Decrease) in
Net Assets Applicable to
Common Shares 3,039,702 (1,038,690)
NET ASSETS APPLICABLE TO
COMMON SHARES:
Beginning of period 63,251,660 64,290,350
------------ ------------
End of period (including
undistributed net investment
income of $67,937 and
$86,231, respectively) $ 66,291,362 $ 63,251,660
============ ============
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
NUMBER OF FUND SHARES: 2003 2002
- ------------------------------------------------------------
Common Shares:
Issued for distributions reinvested 5,788 7,904
Outstanding at:
Beginning of period 4,236,299 4,228,395
------------ ------------
End of period 4,242,087 4,236,299
------------ ------------
Preferred Shares:
Outstanding at end of period 1,492 1,492
------------ ------------
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
May 31, 2003 (Unaudited)
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION:
Colonial Insured Municipal Fund (the "Fund") is a Massachusetts business trust
registered under the Investment Company Act of 1940 (the "Act"), as amended, as
a non-diversified, closed-end management investment company. The Fund's
investment goal is to provide current income, generally exempt from ordinary
federal income tax. The Fund is authorized to issue an unlimited number of
common shares of beneficial interest and 1,492 Auction Preferred Shares ("APS").
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the 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.
Such 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. When
management deems it appropriate, an over-the-counter or exchange bid quotation
is used.
Options are valued at the last sale price, or in the absence of a sale, the mean
between the last quoted bid and asking price.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The 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. Premium and discount are being
amortized and accreted, respectively, for all debt securities.
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to common shareholders are recorded on the ex-date.
Distributions to preferred shareholders are recorded daily and are payable at
the end of each dividend period. Each dividend payment period for the APS is
generally seven days. The applicable dividend rate for the APS on May 31, 2003
was 1.15%. For the six months ended May 31, 2003, the Fund declared dividends to
Auction Preferred shareholders amounting to $215,156 representing an average APS
dividend rate of 1.16%.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America.
The following capital loss carryforwards, determined as of November 30, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
CAPITAL LOSS
YEAR OF EXPIRATION CARRYFORWARD
------------------ ------------
2008 $ 936,392
2010 1,200,810
----------
$2,137,202
----------
10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2003 (Unaudited)
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE:
On April 1, 2003, Colonial Management Associates, Inc. ("Colonial"), the
investment advisor to the Fund merged into Columbia Management Advisors, Inc.
("Columbia"), formerly known as Columbia Management Co., an indirect,
wholly-owned subsidiary of FleetBoston Financial Corporation. At the time of the
merger, Columbia assumed the obligations of Colonial with respect to the Fund.
The merger did not change the way the Fund is managed, the investment personnel
assigned to manage the Fund or the fees paid by the Fund.
Columbia is the investment advisor of the Fund and furnishes accounting and
other services and office facilities for a fee to be paid monthly at the annual
rate of 0.65% of the Fund's average weekly net assets, including assets
applicable to the APS. Through November 30, 2004, Columbia has contractually
agreed to waive a portion of the fee so that it will not exceed 0.35% annually.
PRICING AND BOOKKEEPING FEES:
Columbia is responsible for providing pricing and bookkeeping services to the
Fund under a Pricing and Bookkeeping Agreement. Under a separate agreement (the
"Outsourcing Agreement"), Columbia has delegated those functions to State Street
Bank and Trust Company ("State Street"). Columbia pays fees to State Street
under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average weekly net assets, including assets applicable to the APS,
are more than $50 million, a monthly fee equal to the average weekly net assets,
including assets applicable to the APS, of the Fund for that month multiplied by
a fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. For the six months ended May 31, 2003,
the annualized net asset based fee rate was 0.033%. The Fund also pays
out-of-pocket costs for pricing services.
EXPENSE LIMITS:
Columbia has voluntarily agreed to waive fees and bear certain Fund expenses to
the extent that total expenses (exclusive of management fees, brokerage
commissions, interest, taxes and extraordinary expenses, if any) exceed 0.20%
annually of the Fund's average weekly net assets, including assets applicable to
the APS. This arrangement may be modified or terminated by Columbia at any time.
OTHER:
The Fund pays no compensation to its officers, all of whom are employees of
Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $302 of custody
fees were reduced by balance credits for the six months ended May 31, 2003. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
NOTE 4. PREFERRED SHARES
The Fund currently has outstanding 1,492 APS. The APS 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).
Under the Act, the Fund 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 Fund 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 Fund may be restricted in its ability to declare dividends to common
shareholders or may be required to redeem certain of the APS. At May 31, 2003,
there were no such restrictions on the Fund.
NOTE 5. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY:
For the six months ended May 31, 2003, purchases and sales of investments, other
than short-term obligations, were $1,093,490 and $3,624,201, respectively.
Unrealized appreciation (depreciation) at May 31, 2003, based on cost of
investments for federal income tax purposes, was:
Gross unrealized appreciation $13,325,335
Gross unrealized depreciation (916,152)
-----------
Net unrealized appreciation $12,409,183
===========
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2003 (Unaudited)
FUTURES CONTRACTS AND OPTIONS:
The Fund may invest in municipal and U.S. Treasury futures contracts. 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 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 Columbia of the future direction of interest rates.
Any of these risks may involve amounts exceeding the variation margin recorded
in the Fund's Statement of Assets and Liabilities at any given time.
Upon entering into a futures contract, the Fund deposits cash or securities with
its custodian in an amount sufficient to meet the initial margin requirement.
Subsequent payments are made or received by the Fund equal to the daily change
in the contract value and are recorded as variation margin payable or receivable
and offset in unrealized gains or losses. The Fund recognizes a realized gain or
loss when the contract is closed or expires.
The Fund may write call and put options on futures it owns or in which it may
invest. Writing put options tends to increase the Fund's exposure to the
underlying instrument. Writing call options tends to decrease the Fund's
exposure to the underlying instrument. When the Fund writes a call or put
option, an amount equal to the premium received is recorded as a liability and
subsequently marked-to-market to reflect the current value of the option
written. Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised or
closed are added to the proceeds or offset against the amounts paid on the
underlying future transaction to determine the realized gain or loss. The Fund
as a writer of an option has no control over whether the underlying future may
be sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the future underlying the written option.
There is the risk the Fund may not be able to enter into a closing transaction
because of an illiquid market.
The Fund may also purchase put and call options. Purchasing call options tends
to increase the Fund's exposure to the underlying instrument. Purchasing put
options tends to decrease the Fund's exposure to the underlying instrument. The
Fund pays a premium which is included in the Fund's Statement of Assets and
Liabilities as an investment and subsequently marked- to-market to reflect the
current value of the option. Premiums paid for purchasing options which expire
are treated as realized losses. The risk associated with purchasing put and call
options is limited to the premium paid. Premiums paid for purchasing options
which are exercised or closed are added to the amounts paid or offset against
the proceeds on the underlying future transaction to determine the realized gain
or loss.
For the six months ended May 31, 2003, transactions in written options were as
follows:
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
Options Outstanding
at November 30, 2002 -- $ --
Options Written-Call 183 155,306
Options Written-Put 183 93,353
Options Closed -- --
Options Expired -- --
Options Exercised -- --
---- --------
Options Outstanding
at May 31, 2003 366 $248,659
---- --------
Refer to the Fund's Investment Portfolio for a summary of open futures contracts
and written options at May 31, 2003.
OTHER:
The Fund had greater than 10% of its net assets, at May 31, 2003, invested in
issuers located in Texas.
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.
12
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows
(common shares unless otherwise noted):
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED NOVEMBER 30, ENDED
MAY 31, --------------------------------------- NOVEMBER 30,
2003 2002 2001 2000 1999 (a)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.93 $ 15.20 $ 14.68 $ 14.30 $ 14.33
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.58(b) 1.21(b)(c) 1.24(b) 1.24(d) 0.06
Net realized and unrealized gain (loss) on investments,
futures contracts and written options 0.70 (0.25)(c) 0.51 0.55 (0.06)
--------- --------- --------- --------- ---------
Total from Investment Operations 1.28 0.96 1.75 1.79 --
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS:
From net investment income (0.05) (0.12) (0.26) (0.35) --
--------- --------- --------- --------- ---------
Total from Investment Operations Applicable
to Common Shareholders 1.23 0.84 1.49 1.44 --
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS:
From net investment income (0.53) (1.11) (0.97) (0.93) --
--------- --------- --------- --------- ---------
LESS SHARE TRANSACTIONS:
Offering costs -- common shares -- -- -- --(e) (0.03)
Commission and offering costs -- preferred shares -- -- -- (0.13) --
--------- --------- --------- --------- ---------
Total Share Transactions -- -- -- (0.13) (0.03)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 15.63 $ 14.93 $ 15.20 $ 14.68 $ 14.30
========= ========= ========= ========= =========
Market price per share -- common shares $ 16.27 $ 15.09 $ 16.50 $ 12.63 $ 15.00
========= ========= ========= ========= =========
Total return -- based on market value -- common shares (f)(g) 11.66%(h) (1.72)% 39.25% (9.77)% 0.00%(h)
========= ========= ========= ========= =========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (i)(j) 0.87%(k)(l) 0.87%(k) 0.87%(k) 0.86%(k) 0.55%(l)
Net investment income before preferred stock dividend (i)(j) 7.70%(l) 8.04%(c) 8.11% 8.78% 4.38%(l)
Net investment income after preferred stock dividend (i)(j) 7.03%(l) 7.22%(c) 6.42% 6.34% 4.38%(l)
Voluntary waiver/reimbursement (j) 0.09%(l) 0.13% 0.17% 0.48% 0.61%(l)
Portfolio turnover rate 1%(h) 13% 8% 33% 7%(h)
Net assets, end of period (000's) -- common shares $ 66,291 $ 63,252 $ 64,290 $ 62,051 $ 54,422
(a) The Fund commenced investment operations on October 29, 1999. Per share data
and total return reflect activity from that date.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective December 1, 2001, the Fund adopted the provision of the AICPA
Audit and Accounting Guide for Investment Companies and began accreting
market discount on all debt securities. The effect of this change for the
year ended November 30, 2002, was to increase the ratio of net investment
income to average net assets from 8.02% to 8.04% and increase the ratio of
net investment income (adjusted for dividend payments to preferred
shareholders) from 7.20% to 7.22%. The impact to the net investment income
and realized and unrealized loss per share was less than $0.01. Per share
data and ratios for periods prior to November 30, 2002 have not been
restated to reflect this change in presentation.
(d) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(e) Rounds to less than $0.01 per share.
(f) Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(g) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(h) Not annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(j) Ratios reflect average net assets available to common shares only.
(k) Ratios calculated using average net assets of the Fund equals 0.55%, 0.55%,
0.55% and 0.54% for the six months ended May 31, 2003 and the years ended
November 30, 2002, November 30, 2001 and November 30, 2000, respectively.
(l) Annualized.
13
FINANCIAL HIGHLIGHTS (CONTINUED)
ASSET COVERAGE REQUIREMENTS
INVOLUNTARY
ASSET LIQUIDATING AVERAGE
TOTAL AMOUNT COVERAGE PREFERENCE MARKET VALUE
OUTSTANDING PER SHARE PER SHARE PER SHARE
- ----------------------------------------------------------------------------
05/31/03 * $37,300,000 $69,431 $25,002 $25,000
11/30/02 37,300,000 67,396 25,012 25,000
11/30/01 37,300,000 68,090 25,001 25,000
11/30/00 ** 37,300,000 66,589 25,020 25,000
* Unaudited.
** On December 20, 1999, the Fund began offering Auction Preferred Shares.
14
SHAREHOLDER MEETING RESULTS
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On May 21, 2003, the Annual Meeting of Shareholders of the Fund was held to
conduct a vote for or against the approval of the items listed on the Fund's
Proxy Statement for said Meeting. On February 28, 2003, the record date for the
Meeting, the Fund had 4,239,149 common shares outstanding. The votes cast were
as follows:
PROPOSAL 1.
ELECTION OF TRUSTEES: FOR AGAINST
--------------------------------------------------------------------------
Richard W. Lowry 4,091,823 56,592
William E. Mayer 4,089,723 58,692
Charles R. Nelson 4,094,223 54,192
On February 28, 2003, the record date for the Meeting, the Fund had 1,492
preferred shares outstanding. The votes cast were as follows:
PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD
--------------------------------------------------------------------------
Douglas A. Hacker 1,349 2
Richard W. Lowry 1,349 2
William E. Mayer 1,349 2
Charles R. Nelson 1,349 2
Thomas E. Stitzel 1,349 2
15
DIVIDEND REINVESTMENT PLAN
COLONIAL INSURED MUNICIPAL FUND
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), all Common
Shareholders whose shares are registered in their own names will have all
distributions reinvested automatically in additional Common Shares of the Fund
by EquiServe Trust Company, N.A. (the "Plan Agent"), as agent under the Plan,
unless a Common Shareholder elects to receive cash. An election to receive cash
may be revoked or reinstated at the option of the Common Shareholder.
Shareholders whose shares are held in the name of a broker or nominee will have
distributions reinvested automatically by the broker or nominee in additional
shares under the Plan, unless the service is not provided by the broker or
nominee, or unless the shareholder elects to receive distributions in cash. If
the service is not available, such distributions will be paid in cash.
Shareholders whose shares are held in the name of a broker or nominee should
contact the broker or nominee for details. All distributions to investors who
elect not to participate (or whose broker or nominee elects not to participate)
in the Plan will be paid by check mailed directly to the record holder by the
Plan Agent, as dividend paying agent.
The Plan Agent will furnish each person who buys shares in the offering with
written information relating to the Plan. Included in such information will be
procedures for electing to receive distributions in cash (or, in the case of
shares held in the name of a broker or nominee who does not participate in the
Plan, procedures for having such shares registered in the name of the
shareholder so that such shareholder may participate in the Plan).
If the Trustees of the Fund declare a dividend (including a capital gain
dividend) payable either in shares or in cash, as holders of shares may have
elected, then nonparticipants in the Plan will receive cash and participants in
the Plan will receive the equivalent in shares valued as set forth below.
Whenever a market price is equal to or exceeds net asset value at the time
shares are valued for the purpose of determining the number of shares equivalent
to the distribution, participants will be issued shares at the net asset value
most recently determined as provided under "Net Asset Value" in the Fund's
prospectus and its Statement of Additional Information, but in no event less
than 95% of the market price. If the net asset value of the shares at such time
exceeds the market price of shares at such time, or if the Fund should declare a
dividend (including a capital gain dividend) payable only in cash, the Plan
Agent will, as agent for the participants, use the cash that the shareholders
would have received as a dividend to buy shares in the open market, 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 shares, the average per share purchase price paid by the Plan Agent may
exceed the net asset value of the shares, resulting in the acquisition of fewer
shares than if the dividend (including a capital gain dividend) had been paid in
shares issued by the Fund. The Plan Agent will apply all cash received as a
dividend (including a capital gain dividend) to purchase shares on the open
market as soon as practicable after the payment date of such dividend, but in no
event later than 30 days after such date, except where necessary to comply with
applicable provisions of the federal securities laws.
There is no charge to participants for reinvesting dividends (including capital
gain dividends). The Plan Agent's fees for handling the reinvestment of
dividends (including capital gain dividends) will be paid by the Fund. There
will be no brokerage charges with respect to shares issued directly by the Fund
as a result of dividends or capital gains 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 (including capital gain
dividends).
The automatic reinvestment of dividends (including capital gain dividends) will
not relieve participants of any income tax which may be payable on such
dividends. The amount of the dividend for tax purposes may vary depending on
whether the Fund issues new Common Shares or purchases them on the open market.
The Plan may be amended or terminated on 30 days' written notice to Plan
participants. All correspondence concerning the Plan should be directed to
EquiServe Trust Company, N.A., by mail at P.O. Box 43010, Providence, RI
02940-3010, or by phone at 1-800-730-6001.
16
TRANSFER AGENT
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Insured Municipal Fund is:
EquiServe Trust Company, N.A.
150 Royall Street
Canton, MA 02021
The fund 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
fund.
Financial advisors who want additional information about the fund may speak to a
representative at 800-426-3750.
This report has been prepared for shareholders of Colonial Insured Municipal
Fund.
COLONIAL INSURED MUNICIPAL FUND SEMIANNUAL REPORT
ID-03/230O-0503 (07/03) 03/1849
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable at this time.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Registrant's Chief Executive Officer and Chief Financial Officer,
based on their evaluation of the Registrant's disclosure controls and procedures
as of June 20, 2003, have concluded that such controls and procedures are
adequately designed to ensure that information required to be disclosed by the
Registrant in its reports that it files or submits under the Securities Exchange
Act of 1934, as amended, is accumulated and communicated to the Registrant's
management, including the Chief Executive Officer and Chief Financial Officer,
or persons performing similar functions, as appropriate, to allow timely
decisions regarding required disclosure.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could affect these controls subsequent to the date of our
evaluation.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable at
this time.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act (17
CFR 270.30a-2) in the exact form set forth below: Attached hereto.
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 Insured Municipal Fund
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By (Signature and Title)* /s/ Joseph R. Palombo
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Joseph R. Palombo, President
Date August 6, 2003
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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/ Joseph R. Palombo
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Joseph R. Palombo, President
Date August 6, 2003
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By (Signature and Title)* /s/ J. Kevin Connaughton
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J. Kevin Connaughton, Treasurer
Date August 6, 2003
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* Print the name and title of each signing officer under his or her signature.