N-30D 1 file001.txt COLONIAL CALIFORNIA INSURED MUNICIPAL FUND COLONIAL CALIFORNIA INSURED MUNICIPAL FUND [PHOTO] ANNUAL REPORT NOVEMBER 30, 2002 PRESIDENT'S MESSAGE DEAR SHAREHOLDER: For a third consecutive year, the municipal bond market offered positive returns. In general, the bond market was aided by strong demand, as investors shied away from the stock market in light of economic uncertainty, corporate scandals and the threat of war. Relatively stable interest rates were also an aid to market performance. The Federal Reserve lowered short-term interest rates early in the period and again late in the period, as the economy struggled and consumer confidence sagged. The volume of new municipal bonds increased as cities and states faced budget deficits and revenue shortfalls. However, investor demand for bonds also rose, and that helped support returns throughout the year. The following report will provide you with more detailed information about the fund's performance and the investment strategies used by portfolio manager Maureen Newman. As always, we thank you for choosing Colonial California Insured Municipal Fund and for giving us the opportunity to help you build a strong financial future. /s/ Keith T. Banks Keith T. Banks President o NOT FDIC INSURED o MAY LOSE VALUE o NO BANK GUARANTEE 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 12-month period ended November 30, 2002, Colonial California Insured Municipal Fund generated a total return of 3.70%, based on net asset value. The fund's peer group, the Lipper California Insured Municipal Debt Funds, averaged a 5.68% return.1 During the period, high-quality municipal bonds outperformed lower-quality bonds. A small position in lower-quality securities, such as uninsured United Airlines bonds (0.2% of net assets), held back the fund's performance.2 The lower-quality securities had been added to the portfolio as a way to boost income. The fund's leverage, however, boosted its income stream, which, in turn, enhanced the income available for distribution to the fund's shareholders. During the fiscal year, we brought the fund in line with a new Securities and Exchange Commission rule that requires mutual funds to invest at least 80% of their net assets (plus any borrowings for investment purposes) in the types of securities suggested by their names. In adding more insured securities to the portfolio, we focused on revenue bonds, which are supported by the revenues derived from the particular asset the bonds are used to finance. We emphasized bonds issued by school districts, utilities and water and sewer facilities. We held few general obligation bonds, which are guaranteed by the financial resources and taxing power of the state. Looking ahead, we expect California to issue a relatively large amount of new debt in order to fund services and balance its budget in a difficult economic environment. The state has already announced plans to issue tobacco-settlement bonds, which will be backed by fees that tobacco companies are required to pay to settle law suits. We expect to find value in the new offerings of California bonds and plan to focus more heavily on higher-quality securities when adding investments to the portfolio. /s/ Maureen G. Newman Maureen G. Newman Maureen G. Newman is the portfolio manager of Colonial California Insured Municipal Fund and a senior vice president of Colonial Management Associates, Inc., an affiliate of Columbia Management Group. Ms. Newman received her BA in economics from Boston College and her MBA from Babson College. She is a Chartered Financial Analyst, a member of the Boston Security Analysts Society and former chairman of the National Federation of Municipal Analysts. Past performance is no guarantee of future investment results. The principal value and investment returns 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 fund. 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. Single-state municipal bond funds pose additional risks due to limited geographical diversification. Interest income from certain tax-exempt bonds may be subject to the federal alternative minimum tax for individuals and corporations. 1 Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 2 Holdings are disclosed as of November 30, 2002 and are subject to change. PRICE PER SHARE AS OF 11/30/02 ($) Net asset value 15.30 -------------------------------- Market price 16.40 -------------------------------- 12-MONTH TOTAL RETURN, ASSUMING REINVESTMENT OF ALL DISTRIBUTIONS FOR THE YEAR ENDED 11/30/02 (%) Net asset value 3.70 -------------------------------- Market price 5.67 -------------------------------- DISTRIBUTIONS DECLARED PER COMMON SHARE 12/1/01 - 11/30/02 ($) 1.07 -------------------------------- 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 11/30/02 (%) Special non-property tax 10.2 --------------------------------- Local general obligations 10.0 --------------------------------- Local appropriated 9.8 --------------------------------- Special property tax 9.8 --------------------------------- Water & sewer 8.7 --------------------------------- State general obligations 6.5 --------------------------------- Municipal electric 6.2 --------------------------------- Investor owned utility 4.7 --------------------------------- Hospitals 4.3 --------------------------------- Assisted living/ senior housing 4.0 --------------------------------- QUALITY BREAKDOWN AS OF 11/30/02 (%) AAA 87.4 --------------------------------- AA 1.6 --------------------------------- A 5.7 --------------------------------- BBB 4.1 --------------------------------- CCC 0.1 --------------------------------- CC 0.1 --------------------------------- Non-rated 1.0 --------------------------------- Quality breakdowns are calculated as a percentage of total investments. 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 INVESTMENT PORTFOLIO November 30, 2002 (California unless otherwise stated) MUNICIPAL BONDS - 97.6% PAR VALUE ---------------------------------------------------------- EDUCATION - 3.5% State Community College Financing Authority, West Valley Mission Community College, Series 1997, 5.625% 05/01/22 $2,000,000 $ 2,093,560 State Educational Facilities Authority, La Verne University, Series 2000, 6.625% 06/01/20 250,000 271,770 ------------ 2,365,330 ------------ ---------------------------------------------------------- HEALTH CARE - 4.7% CONGREGATE CARE RETIREMENT - 0.4% Statewide Community Development Authority, Eskaton Village - Grass Valley, Series 2000, 8.250% 11/15/31 (a) 250,000 265,692 ------------ HOSPITALS - 4.3% Abag Finance Authority for Nonprofit Corps., San Diego Hospital Association, Series 2001 A, 6.125% 08/15/20 250,000 255,673 Oakland, Harrison Foundation, Series 1999 A, 6.000% 01/01/29 1,000,000 1,094,580 State Health Facilities Financing Authority, Cedars-Sinai Medical Center, Series 1999 A, 6.125% 12/01/30 500,000 522,320 Statewide Community Development Authority, Catholic Healthcare West, Series 1999, 6.500% 07/01/20 500,000 523,380 Whittier Health Facility, Presbyterian Intercommunity Hospital, Series 2002, 5.750% 06/01/31 500,000 500,000 ------------ 2,895,953 ------------ ----------------------------------------------------------- HOUSING - 11.6% ASSISTED LIVING/SENIOR - 4.0% Abag Finance Authority for Nonprofit Corps.: Odd Fellows Home, Series 1999, 6.000% 08/15/24 2,000,000 2,129,000 St. Joe's Housing, Series 1999, 6.200% 11/01/29 500,000 538,395 ------------ 2,667,395 ------------ MULTI-FAMILY - 3.9% Abag Finance Authority for Nonprofit Corps., Civic Center Drive Apartments, Series 1999 A, 5.875% 03/01/32 2,500,000 2,608,600 ------------ PAR VALUE ----------------------------------------------------------- SINGLE FAMILY - 3.7% State Housing Finance Agency, Series 1997 I, 5.750% 02/01/29 $ 820,000 $ 845,084 State Rural Home Mortgage Finance Authority: Series 1998 A, 6.350% 12/01/29 720,000 803,160 Series 1998 B-4, 6.350% 12/01/29 755,000 805,109 ------------ 2,453,353 ------------ ----------------------------------------------------------- OTHER - 2.1% REFUNDED/ESCROWED (B) - 2.1% Los Angeles Department of Water & Power, Series 1999, 6.100% 10/15/39 750,000 895,987 Ontario Redevelopment Financing Authority, Ontario Redevelopment Project No. 1, Series 1993, 5.800% 08/01/23 500,000 522,995 ------------ 1,418,982 ------------ ----------------------------------------------------------- RESOURCE RECOVERY - 2.8% DISPOSAL - 2.8% Sacramento City Financing Authority, Series 1999, 5.875% 12/01/29 1,250,000 1,366,962 Salinas Valley Solid Waste Authority, Series 2002, 5.125% 08/01/22 500,000 497,205 ------------ 1,864,167 ------------ ----------------------------------------------------------- TAX-BACKED - 50.3% LOCAL APPROPRIATED - 9.8% Del Norte County, Series 1999, 5.400% 06/01/29 500,000 516,235 Los Angeles County Schools, Series 1999 A: (c) 08/01/18 2,020,000 910,737 (c) 08/01/23 2,220,000 716,794 Pacifica, Series 1999, 5.875% 11/01/29 1,500,000 1,638,420 San Bernardino County, Medical Center Financing Project, Series 1994, 5.500% 08/01/17 2,500,000 2,791,925 ------------ 6,574,111 ------------ LOCAL GENERAL OBLIGATIONS - 10.0% Brea-Olinda Unified School District, Series 1999 A, 5.600% 08/01/20 1,000,000 1,070,340 Inglewood Unified School District, Series 1999 A, 5.600% 10/01/24 1,185,000 1,244,985 See notes to investment portfolio. 2 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2002 (California unless otherwise stated) MUNICIPAL BONDS (CONTINUED) PAR VALUE ----------------------------------------------------------- TAX-BACKED (CONTINUED) LOCAL GENERAL OBLIGATIONS (CONTINUED) Los Angeles Unified School District, Series 2002, 5.750% 07/01/16 $ 500,000 $ 572,890 Pomona Unified School District, Series 2000, 6.550% 08/01/29 1,000,000 1,231,990 Union Elementary School District, Series 1999 A, (c) 09/01/18 1,630,000 734,951 Upland Unified School District, Series 2001, (d) 08/01/25 (5.125% 08/01/03) 250,000 245,225 Vallejo City Unified School District, Series 2002 A, 5.900% 02/01/21 500,000 568,775 West Covina Unified School District, Series 2002 A, 5.800% 02/01/21 500,000 562,740 Yuba City Unified School District, Series 2000, (c) 09/01/18 1,000,000 450,340 ------------ 6,682,236 ------------ SPECIAL NON-PROPERTY TAX - 10.2% PR Commonwealth of Puerto Rico Highway & Transportation Authority: Series 1996 Y, 5.500% 07/01/36 2,500,000 2,641,490 Series 2002 E: 5.500% 07/01/21 250,000 273,945 5.500% 07/01/23 1,000,000 1,086,740 San Francisco City & County Hotel Tax Agency, Series 1994, 6.750% 07/01/25 1,850,000 2,018,406 VI Virgin Islands Public Finance Authority, Series 1999, 6.500% 10/01/24 750,000 831,368 ------------ 6,851,949 ------------ SPECIAL PROPERTY TAX - 9.8% Huntington Beach Community Facilities District, Grand Coast Resort, Series 2001, 6.450% 09/01/31 100,000 102,242 Orange County Community Facilities District, Ladera Ranch, Series 1999 A, 6.700% 08/15/29 200,000 212,418 Palmdale Elementary School District, Community Facilities District No. 90-1, Series 1999, 5.800% 08/01/29 1,500,000 1,608,915 Pittsburgh Redevelopment Agency, Los Medanos Project, Series 1999, (c) 08/01/21 2,575,000 946,930 PAR VALUE ----------------------------------------------------------- Rancho Cucamonga Redevelopment Agency, Series 1999, 5.250% 09/01/20 $1,000,000 $ 1,035,980 Ridgecrest, Ridgecrest Civic Center, Series 1999, 6.250% 06/30/26 500,000 529,920 San Jose Redevelopment Agency, Series 1997, 5.625% 08/01/25 1,000,000 1,045,390 Santa Clara Redevelopment Agency, Bayshore North Project, Series 1999 A, 5.500% 06/01/23 1,000,000 1,044,920 ------------ 6,526,715 ------------ STATE APPROPRIATED - 4.0% State Public Works Board, Department of Health Services, Series 1999 A, 5.750% 11/01/24 (e) 2,500,000 2,653,350 ------------ STATE GENERAL OBLIGATIONS - 6.5% PR Commonwealth of Puerto Rico, Series 1997, 5.375% 07/01/25 2,100,000 2,160,417 State of California: Series 1999, 5.750% 12/01/29 1,000,000 1,050,060 Series 2002, 6.000% 02/01/17 1,000,000 1,167,320 ------------ 4,377,797 ------------ ----------------------------------------------------------- TRANSPORTATION - 2.6% AIR TRANSPORTATION - 0.2% Statewide Community Development Authority: United Airlines, Inc.: Series 1997 A, 5.700% 10/01/33 (f) 250,000 60,312 Series 2001, 6.250% 10/01/35 (f) 250,000 55,310 ------------ 115,622 ------------ AIRPORTS - 1.6% Port of Oakland, Series 2000 K, 5.750% 11/01/29 1,000,000 1,052,310 ------------ PORTS - 0.4% Port of Oakland, Series 2002 L, 5.500% 11/01/20 250,000 261,265 ------------ TRANSPORTATION - 0.4% San Francisco Bay Area Rapid Transit District, Series 1999, 5.500% 07/01/34 250,000 259,335 ------------ See notes to investment portfolio. 3 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2002 (California unless otherwise stated) MUNICIPAL BONDS (CONTINUED) PAR VALUE ---------------------------------------------------------- UTILITY - 20.0% INDEPENDENT POWER PRODUCER - 0.4% PR Commonwealth of Puerto Rico Industrial, Educational, Medical & Environmental Cogeneration Facilities, AES Project, Series 2000, 6.625% 06/01/26 $ 250,000 $ 257,940 ------------ INVESTOR OWNED - 4.7% State Pollution Control Financing Authority: Pacific Gas & Electric Co., Series 1996 A, 5.350% 12/01/16 1,000,000 1,067,720 San Diego Gas & Electric Co., Series 1991 A, 6.800% 06/01/15 500,000 569,960 Southern California Edison Co., Series 1999 B, 5.450% 09/01/29 1,500,000 1,530,210 ------------ 3,167,890 ------------ MUNICIPAL ELECTRIC - 6.2% GM Guam Power Authority, Series 1999 A, 5.125% 10/01/29 1,000,000 1,011,320 PR Puerto Rico Electric Power Authority, Series 1997 AA, 5.375% 07/01/27 2,500,000 2,574,575 State Department of Water Resources, Series 2002 A, 5.500% 05/01/14 500,000 554,335 ------------ 4,140,230 ------------ WATER & SEWER - 8.7% Culver City, Series 1999 A, 5.700% 09/01/29 1,500,000 1,593,480 Pico Rivera Water Authority, Series 1999 A, 5.500% 05/01/29 2,000,000 2,148,740 Placer County Water Agency, Series 1999, 5.500% 07/01/29 1,000,000 1,041,810 Pomona Public Financing Authority, Series 1999 AC, 5.500% 05/01/29 1,000,000 1,041,130 ------------ 5,825,160 ------------ TOTAL MUNICIPAL BONDS (cost of $60,249,222) (g) 65,285,382 ------------ OTHER ASSETS & LIABILITIES, NET - 2.4% 1,596,643 ------------ NET ASSETS* - 100.0% $66,882,025 ------------ NOTES TO INVESTMENT PORTFOLIO: -------------------------------------------------------------------------------- (a) Denotes a restricted security, which is subject to restrictions on resale under federal securities laws. At November 30, 2002, this security amounted to $265,692, which represents 0.4% of net assets. Additional information on this security is as follows: Acquisition Acquisition Security Date Cost ------------------------------------------------------------- Statewide Community Development Authority, Eskaton Village - Grass Valley, Series 2000, 8.250% 11/15/31 09/08/00 $250,000 (b) 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 the interest and principal. (c) Zero coupon bond. (d) Step coupon bond. Currently accruing at zero. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing this rate. (e) This security, or a portion thereof with a market value of $271,703, is being used to collateralize open futures contracts. (f) As of November 30, 2002, the Fund held bonds of United Airlines Inc. representing 0.2% of net assets. United Airlines Inc., filed for bankruptcy protection under Chapter 11 on December 9, 2002. (g) Cost for generally accepted accounting principles is $60,249,222. Cost for federal income tax purposes is $60,175,984. The difference between cost for generally accepted accounting principles and cost on a tax basis is related to amortization/accretion tax elections on fixed-income securities. Short futures contracts open at November 30, 2002: Par Value Unrealized Covered by Expiration Appreciation Type Contracts Month at 11/30/02 ------------------------------------------------------------------ 10 Year U.S. Treasury Bond $ 1,000,000 March $ 8,151 10 Year U.S. Treasury Note 14,400,000 March 70,669 ------------ $78,820 ------------ Summary of Securities by Insurer (unaudited): % of Insurer Total Investments -------------------------------------------------------------- MBIA Insurance Corp. 36.6% Financial Security Assurance, Inc. 18.6 Ambac Assurance Corp. 16.8 Financial Guaranty Insurance Corp. 13.2 FNMA Collateralized 2.5 ACA Financial Guaranty Corp. 0.8 ------------ 88.5% ------------ Acronym Name --------------- ------------------------------- Abag Association of Bay Area Government * Net assets represent both Common Shares and Auction Preferred Shares. See notes to financial statements. 4 STATEMENT OF ASSETS & LIABILITIES November 30, 2002 ASSETS: Investments, at cost $60,249,222 ------------ Investments, at value $65,285,382 Cash 926,324 Interest receivable 1,006,399 Expense reimbursement due from Advisor 24,786 Deferred Trustees' compensation plan 1,520 ------------ Total Assets 67,244,411 ------------ LIABILITIES: Payable for: Futures variation margin 51,938 Distributions - common shares 237,071 Distributions - preferred shares 1,499 Management fee 20,149 Pricing and bookkeeping fees 3,135 Trustees' fee 389 Deferred Trustees' fee 1,520 Other liabilities 46,685 ------------ Total Liabilities 362,386 ------------ Auction Preferred Shares (978 shares issued and outstanding at $25,000 per share) 24,450,000 ------------ COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHARES: Paid-in capital - common shares $39,269,959 Undistributed net investment income 82,828 Accumulated net realized loss (2,035,742) Net unrealized appreciation on: Investments 5,036,160 Futures contracts 78,820 ------------ Net assets at value applicable to 2,773,898 common shares of beneficial interest outstanding $42,432,025 ------------ Net asset value per common share $ 15.30 ------------ STATEMENT OF OPERATIONS For the Year Ended November 30, 2002 INVESTMENT INCOME: Interest $ 3,626,159 ------------ EXPENSES: Management fee 438,463 Pricing and bookkeeping fees 64,245 Trustees' fee 7,582 Preferred shares remarketing commissions 61,184 Transfer agent fee 30,273 Audit fee 31,099 Custody fee 2,775 Reports to shareholders 28,657 Other expenses 11,659 ------------ Total Expenses 675,937 Fees and expenses waived or reimbursed by the Advisor (302,546) Custody earnings credit (2,486) ------------ Net Expenses 370,905 ------------ Net Investment Income 3,255,254 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS: Net realized gain (loss) on: Investments 593,178 Futures contracts (1,141,241) ------------ Net realized loss (548,063) ------------ Net change in unrealized appreciation/ depreciation on: Investments (740,099) Futures contracts 826 ------------ Net change in unrealized appreciation/depreciation (739,273) ------------ Net Loss (1,287,336) ------------ Net Increase in Net Assets from Operations 1,967,918 ------------ LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (327,234) ------------ Net Increase in Net Assets from Operations Applicable to Common Shares $ 1,640,684 ------------ See notes to financial statements. 5 STATEMENT OF CHANGES IN NET ASSETS YEAR ENDED NOVEMBER 30, -------------------------- INCREASE (DECREASE) IN NET ASSETS: 2002 2001 ----------------------------------------------------------- OPERATIONS: Net investment income $ 3,255,254 $ 3,297,725 Net realized loss on investments and futures contracts (548,063) (226,430) Net change in unrealized appreciation/ depreciation on investments and futures contracts (739,273) 1,855,658 ------------ ------------ Net Increase from Operations 1,967,918 4,926,953 ------------ ------------ LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (327,234) (677,888) ------------ ------------ Net Increase in Net Assets from Operations Applicable to Common Shares 1,640,684 4,249,065 ------------ ------------ LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS: From net investment income (2,966,537) (2,532,406) ------------ ------------ SHARE TRANSACTIONS: Distributions reinvested - common shares 79,711 14,144 ------------ ------------ Total Increase (Decrease) in Net Assets Applicable to Common Shares (1,246,142) 1,730,803 NET ASSETS APPLICABLE TO COMMON SHARES: Beginning of period 43,678,167 41,947,364 ------------ ------------ End of period (including undistributed net investment income of $82,828 and $72,491, respectively) $42,432,025 $43,678,167 ------------ ------------ YEAR ENDED NOVEMBER 30, ---------------------------- NUMBER OF FUND SHARES: 2002 2001 ------------------------------------------------------------ Common Shares: Issued for distributions reinvested 5,458 882 Outstanding at: Beginning of period 2,768,440 2,767,558 ------------ ------------ End of period 2,773,898 2,768,440 ------------ ------------ Preferred Shares: Outstanding at end of period 978 978 ------------ ------------ See notes to financial statements. 6 NOTES TO FINANCIAL STATEMENTS November 30, 2002 NOTE 1. ACCOUNTING POLICIES ORGANIZATION: Colonial California 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 and California state personal income tax. The Fund is authorized to issue an unlimited number of common shares of beneficial interest and 978 Auction Preferred Shares ("APS"). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of 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. When management deems it appropriate, an over-the-counter or exchange bid quotation is used. 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. Original issue discount is accreted to interest income over the life of the security with a corresponding increase in the cost basis. Premium is amortized against interest income with a corresponding decrease in the cost basis. Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on all debt securities. The cumulative effect of this accounting change did not impact total net assets of the Fund, but resulted in reclassifications as follows, based on securities held by the Fund on December 1, 2001: NET UNREALIZED COST DEPRECIATION ------- ------------ $48,854 $(48,854) The effect of this change, for the year ended November 30, 2002, was as follows: NET INVESTMENT NET REALIZED NET UNREALIZED INCOME LOSS DEPRECIATION ------- ------ ------------ $25,287 $(903) $(24,384) The Statement of Changes in Net Assets and Financial Highlights for prior periods have not been restated to reflect this change. 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 November 30, 2002 was 1.30%. For the year ended November 30, 2002, the Fund declared dividends to Auction Preferred shareholders amounting to $327,234 representing an average APS dividend rate of 1.34%. 7 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2. FEDERAL TAX INFORMATION Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for discount accretion on debt securities, straddle deferrals, mark-to-market on futures contracts, current year distribution payable, capital loss carryforwards, and non-deductible expenses. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The tax character of distributions paid to common and APS shareholders during the year was as follows: TAX-EXEMPT ORDINARY INCOME INCOME ------------ --------------- $810 $3,292,961 As of November 30, 2002, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED TAX-EXEMPT UNREALIZED INCOME APPRECIATION ------ -------------- $250,611 $5,188,218 The following capital loss carryforwards 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: YEAR OF CAPITAL LOSS EXPIRATION CARRYFORWARD --------- ------------ 2008 $ 5,151 2010 760,735 --------- $765,886 --------- NOTE 3. FEE AND COMPENSATION PAID TO AFFILIATES MANAGEMENT FEE: Colonial Management Associates, Inc. (the "Advisor") is the investment advisor of the Fund and furnishes accounting and other services and office facilities for a 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, the Advisor has contractually agreed to waive a portion of the fee so that it will not exceed 0.35% annually. PRICING AND BOOKKEEPING FEES: The Advisor is responsible for providing pricing and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement. Under a separate agreement (the "Outsourcing Agreement"), the Advisor has delegated those functions to State Street Bank and Trust Company ("State Street"). The Advisor pays fees to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, the Advisor 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 year ended November 30, 2002, the net asset based fee rate was 0.035%. The Fund also pays out-of-pocket costs for pricing services. EXPENSE LIMITS: The Advisor 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 the Advisor at any time. OTHER: The Fund pays no compensation to its officers, all of whom are employees of the Advisor 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 $2,486 of custody fees were reduced by balance credits for the year ended November 30, 2002. 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 978 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). 8 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 and in accordance with the guidelines prescribed by the 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 November 30, 2002, there were no such restrictions on the Fund. Under Emerging Issues Task Force ("EITF") promulgation Topic D-98, Classification and Measurement of Redeemable Securities, which was issued on July 19, 2001, preferred securities that are redeemable for cash or other assets are classified outside of permanent equity to the extent that the redemption is at a fixed or determinable price and at the option of the holder or upon the occurrence of an event that is not solely within the control of the issuer. Subject to the guidance of the EITF, the Fund's preferred shares, which were previously classified as a component of net assets, have been reclassified outside of permanent equity (net assets) in the accompanying financial statements. Prior year amounts have also been reclassified to conform with this presentation. The impact of this reclassification creates no change to the net assets available to common shareholders. NOTE 5. PORTFOLIO INFORMATION INVESTMENT ACTIVITY: During the year ended November 30, 2002, purchases and sales of investments, other than short-term obligations, were $7,157,157 and $9,165,229, respectively. Unrealized appreciation (depreciation) at November 30, 2002, based on cost of investments for federal income tax purposes, was: Gross unrealized appreciation $5,473,957 Gross unrealized depreciation (364,559) ------------ Net unrealized appreciation $5,109,398 ------------ OTHER: There are certain risks arising from geographic concentration in any state. Certain revenue or tax related events in a state may impair the ability of certain issuers of municipal securities to pay principal and interest on their obligations. The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. The Fund may invest in municipal and U.S. Treasury futures contracts and purchase and write options on futures. The Fund will invest in these instruments to hedge against the effects of changes in the value of portfolio securities due to anticipated changes in interest rates and/or market conditions, for duration management, or when the transactions are economically appropriate to the reduction of risk inherent in the management of the Fund and not for trading purposes. The use of futures contracts and options involves certain risks which include: (1) imperfect correlation between the price movement of the instruments and the underlying securities, (2) inability to close out positions due to different trading hours, or the temporary absence of a liquid market, for either the instrument or the underlying securities or (3) an inaccurate prediction by the Advisor of the future direction of interest rates. Any of these risks may involve amounts exceeding the amount recognized in the Fund's Statement of Assets and Liabilities at any given time. 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. Refer to the Fund's Investment Portfolio for a summary of open futures contracts at November 30, 2002. Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in good faith using methods approved by the Board of Trustees. 9 FINANCIAL HIGHLIGHTS Selected data for a share outstanding throughout each period is as follows (common shares unless otherwise noted):
YEAR ENDED NOVEMBER 30, PERIOD ENDED --------------------------------------- NOVEMBER 30, 2002 2001 2000 1999 (a) --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 15.78 $ 15.16 $ 14.29 $ 14.33 ----------- ------------ ------------ ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 1.17(b)(c) 1.19(c) 1.18(d) 0.05 Net realized and unrealized gain (loss) on investments and futures contracts (0.46)(b) 0.59 1.07 (0.06) ----------- ------------ ------------ ---------- Total from Investment Operations 0.71 1.78 2.25 (0.01) ----------- ------------ ------------ ---------- LESS DISTRIBUTIONS DECLARED TO PREFERRED SHAREHOLDERS: From net investment income (0.12) (0.24) (0.34) -- ----------- ------------ ------------ ---------- Total from Investment Operations Applicable to Common Shareholders 0.59 1.54 1.91 (0.01) ----------- ------------ ------------ ---------- LESS DISTRIBUTIONS DECLARED TO COMMON SHAREHOLDERS: From net investment income (1.07) (0.92) (0.90) -- ----------- ------------ ------------ ---------- LESS SHARE TRANSACTIONS: Offering costs-- common shares -- -- --(e) (0.03) Commissions and offering costs-- preferred shares -- -- (0.14) -- ----------- ------------ ------------ ---------- Total Share Transactions -- -- (0.14) (0.03) ----------- ------------ ------------ ---------- NET ASSET VALUE, END OF PERIOD $ 15.30 $ 15.78 $ 15.16 $ 14.29 ----------- ------------ ------------ ---------- Market price per share-- common shares $ 16.40 $ 16.60 $ 12.69 $ 15.00 ----------- ------------ ------------ ---------- Total return-- based on market value-- common shares (f)(g) 5.67% 38.91% (9.86)% 0.00%(h) ----------- ------------ ------------ ---------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (i)(j) 0.86%(l) 0.86%(l) 0.87%(l) 0.55%(k) Net investment income before preferred stock dividend (i)(j) 7.57%(b) 7.58% 8.27% 4.12%(k) Net investment income after preferred stock dividend (i)(j) 6.81%(b) 6.02% 5.93% 4.12%(k) Voluntary waiver/reimbursement (j) 0.23% 0.22% 0.27% 1.08%(k) Portfolio turnover rate 11% 7% 22% 0%(h) Net assets, end of period (000's)-- common shares $ 42,432 $ 43,678 $ 41,947 $ 34,382
(a) The Fund commenced investment operations on October 29, 1999. (b) Effective December 1, 2001, the Fund adopted the provisions 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 7.51% to 7.57% and increase the ratio of net investment income (adjusted for dividend payments to preferred shareholders) from 6.75% to 6.81%. 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. (c) Per share data was calculated using average shares outstanding during the period. (d) The per share net investment income amount does not reflect the period's reclassifications 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) Annualized. (l) Ratios calculated using average net assets of the Fund equals 0.55%.
ASSET COVERAGE REQUIREMENTS INVOLUNTARY ASSET LIQUIDATING AVERAGE TOTAL AMOUNT COVERAGE PREFERENCE MARKET VALUE OUTSTANDING PER SHARE PER SHARE PER SHARE ------------------------------------------------------------------------------------------------------------------------------- 11/30/02 $24,450,000 $68,387 $25,002 $25,000 11/30/01 24,450,000 69,661 25,001 25,000 11/30/00 * 24,450,000 67,891 25,019 25,000
* On December 10, 1999, the Fund began offering Auction Preferred Shares. 10 REPORT OF INDEPENDENT ACCOUNTANTS TO THE TRUSTEES AND THE SHAREHOLDERS OF COLONIAL CALIFORNIA INSURED MUNICIPAL FUND In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Colonial California Insured Municipal Fund (the "Fund") at November 30, 2002, and the results of its operations, the changes in its net assets and its financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at November 30, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts January 20, 2003 11 UNAUDITED INFORMATION FEDERAL INCOME TAX INFORMATION: 99.98% of the distributions from net investment income will be treated as exempt income for federal income tax purposes. 12 DIVIDEND REINVESTMENT PLAN COLONIAL CALIFORNIA 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. 13 TRUSTEES The Trustees serve terms of indefinite duration. The names, addresses and ages of the Trustees and officers of Colonial California Insured Municipal Fund, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee, and other directorships they hold are shown below.
Year first Number of elected or portfolios in fund Other Position with appointed Principal occupation(s) complex overseen directorships Name, address and age Liberty Funds1 to office during past five years by trustee held ------------------------------------------------------------------------------------------------------------------------------------ Disinterested Trustees ---------------------- Douglas A. Hacker (age 47) Trustee 1996 Executive Vice President-Strategy of United Airlines 103 None c/o Liberty Funds Group LLC since December 2002 (formerly President of UAL One Financial Center Loyalty Services and Executive Vice President Boston, MA 02111 of United Airlines (airline) from September 2001 to December 2002; formerly Executive Vice President from July 1999 to September 2001); Chief Financial Officer of United Airlines since July 1999; Senior Vice President and Chief Financial Officer of UAL, Inc. prior thereto Janet Langford Kelly (age 45) Trustee 1996 Executive Vice President-Corporate Development 103 None c/o Liberty Funds Group LLC and Administration, General Counsel and One Financial Center Secretary, Kellogg Company (food manufacturer), Boston, MA 02111 since September 1999; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer- products manufacturer) prior thereto Richard W. Lowry (age 66) Trustee 1995 Private Investor since 1987 (formerly 105*** None c/o Liberty Funds Group LLC Chairman and Chief Executive Officer, U.S. One Financial Center Plywood Corporation (building products Boston, MA 02111 manufacturer)) Salvatore Macera (age 71) Trustee 1998 Private Investor since 1981 (formerly Executive 103 None c/o Liberty Funds Group LLC Vice President and Director of Itek Corporation One Financial Center (electronics) from 1975 to 1981) Boston, MA 02111 Charles R. Nelson (age 60) Trustee 1981 Professor of Economics, University of Washington, 118* None c/o Liberty Funds Group LLC since January 1976; Ford and Louisa Van Voorhis One Financial Center Professor of Political Economy, University of Boston, MA 02111 Washington, since September 1993; Director, Institute for Economic Research, University of Washington, since September2001; Adjunct Professor of Statistics, University of Washington, since September 1980; Associate Editor, Journal of Money Credit and Banking, since September, 1993; Trustee, Columbia Funds since July 2002; consultant on economic and statistical matters John J. Neuhauser (age 59) Trustee 1985 Academic Vice President and Dean of Faculties 105*** Saucony, Inc. c/o Liberty Funds Group LLC since August 1999, Boston College (formerly (athletic footwear) One Financial Center Dean, Boston College School of Management and SkillSoft Corp. Boston, MA 02111 from September 1977 to September 1999) (e-learning) Thomas E. Stitzel (age 66) Trustee 1998 Business Consultant since 1999 (formerly 103 None c/o Liberty Funds Group LLC Professor of Finance from 1975 to 1999 and Dean One Financial Center from 1977 to 1991, College of Business, Boise State Boston, MA 02111 University); Chartered Financial Analyst 1 In December 2000, the board of each of the Liberty Funds and Stein Roe Funds were combined into one board of trustees with common membership. The date shown is the earliest date on which a trustee was elected to either the Liberty board or the former Stein Roe Funds board.
14
TRUSTEES (CONTINUED) Year first Number of elected or portfolios in fund Other Position with appointed Principal occupation(s) complex overseen directorships Name, address and age Liberty Funds to office during past five years by trustee held ------------------------------------------------------------------------------------------------------------------------------------ Disinterested Trustees ---------------------- Thomas C. Theobald (age 65) Trustee 1996 Managing Director, William Blair Capital Partners 103 Xerox Corporation c/o Liberty Funds Group LLC (private equity investing) since September 1994 (business products One Financial Center (formerly Chief Executive Officer and Chairman and services), Boston, MA 02111 of the Board of Directors, Continental Bank Anixter International Corporation) (network support equipment distributor), Jones Lang LaSalle (real estate management services) and MONY Group (life insurance) Anne-Lee Verville (age 57) Trustee 1998 Author and speaker on educational systems needs 103 Chairman of the c/o Liberty Funds Group LLC (formerly General Manager, Global Education Board of Directors, One Financial Center Industry from 1994 to 1997, and President, Enesco Group, Inc. Boston, MA 02111 Applications Solutions Division from 1991 to (designer, importer 1994, IBM Corporation (global education and and distributor of global applications)) giftware and collectibles) Interested Trustees ------------------- William E. Mayer** (age 62) Trustee 1994 Managing Partner, Park Avenue Equity Partners 105*** Lee Enterprises c/o Liberty Funds Group LLC (private equity fund) since February 1999 (print and online One Financial Center (formerly Founding Partner, Development Capital media), WR Hambrecht Boston, MA 02111 LLC from November 1996 to February 1999; + Co. (financial Dean and Professor, College of Business and service provider), Management, University of Maryland from First Health (health October 1992 to November 1996) care) and Systech Retail Systems (retail industry technology provider) Joseph R. Palombo** (age 49) Trustee 2000 Chief Operating Officer of Columbia 103 None One Financial Center and Management Group, Inc. (Columbia Management Boston, MA 02111 Chairman Group) since November 2001; formerly Chief of the Operations Officer of Mutual Funds, Liberty Board Financial Companies, Inc. from August 2000 to November 2001; Executive Vice President of Stein Roe & Farnham, Incorporated (Stein Roe) since April 1999; Executive Vice President and Director of Colonial Management Associates, Inc. since April 1999; Executive Vice President and Chief Administrative Officer of Liberty Funds Group LLC (LFG) since April 1999; Director of Stein Roe since September 2000; Trustee and Chairman of the Board of Stein Roe Mutual Funds since October 2000; Manager of Stein Roe Floating Rate Limited Liability Company since October 2000; Vice President of Galaxy Funds since September 2002; (formerly Vice President of Liberty Funds from April 1999 to August 2000; Chief Operating Officer and Chief Compliance Officer, Putnam Mutual Funds from December 1993 to March 1999)
* In addition to serving as a disinterested trustee of Liberty Funds, Mr. Nelson serves as a disinterested director of Columbia Funds, currently consisting of 15 funds, which are advised by an affiliate of the Advisor. ** Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 ("1940 Act")) by reason of his affiliation with WR Hambrecht + Co, a registered broker-dealer. Mr. Palombo is an interested person as an employee of an affiliate of the Advisor. *** In addition to serving as a trustee of Liberty Funds, Mr. Lowry, Mr. Neuhauser and Mr. Mayer each serve as a director/trustee of Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. 15
OFFICERS Year first elected or Position with appointed Name, address and age Liberty Funds to office Principal occupation(s) during past five years ------------------------------------------------------------------------------------------------------------------------------------ Keith T. Banks (age 47) President 2001 President of Liberty Funds since November 2001; President, Chief Investment Columbia Management Group, Inc. Officer and Chief Executive Officer of Columbia Management Group or its 590 Madison Avenue, 36th Floor predecessor since August 2000; President, Chief Executive Officer and Chief New York, NY 10022 Investment Officer of Fleet Investment Advisors Inc. since 2000 (formerly Managing Director and Head of U.S. Equity, J.P. Morgan Investment Management from November 1996 to August 2000); President of Galaxy Funds since September 2002 Vicki L. Benjamin (age 41) Chief 2001 Controller of Liberty Funds, Stein Roe and Liberty All-Star Funds since May One Financial Center Accounting 2002; Chief Accounting Officer of Liberty Funds, Stein Roe and Liberty All-Star Boston, MA 02111 Officer Funds since June 2001; Controller and Chief Accounting Officer of Galaxy Funds since September 2002; Vice President of Liberty Funds since April 2001 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May 1998 to April 2001; Audit Manager from July 1994 to June 1997; Senior Audit Manager from July 1997 to May 1998, Coopers & Lybrand, LLP) J. Kevin Connaughton (age 38) Treasurer 2000 Treasurer of Liberty Funds and Liberty All-Star Funds since December 2000 One Financial Center (formerly Controller of the Liberty Funds and Liberty All-Star Funds from Boston, MA 02111 February 1998 to October 2000); Treasurer of Stein Roe Funds since February 2001 (formerly Controller from May 2000 to February 2001); Treasurer of Galaxy Funds since September 2002; Senior Vice President of Liberty Funds since January 2001 (formerly Vice President from April 2000 to January 2001; Vice President of Colonial Management Associates, Inc. from February 1998 to October 2000; Senior Tax Manager; Coopers & Lybrand, LLP from April 1996 to January 1998) Jean S. Loewenberg (age 57) Secretary 2002 Secretary of Liberty Funds, Stein RoeFunds and Liberty All-Star Funds since One Financial Center February 2002; General Counsel of Columbia Management Group since December 2001; Boston, MA 02111 Senior Vice President since November 1996, Assistant General Counsel since September 2002 of Fleet National Bank (formerly Senior Vice President and Group Counsel of Fleet National Bank from November 1996 to September 2002)
16 TRANSFER AGENT IMPORTANT INFORMATION ABOUT THIS REPORT The Transfer Agent for Colonial California Insured Municipal Fund is: EquiServe Trust Company, N.A. 150 Royall Street Canton, MA 02021 800-730-6001 The fund mails one shareholder report to each shareholder address. Shareholders can order additional reports by calling 800-345-6611. 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 California Insured Municipal Fund. COLONIAL CALIFORNIA INSURED MUNICIPAL FUND ANNUAL REPORT IC-02/040M-1102 (01/03) 02/3048