UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-9537
Colonial California Insured Municipal Fund
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
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(Address of principal executive offices) (Zip code)
James R. Bordewick, Jr., Esq.
Columbia Management Advisors, LLC
One Financial Center
Boston, MA 02111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-426-3750
Date of fiscal year end: November 30, 2006
Date of reporting period: May 31, 2006
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
Item 1. Reports to Stockholders
[PHOTO]
COLONIAL CALIFORNIA
INSURED MUNICIPAL FUND
Semiannual Report
May 31, 2006
[LOGO] Not FDIC Insured May Lose Value
No Bank Guarantee
[GRAPHIC]
Dear Shareholder:
The US stock and bond markets delivered positive, but modest, returns during
the six month period ended May 31, 2006. After a weak fourth quarter, economic
growth turned sharply higher in 2006 and job growth was steady, although
somewhat slower at the end of the period. Confident consumers continued to pump
dollars into US retail markets, despite higher energy prices, which boosted
inflation. The housing market continued to cool as mortgage rates moved higher,
but housing-market indicators--such as housing starts, sales of existing homes,
and house prices--remained strong by historical measures.
In this environment, the US fixed income markets faced the challenge of rising
interest rates, especially within the short-and intermediate-maturity ranges
and was generally flat for the period. The Federal Reserve Board, in an effort
to balance economic growth and the forces of inflation, raised short-term
interest rates by one full percentage point during the reporting period. The
yield on the 10-year US Treasury note, a bellwether for the bond market, moved
up from 4.5% to 5.1%. Lower quality bonds did better than higher quality bonds.
In fact, high-yield bonds did better than either stocks or investment-grade
bonds. A strong economy favored corporate high-yield bonds, as default rates
remained low and corporate profits surprised investors with
better-than-expected results. However, that trend showed signs of shifting near
the end of the six-month period. The municipal sector generated respectable
gains as economic growth helped buoy revenues and stabilize budgets in many
states and municipalities. Within the municipal market, high-yield also
outperformed high-grade bonds for the period.
In the pages that follow, your fund's manager discusses key factors that
influenced performance during this six-month reporting period. We urge you to
read this report carefully and to discuss any questions you might have with
your financial advisor.
As always, we thank you for choosing Colonial Funds. We look forward to
continuing to help you build toward your financial goals.
Sincerely,
/s/ Christopher L. Wilson
Christopher L. Wilson
President, Columbia Funds
Past performance is no guarantee of future results.
Investments in high-yield or "junk" bonds offer the potential for higher income
than investments in investment-grade bonds, but also have a higher degree of
risk. Changes in economic conditions or other circumstances may adversely
effect a high-yield bond issuer's ability to make timely principal and interest
payments.
The views expressed in the President's Letter and Portfolio Managers' Report
reflect the current views of the respective parties. These views are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict so actual outcomes and results may
differ significantly from the views expressed. These views are subject to
change at any time based upon economic, market or other conditions and the
respective parties disclaim any responsibility to update such views. These
views may not be relied on as investment advice and, because investment
decisions for a Colonial Fund are based on numerous factors, may not be relied
on as an indication of trading intent on behalf of any particular Colonial
Fund. References for specific company securities should not be construed as a
recommendation or investment advice.
[GRAPHIC]
[GRAPHIC]
PORTFOLIO MANAGER'S REPORT
Summary
.. For the six-month period ended May 31, 2006, Colonial California Insured
Municipal Fund had a return of -0.95%, based on its market price. Changes in
the market price of the fund's shares reflect investor demand and are not
necessarily directly linked to changes in the fund's net asset value. For
the same period, the fund returned 1.62% based on investment at net asset
value, which was less than the 2.07% average return of its peer group, the
Lipper California Insured Municipal Debt Funds (Leveraged) Category/1/.
Lipper Inc., a widely respected data provider in the industry, calculates an
average total return (assuming reinvestment of distributions) for mutual
funds with investment objectives similar to those of the fund. Lipper makes
no adjustment for the effect of sales loads. The fund's dividend income
declined as higher short-term interest rates raised the payout rate to
preferred shareholders. However, leveraged positions continued to provide
the fund with an income advantage over its non-leveraged peers.
.. Bonds with longer maturity dates continued to outperform shorter- and
intermediate-maturity bonds as the Federal Reserve Board continued to
oversee a rise in short-term rates during the period. As a result, the
fund's concentration in bonds that mature in 10 to 15 years detracted from
performance. The fund continued to diversify into intermediate- and
longer-term bonds, with an emphasis on bonds without call provisions.
However, the supply of these bonds in the California market plus an overall
decline in municipal bond issuance hampered our efforts. The fund continued
to benefit from light exposure to bonds in the one- to five-year maturity
range.
.. While California has rebounded from its earlier downturn, some drivers of
recent growth have come under pressure from rising interest rates. At the
same time, higher expenditures have offset growing tax revenues. This
situation has left California without budgetary reserves and continues to
affect the state's debt rating. However, our outlook for the state remains
stable. We currently plan to continue selling shorter-maturity bond
holdings, using the proceeds to invest in bonds maturing in 20 years or
longer, preferably without call provisions.
Portfolio Management
Kimberly Campbell has been the portfolio manager of Colonial California Insured
Municipal Fund since October 2003.
Shares of closed-end funds frequently trade at a discount to net asset value.
The price of the fund's shares is determined by a number of factors, several of
which are beyond the control of the fund. Therefore, the fund cannot predict
whether its shares will trade at, below or above net asset value.
Performance data quoted represents past performance and current performance may
be lower or higher. Past performance is no guarantee of future results.
Investing in fixed-income securities may involve certain risks, including the
credit quality of individual issuers, possible prepayments, market or economic
developments and yield and share price fluctuations due to changes in interest
rates. When interest rates go up, bond prices typically drop, and vice versa.
-------------
/1/Lipper Inc., a widely respected data provider in the industry, calculates an
average total return (assuming reinvestment of distributions) for mutual
funds with investment objectives similar to those of the fund. Lipper makes
no adjustment for the effect of sales loads.
Price per share as of 5/31/06 ($)
Market price 13.70
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Net asset value 14.64
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6-month (cumulative) total return as of 5/31/06 (%)
Market price -0.95
-------------------------------
Net asset value 1.62
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Lipper California Insured
Municipal Debt Funds
Category average 2.07
-------------------------------
Performance is historical, assumes reinvestment of all dividends and capital
gains, and does not guarantee future results. Investment return and principal
value fluctuate with changing market conditions so that, when sold, shares may
be worth more or less than their original cost. Current performance may be
lower or higher than the performance data quoted. Please call 800-730-6001 for
the fund's most recent performance.
Total return based on net asset value reflects changes in the fund's net asset
value during each period. Total return based on market value reflects changes
to market value. These figures will differ depending on the level of any
discount from or premium to during the period.
Distributions declared
per common share
12/01/05-5/31/06 ($)
0.37
--------
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 5 sectors as of 5/31/06 (%)
Local general obligations 18.8
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Water & sewer 17.6
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Refunded/Escrowed 11.3
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Local appropriated 7.5
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Special property tax 7.4
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Quality breakdown as of 5/31/06 (%)
AAA 89.0
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A 5.4
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BBB 2.8
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Cash equivalents 1.7
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Non-rated 1.1
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Sector and quality breakdowns are calculated as a percentage of total
investments and net assets, respectively. Ratings shown in the quality
breakdown represent the rating assigned to a particular bond by one of the
following nationally recognized rating agencies: Standard & Poor's, a division
of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc. or Fitch
Ratings, Ltd. Ratings are relative and subjective and are not absolute
standards of quality. The fund's credit quality does not remove market risk
Because the fund is actively managed, there is no guarantee that the fund will
continue to invest in these sectors or maintain these quality breakdowns in the
future.
1
[GRAPHIC]
Investing in high-yield or "junk" bonds offers the potential for higher income
than investments in investment-grade bonds but they also have a higher degree
of risk. Changes in economic conditions or other circumstances may adversely
affect a high-yield bond issuer's ability to make timely principal and interest
payments.
Tax-exempt investing offers current tax-exempt income, but it also involves
special risks. The value of the fund will be affected by interest rate changes
and the creditworthiness of issues held in the fund. Interest income from
certain tax-exempt bonds may be subject to certain state and local taxes and,
if applicable, the alternative minimum tax. Capital gains are not exempt from
income taxes.
2
[GRAPHIC]
PORTFOLIO MANAGER'S REPORT (continued)
[GRAPHIC]
INVESTMENT PORTFOLIO
May 31, 2006 (Unaudited)
MUNICIPAL BONDS - 155.5% PAR ($) VALUE ($)
-----------------------------------------------------------
EDUCATION - 9.3%
EDUCATION - 9.3%
CA Educational Facilities Authority:
Pepperdine University,
Series 2005 A,
Insured: AMBAC
5.000% 12/01/35 1,000,000 1,031,280
Pooled College & University Projects,
Series 2000 B,
6.625% 06/01/20 250,000 269,297
CA University Enterprises, Inc.,
Auxiliary Organization,
Series 2005 A,
Insured: FGIC
4.375% 10/01/30 1,000,000 936,050
CA University Revenue,
Series 2005 C,
Insured: MBIA
5.000% 11/01/29 1,500,000 1,552,335
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Education Total 3,788,962
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EDUCATION TOTAL 3,788,962
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-----------------------------------------------------------
HEALTH CARE - 2.3%
HOSPITALS - 2.3%
CA Statewide Communities
Development Authority Revenue,
Catholic Healthcare West,
Series 1999,
6.500% 07/01/20 145,000 157,843
Daughters of Charity Health,
Series 2005 A,
5.250% 07/01/30 500,000 509,745
CA Whittier Health Facility Revenue,
Presbyterian Intercommunity Hospital,
Series 2002,
5.750% 06/01/31 250,000 262,670
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Hospitals Total 930,258
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HEALTH CARE TOTAL 930,258
---------
-----------------------------------------------------------
HOUSING - 5.3%
ASSISTED LIVING/SENIOR - 5.1%
CA ABAG Finance Authority for
Nonprofit Corps. Odd Fellows Home,
Series 1999,
Insured: MBIA
6.000% 08/15/24 2,000,000 2,071,060
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Assisted Living/Senior Total 2,071,060
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PAR ($) VALUE ($)
---------------------------------------------------------
SINGLE-FAMILY - 0.2%
CA Rural Home Mortgage Finance
Authority:
Series 1998 A, AMT,
Guarantor: GNMA
6.350% 12/01/29 65,000 65,811
Series 1998 B-5, AMT,
Guarantor: FNMA
6.350% 12/01/29 40,000 40,861
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Single-Family Total 106,672
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HOUSING TOTAL 2,177,732
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---------------------------------------------------------
OTHER - 20.4%
REFUNDED/ESCROWED (A) - 17.9%
CA Community College Financing
Authority, West Valley Mission
Community College,
Series 1997,
Pre-refunded 05/01/07,
Insured: MBIA
5.625% 05/01/22 2,000,000 2,076,380
CA Oakland Harrison Foundation,
Series 1999 A,
Pre-refunded 01/01/10,
Insured: AMBAC
6.000% 01/01/29 1,000,000 1,078,580
CA Orange County Community Facilities
District, Ladera Ranch,
Series 1999 A,
Pre-refunded 08/15/09
6.700% 08/15/29 200,000 221,722
CA Pacifica,
Series 1999,
Pre-refunded 11/01/09,
Insured: AMBAC
5.875% 11/01/29 1,500,000 1,623,165
CA Public Works Board Department of
Health Services,
Series 1999 A,
Pre-refunded 11/01/09,
Insured: MBIA
5.750% 11/01/24(b) 1,500,000 1,613,535
CA Statewide Communities
Development Authority:
Certificates of Participation,
Catholic Healthcare West,
Series 1999,
Pre-refunded 07/01/10
6.500% 07/01/20 355,000 394,966
Eskaton Village - Grass Valley,
Series 2000,
Pre-refunded 11/15/10,
8.250% 11/15/31(c) 250,000 294,215
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Refunded/Escrowed Total 7,302,563
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See Accompanying Notes to Financial Statements.
3
[GRAPHIC]
INVESTMENT PORTFOLIO (continued)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
------------------------------------------------------------
OTHER (CONTINUED)
TOBACCO - 2.5%
CA Golden State Tobacco, Securitization
Enhanced Asset Backed,
Series 2005 A,
Insured: FGIC
5.000% 06/01/35 1,000,000 1,021,810
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Tobacco Total 1,021,810
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OTHER TOTAL 8,324,373
---------
------------------------------------------------------------
RESOURCE RECOVERY - 1.3%
DISPOSAL - 1.3%
CA Salinas Valley Solid Waste Authority,
Series 2002,
Insured: AMBAC
5.125% 08/01/22 500,000 512,815
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Disposal Total 512,815
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RESOURCE RECOVERY TOTAL 512,815
---------
------------------------------------------------------------
TAX-BACKED - 68.4%
LOCAL APPROPRIATED - 11.8%
CA Los Angeles County Schools,
Series 1999 A,
Insured: AMBAC:
(d) 08/01/18 2,020,000 1,137,522
(d) 08/01/23 2,220,000 955,111
CA San Bernardino County, Medical
Center Financing Project,
Series 1994,
Insured: MBIA
5.500% 08/01/17 2,500,000 2,709,550
---------
Local Appropriated Total 4,802,183
---------
LOCAL GENERAL OBLIGATIONS - 29.7%
CA Culver City Unified School District
Financing Authority,
Series 2005,
Insured: FSA
5.500% 08/01/25 1,000,000 1,141,380
CA Golden West Schools Financing
Authority Placentia Yorba Linda
Unified,
Series 2006,
Insured: AMBAC
5.500% 08/01/23 1,000,000 1,131,500
CA Newhall School District, Series 2004,
Insured: FGIC
5.000% 05/01/20 500,000 536,895
CA Pomona Unified School District,
Series 2000 A,
Insured: MBIA
6.550% 08/01/29 1,000,000 1,262,910
PAR ($) VALUE ($)
-------------------------------------------------------------
CA Rescue Unified School District,
Election 1998, Capital Appreciation,
Series 2005,
Insured: MBIA
(d) 09/01/26 1,125,000 414,011
CA San Diego Unified School District,
Election of 1998,
Series 2000 B,
Insured: MBIA
6.000% 07/01/19 1,000,000 1,170,910
CA Santa Clara Community College
District, Election 2001,
Series 2005,
Insured: FSA
5.000% 08/01/28 1,000,000 1,035,640
CA Sonoma County Junior College
District, Series 2005 B,
Insured: FSA
5.000% 08/01/27 1,000,000 1,037,160
CA Temecula Valley Unified School
District, Series 2004,
Insured: FSA
5.000% 08/01/20 500,000 537,365
CA Union Elementary School District,
Series 1999 A,
Insured: FGIC
(d) 09/01/18 1,630,000 924,080
CA Vallejo City Unified School District,
Series 2002 A,
Insured: MBIA:
5.900% 02/01/21 500,000 584,540
5.900% 08/01/25 500,000 584,345
CA West Contra Costa Unified School
District, Series 2001 A,
Insured: MBIA
5.700% 02/01/23 500,000 578,105
CA West Covina Unified School District,
Series 2002 A,
Insured: MBIA
5.800% 02/01/21 500,000 579,150
CA Yuba City Unified School District,
Series 2000,
Insured: FGIC
(d) 09/01/18 1,000,000 566,920
----------
Local General Obligations Total 12,084,911
----------
SPECIAL NON-PROPERTY TAX - 7.2%
CA San Francisco City & County Hotel
Tax Agency, Series 1994,
Insured: FSA
6.750% 07/01/25 1,000,000 1,016,340
See Accompanying Notes to Financial Statements.
4
[GRAPHIC]
INVESTMENT PORTFOLIO (continued)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------------------
TAX-BACKED (CONTINUED)
SPECIAL NON-PROPERTY TAX (CONTINUED)
PR Commonwealth of Puerto Rico
Highway & Transportation Authority:
Series 1996 Y, AMT,
5.500% 07/01/36 500,000 528,515
Series 1996 Y,
Insured: FSA
5.500% 07/01/36 1,000,000 1,098,170
Series 2002 E,
Insured: FSA
5.500% 07/01/21 250,000 280,955
---------
Special Non-Property Tax Total 2,923,980
---------
SPECIAL PROPERTY TAX - 11.7%
CA Fontana Public Finance Authority,
Tax Allocation Revenue, North
Fontana Redevelopment,
Series 2005 A,
Insured: AMBAC
5.000% 10/01/29 1,000,000 1,028,480
CA Huntington Beach Community
Facilities District, Grand Coast Resort,
Series 2001-1,
6.450% 09/01/31 100,000 106,689
CA Huntington Park Public Financing
Authority Revenue,
Series 2004,
Insured: FSA
5.250% 09/01/19 1,000,000 1,084,920
CA Lancaster Financing Authority
Redevelopment Project No. 5 & 6,
Series 2003,
Insured: MBIA
5.250% 02/01/20 1,075,000 1,168,041
CA Long Beach Bond Finance Authority
Tax Allocation Revenue,
Series 2006 C,
Insured: AMBAC
5.500% 08/01/31 750,000 852,405
CA Oceanside Community Development
Commission, Downtown
Redevelopment Project,
Series 2003,
5.700% 09/01/25 500,000 523,155
---------
Special Property Tax Total 4,763,690
---------
STATE APPROPRIATED - 1.3%
CA Public Works Board, Department of
Mental Health, Coalinga State Hospital,
Series 2004 A,
5.500% 06/01/19 500,000 542,015
---------
State Appropriated Total 542,015
---------
PAR ($) VALUE ($)
---------------------------------------------------------
STATE GENERAL OBLIGATIONS - 6.7%
CA State:
Series 2002,
Insured: AMBAC
6.000% 02/01/17 1,000,000 1,157,050
Series 2003,
5.250% 02/01/20 500,000 541,130
Series 2004,
5.000% 02/01/22 1,000,000 1,032,060
----------
State General Obligations Total 2,730,240
----------
TAX-BACKED TOTAL 27,847,019
----------
---------------------------------------------------------
TRANSPORTATION - 8.8%
AIRPORTS - 3.9%
CA Port of Oakland,
Series 2002 K, AMT,
Insured: FGIC
5.750% 11/01/29 1,000,000 1,053,190
CA San Diego County Regional Airport
Authority, Series 2005, AMT,
Insured: AMBAC
5.250% 07/01/20 500,000 534,470
----------
Airports Total 1,587,660
----------
PORTS - 3.2%
CA San Diego Unified Port District
Revenue, Series 2004 B,
Insured: MBIA
5.000% 09/01/29 1,250,000 1,282,187
----------
Ports Total 1,282,187
----------
TRANSPORTATION - 1.7%
CA San Francisco Bay Area Rapid
Transit Financing Authority,
Series 2005 A,
Insured: MBIA
5.000% 07/01/30 685,000 707,701
----------
Transportation Total 707,701
----------
TRANSPORTATION TOTAL 3,577,548
----------
---------------------------------------------------------
UTILITIES - 39.7%
INVESTOR OWNED - 7.9%
CA Pollution Control Financing
Authority:
Pacific Gas & Electric Co.,
Series 1996 A, AMT,
Insured MBIA
5.350% 12/01/16 1,000,000 1,054,880
San Diego Gas & Electric Co.,
Series 1991 A, AMT,
6.800% 06/01/15 500,000 584,015
See Accompanying Notes to Financial Statements.
5
[GRAPHIC]
INVESTMENT PORTFOLIO (continued)
May 31, 2006 (Unaudited)
MUNICIPAL BONDS (CONTINUED) PAR ($) VALUE ($)
------------------------------------------------------------
UTILITIES (CONTINUED)
INVESTOR OWNED (CONTINUED)
Southern California Edison Co.,
Series 1999 B,
Insured: MBIA
5.450% 09/01/29 1,500,000 1,575,195
---------
Investor Owned Total 3,214,090
---------
MUNICIPAL ELECTRIC - 3.9%
CA Department of Water Resources,
Power Supply Revenue Bonds,
Series 2002 A,
Insured: AMBAC
5.500% 05/01/14 500,000 546,615
CA Los Angeles Department of Water &
Power Waterworks, Series 2004 C,
Insured: MBIA
5.000% 07/01/22 1,000,000 1,042,480
---------
Municipal Electric Total 1,589,095
---------
WATER & SEWER - 27.9%
CA Culver City, Series 1999 A,
Insured: FGIC
5.700% 09/01/29 1,500,000 1,608,990
CA Department of Water Resources
Water Revenue, Central Valley Project,
Series 2005 AD,
Insured: FSA
5.000% 12/01/25 1,000,000 1,040,420
CA El Dorado Irrigation District,
Series 2004 A,
Insured: FGIC
5.000% 03/01/21 1,000,000 1,038,970
CA Elsinore Valley Municipal Water
District, Series 2002,
Insured: FGIC
5.375% 07/01/18 1,160,000 1,278,819
CA Los Angeles Department Water &
Power Waterworks Systems,
Sub-series 2006 A-2,
Insured: AMBAC
5.000% 07/01/27 1,000,000 1,040,130
CA Metropolitan Water District of
Southern California,
Series 2005 A,
Insured: FSA
5.000% 07/01/30 1,000,000 1,033,140
CA Pico Rivera Water Authority
Revenue, Water System Project,
Series 1999 A,
Insured: MBIA
5.500% 05/01/29 2,000,000 2,246,820
CA Pomona Public Financing Authority,
Series 1999 AC,
Insured: FGIC
5.500% 05/01/29 1,000,000 1,051,480
PAR ($) VALUE ($)
----------------------------------------------------------------
CA Westlands Water District Revenue,
Certificates of Participation,
Series 2005 A,
Insured: MBIA
5.000% 09/01/30 1,000,000 1,024,130
-----------
Water & Sewer Total 11,362,899
-----------
UTILITIES TOTAL 16,166,084
-----------
TOTAL MUNICIPAL BONDS
(cost of $60,392,090) 63,324,791
-----------
SHORT-TERM OBLIGATIONS - 2.7%
----------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (E) - 2.7%
CA Adelanto Public Utility Authority,
Series 2005 A,
Insured: AMBAC,
LOC: Dexia Credit Local
3.540% 11/01/34 100,000 100,000
CA Department of Water Resources,
Series 2002 B-6,
LOC: State Street Bank & Trust Co.
3.460% 05/01/22 200,000 200,000
CA Economic Recovery Series 2004 C-6,
LOC: Citibank N.A.
3.500% 07/01/23 300,000 300,000
CA Irvine Improvement Bond Act 1915
Assessment District No. 97-17,
Series 1998,
LOC: State Street Bank & Trust Co.
3.460% 09/02/23 200,000 200,000
CA Madera Irrigation Financing Authority,
Series 2005 A,
Insured: XLCA
SPA: Dexia Credit Local
3.540% 01/01/36 300,000 300,000
-----------
VARIABLE RATE DEMAND NOTES TOTAL 1,100,000
-----------
TOTAL SHORT-TERM OBLIGATIONS
(cost of $1,100,000) 1,100,000
-----------
TOTAL INVESTMENTS - 158.2%
(cost of $61,492,090)(f) 64,424,791
AUCTION PREFERRED SHARES PLUS
CUMULATIVE UNPAID DISTRIBUTIONS
- (60.0)% (24,437,543)
OTHER ASSETS & LIABILITIES, NET - 1.8% 735,298
-----------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS - 100.0% 40,722,546
-----------
See Accompanying Notes to Financial Statements.
6
[GRAPHIC]
INVESTMENT PORTFOLIO (continued)
May 31, 2006 (Unaudited)
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a)The Fund has been informed that each issuer has placed direct obligations of
the U.S. Government in an irrevocable trust, solely for the payment of
principal and interest.
(b)A portion of this security with a market value of $1,613,535 is pledged as
collateral for open futures contracts.
(c)Denotes a restricted security, which is subject to restrictions on resale
under federal securities laws or in transactions exempt from registration.
At May 31, 2006, the value of this security represents 0.7% of net assets.
Acquisition Acquisition
Security Date Cost
------------------------------------------------------------
CA Statewide Communities
Development Authority, Eskaton
Village - Grass Valley, Series 2000
Pre-refunded 11/15/10,
8.250% 11/15/31 09/08/00 $250,000
(d)Zero coupon bond.
(e)Variable rate demand note. These securities are payable upon demand and are
secured by letters of credit or other credit support agreements from banks.
The interest rate changes periodically and the interest rate shown reflects
the rate as of May 31, 2006.
(f)Cost for federal income tax purposes is $61,432,946.
At May 31, 2006, the Fund held the following open short futures contracts:
NUMBER OF AGGREGATE EXPIRATION UNREALIZED
TYPE CONTRACTS VALUE FACE VALUE DATE APPRECIATION
-----------------------------------------------------------------------
10 Year U.S
Treasury Notes 53 $5,569,140 $5,671,280 Jun-06 $102,140
At May 31, 2006, the composition of the Fund by revenue source is as follows:
% OF
HOLDINGS BY REVENUE SOURCE NET ASSETS
------------------------------------------
Tax-Backed 68.4%
Utility 39.7
Other 20.4
Education 9.3
Transportation 8.8
Housing 5.3
Health Care 2.3
Resource Recovery 1.3
Short-Term Obligation 2.7
Auction Preferred Shares (60.0)
Other Assets & Liabilities, Net 1.8
-----
100.0%
-----
ACRONYM NAME
--------- ------------------------------------------
ABAG Association of Bay Area Government
AMBAC Ambac Assurance Corp.
AMT Alternative Minimum Tax
FGIC Financial Guaranty Insurance Co.
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
LOC Letter of Credit
MBIA MBIA Insurance Corp.
SPA Stand-by Purchase Agreement
XLCA XL Capital Assurance, Inc.
See Accompanying Notes to Financial Statements.
7
[GRAPHIC]
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2006 (Unaudited)
ASSETS:
Investments, at cost $61,492,090
-----------
Investments, at value $64,424,791
Cash 47,215
Receivable for:
Interest 898,788
Futures variation margin 16,562
Expense reimbursement due from Investment
Advisor 11,845
Deferred Trustees' compensation plan 7,753
Other assets 9,188
-----------
Total Assets 65,416,142
-----------
LIABILITIES:
Payable for:
Distributions -- common shares 164,065
Distributions -- preferred shares 12,457
Investment advisory fee 25,836
Transfer agent fee 5,730
Audit fee 10,979
Custody fee 1,078
Reports to shareholders 15,071
Chief compliance officer expenses 627
Deferred Trustees' fees 7,753
-----------
Total Liabilities 243,596
-----------
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 $39,376,142
Undistributed net investment income 24,371
Accumulated net realized loss (1,712,808)
Net unrealized appreciation on:
Investments 2,932,701
Futures contracts 102,140
-----------
Net assets at value applicable to 2,780,771
common shares of beneficial interest
outstanding $40,722,546
-----------
Net asset value per common share $ 14.64
-----------
[GRAPHIC]
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 2006 (Unaudited)
INVESTMENT INCOME:
Interest $1,571,517
----------
EXPENSES:
Investment advisory fee 213,079
Transfer agent fee 16,223
Pricing and bookkeeping fees 44,174
Trustees' fees 4,823
Custody fee 4,265
Audit fee 15,656
Reports to shareholders 13,672
Preferred shares remarketing commissions 30,514
Chief compliance officer expenses
(See Note 4) 1,938
Other expenses 10,763
----------
Total Expenses 355,107
Fees and expenses waived or reimbursed by
Investment Advisor (140,710)
Custody earnings credit (1,319)
----------
Net Expenses 213,078
----------
Net Investment Income 1,358,439
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES CONTRACTS:
Net realized gain (loss) on:
Investments 185,535
Futures contracts 67,056
----------
Net realized gain 252,591
----------
Net change in unrealized appreciation
(depreciation) on:
Investments (674,108)
Futures contracts 104,287
----------
Net change in unrealized appreciation
(depreciation) (569,821)
----------
Net Loss (317,230)
----------
Net Increase in Net Assets from Operations 1,041,209
----------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (366,672)
----------
Net Increase in Net Assets from Operations
Applicable to Common Shares $ 674,537
----------
See Accompanying Notes to Financial Statements.
8
[GRAPHIC]
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
INCREASE (DECREASE) IN NET ASSETS: 2006 2005
------------------------------------------------------------
OPERATIONS
Net investment income $ 1,358,439 $ 2,825,741
Net realized gain (loss) on
investments and futures
contracts 252,591 1,433,896
Net change in unrealized
appreciation (depreciation)
on investments and futures
contracts (569,821) (2,001,238)
----------- -----------
Net Increase from Operations 1,041,209 2,258,399
----------- -----------
LESS DISTRIBUTIONS
DECLARED TO PREFERRED
SHAREHOLDERS:
From net investment income (366,672) (482,024)
----------- -----------
Net Increase in Net Assets
from Operations Applicable
to Common Shares 674,537 1,776,375
----------- -----------
LESS DISTRIBUTIONS
DECLARED TO COMMON
SHAREHOLDERS:
From net investment income (1,028,885) (2,330,286)
----------- -----------
SHARE TRANSACTIONS:
Distributions reinvested --
common shares -- --
----------- -----------
Total Decrease in Net Assets
Applicable to Common
Shares (354,348) (553,911)
NET ASSETS APPLICABLE TO
COMMON SHARES:
Beginning of period 41,076,894 41,630,805
----------- -----------
End of period (including
undistributed net
investment income of
$24,371 and $61,489,
respectively) $40,722,546 $41,076,894
----------- -----------
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
NUMBER OF FUND SHARES: 2006 2005
---------------------------------------------------------
Common Shares:
Issued for distributions
reinvested -- --
Outstanding at:
Beginning of period 2,780,771 2,780,771
--------- ---------
End of period 2,780,771 2,780,771
--------- ---------
Preferred Shares:
Outstanding at end of period 978 978
--------- ---------
See Accompanying Notes to Financial Statements.
9
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as
follows (common shares unless otherwise noted):
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, ---------------------------------------------------------
2006 2005 2004 2003 2002 2001
-------------------------------------------- ----------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.77 $ 14.97 $ 15.21 $ 15.30 $ 15.78 $ 15.16
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.49 1.02(b) 1.03(b) 1.10(b) 1.17(b)(c) 1.19(b)
Net realized and unrealized gain (loss) on
investments, futures contracts and
written options (0.12) (0.21) (0.26) (0.09) (0.46)(c) 0.59
------- ------- ------- ------- ------- -------
Total from Investment Operations 0.37 0.81 0.77 1.01 0.71 1.78
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (0.13) (0.17) (0.09) (0.08) (0.12) (0.24)
------- ------- ------- ------- ------- -------
Total from Investment Operations
Applicable to Common Shareholders 0.24 0.64 0.68 0.93 0.59 1.54
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO
COMMON SHAREHOLDERS:
From net investment income (0.37) (0.84) (0.92) (1.02) (1.07) (0.92)
------- ------- ------- ------- ------- -------
LESS SHARE TRANSACTIONS:
Offering costs -- common shares -- -- -- -- -- --
Commission and offering costs --
preferred shares -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total Share Transactions -- -- -- -- -- --
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 14.64 $ 14.77 $ 14.97 $ 15.21 $ 15.30 $ 15.78
------- ------- ------- ------- ------- -------
Market price per share -- common
shares $ 13.70 $ 14.20 $ 13.61 $ 15.60 $ 16.40 $ 16.60
------- ------- ------- ------- ------- -------
Total return -- based on market value --
common shares (f)(g) (0.95)%(h) 10.63% (6.99)% 1.65% 5.67% 38.91%
------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (i)(j) 1.03%(k)(l) 0.95%(k) 0.87%(k) 0.88%(k) 0.86%(k) 0.86%(k)
Net investment income before preferred
stock dividends (i)(j) 6.57%(l) 6.72% 6.89% 7.17% 7.57%(c) 7.58%
Net investment income after preferred
stock dividends (i)(j) 4.80%(l) 5.57% 6.30% 6.63% 6.81%(c) 6.02%
Voluntary waiver/reimbursement (j) 0.37%(l) 0.31% 0.21% 0.26% 0.23% 0.22%
Portfolio turnover rate 6%(h) 29% 16% 10% 11% 7%
Net assets, end of period (000's) --
common shares $40,723 $41,077 $41,631 $42,260 $42,432 $43,678
PERIOD
ENDED
-------- NOVEMBER 30,
2000 1999 (A)
------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.29 $ 14.33
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 1.18(d) 0.05
Net realized and unrealized gain (loss) on
investments, futures contracts and
written options 1.07 (0.06)
------- -------
Total from Investment Operations 2.25 (0.01)
------- -------
LESS DISTRIBUTIONS DECLARED TO
PREFERRED SHAREHOLDERS:
From net investment income (0.34) --
------- -------
Total from Investment Operations
Applicable to Common Shareholders 1.91 (0.01)
------- -------
LESS DISTRIBUTIONS DECLARED TO
COMMON SHAREHOLDERS:
From net investment income (0.90) --
------- -------
LESS SHARE TRANSACTIONS:
Offering costs -- common shares --(e) (0.03)
Commission and offering costs --
preferred shares (0.14) --
------- -------
Total Share Transactions (0.14) (0.03)
------- -------
NET ASSET VALUE, END OF PERIOD $ 15.16 $ 14.29
------- -------
Market price per share -- common
shares $ 12.69 $ 15.00
------- -------
Total return -- based on market value --
common shares (f)(g) (9.86)% 0.00%(h)
------- -------
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (i)(j) 0.87%(k) 0.55%(l)
Net investment income before preferred
stock dividends (i)(j) 8.27% 4.12%(l)
Net investment income after preferred
stock dividends (i)(j) 5.93% 4.12%(l)
Voluntary waiver/reimbursement (j) 0.27% 1.08%(l)
Portfolio turnover rate 22% 0%(h)
Net assets, end of period (000's) --
common shares $41,947 $34,382
(a)The Fund commenced investment operations on October 29, 1999. Per share data
and total return reflect activity from that date.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Effective December 1, 2001, the Fund adopted the 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 net realized and unrealized loss per share was less than $0.01. Per
share data and ratios for periods prior to November 30, 2002 have not been
restated to reflect this change in presentation.
(d)The per share net investment income amount does not reflect the period's
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 Investment Advisor and/or any of its affiliates not waived or
reimbursed a portion of expenses, total return would have been reduced.
(h)Not annualized.
(i)The benefits derived from custody credits had an impact of less than 0.01%,
except for the year ended November 30, 2004 which had an impact of 0.01% and
the year ended November 30, 2003 which had an impact of 0.02%.
(j)Ratios reflect average net assets available to common shares only.
(k)Ratios calculated using average net assets including auction preferred
shares of the Fund, including the effect of custody credits equals 0.65%,
0.60%, 0.55%, 0.55%, 0.55%, 0.55% and 0.55% for the six months ended May 31,
2006 and for the years ended November 30, 2005, November 30,
2004, November 30, 2003, November 30, 2002, November 30, 2001 and
November 30, 2000, respectively.
(l)Annualized.
See Accompanying Notes to Financial Statements.
10
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS
May 31, 2006 (Unaudited)
NOTE 1. 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.
INVESTMENT GOAL
The Fund seeks to provide current income generally exempt from ordinary federal
income tax and California State personal income tax.
FUND SHARES
The Fund may issue an unlimited number of common shares. On December 10, 1999,
the Fund issued 978 Auction Preferred Shares ("APS").
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the 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
Debt securities generally are valued by pricing services approved by the Fund's
Board of Trustees, based upon market transactions for normal,
institutional-size trading units of similar securities. The services may use
various pricing techniques which take into account appropriate factors such as
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other data, as well as broker quotes. Debt securities for which quotations
are readily available are valued at an over-the-counter or exchange bid
quotation. Certain debt securities, which tend to be more thinly traded and of
lesser quality, are priced based on fundamental analysis of the financial
condition of the issuer and the estimated value of any collateral. Valuations
developed through pricing techniques may vary from the actual amounts realized
upon sale of the securities, and the potential variation may be greater for
those securities valued using fundamental analysis.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Investments in open end investment companies are valued at net asset value.
Futures contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are traded.
Investments for which market quotations are not readily available, or that have
quotations which management believes are not appropriate, are valued at fair
value as determined in good faith under consistently applied procedures
established by and under the general supervision of the Board of Trustees. If a
security is valued at "fair value", such value is likely to be different from
the last quoted market price for the security.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
FUTURES CONTRACTS
The Fund may invest in municipal and U.S. Treasury futures contracts. The Fund
will invest in these instruments to hedge against the effects of changes in the
value of portfolio securities due to anticipated changes in interest rates
and/or market conditions, for duration management, or when the transactions are
economically appropriate to the reduction of risk inherent in the management of
the Fund and not for trading purposes. The use of futures contracts involves
certain risks, which include: (1) imperfect correlation between the price
movement of the instruments and the underlying securities, (2) inability to
close out positions due to differing trading hours, or the temporary absence of
a liquid market, for either the instrument or the underlying securities, or
(3) an inaccurate prediction by Columbia Management Advisors, LLC of the future
direction of interest rates. Any of these risks may involve amounts exceeding
the variation margin recorded in the Fund's Statement of Assets and Liabilities
at any given time.
Upon entering into a futures contract, the Fund deposits cash or securities
with the broker 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 receivable or
payable and offset in unrealized gains or losses. The Fund also identifies
11
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
portfolio securities as segregated with the custodian in a separate account in
an amount equal to the futures contract. The Fund recognizes a realized gain or
loss when the contract is closed or expires.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from 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 resale.
INCOME RECOGNITION
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 and discount are amortized and accreted,
respectively, on all debt securities.
FEDERAL INCOME TAX STATUS
The Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, as amended, and will distribute
substantially all of its tax-exempt or taxable income, if any, for its tax
year, and as such will not be subject to federal income taxes. In addition, the
Fund intends to distribute in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, such that
the Fund should not be subject to federal excise tax. Therefore, no federal
income or excise tax provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to common shareholders are recorded on the ex-date. Distributions
to Auction Preferred shareholders are recorded daily and payable at the end of
each dividend period. Each dividend payment period for the APS is generally
seven days. The applicable dividend rate for the APS on May 31, 2006, was
3.100%. For the six months ended May 31, 2006, the Fund declared dividends to
Auction Preferred shareholders amounting to $366,672, representing an
annualized average dividend rate of 3.00% per APS.
NOTE 3. FEDERAL TAX INFORMATION
The tax character of distributions paid during the year ended November 30,
2005, was as follows:
NOVEMBER 30,
2005
- ------------
Distributions paid from:
Tax-Exempt Income $2,812,194
Ordinary Income 116
Long-Term Capital Gains --
Unrealized appreciation and depreciation at May 31, 2006, based on cost of
investments for federal income tax purposes, was:
Unrealized appreciation $3,388,790
Unrealized depreciation (396,945)
----------
Net unrealized appreciation $2,991,845
----------
The following capital loss carryforwards, determined as of November 30, 2005,
may be 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
---------- ------------
2011 $567,385
2012 70,908
--------
$638,293
--------
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
INVESTMENT ADVISORY FEE
Columbia Management Advisors, LLC ("Columbia"), an indirect, wholly-owned
subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to
the Fund and provides administrative and other services. Columbia receives a
monthly investment advisory fee at the annual rate of 0.65% of the Fund's
average weekly net assets, including assets applicable to the APS.
Columbia contractually agreed to waive a portion of its investment advisory fee
through November 30, 2006, so that such fee will not exceed 0.45% annually.
Columbia has contractually agreed to waive a portion of its investment advisory
fee for the years ending November 30, 2007, 2008 and 2009 so that the Fund's
investment advisory fees will not exceed the annual rates of 0.50%, 0.55% and
0.60%, respectively.
PRICING AND BOOKKEEPING FEES
Columbia is responsible for providing pricing and bookkeeping services to the
Fund under a pricing and
12
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
bookkeeping agreement. Under a separate agreement (the "Outsourcing
Agreement"), Columbia has delegated those functions to State Street Corporation
("State Street"). As a result, Columbia pays State Street the total fees
collected under the pricing and bookkeeping agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives an
annual fee of $38,000 paid monthly plus an additional monthly fee based on the
level of average daily net assets for the month; provided that during any
12-month period, the aggregate fee, exclusive of out-of-pocket expenses and
charges, shall not exceed $140,000.
The Fund also reimburses Columbia and State Street for out-of-pocket expenses
and charges, including fees payable to third parties for pricing the Fund's
portfolio securities and direct internal costs incurred by Columbia in
connection with providing fund accounting oversight and monitoring and certain
other services. For the six months ended May 31, 2006, the annualized effective
pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket
expenses, was 0.135% of the Fund's average daily net assets.
FEE WAIVERS
Columbia has voluntarily agreed to reimburse the Fund for certain expenses so
that total expenses (exclusive of investment advisory fees, brokerage
commissions, interest, taxes and extraordinary expenses, if any) will not
exceed 0.20% annually of the Fund's average weekly net assets, including assets
applicable to APS. Columbia, at its discretion, may revise or discontinue this
arrangement any time.
CUSTODY CREDITS
The Fund has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. These credits are recorded as a reduction of
total expenses on the Statement of Operations. 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.
FEES PAID TO OFFICERS AND TRUSTEES
With the exception of one officer, all officers of the Fund are employees of
Columbia or its affiliates and receive no compensation from the Fund. The Board
of Trustees has appointed a Chief Compliance Officer to the Fund in accordance
with federal securities regulations. The Fund, along with other affiliated
funds, will pay its pro-rata share of the expenses associated with the Chief
Compliance Officer position. The Fund's fee for the Office of the Chief
Compliance Officer will not exceed $15,000 per year.
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.
OTHER
Columbia provides certain services to the Fund related to Sarbanes-Oxley
compliance. For the six months ended May 31, 2006, the Fund paid $1,194 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the six months ended May 31, 2006, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $3,577,396 and
$4,180,466, respectively.
NOTE 6. 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).
Under the Act, the Fund is required to maintain asset coverage of at least 200%
with respect to the APS as of the last business day of each month in which any
APS are outstanding. Additionally, the Fund is required to meet more stringent
asset coverage requirements under the terms of the APS Agreement and in
accordance with the guidelines prescribed by the APS' rating agencies. Should
these requirements not be met, or should dividends accrued on the APS not be
paid, the Fund may be restricted in its ability to declare dividends to common
shareholders or may be required to redeem certain APS. At May 31, 2006, there
were no such restrictions on the Fund.
NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
CONCENTRATION OF CREDIT RISK
The Fund holds investments that are insured by private insurers who guarantee
the payment of principal and interest in the event of default or that are
supported by a letter of credit. Each of the Fund's insurers is rated Aaa by
Moody's Investor Services, Inc. At May 31, 2006, private
13
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
insurers who insure greater than 5% of the total investments of the Fund were
as follows:
% OF TOTAL
INSURER INVESTMENTS
----------------------------------------------
MBIA Insurance Corp. 39.3
Ambac Assurance Corp. 19.8
Financial Guaranty Insurance Corp. 15.5
Financial Security Assurance, Inc. 14.4
GEOGRAPHIC CONCENTRATION
The Fund has greater than 5% of its total investments at May 31, 2006 invested
in debt obligations issued by the state of California and its respective
political subdivisions, agencies and public authorities. The Fund is more
susceptible to economic and political factors adversely affecting issuers of
the state's municipal securities than are municipal bond funds that are not
concentrated to the same extent in these issuers.
HIGH-YIELD SECURITIES
Investing in high-yield securities may involve greater credit risk and
considerations not typically associated with investing in U.S. government bonds
and other higher quality fixed income securities. These securities are
non-investment grade securities, often referred to as "junk" bonds. Economic
downturns may disrupt the high yield market and impair the ability of issuers
to repay principal and interest. Also, an increase in interest rates would
likely have an adverse impact on the value of such obligations. Moreover,
high-yield securities may be less liquid to the extent that there is no
established secondary market.
ISSUER FOCUS
As a non-diversified fund, the Fund may invest a greater percentage of its
total assets in the securities of fewer issuers than a diversified fund. The
Fund may, therefore, have a greater risk of loss from a few issuers than a
similar fund that invests more broadly.
LEGAL PROCEEDINGS
On February 9, 2005, Columbia Management Advisors, Inc. (which has since merged
into Banc of America Capital Management, LLC (now named Columbia Management
Advisors, LLC)) ("Columbia") and Columbia Funds Distributor, Inc. (which has
been renamed Columbia Management Distributors, Inc.) (the "Distributor")
(collectively, the "Columbia Group") entered into an Assurance of
Discontinuance with the New York Attorney General ("NYAG") (the "NYAG
Settlement") and consented to the entry of a cease-and-desist order by the
Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and
the NYAG Settlement are referred to collectively as the "Settlements". The
Settlements contain substantially the same terms and conditions as outlined in
the agreements in principle which Columbia Group entered into with the SEC and
NYAG in March 2004.
Under the terms of the SEC Order, the Columbia Group agreed, among other
things, to: pay $70 million in disgorgement and $70 million in civil money
penalties; cease and desist from violations of the antifraud provisions and
certain other provisions of the federal securities laws; maintain certain
compliance and ethics oversight structures; retain an independent consultant to
review the Columbia Group's applicable supervisory, compliance, control and
other policies and procedures; and retain an independent distribution
consultant (see below). The Columbia Funds have also voluntarily undertaken to
implement certain governance measures designed to maintain the independence of
their boards of trustees. The NYAG Settlement also, among other things,
requires Columbia and its affiliates to reduce management fees for certain
Columbia Funds (including the former Nations Funds) and other mutual funds
collectively by $32 million per year for five years, for a projected total of
$160 million in management fee reductions.
Pursuant to the procedures set forth in the SEC order, the $140 million in
settlement amounts described above will be distributed in accordance with a
distribution plan developed by an independent distribution consultant and
approved by the SEC. The independent distribution consultant has been in
consultation with the staff of the SEC and has submitted a proposed plan of
distribution. The SEC has not yet approved a final plan of distribution.
As a result of these matters or any adverse publicity or other developments
resulting from them, the market price of the shares could decline.
A copy of the SEC Order is available on the SEC website at http://www.sec.gov.
A copy of the NYAG Settlement is available as part of the Bank of America
Corporation Form 8-K filing on February 10, 2005.
In connection with the events described in detail above, various parties have
filed suit against certain funds, the Trustees of the Columbia Funds,
FleetBoston Financial Corporation and its affiliated entities and/or Bank of
America and its affiliated entities.
On February 20, 2004, the Judicial Panel on Multidistrict Litigation
transferred these cases and cases
14
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
against several other mutual fund companies based on similar allegations to the
United States District Court in Maryland for consolidated or coordinated
pretrial proceedings (the ''MDL''). Subsequently, additional related cases were
transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed
amended and consolidated complaints. One of these amended complaints is a
putative class action that includes claims under the federal securities laws
and state common law, and that names Columbia, the Distributor, the Trustees of
the Columbia Funds, Bank of America Corporation and others as defendants.
Another of the amended complaints is a derivative action purportedly on behalf
of the Columbia Funds that asserts claims under federal securities laws and
state common law.
On February 25, 2005, Columbia and other defendants filed motions to dismiss
the claims in the pending cases. On March 1, 2006, for reasons stated in the
court's memoranda dated November 3, 2005, the U.S. District Court for the
District of Maryland granted in part and denied in part the defendants' motions
to dismiss. The court dismissed all of the class action claims pending against
the Columbia Funds Trusts and the Columbia Acorn Trust. As to Columbia and the
Distributor, the claims under the Securities Act of 1933, the claims under
Sections 34(b) and 36(a) of the Investment Company Act of 1940 ("ICA") and the
state law claims were dismissed. The claims under Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and claims under Section 36(b) of the ICA
along with related claims under Section 48(a) of the ICA were not dismissed.
On March 21, 2005, a purported class action was filed in Massachusetts state
court alleging that the conduct, including market timing, entitles Class B
shareholders in certain Columbia funds to an exemption from contingent deferred
sales charges upon early redemption ("the CDSC Lawsuit"). The CDSC Lawsuit has
been removed to federal court in Massachusetts and the federal Judicial Panel
has transferred the CDSC Lawsuit to the MDL.
The MDL is ongoing. Accordingly, an estimate of the financial impact of this
litigation on any fund, if any, cannot currently be made.
In 2004, certain Columbia funds, the Trustees of the Columbia Funds, advisers
and affiliated entities were named as defendants in certain purported
shareholder class and derivative actions making claims, including claims under
the Investment Company and the Investment Advisers Acts of 1940 and state law.
The suits allege, inter alia, that the fees and expenses paid by the funds are
excessive and that the advisers and their affiliates inappropriately used fund
assets to distribute the funds and for other improper purpose. On March 2,
2005, the actions were consolidated in the Massachusetts federal court as In re
Columbia Entities Litigation. The plaintiffs filed a consolidated amended
complaint on June 9, 2005. On November 30, 2005, the judge dismissed all claims
by plaintiffs and ordered that the case be closed. The plaintiffs filed a
notice of appeal on December 30, 2005 and this appeal is pending.
15
[GRAPHIC]
ASSET COVERAGE REQUIREMENTS
INVOLUNTARY
ASSET LIQUIDATING AVERAGE
TOTAL AMOUNT COVERAGE PREFERENCE MARKET VALUE
OUTSTANDING PER SHARE* PER SHARE PER SHARE
-------------------------------------------------------------
05/31/06 ** $24,450,000 $66,639 $24,987 $25,000
11/30/05 24,450,000 67,001 25,012 25,000
11/30/04 24,450,000 67,567 25,003 25,000
11/30/03 24,450,000 68,211 25,002 25,000
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
* Calculated by subtracting the Fund's total liabilities from the Fund's total
assets and dividing the amount by the number of APS outstanding.
**Unaudited
***On December 10, 1999, the Fund began offering Auction Preferred Shares.
[GRAPHIC]
SHAREHOLDER MEETING RESULTS
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On May 24, 2006, the Annual Meeting of Shareholders of the Fund was held to
consider re-election of Trustees. On March 10, 2006, the record date for the
Meeting, the Fund had 2,780,771 common shares outstanding and 978 preferred
shares outstanding. The votes cast were as follows:
ELECTION OF TRUSTEES:
The shareholders re-elected the following Trustees as follows:
FOR WITHHELD
---------------------------------------
Richard W. Lowry 2,625,683 60,173
William E. Mayer 2,582,758 103,098
Charles R. Nelson 2,636,158 49,698
Richard L. Woolworth 2,631,808 54,048
The holders of preferred shareholders re-elected the following Trustees as
follows:
FOR WITHHELD
------------------------------
Douglas A. Hacker 730 14
Thomas E. Stitzel 730 14
The terms of office of Thomas C. Theobald, Janet Langford Kelly, John J.
Neuhauser, Patrick J. Simpson and Anne-Lee Verville continued after the Meeting.
16
[GRAPHIC]
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 Computershare (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 American 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. Contact the Plan Agent for additional information regarding the
Plan. All correspondence concerning the Plan should be directed to
Computershare by mail at P.O. Box 43010, Providence, RI 02940-3010, or by phone
at 1-800-730-6001.
17
[LOGO]
Transfer Agent
Important Information About This Report
The Transfer Agent for Colonial California Insured Municipal Fund is:
Computershare
P.O. Box 43010
Providence, RI 02940-3010
The fund mails one shareholder report to each shareholder address. Shareholders
can order additional reports by calling 800-730-6001. In addition,
representatives at that number can provide shareholders information about the
fund.
Financial advisors who want additional information about the fund may speak to
a representative at 800-426-3750.
A description of the fund's proxy voting policies and procedures is available
(i) at www.columbiamanagement.com; (ii) on the Securities and Exchange
Commission's website at www.sec.gov, and (iii) without charge, upon request, by
calling 800-730-6001. Information regarding how the fund voted proxies relating
to portfolio securities during the 12-month period ended June 30 is available
from the SEC's website. Information regarding how the fund voted proxies
relating to portfolio securities is also available at
www.columbiamanagement.com.
The fund files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q
is available on the SEC's website at www.sec.gov and may be reviewed and copied
at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
This report has been prepared for shareholders of Colonial California Insured
Municipal Fund.
[GRAPHIC]
COLONIAL CALIFORNIA INSURED MUNICIPAL FUND
SEMIANNUAL REPORT
SHC- 44/111526-0506 (07/06) 06/26841
Item 2. Code of Ethics.
Not applicable at this time.
Item 3. Audit Committee Financial Expert.
Not applicable at this time.
Item 4. Principal Accountant Fees and Services.
Not applicable at this time.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments
The registrant's "Schedule I - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form
N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Registrant Purchases of Equity Securities*
-----------------------------------------------------------------
(c)
Total Number of (d)
(a) (b) Shares Purchased as Maximum Number of
Total Number Average Part of Publicly Shares that May Yet
of Shares Price Paid Announced Plans Be Purchased Under
Period Purchased Per Share or Programs the Plans or Programs
------ ------------ ---------- ------------------- ---------------------
12/01/05 through 12/31/05... 85 $14.29 85 N/A
01/01/06 through 01/31/06... 81 $14.05 81 N/A
02/01/06 through 02/28/06... 79 $13.93 79 N/A
03/01/06 through 03/31/06... 76 $14.15 76 N/A
04/01/06 through 04/30/06... 110 $14.09 110 N/A
05/01/06 through 05/31/06... 82 $14.25 82 N/A
--- ------ --- ---
Total....................... 513 $14.13 513 N/A
--- ------ --- ---
--------
* Includes shares purchased by the Dividend Reinvestment Agent pursuant to
the Registrant's Dividend Reinvestment Plan.
Item 10. Submission of Matters to a Vote of Security Holders.
There have not been any material changes to the procedures by which
shareholders may recommend nominees to the registrant's board of directors,
since those procedures were last disclosed in response to the requirements of
Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial
officers, based on their evaluation of the registrant's disclosure
controls and procedures as of a date within 90 days of the filing of
this report, have concluded that such controls and procedures are
adequately designed to ensure that information required to be
disclosed by the registrant in Form N-CSR is accumulated and
communicated to the registrant's management, including the principal
executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not
applicable at this time.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Colonial California Insured Municipal Fund
--------------------------------------------------------
By (Signature and Title) /S/ Christopher L. Wilson
--------------------------------------------
Christopher L. Wilson, President
Date July 27, 2006
----------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /S/ Christopher L. Wilson
--------------------------------------------
Christopher L. Wilson, President
Date July 27, 2006
----------------------------------------------------------------
By (Signature and Title) /S/ J. Kevin Connaughton
--------------------------------------------
J. Kevin Connaughton, Treasurer
Date July 27, 2006
----------------------------------------------------------------