-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NX9Tuc69m83l3AqOPENWXmrkSvjPUZWHLvbZJpx+LvakMxXWHhCIysUhym9XwJde h38+RAUqLrhNGqF1vN0Xyw== 0000891804-03-001742.txt : 20030808 0000891804-03-001742.hdr.sgml : 20030808 20030808104033 ACCESSION NUMBER: 0000891804-03-001742 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030531 FILED AS OF DATE: 20030808 EFFECTIVENESS DATE: 20030808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL INSURED MUNICIPAL FUND CENTRAL INDEX KEY: 0001092895 IRS NUMBER: 043483816 STATE OF INCORPORATION: MA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-09533 FILM NUMBER: 03830409 BUSINESS ADDRESS: STREET 1: C/O ROPES & GRAY STREET 2: ONE INTERNATIONAL PLACE CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6179517000 MAIL ADDRESS: STREET 1: C/O ROPES & GRAY STREET 2: ONE INTERNATIONAL PLACE CITY: BOSTON STATE: MA ZIP: 02110 FORMER COMPANY: FORMER CONFORMED NAME: PREMIER MUNICIPAL INCOME FUND DATE OF NAME CHANGE: 19990809 N-CSR 1 file001.txt COLONIAL INSURED MUNICIPAL FUND 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 --------------------- COLONIAL INSURED MUNICIPAL FUND ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) One Financial Center, Boston, Massachusetts 02111 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Russell L. Kane, Esq. Columbia Management Group, Inc. One Financial Center Boston, MA 02111 - ------------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: 1-617-426-3363 ------------------- Date of fiscal year end: November 30, 2003 ------------------ Date of reporting period: May 31, 2003 ----------------- 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 - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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 ($) Net asset value 15.63 - --------------------------------- Market price 16.27 - --------------------------------- SIX MONTH TOTAL RETURNS AS OF 5/31/03 (%) Net asset value 8.42 - --------------------------------- Market price 11.66 - --------------------------------- DISTRIBUTIONS DECLARED PER COMMON SHARE 12/1/02-5/31/03 ($) 0.53 - --------------------------------- 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 - ------------------------------ Hospitals 8.7 - ------------------------------ Airports 7.7 - ------------------------------ Ports 6.7 - ------------------------------ Water & sewer 6.6 - ------------------------------ Refunded/escrowed 6.1 - ------------------------------ Investor owned utility 5.3 - ------------------------------ Single family 4.8 - ------------------------------ State appropriated 4.5 - ------------------------------ Air transportation 4.4 - ------------------------------ QUALITY BREAKDOWN AS OF 5/31/03 (%) (UNAUDITED) AAA 79.4 - ------------------------------ AA 5.7 - ------------------------------ A 4.4 - ------------------------------ BBB 4.7 - ------------------------------ BB 0.8 - ------------------------------ CCC 0.1 - ------------------------------ CC 0.1 - ------------------------------ Non-rated 3.7 - ------------------------------ Cash Equivalents 1.1 - ------------------------------ 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 - ----------------------------------------------------------- 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 ----------- 1,617,895 ----------- 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 ----------- 2,680,016 ----------- - ----------------------------------------------------------- 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 ----------- 1,166,436 ----------- HEALTH SERVICES - 2.2% WI Health & Educational Facilities Authority, Marshfield Clinic, Series 1999, 6.250% 02/15/29 2,000,000 2,283,320 ----------- 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 - ----------------------------------------------------------- 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 ----------- 8,973,997 ----------- - ----------------------------------------------------------- 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 ----------- 733,707 ----------- 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 ----------- 513,185 ----------- 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 - ----------------------------------------------------------- HOUSING (CONTINUED) SINGLE FAMILY (CONTINUED) OK Housing Finance Agency, Series 2000 C-2, 7.550% 09/01/28 $ 780,000 $ 889,504 ----------- 4,970,703 ----------- - ----------------------------------------------------------- INDUSTRIAL - 0.5% FOREST PRODUCTS - 0.5% MN International Falls, Boise Cascade Corp., Series 1999, 6.850% 12/01/29 500,000 507,870 ----------- - ----------------------------------------------------------- OTHER - 9.4% OTHER - 2.3% AL Incentives Financing Authority, Series 1999 A, 6.000% 10/01/29 2,000,000 2,363,180 ----------- POOL/BOND BANK - 1.0% UT Water Finance Agency, Series 2002 B, 5.125% 07/01/23 1,000,000 1,069,390 ----------- 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 ----------- 6,273,487 ----------- - ----------------------------------------------------------- OTHER REVENUE - 0.1% RECREATION - 0.1% CT Gaming Authority, Mohegan Tribe Indians, Series 2001, 6.250% 01/01/31 100,000 107,641 ----------- - ----------------------------------------------------------- RESOURCE RECOVERY - 0.8% DISPOSAL - 0.8% CA Solid Waste Authority, Salinas Valley, Series 2002, 5.125% 08/01/22 750,000 787,732 ----------- - ----------------------------------------------------------- PAR VALUE - ----------------------------------------------------------- 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 ----------- 3,390,290 ----------- 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 ----------- 13,192,995 ----------- See notes to investment portfolio. 4 INVESTMENT PORTFOLIO (CONTINUED) May 31, 2003 (Unaudited) MUNICIPAL BONDS (CONTINUED) PAR VALUE - ----------------------------------------------------------- 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 ----------- 4,279,185 ----------- 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 ----------- 999,095 ----------- 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 ----------- 4,612,502 ----------- STATE GENERAL OBLIGATION - 0.6% CA California, Series 2002, 6.000% 04/01/16 500,000 621,870 ----------- - ----------------------------------------------------------- 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 - ----------------------------------------------------------- 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 ----------- 4,550,150 ----------- 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 ----------- 8,006,493 ----------- 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 ----------- 6,884,310 ----------- 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 ----------- 450,296 ----------- 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 ----------- - ----------------------------------------------------------- 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 ----------- 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 ----------------------------------------------------------- By (Signature and Title)* /s/ Joseph R. Palombo ---------------------------------------------- Joseph R. Palombo, President Date August 6, 2003 ------------------------------------------------------------------- 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 ---------------------------------------------- Joseph R. Palombo, President Date August 6, 2003 ------------------------------------------------------------------- By (Signature and Title)* /s/ J. Kevin Connaughton ---------------------------------------------- J. Kevin Connaughton, Treasurer Date August 6, 2003 ------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CERT 3 file002.txt CERTIFICATIONS COLONIAL INSURED MUNICIPAL FUND I, Joseph R. Palombo, certify that: 1. I have reviewed this report on Form N-CSR of Colonial Insured Municipal Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 6, 2003 /s/ Joseph R. Palombo ---------------------------------- Joseph R. Palombo, President COLONIAL INSURED MUNICIPAL FUND I, J. Kevin Connaughton, certify that: 1. I have reviewed this report on Form N-CSR of Colonial Insured Municipal Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 6, 2003 /s/ J. Kevin Connaughton ------------------------------- J. Kevin Connaughton, Treasurer EX-99.906CERT 4 file003.txt CERTIFICATIONS COLONIAL INSURED MUNICIPAL FUND I, Joseph R. Palombo, certify that: 1. The Form N-CSR (the "Report") of Colonial Insured Municipal Fund (the "Fund") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Date: August 6, 2003 /s/ Joseph R. Palombo ---------------------------------- Joseph R. Palombo, President COLONIAL INSURED MUNICIPAL FUND I, J. Kevin Connaughton, certify that: 1. The Form N-CSR (the "Report") of Colonial Insured Municipal Fund (the "Fund") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Date: August 6, 2003 /s/ J. Kevin Connaughton --------------------------------- J. Kevin Connaughton, Treasurer -----END PRIVACY-ENHANCED MESSAGE-----