-----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, K60e+ilOOssB3b1dO9IwIZCaQZrlR+6O0g6GynA1BStrP3Vwu2Rrp244Vx9WMpGx Dv1Uvt3objg4DjNCHf8Q+A== 0000950146-00-000111.txt : 20000210 0000950146-00-000111.hdr.sgml : 20000210 ACCESSION NUMBER: 0000950146-00-000111 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991130 FILED AS OF DATE: 20000209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL CALIFORNIA INSURED MUNICIPAL FUND CENTRAL INDEX KEY: 0001092896 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 001-15415 FILM NUMBER: 528418 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 CALIFORNIA MUNICIPAL INCOME FUND DATE OF NAME CHANGE: 19990809 N-30D 1 COLONIAL CA INSURED MUNICIPAL FUND [Picture of bridge] Colonial California Insured Municipal Fund Annual Report November 30, 1999 President's Message Dear Shareholder: I am pleased to welcome you as shareholders of the Colonial California Insured Municipal Fund. This is the first Annual Report for the Fund, covering the brief period from the Fund's inception on October 29, 1999 through the end of its fiscal year on November 30, 1999. This Fund draws on Colonial's long-standing reputation for managing municipal bond portfolios. The Fund is designed to generate an attractive tax-exempt yield. To accomplish this, the Fund issued preferred shares on December 20, 1999. Preferred shares are designed to enhance the portfolio's income. In November, 1999, the U.S. bond market continued to fight an uphill battle against the rising interest rates that have characterized 1999. During the summer, the Federal Reserve Board (the "Fed") became concerned about the combination of a robust economy, high stock prices and tight labor markets--and the effects of these factors on inflation. To slow the economy, the Fed made three quarter-point (0.25%) increases in short-term interest rates--in June, August and finally in mid-November. In the bond market, rising interest rates can hurt performance because as rates rise, prices fall. However, the current reporting period was so short that the Fund's performance was not really affected by market factors. We remain focused on the long term, managing our fixed-income portfolios for both income and price appreciation. Thank you for choosing Liberty Funds and for giving us the opportunity to serve your investment needs. Sincerely, /s/ Stephen E. Gibson Stephen E. Gibson January 12, 2000 Because economic and market conditions change frequently, there can be no assurance that the trends described in this report will continue or come to pass. By increasing the Fund's duration, preferred shares can increase the Fund's sensitivity to changes in interest rates and, by paying a short-term variable rate to other investors, can increase the potential for volatility in the dividend rate. However, we employ certain hedging techniques that are designed to reduce these risks. - ------------------------------- Not FDIC May Lose Value ------------------ Insured No Bank Guarantee - ------------------------------- - -------------------------------------------------------------------------------- Highlights - -------------------------------------------------------------------------------- > The Fund is almost fully invested in a diverse portfolio of municipal bonds Since the Fund's inception, we have invested its assets in a diverse portfolio of California tax-exempt municipal securities. The Fund has over 73% of its investments in AAA-rated bonds, and is invested in a broad range of traditional municipal sectors, including water and sewer, hospitals, housing, and education-- all of which are benefiting from the strong California economy. We will continue to seek bonds that can provide as high a level of income as is consistent with our objectives, while also providing opportunities for total return. > Portfolio manager's commentary During the brief period since the Fund's inception, its total return was negative 0.28% based on net asset value and 0.00% based on market price. From the Fund's inception on October 29, 1999 through November 30, 1999, the bond market experienced declines as a result of generally rising interest rates. During this time, we invested the majority of the Fund's assets in investment-grade (BBB-rated or better) municipal bonds. The Fund's net asset value performance was only slightly affected by the bond market's volatility. Our longer-term outlook is for the U.S. economy to slow down somewhat and for interest rates to stabilize. However, we will continue to monitor economic and financial developments and make adjustments to the portfolio as conditions change. -William Loring and Brian Hartford A Difficult Year for the Bond Market: Total Return for the Lehman Brothers Municipal Bond Index, 11/30/98 to 11/30/99 [Begin Line Chart] 11/98 10,000 12/98 10,025 1/99 10,144 2/99 10,100 3/99 10,139 4/99 10,139 5/99 10,080 6/99 9,935 7/99 9,971 8/99 9,891 9/99 9,895 10/99 9,788 11/99 9,892 (1.08)% [End Line Chart] The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that tracks the performance of the municipal bond market. Unlike mutual funds, indexes are not investments and do not incur fees or expenses. It is not possible to invest directly in an index. 1 Cumulative total return from 10/29/1999 to 11/30/1999: NAV (0.28)% - --------------------------- Market price 0.00% - ---------------------------
Past performance cannot predict future investment results. Returns and value of an investment will vary, resulting in a gain or loss on sale. Price per share as of 11/30/1999: NAV $14.29 - ---------------------- Market price $15.00 - ----------------------
A portion of the Fund's income may be subject to the alternative minimum tax. The Fund may at times purchase tax-exempt securities at a discount. Some or all of this discount may be included in the Fund's ordinary income, and is taxable when distributed. Top Industry Sectors Special Property Tax 18.1% - ------------------------------------- Water & Sewer 15.9% - ------------------------------------- Local Appropriated 13.8% - ------------------------------------- Hospitals 11.3% - ------------------------------------- Local General Obligations 5.4% - ------------------------------------- Single Family Housing 4.8% - ------------------------------------- Special Non Property 3.9% - ------------------------------------- Toll Facilities 3.5% - ------------------------------------- Education 3.4% - -------------------------------------
Quality Breakdown as of 11/30/1999 AAA 73.7% - ---------------------------- AA 3.3% - ---------------------------- A 3.8% - ---------------------------- BBB 10.1% - ---------------------------- Non-rated 1.1% - ---------------------------- Cash equivalents 8.0% - ----------------------------
Quality and sector breakdowns are calculated as a percentage of total investments, including short-term obligations. Ratings shown in the Quality Breakdown represent the highest rating assigned to a particular bond by one of the following respected rating agencies: Standard & Poor's Corporation, Moody's Investors Service, Inc. or Fitch Investors Service, Inc. Because the Fund is actively managed, there can be no guarantee the Fund will continue to maintain this quality breakdown or invest in these sectors in the future. Industry sectors in the following financial statements are based upon the standard industrial classifications (SIC) published by the U.S. Office of Management and Budget. The sector classifications used on this page are based upon Colonial's defined criteria as used in the investment process. - ------------------------------------------------------------------------------- Schedule of Investments - ------------------------------------------------------------------------------- November 30, 1999 (In thousands--California unless stated)
Municipal Bonds - 104.1% Par Value - -------------------------------------------------------------------------------- EDUCATION--4.0% Education State Educational Facilities Authority, Stanford University, Series 1998 O, 5.125% 01/01/31 $ 1,500 $ 1,327 ------- - -------------------------------------------------------------------------------- HEALTHCARE--12.8% Hospital Oakland, Harrison Foundation, Series 1999 A, 6.000% 01/01/29 (a) 1,000 1,000 State Health Facilities Financing Authority, Cedars-Sinai Medical Center, Series 1999 A, 6.125% 12/01/30 1,000 979 Statewide Communities Development Authority: Catholic Healthcare West, Series 1999, 6.500% 07/01/20 (b) 1,500 1,488 Sutter Health, Series 1999, 5.500% 08/15/31 (a) 1,000 930 ------- 4,397 ------- - -------------------------------------------------------------------------------- HOUSING--6.8% Assisted Living/Senior--1.4% Abag Finance Authority for Nonprofit Corps., Series 1999, 6.200% 11/01/29 500 494 ------- Single-Family--5.4% State Housing Finance Agency, Series 1997 I, 5.750% 02/01/29 1,000 952 State Rural Home Mortgage Finance Authority, Series 1998 B-4, 6.350% 12/01/29 910 920 ------- 1,872 ------- - -------------------------------------------------------------------------------- TAX-BACKED--49.2% Local Appropriated--15.6% Del Norte County, Series 1999, 5.400% 06/01/29 1,500 1,394 Los Angeles County, Series 1999 A, (c) 08/01/23 2,220 526 Pacifica, Series 1999, 5.875% 11/01/29 1,500 1,490 San Leandro, Series 1999, 5.750% 11/01/29 2,000 1,961 ------- 5,371 ------- Local General Obligations--6.1% Brea Olinda USD, 5.600% 08/01/20 1,000 965 Inglewood Unified School District, Series 1999 A, 5.600% 10/01/24 (a) 1,185 1,142 ------- 2,107 ------- Special Non-Property Tax--7.1% PR Commonwealth of Puerto Rico Highway & Transportation Authority, Series 1996 Y, 5.500% 07/01/36 1,000 940 VI Virgin Islands Public Finance Authority, Series 1999, 6.500% 10/01/24 1,500 1,504 ------- 2,444 ------- Par Value - -------------------------------------------------------------------------------- Special Property Tax--20.4% Fairfield-Suisan Unified School District, Series 1999, 5.375% 08/15/29 $1,500 $1,392 Orange County Community Facilities District, Ladera Ranch, Series 1999 A, 6.700% 08/15/29 200 200 Palmdale Elementary School District, Community Facilities District No. 90-1, Series 1999, 5.800% 08/01/29 (b) 1,500 1,477 Pittsburg Redevelopment Agency, Los Medanos Project, Series 1999, (c) 08/01/21 2,575 688 Rancho Cucamonga Redevelopment Agency, Series 1999, 5.250% 09/01/20 1,500 1,389 Ridgecrest, Ridgecrest Civic Center, Series 1999, 6.250% 06/30/26 (b) 500 480 Santa Clara Redevelopment Agency, Bayshore North Project, Series 1999 A, 5.500% 06/01/23(a) 1,245 1,187 Santa Margarita Water District, Series 1999, 6.250% 09/01/29 225 215 ------ 7,028 ------ - -------------------------------------------------------------------------------- TRANSPORTATION--8.0% Air Transportation--1.3% Statewide Communities Development Authority, Series 1997 A, 5.700% 10/01/33 500 449 ------ Toll Facilities--4.0% San Joaquin Toll Road, 5.250% 01/15/30 1,500 1,356 ------ Transportation--2.7% San Francisco Bay Area Rapid Transit District, Series 1999, 5.500% 07/01/34 (a) 1,000 937 ------ - -------------------------------------------------------------------------------- UTILITY--23.3% Investor Owned--2.7% Pollution Control Financing Authority, Southern California Edison, Series A, 5.450% 09/01/29 1,000 938 ------ Municipal Electric--2.6% GU Guam Power Authority, Series 1999 A, 5.125% 10/01/29 1,000 883 ------ Water & Sewer--18.0% Culver City, Series 1999 A, 5.700% 09/01/29 (b) 1,500 1,460 Los Angeles Department of Water & Power, Series 1999, 6.100% 10/15/39 1,500 1,520 Metropolitan Water District, Series 1997 A, 5.000% 07/01/37 1,500 1,273 Pomona Public Financing Authority, Series 1999 AC, 5.500% 05/01/29 (a) 1,000 946 Statewide Communities Development Authority, Series 1999 B, 5.700% 10/01/24 (a) 1,000 975 ------ 6,174 ------ Total Municipal Bonds (cost of $35,927) (d) 35,777 ------
2 - ------------------------------------------------------------------------------- Schedule of Investments - ------------------------------------------------------------------------------- November 30, 1999 (in thousands)
Short-Term Obligations - 9.0% Par Value - --------------------------------------------------------------------------- VARIABLE RATE DEMAND NOTES (e) Alameda Schools Financing Authority, 3.600% 11/01/14 $1,500 $ 1,500 Santa Clara County Transportation District, Series 1985 A, 3.600% 06/01/15 1,500 1,500 State Educational Facilities Authority, Foundation for Educational Achievement, Series 1996, 3.650% 07/01/26 100 100 -------- Total Short-Term Obligations 3,100 -------- Other Assets & Liabilities, Net--(13.1)% (4,495) -------- Net Assets--100.0% $ 34,382 ========
NOTES TO INVESTMENT PORTFOLIO: (a) These securities, or a portion thereof, with a total market value of $6,896, are being used to collateralize the delayed delivery purchases indicated in note (b) below. (b) These securities have been purchased on a delayed delivery basis for settlement at a future date beyond the customary settlement time. (c) Zero coupon bond. (d) Cost for federal income tax purposes is the same. (e) Variable rate demand notes are considered short-term obligations. Interest rates change periodically on specific dates. These securities are payable on demand and are secured by either letters of credit or other credit support agreements from banks. The rates listed are as of November 30, 1999. See notes to financial statements. 3 - ------------------------------------------------------------------------------- Statement of Assets and Liabilities - ------------------------------------------------------------------------------- November 30, 1999 (In thousands except for per share amounts and footnotes) (In thousands) Assets Investments at value (cost $35,927) $35,777 Short-term obligations 3,100 ------- 38,877 Cash $ 72 Receivable for: Interest 449 Expense reimbursement due from Advisor 33 554 ----- ------- Total Assets 39,431 Liabilities Payable for: Investments purchased 4,927 Accrued: Management fee 11 Bookkeeping fee 2 Other 109 ----- Total Liabilities 5,049 ------- Net Assets at value for 2,407 shares of beneficial interest outstanding $34,382 ------- Net asset value per share $ 14.29 ------- Composition of Net Assets Capital paid in $34,408 Undistributed net investment income 124 Net unrealized depreciation (150) ------- $34,382 -------
- ------------------------------------------------------------------------------- Statement of Operations - ------------------------------------------------------------------------------- Investment Income Interest $141 Expenses Management fee $ 11 Transfer agent fee 4 Bookkeeping fee 2 Trustees fee 1 Custodian fee 1 Audit fee 20 Legal fee 4 Reports to shareholders 4 Other 3 ----- Total expenses 50 Fees and expenses waived or borne by the Advisor (33) 17 ----- ---- Net Investment Income 124 ---- Net Realized & Unrealized Loss on Portfolio Positions Net Change in Unrealized Appreciation/Depreciation during the period (150) ---- Decrease in Net Assets from Operations $(26) ----
(a) The Fund commenced investment operations on October 29, 1999. 4 See notes to financial statements. - ------------------------------------------------------------------------------- Statement of Changes in Net Assets - ------------------------------------------------------------------------------- (in thousands)
Period ended November 30, Increase (Decrease) in Net Assets 1999(a) - -------------------------------------------------------------------- Operations: Net investment income $ 124 Net change in unrealized appreciation/depreciation (150) ------- Net Decrease from Operations (26) Fund Share Transactions: Receipts for shares sold 34,408 ------- Total Increase 34,382 Net Assets Beginning of period -- ======= End of period (including undistributed income of $124) $34,382 ======= Number of Fund Shares Outstanding 2,407 -------
(a) The Fund commenced investment operations on October 29, 1999. See notes to financial statements. 5 - ------------------------------------------------------------------------------- Notes to Financial Statements - ------------------------------------------------------------------------------- November 30, 1999 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, as amended, as a nondiversified, closed-end, management investment company. The Fund's investment objective is to provide current income exempt from ordinary federal income tax and California state personal income tax. The Fund authorized an unlimited number of shares. On October 29, 1999 the Fund completed the offering of 2,400,000 common shares at a price of $15.00 per share, raising $34,308,000, net of underwriting and offering costs. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies that are consistently followed by the Fund in the preparation of its financial statements. Security valuation and transactions: Debt securities generally are valued by a pricing service based upon market transactions for normal, institutional-size trading units of similar securities. When management deems it appropriate, an over-the-counter or exchange bid quotation is used. Futures contracts are valued based on the difference between the last sale price and the opening price of the contract. Short-term obligations with a maturity of 60 days or less are valued at amortized cost. Portfolio positions for which market quotations are not readily available are valued at fair value under procedures approved by the Trustees. Security transactions are accounted for on the date the securities are purchased, sold or mature. Cost is determined and gains and losses are based upon the specific identification method for both financial statement and federal income tax purposes. The Fund may trade securities on other than normal settlement terms. This may increase the risk if the other party to the transaction fails to deliver and causes the Fund to subsequently invest at less advantageous prices. Federal income taxes: Consistent with the Fund's policy to qualify as a regulated investment company and to distribute all of its taxable and tax-exempt income, no federal income tax has been accrued. Interest income, debt discount and premium: Interest income is recorded on the accrual basis. Original issue discount is accreted to interest income over the life of a security with a corresponding increase in the cost basis; market discount is not accreted. Premium is amortized against interest income with a corresponding decrease in the cost basis. Distributions to shareholders: Distributions to shareholders are recorded on the ex-date. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. Note 2. Fees and Compensation Paid to Affiliates Management fee: Colonial Management Associates, Inc. (the Advisor) is the investment Advisor of the Fund and furnishes accounting and other services and office facilities for a monthly fee equal to 0.65% annually of the Fund's average weekly net assets. The Advisor has voluntarily agreed to waive a portion of the fee so that it will not exceed 0.35% annually for the first five years of the Fund's operations. Bookkeeping fee: The Advisor provides bookkeeping and pricing services for $18,000 per year plus 0.0233% annually of the Fund's average net assets over $50 million. Expense Limits: The Advisor has agreed, until further notice, to waive fees and bear certain Fund expenses to the extent that total expenses (exclusive of management fees, brokerage commissions, interest, preferred dividends, taxes and extraordinary expenses, if any) exceed 0.20% annually of the Fund's average net assets. Other: The Fund pays no compensation to its officers, all of whom are employees of the Advisor. The Fund's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Fund's assets. Note 3. Portfolio Information Investment activity: During the period ended November 30, 1999, purchases and sales of investments, other than short-term obligations, were $35,923,989 and none, respectively. Unrealized appreciation (depreciation) at November 30, 1999, based on cost of investments for both financial statement and federal income tax purposes was: Gross unrealized appreciation $ 53,936 Gross unrealized depreciation (204,194) --------- Net unrealized depreciation $(150,258) ---------
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. 6 - ------------------------------------------------------------------------------- Notes to Financial Statements (continued) - ------------------------------------------------------------------------------- November 30, 1999 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 Treasury bond futures contracts and purchase and write options on futures. The Fund will invest in these instruments to hedge against the effects of changes in the value of portfolio securities due to anticipated changes in interest rates and/or market conditions, for duration management, or when the transactions are economically appropriate to the reduction of risk inherent in the management of the Fund and not for trading purposes. The use of futures contracts and options involves certain risks, which include (1) imperfect correlation between the price movement of the instruments and the underlying securities, (2) inability to close out positions due to different trading hours, or the temporary absence of a liquid market, for either the instrument or the underlying securities or (3) an inaccurate prediction by the Advisor of the future direction of interest rates. Any of these risks may involve amounts exceeding the amount recognized in the Fund's Statement of Assets and Liabilities at any given time. Note 4. Subsequent Event On December 10, 1999 the Fund offered 360,000 common shares at a purchase price of $15 per share, raising $5,146,200, net of underwriting and offering costs. Additionally, on December 20, 1999, the Fund offered 978 shares of Series TH Municipal Preferred at a purchase price of $25,000 per share, raising $24,205,500, net of underwriting costs. For the offering of the preferred shares, the Fund expects to incur approximately $75,000 of offering costs. 7 - ------------------------------------------------------------------------------- Financial Highlights - ------------------------------------------------------------------------------- Selected per share data, total return, ratios and supplemental data throughout each period are as follows:
Period ended November 30 1999 (b) - ------------------------------------------------------------------------------------------------ Net asset value--Beginning of period $ 14.330 -------- Income From Investment Operations: Net investment income (a) 0.052 Offering costs ( 0.030) Net realized and unrealized loss ( 0.062) -------- Total from Investment Operations ( 0.040) -------- Net Asset Value, End of Period $ 14.290 -------- Market price per share $ 15.000 -------- Total return--based on market value (c)(d)(e) 0.00 % -------- Ratios to Average Net Assets: Expenses (f)(g) 0.55 % Net Investment Income (f)(g) 4.12 % Portfolio turnover 0% Net assets at end of period (000) $ 34,382 $ 0.014
(a) Net of fees and expenses waived or borne by the Advisor which amounted to: (b) The Fund commenced investment operations on October 29, 1999. (c) Total return at market value assuming all distributions reinvested and excluding brokerage commissions. (d) Had the Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) The benefits derived from custody credits and directed brokerage arrangements had no impact. (g) Annualized. 8 - ------------------------------------------------------------------------------- Report of Independent Accountants - ------------------------------------------------------------------------------- To the Shareholders and the Trustees 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, 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, 1999, the results of its operations, the changes in its net assets and the financial highlights for the period from October 29, 1999 (commencement of operations) through November 30, 1999, in conformity with generally accepted accounting principles. These financial statements and the financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of portfolio positions at November 30, 1999 by correspondence with the custodian and brokers, provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Boston, Massachusetts January 12, 2000 9 - ------------------------------------------------------------------------------- Dividend Reinvestment Plan - ------------------------------------------------------------------------------- 1. You, BankBoston, NA, will act as Agent for me, and will open an account for me under the Dividend Reinvestment Plan with the same registration as my shares of the Fund are currently registered. You will effect the dividend reinvestment option on my behalf as of the first record date for an income dividend or capital gain distribution ("distribution"), separately or collectively, after you receive the authorization duly executed by me. 2. Whenever the Fund declares a distribution payable in the Fund's shares of beneficial interest ("shares") or cash at the option of the shareholder, I hereby elect to take such distribution entirely in shares, subject to the terms of this Plan. If on the valuation date the Fund's net asset value per share is less than the market price (including estimated brokerage commissions), you shall on the payable date automatically receive for my account from the Fund that number of newly-issued shares that the cash otherwise receivable by me would purchase if the purchase price per share equaled the higher of: (a) net asset value per share on the valuation date, or (b) 95% of market price (not including estimated brokerage commission) on the payable date; except if the market price (not including estimated brokerage commissions) on the payable date is less than 95% of the net asset value per share on the valuation date, you shall receive a distribution of cash from the Fund and shall apply the amount of such distribution to the purchase in the open market of shares of my account, commencing on the business day after the payable date, subject to the condition that such purchases must be made at a "discount" during the remainder of the "buying period." "Discount" is defined as a market price per share (including estimated brokerage commissions) which is lower than the most recently determined net asset value per share (as calculated from time to time). "Buying period" shall mean the period commencing the first business day after the valuation date and ending at the close of business on the business day preceding the "ex" date for the next distribution. The valuation date will be the last business day of the week preceding the week of the payable date. 3. Should the Fund's net asset value per share exceed the market price (including estimated brokerage commissions) on the valuation date for a distribution, you shall receive for my account a distribution in cash from the Fund and shall apply the amount of such distribution on my shares to the purchase in the open market of shares for my account commencing on the first business day after the valuation date, subject to the condition that such purchases must be made at a discount during the buying period. 4. In the event you are instructed to purchase shares in the open market pursuant to paragraph 2 or 3 hereof, and you are unable for any reason to invest the full amount of the distribution in shares acquired in open-market purchases at a discount during the buying period, you will invest the uninvested portion of such distribution in newly-issued shares at the close of business at the end of such buying period at the higher of: (a) net asset value determined at such close, or (b) 95% of the market price (not including estimated brokerage commissions) at such close. 5. You may not acquire newly-issued shares after the valuation date unless you have received a legal opinion that registration of such shares is not required under the Securities Act of 1993, as amended, or unless the shares to be issued are registered under such an Act. 6. For all purposes of the Plan: (a) the market price of the shares on a particular date shall be the last sales price on the New York Stock Exchange on that date, or if there is no sale on such Exchange on that date, then the mean between the closing bid and asked quotations for such shares on such Exchange on such date (in either case including or not including estimated brokerage commissions as provided above) and (b) net asset value per share of the shares on a particular date shall be as determined by or on behalf of the Fund. 7. Open-market purchases provided for above may be made on any securities exchange where the shares are traded, in the over-the-counter market or in negotiated transactions and may be on such terms as to price, delivery and otherwise as you shall determine. My cash funds held by you uninvested will not bear interest and it is understood that, in any event, you shall have no liability in connection with any inability to purchase shares within 30 days after the initial date of such purchase as herein provided, or with the timing of any purchases effected. You shall have no responsibility as to the value of the shares acquired for my account. For the purposes of open-market purchases with respect to the Plan you may commingle my funds with those of other shareholders of the Fund for whom you similarly act as Agent, and the average price (including brokerage commissions) of all shares purchased by you as Agent shall be the price per share allocated to me in connection therewith. 8. You may hold my shares acquired pursuant to my authorization, together with the shares of other shareholders of the Fund acquired pursuant to similar authorizations, in non-certificate form in your name or that of your nominee. You will forward to me any proxy solicitation material and will vote any shares so held for me only in accordance with the proxy returned by me to the Fund. Upon my written request, you will deliver to me, without charge, a certificate or certificates for the full shares. 9. You will confirm to me each investment made for my account as soon as practicable but not later than 60 days after the date thereof. Although I may from time to time have an undivided fractional interest (computed to three decimal places) in a share, no certificates for a fractional share will be issued. However, distributions on fractional shares will be credited to my account. In the event of termination of my account under the Plan, you will sell such undivided fractional interests at the market value of the shares at the time of termination and send the net proceeds to me. 10 - ------------------------------------------------------------------------------- Dividend Reinvestment Plan - ------------------------------------------------------------------------------- 10. Any stock dividends or split shares distributed by the Fund on shares held by you for me will be credited to my account. In the event that the Fund makes available to its shareholders rights to purchase additional shares or other securities, the shares held for me under the Plan will be added to other shares held by me in calculating the number of rights to be issued to me. 11. Your fee for service described in this Plan will be paid by the Fund. I will be charged a pro rata share of brokerage commission on all open-market purchases. 12. I may terminate my account under the Plan by notifying you in writing. Such termination will be effective immediately if my notice is received by you prior to the record date of subsequent distributions. The Plan may be terminated by you or the Fund upon notice in writing mailed to me at least 30 days prior to any record date for the payment of any distribution of the Fund. Upon any termination you will cause a certificate or certificates for the full shares held for me under the Plan and the proceeds from the sales of any fractional shares to be delivered to me without charge. If I elect by notice to you in writing in advance of such termination to have you sell part or all of my shares and remit the proceeds to me, you are authorized to deduct brokerage commission for this transaction from the proceeds. If I decide to terminate my account under the Plan, I may request that all my Plan shares, both full and fractional, be sold. The per share price may fall during the period between my request for sale and the sale in the open market which will be made within ten trading days after the Agent receives my request. The proceeds of the sale less a $2.50 service fee, plus any brokerage commission will be mailed to me after the settlement of funds from the brokerage firm. The settlement is three business days after the sale of shares. 13. These Terms and Conditions may be amended or supplemented by you or the Fund at any time or times but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority, only by mailing to me appropriate written notice at least 30 days prior to the effective date thereof. The amendment or supplement shall be deemed to be accepted by me unless, prior to the effective date thereof, you receive written notice of the termination of my account under the Plan. Any such amendment may include an appointment by you in your place and stead of successor Agent under these Terms and Conditions, with full power and authority to perform all or any of the acts to be performed by the Agent under these Terms and Conditions. Upon any such appointment of any Agent for the purpose of receiving distributions, the Fund will be authorized to pay to such successor Agent, for my account, all distributions payable on shares held in my name or under the Plan for retention or application by such successor Agent as provided in these Terms and Conditions. 14. You shall at all times act in good faith and agree to use your best efforts within reasonable limits to insure the accuracy of all services performed under this Agreement and to comply with applicable law, but assume no responsibility and shall not be liable for loss or damage due to errors unless such error is caused by your negligence, bad faith or willful misconduct, or that of your employees. 15. These Terms and Conditions shall be governed by the laws of the Commonwealth of Massachusetts. 14. You shall at all times act in good faith and agree to use your best efforts within reasonable limits to insure the accuracy of all services performed under this Agreement and to comply with applicable law, but assume no responsibility and shall not be liable for loss or damage due to errors unless such error is caused by your negligence, bad faith or willful misconduct, or that of your employees. 15. These Terms and Conditions shall be governed by the laws of the Commonwealth of Massachusetts. 11 Transfer Agent - ------------------------------------------------------------------------------- Important Information About This Report The Transfer Agent for Colonial California Insured Municipal Fund is: BankBoston, NA 100 Federal Street Boston, MA 02110 1-800-730-6001 The Fund mails one shareholder report to each shareholder address. If you would like more than one report, please call 1-800-426-3750 and additional reports will be sent to you. This report has been prepared for shareholders of Colonial California Insured Municipal Fund. Trustees Robert J. Birnbaum Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief Operating Officer, New York Stock Exchange, Inc.; President, American Stock Exchange Inc.) Tom Bleasdale Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank & Trust Company) John V. Carberry Senior Vice President of Liberty Financial Companies, Inc. (formerly Managing Director, Salomon Brothers) Lora S. Collins Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel) James E. Grinnell Private Investor (formerly Senior Vice President-Operations, The Rockport Company) Richard W. Lowry Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood Corporation) Salvatore Macera Private Investor (formerly Executive Vice President of Itek Corp. and President of Itek Optical & Electronic Industries, Inc.) William E. Mayer Partner, Development Capital, LLC (formerly Dean, College of Business and Management, University of Maryland; Dean, Simon Graduate School of Business, University of Rochester; Chairman and Chief Executive Officer, CS First Boston Merchant Bank; and President and Chief Executive Officer, The First Boston Corporation) James L. Moody, Jr. Retired (formerly Chairman of the Board, Chief Executive Officer and Director Hannaford Bros. Co.) John J. Neuhauser Academic Vice President and Dean of Faculties, Boston College (former Dean, Boston College School of Management) Thomas E. Stitzel Professor of Finance, College of Business, Boise State University; Business Consultant and Author Robert L. Sullivan Retired Partner, KPMG LLP (formerly Management Consultant, Saatchi and Saatchi Consulting Ltd. and Principal and International Practice Director, Management Consulting, Peat Marwick Main & Co.) Anne-Lee Verville Consultant (formerly General Manager, Global Education Industry, and President, Applications Solutions Division, IBM Corporation) - ------------------------------------------------------------------------------- COLONIAL CALIFORNIA INSURED MUNICIPAL FUND Annual Report - ------------------------------------------------------------------------------- IC-02/268I-1199 (1/00) 99/1611 -----END PRIVACY-ENHANCED MESSAGE-----