COLONIAL NEW YORK
INSURED MUNICIPAL FUND
ANNUAL REPORT
NOVEMBER 30, 2001
PRESIDENT'S LETTER
DEAR SHAREHOLDER,
I want to take this opportunity to let you know that the sale of Liberty
Financial's asset management companies -- including Colonial Management
Associates -- to FleetBoston Financial was completed effective November 1, 2001.
In light of this change and recent turmoil in the markets, I think it is
important to assure you that only the ownership of Colonial has changed. Your
fund will continue to be managed following the same investment principles which
attracted you to the fund in the first place.
The past year has been an interesting time for US investment markets. At the
beginning of 2001, the Fed began lowering interest rates in hopes of stimulating
the sagging economy. In total, we saw 10 rate cuts during the year, bringing the
short-term interest rate down from 6.5% to 2.0%. These aggressive rate cuts
raised some concerns that inflationary pressures could surface, but inflation
has thus far been kept in check. At the same time, economic weakness and stock
market volatility has prompted investors to shift assets into the bond
market -- a move which has benefited municipal bond prices.
Thank you for choosing Colonial New York Insured Municipal Fund. If you have
further questions, we encourage you to contact your financial advisor.
Sincerely,
/s/ Keith T. Banks
---------------------------
Keith T. Banks
President
MEET THE NEW PRESIDENT
On November 1, 2001, Keith T. Banks became president of Liberty Funds. Mr. Banks
is currently chief investment officer and chief executive officer of Fleet Asset
Management, a position he has held since 2000. Prior to joining Fleet, he was
managing director and head of US equity for J.P. Morgan Investment Management
from 1996 to 2000. He began his investment career in 1981 as an equity analyst
at Home Insurance. A chartered financial analyst, Mr. Banks earned his BA from
Rutgers University and his MBA from Columbia Business School.
----------------------------
Not FDIC May Lose Value Economic and market conditions can frequently
Insured ----------------- change. There is not assurance that the trends
No Bank Guarantee described herein will continue or commence.
----------------------------
--------------------------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------------------------
PRICE PER SHARE AS OF 11/30/01 ($)
Net asset value 15.78
---------------------------------------
Market price 14.60
---------------------------------------
ONE YEAR TOTAL RETURN AS OF
11/30/01 (%)
Net asset value 11.88
---------------------------------------
Market price 5.63
---------------------------------------
DISTRIBUTIONS DECLARED
PER COMMON SHARE
12/1/00-11/30/01 ($)
0.833
---------------------------------------
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.
QUALITY BREAKDOWN AS OF 11/30/01 (%)
AAA 74.1
---------------------------------------
AA 14.8
---------------------------------------
A 6.2
---------------------------------------
BBB 2.9
---------------------------------------
Non-Rated 2.0
---------------------------------------
TOP 10 INDUSTRY SECTORS AS OF
11/30/01 (%)
Education 15.3
---------------------------------------
Special non-property tax 14.4
---------------------------------------
State appropriated 9.7
---------------------------------------
Airport 8.4
---------------------------------------
Hospitals 8.0
---------------------------------------
Water & sewer 7.0
---------------------------------------
Municipal electric 5.1
---------------------------------------
Local general obligations 4.7
---------------------------------------
Toll facilities 4.0
---------------------------------------
State general obligations 3.9
---------------------------------------
Quality breakdowns are calculated as a
percentage of total investments,
including short-term obligations.
Ratings shown in the quality breakdown
represent the highest rating assigned to
a particular bond by one of the
following nationally-recognized rating
agencies: Standard & Poor's Corporation,
Moody's Investors Service, Inc. or Fitch
Investors Service, Inc. Sector
breakdowns are calculated as a
percentage of net assets.
Because the fund is actively managed,
there can be no guarantee that the fund
will continue to maintain this quality
breakdown or invest in these sectors in
the future.
- FUND MAINTAINED DURATION IN THE FACE OF FALLING INTEREST RATES
Colonial New York Insured Municipal Fund generated an 11.88% return (based
on net asset value) during the fiscal year ended November 30, 2001. The
fund remained ahead of its peer group, the Lipper New York Insured
Municipal Debt Funds, which posted an average return of 9.86%. As the
Federal Reserve cut rates throughout 2001, short-term rates fell sharply,
steepening the yield curve. In the face of falling rates, our primary
strategy was to maintain a longer average duration than that of our peers,
thus increasing the fund's interest rate sensitivity.
- NEW YORK ECONOMY BATTERED LATE IN THE FISCAL YEAR
Clearly, the horrific events of September 11 severely impacted the state's
economy. However, the months leading up to the attacks had already seen a
significant economic slowdown in New York. Unemployment claims rose as
capital spending slowed and business revenues decreased. After September
11, the state's economy staggered as New York City struggled to recover
from the terrorist attacks. New unemployment claims reached record levels
in the days after the attacks. The need for increased security and clean-up
costs further strained the state's finances.
The state's financial woes were not confined to New York City. Buffalo, in
particular, is in the midst of a fiscal emergency, as some analysts voice
concern over the city's ability to meet its financial obligations.
Still, our emphasis on above-average duration, as well as a focus on
noncallable and discounted bonds, served the fund well during the period.
Though short-term rates declined sharply, we were able to lock in favorable
interest rates at the long end of the curve.
- NEW YORK BEGINS ITS RECOVERY
Generally, we expect to continue our focus on longer-term debt instruments.
Though we anticipate another quarter or two of negative to zero economic
growth, we feel that the state and national economies should begin to turn
around some time in 2002. We will pay close attention to city and state
legislators, who face a significant challenge in closing projected budget
deficits. Further, federal aid and insurance proceeds should lessen the
severe financial impact of the faltering economy and the attacks on the
World Trade Center.
/s/ William C. Loring, Jr. /s/ Brian M. Hartford
------------------------------- -----------------------------
WILLIAM C. LORING, Jr. BRIAN M. HARTFORD, CFA
Effective December 19, 2001, the Colonial New York Insured Municipal Fund is
managed by Maureen G. Newman. Ms. Newman is a senior vice president of Colonial
Management Associates, Inc. (CMA). Prior to joining CMA, she worked at Fidelity
Investments for 11 years, managing several mutual funds. Ms. Newman received her
BA in economics from Boston College and her MBA from Babson College. She is a
chartered financial analyst, a member of the Boston Security Analysts Society
and former chairman of the National Federation of Municipal Analysts.
Tax-exempt investing offers current tax-free income, but it also involves
certain risks. The value of fund shares will be affected by interest rate
changes and the creditworthiness of issues held in the fund. Single-state
municipal bond funds pose additional risks due to limited geographical
diversification. Interest income from certain tax-exempt bonds may be subject to
the federal alternative minimum tax for individuals and corporations.
1
-------------------------------------------------------------------
INVESTMENT PORTFOLIO
-------------------------------------------------------------------
November 30, 2001 (New York unless otherwise stated)
MUNICIPAL BONDS - 98.0% PAR VALUE
-------------------------------------------------------------------
EDUCATION - 15.3%
EDUCATION - 15.3%
Niagara County Industrial
Development Agency, Niagara
University, Series 2001 A,
5.350% 11/1/23 $1,000,000 $ 996,120
Schenectady Industrial Development
Agency, Union College, Series 1999 A,
5.450% 12/1/29 1,000,000 1,028,420
St. Lawrence County Industrial
Development Agency, St. Lawrence
University, Series 1998 A,
5.375% 7/1/18 700,000 722,547
State Dormitory Authority, New York:
University, Series 1998 A,
5.750% 7/1/27 1,500,000 1,662,495
Pratt Institute, Series 1999,
6.000% 7/1/28 500,000 538,990
Cooper Union, Series 1999,
6.000% 7/1/19 1,000,000 1,094,490
-----------
6,043,062
-----------
------------------------------------------------------------------
HEALTHCARE - 12.0%
CONGREGATE CARE RETIREMENT - 1.4%
State Dormitory Authority, Miriam
Osborn Memorial Home, Series 2000 B,
6.875% 7/1/19 300,000 340,191
Suffolk County Industrial
Development Agency, Jefferson
Ferry, Series 1999 A,
7.200% 11/1/19 200,000 208,500
-----------
548,691
-----------
HOSPITALS - 8.0%
New Island Hospital, Series 1999 B,
5.750% 7/1/19 1,000,000 1,062,810
Sloan Kettering Cancer Center,
Series 1998,
5.500% 7/1/23 1,000,000 1,069,640
State Dormitory Authority, St.
Francis Hospital, Series 1999 A,
5.500% 7/1/29 1,000,000 1,027,690
-----------
3,160,140
-----------
NURSING HOME - 2.6%
Syracuse Housing Authority, Loretto
Rest, Series 1997 A,
5.700% 8/1/27 1,000,000 1,039,600
-----------
HOUSING - 3.0%
ASSISTED LIVING/SENIOR - 0.4%
Huntington Housing Authority, Gurwin
Jewish Senior Center, Series 1999,
6.000% 5/1/29 $ 200,000 $ 176,000
-----------
SINGLE FAMILY - 2.6%
State Mortgage Agency, Series 1999
8-2,
5.650% 4/1/30 1,000,000 1,012,410
-----------
------------------------------------------------------------------
OTHER - 2.8%
OTHER - 1.3%
New York City, Tobacco Trust II,
Series 2001,
5.750% 6/1/43 500,000 511,475
-----------
POOL/BOND BANK - 1.5%
State Environmental Facilities
Corp., Series 2000,
5.700% 7/15/22 540,000 571,617
-----------
------------------------------------------------------------------
OTHER REVENUE - 2.6%
RECREATION - 2.6%
New York City Cultural Trust,
American Museum of Natural
History, Series 1997 A,
5.650% 4/1/22 1,000,000 1,040,580
-----------
------------------------------------------------------------------
TAX-BACKED - 32.7%
LOCAL GENERAL OBLIGATIONS - 4.7%
New York City:
Series 1998 B,
5.375% 8/1/22 1,000,000 1,017,200
Series 1998 D,
5.250% 8/1/21 500,000 503,730
PR Commonwealth of Puerto Rico
Municipal Finance Agency, Series
1999 A,
5.500% 8/1/23 300,000 314,421
-----------
1,835,351
-----------
SPECIAL NON-PROPERTY TAX - 14.4%
Metropolitan Transportation
Authority, Series 1998 A,
5.250% 7/1/28 (a) 1,000,000 1,013,260
New York City Transitional Finance
Authority, Series 2000 A,
5.750% 8/15/24 1,500,000 1,585,110
See notes to investment portfolio.
2
------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
------------------------------------------------------------------
November 30, 2001 (New York unless otherwise stated)
MUNICIPAL BONDS (CONTINUED) PAR VALUE
------------------------------------------------------------------
TAX-BACKED (CONTINUED)
SPECIAL NON-PROPERTY TAX (CONTINUED)
PR Commonwealth of Puerto Rico:
Highway & Transportation
Authority, Series 1996 Y,
5.500% 7/1/36 $1,500,000 $ 1,558,470
Public Building Authority, Series
1997 B,
5.000% 7/1/27 1,000,000 998,950
VI Virgin Islands Public Finance
Authority, Series 1999,
6.500% 10/1/24 500,000 540,590
-----------
5,696,380
-----------
STATE APPROPRIATED - 9.7%
State Dormitory Authority, City
University of New York, Series
1997 I,
5.125% 7/1/27 1,000,000 991,920
State University Dorm Facilities,
Series 1999 C,
5.500% 7/1/29 1,700,000 1,760,095
State Urban Development Corp.,
Series 1999 C,
6.000% 1/1/29 1,000,000 1,080,340
-----------
3,832,355
-----------
STATE GENERAL OBLIGATIONS - 3.9%
PR Commonwealth of Puerto Rico,
Series 1997,
5.375% 7/1/25 1,500,000 1,532,910
-----------
------------------------------------------------------------------
TRANSPORTATION - 15.0%
AIRPORT - 8.4%
Albany County Airport Authority,
Series 1997,
5.500% 12/15/19 1,500,000 1,534,170
Niagara Frontier Transportation
Authority, Series 1999 A,
5.625% 4/1/29 1,750,000 1,800,418
-----------
3,334,588
-----------
TOLL FACILITIES - 4.0%
Triborough Bridge & Tunnel
Authority, Series 1992 Y,
6.125% 1/1/21 1,390,000 1,586,393
-----------
TRANSPORTATION - 2.6%
New York City Transportation
Authority, Series 1999 A,
5.250% 1/1/29 1,000,000 1,007,860
-----------
------------------------------------------------------------------
UTILITY - 14.6%
INDEPENDENT POWER PRODUCER - 2.5%
New York City Industrial Finance
Agency, Brooklyn Navy Yard
Partners, Series 1997,
5.650% 10/1/28 $ 300,000 $ 292,692
Port Authority of New York & New
Jersey, KIAC Partners, Series 1996 IV,
6.750% 10/1/19 200,000 203,000
Suffolk County Industrial
Development Agency, Nissequogue
Cogen Partners, Series 1998,
5.500% 1/1/23 200,000 186,500
PR Commonwealth of Puerto Rico
Industrial, Educational, Medical &
Environmental Cogeneration
Facilities, AES Project, Series 2000,
6.625% 6/1/26 250,000 271,360
-----------
953,552
-----------
MUNICIPAL ELECTRIC - 5.1%
GM Guam Power Authority, Series 1999 A,
5.250% 10/1/34 1,000,000 1,013,900
Long Island Power Authority, Series
1998 A,
5.250% 12/1/26 1,000,000 1,004,760
-----------
2,018,660
-----------
WATER & SEWER - 7.0%
Albany Municipal Water Finance
Authority, >Series 2000 A,
6.375% 12/1/17 200,000 227,524
Buffalo Municipal Water Finance
Authority, Series 1999,
6.000% 7/1/29 1,450,000 1,572,481
Clifton Park Water Authority, Series
1999 A,
5.000% 10/1/29 1,000,000 976,430
-----------
2,776,435
-----------
TOTAL INVESTMENTS - 98.0%
(cost of $35,171,192) (b) 38,678,059
-----------
OTHER ASSETS & LIABILITIES, NET - 2.0% 785,142
-----------
NET ASSETS - 100.0% $39,463,201
-----------
See notes to investment portfolio.
3
-----------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
-----------------------------------------------------------------------------
November 30, 2001
NOTES TO INVESTMENT PORTFOLIO:
-----------------------------------------------------------------------------
(a) This security, or a portion thereof, with a market value of $101,326 is
being used to collateralize open futures contracts.
(b) Cost for both financial statement and federal income tax purposes is the
same.
Short futures contracts open at November 30, 2001:
Par value Unrealized
covered by Expiration appreciation
Type contracts month at 11/30/01
-----------------------------------------------------------------------------
Municipal Bond Index $3,900,000 March $85,590
-------
Long futures contracts open at November 30, 2001:
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 11/30/01
-----------------------------------------------------------------------------
U.S. Treasury Bond $800,000 March $(38,981)
--------
Summary of securities by insurer (unaudited):
% of Total
Insurer Investments
-----------------------------------------------------------------------------
Municipal Bond Investors Assurance 38.18%
American Municipal Bond Assurance Corp. 13.24
Financial Security Assurance 12.81
Financial Guaranty Insurance Co. 5.73
Asset Guaranty Co. 3.97
Federal Housing Administration 2.69
ACA Financial Guaranty Corp. 0.88
-----
77.50%
=====
See notes to financial statements.
4
------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
------------------------------------------------------------
November 30, 2001
ASSETS
Investments, at cost $35,171,192
-----------
Investments, at value $38,678,059
Cash 11,912
Receivable for:
Investments sold 1,000,187
Interest 734,467
Expense reimbursement due from Advisor 93,934
Deferred Trustees' compensation plan 1,252
-----------
Total Assets 40,519,811
-----------
LIABILITIES
Payable for:
Investments purchased 1,001,301
Futures variation margin 4,187
Distributions -- preferred shares 1,487
Management fee 11,548
Bookkeeping fee 833
Audit fee 26,400
Trustees' fee 100
Deferred Trustees' fee 1,252
Other liabilities 9,502
-----------
Total Liabilities 1,056,610
-----------
NET ASSETS $39,463,201
===========
COMPOSITION OF NET ASSETS
Auction Preferred Shares (564 shares issued
and outstanding at $25,000 per share) $14,100,000
Paid-in capital -- common shares 22,687,782
Undistributed net investment income 207,841
Accumulated net realized loss (1,085,898)
Net unrealized appreciation on:
Investments 3,506,867
Futures contracts 46,609
-----------
NET ASSETS $39,463,201
===========
Net assets at value including undeclared
dividends applicable to 564 preferred
shares outstanding $14,100,000
===========
Net assets at value applicable to 1,606,900
common shares of beneficial interest
outstanding $25,363,201
===========
Net asset value per common share $ 15.78
===========
------------------------------------------------------------
STATEMENT OF OPERATIONS
------------------------------------------------------------
For the Year Ended November 30, 2001
INVESTMENT INCOME
Interest $2,094,727
EXPENSES
Management fee 126,290
Bookkeeping fee 16,611
Transfer agent fee 37,537
Trustees' fee 8,460
Preferred shares remarketing
commissions 35,871
Audit fee 42,900
Reports to shareholders 34,768
Other expenses 46,503
-----------
Total Expenses 348,940
Fees and expenses waived or
reimbursed by Advisor (143,420)
Custody earnings credit (135)
-----------
Net Expenses 205,385
-----------
Net Investment Income 1,889,342
-----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FUTURES CONTRACTS
Net realized gain (loss) on:
Investments 136,097
Futures contracts (377,156)
-----------
Net realized loss (241,059)
-----------
Net change in unrealized
appreciation/depreciation on:
Investments 1,368,464
Futures contracts 87,041
-----------
Net change in unrealized
appreciation/depreciation 1,455,505
-----------
Net Gain 1,214,446
-----------
Increase in Net Assets from
Operations $ 3,103,788
===========
See notes to financial statements.
5
-------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
-------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
-----------------------
INCREASE (DECREASE) IN NET ASSETS 2001 2000
-------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,889,342 $ 2,032,614
Net realized loss on investments
and futures contracts (241,059) (837,558)
Net change in unrealized
appreciation/depreciation on
investments and futures
contracts 1,455,505 2,229,971
----------- -----------
Net Increase from Operations 3,103,788 3,425,027
----------- -----------
DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income to
common shareholders (1,338,553) (1,484,596)
From net investment income to
preferred shareholders (397,551) (533,848)
----------- -----------
Total Distributions Declared to
Shareholders (1,736,104) (2,018,444)
----------- -----------
SHARE TRANSACTIONS:
Preferred share initial offering -- 13,812,634
Distributions reinvested -- 3,149
----------- -----------
Net Increase from Share
Transactions -- 13,815,783
----------- -----------
Total Increase in Net Assets 1,367,684 15,222,366
NET ASSETS
Beginning of period 38,095,517 22,873,151
----------- -----------
End of period (including
undistributed net investment
income of $207,841 and $47,321,
respectively) $39,463,201 $38,095,517
=========== ===========
YEAR ENDED NOVEMBER 30,
-----------------------
NUMBER OF FUND SHARES 2001 2000
---------------------- ---------------------------------------
Common Shares:
Sold -- 233
Outstanding at:
Beginning of period 1,606,900 1,606,667
----------- -----------
End of period 1,606,900 1,606,900
----------- -----------
Preferred Shares:
Issued in initial offering -- 564
Outstanding at:
Beginning of period 564 --
----------- -----------
End of period 564 564
----------- -----------
See notes to financial statements.
6
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
November 30, 2001
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION:
Colonial New York Insured Municipal Fund (the "Fund"), is a Massachusetts
business trust registered under the Investment Company Act of 1940 (the "Act"),
as amended, as a nondiversified, closed-end management investment company. The
Fund's investment objective is to provide current income generally exempt from
ordinary federal income tax and New York State and City personal income taxes.
The Fund authorized an unlimited number of common shares of beneficial interest
and 564 Auction Preferred Shares ("APS").
On November 19, 1999, the Fund completed the offering of 1,600,000 common shares
at a price of $15.00 per share, raising $22,872,000, 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 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.
Investments 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 (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.
At November 30, 2001, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
YEAR OF EXPIRATION CAPITAL LOSS CARRYFORWARD
------------------ -------------------------
2008 $284,413
--------
Expired capital loss carryforwards, if any, are recorded as a reduction of
paid-in capital.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM:
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of the security with a corresponding
increase in the cost basis; market discount is not accreted. Premium is
amortized against interest income with a corresponding decrease in the cost
basis.
Effective December 1, 2001, the Fund will adopt the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and will be required to
amortize premium and discount on all debt securities. Upon the effective date,
this accounting principle change will not have an impact on total net assets but
will result in a reclassification between cost of securities held and net
unrealized appreciation/depreciation. Management of the Fund believes that the
impact of adopting this principle will not be material to the financial
statements.
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to common and preferred 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.
The following reclassifications have been made to the financial statements:
INCREASE (DECREASE)
--------------------------------------------------------------------------------
UNDISTRIBUTED NET ACCUMULATED NET
PAID-IN CAPITAL INVESTMENT INCOME REALIZED LOSS
--------------- ------------------ ---------------
$(1) $7,282 $(7,281)
These differences are primarily due to market discount reclassifications. Net
investment income, net realized gains (losses) and net assets were not affected
by this reclassification.
Distributions to preferred shareholders are recorded daily and are payable at
the end of each dividend period. Each dividend payment period for the APS is
generally seven days. The applicable dividend rate for the APS on November 30,
2001 was 1.75%. For the year ended November 30, 2001, the Fund declared
dividends to Auction Preferred shareholders amounting to $397,551 representing
an average APS dividend rate of 2.82%.
7
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
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 daily net
assets. For the period from the commencement of the Fund's operations through
January 1, 2001, the Advisor agreed to waive all of its management fees. For the
period from January 2, 2001 through November 30, 2004, the Advisor contractually
agreed to waive a portion of its fee so that it will not exceed 0.35% annually.
On November 1, 2001, Liberty Financial Companies, Inc., the former parent of the
Advisor, completed the sale of its asset management business, including the
Advisor, to Fleet National Bank ("Fleet"). This transaction resulted in a change
of control of the Advisor and, therefore, an assignment of the Advisor's
investment advisory contract with the Fund to Fleet. The Fund had obtained
approval of a new investment advisory contract by the Fund's Board of Trustees
and shareholders, which became effective upon completion of the sale. The new
contract is identical to the prior contract in all material respects except for
its effective and termination dates.
BOOKKEEPING FEE:
The Advisor is responsible for providing pricing and bookkeeping services to the
Fund under a Pricing and Bookkeeping Agreement. Under a separate agreement (the
"Outsourcing Agreement"), the Advisor has delegated those functions to State
Street Bank and Trust Company ("State Street"). The Advisor pays fees to State
Street under the Outsourcing Agreement.
During the period December 1, 2000 to June 30, 2001, the Advisor provided
bookkeeping and pricing services to the Fund for a monthly fee of $1,500 for the
first $50 million of the Fund's average daily net assets, plus a monthly
percentage fee of 0.0233% annually of the next $950 million. Effective July 1,
2001, under its pricing and bookkeeping agreement with the Fund, the Advisor
receives from the Fund an annual flat fee of $10,000, paid monthly, and in any
month that the Fund's average daily net assets are more than $50 million, a
monthly fee equal to the average daily net assets of the Fund for that month
multiplied by a fee rate that is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement.
EXPENSE LIMITS:
The Advisor has voluntarily agreed to waive fees and bear certain Fund expenses
to the extent that total expenses (exclusive of management fees, brokerage
commissions, interest, taxes and extraordinary expenses, if any) exceed 0.20%
annually of the Fund's average daily net assets. This arrangement may be
modified or terminated by the Advisor at any time.
OTHER:
The Fund pays no compensation to its officers, all of whom are employees of the
Advisor.
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.
The Fund has an agreement with its custodian bank under which $135 of custody
fees were reduced by balance credits for the year ended November 30, 2001. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangements in an income producing asset if it had not entered
into such agreements.
NOTE 3. PREFERRED SHARE OFFERING
On December 20, 1999, the Fund offered and currently has outstanding 564 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). Total proceeds, net of commissions, of
$13,959,000, were received upon completion of the offering.
APS commissions of $141,000 from the offering and costs incurred by the Fund in
connection with the offering of the APS totaling $146,366 were recorded as a
reduction of capital paid in excess of par applicable to common shares.
Under the Act, the Fund is required to maintain asset coverage of at least 200%
with respect to the APS as of the last business day of each month in which any
APS are outstanding. Additionally, the Fund is required to meet more stringent
asset coverage requirements under the terms of the APS and in accordance with
the guidelines prescribed by the rating agencies. Should these requirements not
be met, or should dividends accrued on the APS not be paid, the Fund may be
restricted in its ability to declare dividends to common shareholders or may be
required to redeem certain of the APS. At November 30, 2001 there were no such
restrictions on the Fund.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY:
During the year ended November 30, 2001, purchases and sales of investments,
other than short-term obligations, were $1,488,270 and $1,540,395, respectively.
Unrealized appreciation (depreciation) at November 30, 2001, based on cost of
investments for both financial statement and federal income tax purposes, was:
Gross unrealized appreciation $3,509,567
Gross unrealized depreciation (2,700)
----------
Net unrealized appreciation $3,506,867
==========
OTHER:
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
8
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
The Fund may invest in municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund may 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.
9
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share outstanding throughout each
period is as follows (common shares unless otherwise noted):
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
----------------------- ------------
2001 2000 1999(a)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.93 $ 14.24 $ 14.33
------- ------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 1.18(b) 1.27(c) 0.02
Net realized and unrealized gain (loss) on investments and
futures contracts 0.75 0.86 (0.08)
------- ------- ---------
Total from Investment Operations 1.93 2.13 (0.06)
------- ------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income to common shareholders (0.83) (0.93) --
From net investment income to preferred shareholders (0.25) (0.33) --
------- ------- ---------
Total Distributions Declared to Shareholders (1.08) (1.26) --
------- ------- ---------
LESS SHARE TRANSACTIONS:
Offering costs -- common shares -- -- (0.03)
Commission and offering costs -- preferred shares -- (0.18) --
------- ------- ---------
Total Share Transactions -- (0.18) (0.03)
------- ------- ---------
NET ASSET VALUE, END OF PERIOD $ 15.78 $ 14.93 $ 14.24
======= ======= =======
Market price per share -- common shares $ 14.60 $ 14.63 $ 15.06
======= ======= =======
Total return -- based on market value (d)(e) 5.63% 3.58% 0.41%(f)
======= ======= =======
RATIOS TO AVERAGE NET ASSETS:
Expenses (g)(h) 0.81%(j) 0.32%(j) 0.20%(k)
Net investment income (g)(h) 7.49% 8.86% 5.20%(k)
Net investment income (g)(h) 5.91%(i) 6.53%(i) 5.20%(k)
Waiver/reimbursement (h) 0.57% 0.18% --
Portfolio turnover rate 4% 32% 0%(f)
Net assets, end of period (000's) -- common shares $25,363 $23,996 $22,873
(a) The Fund commenced investment operations on November 19, 1999.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(d) Total return at market value assuming all distributions reinvested at
prices obtained by the dividend reinvestment plan.
(e) Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had no impact.
(h) Ratios reflect average net assets available to common shares only.
(i) Ratios reflect reduction for dividend payments to preferred shareholders.
(j) Ratios calculated using average net assets of the Fund equal 0.52% and
0.20% for the years ended November 30, 2001 and November 30, 2000,
respectively.
(k) Annualized.
ASSET COVERAGE REQUIREMENTS
INVOLUNTARY
ASSET LIQUIDATING AVERAGE
TOTAL AMOUNT COVERAGE PREFERENCE MARKET VALUE
NOVEMBER 30, OUTSTANDING PER SHARE PER SHARE PER SHARE
----------------------------------------------------------------------------------------------
2001 $14,100,000 $69,970 $25,003 $25,000
2000* 14,100,000 67,545 25,014 25,000
* On December 20, 1999, the Fund began offering Auction Preferred Shares.
10
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
TO THE TRUSTEES AND SHAREHOLDERS OF COLONIAL NEW YORK INSURED MUNICIPAL FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Insured New York Municipal
Fund (the "Fund"), at November 30, 2001, the results of its operations, the
changes in its net assets, and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. 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 audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of portfolio positions
at November 30, 2001 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 10, 2002
11
--------------------------------------------------------------------------------
UNAUDITED INFORMATION
--------------------------------------------------------------------------------
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On September 26, 2001, the Annual Meeting of Shareholders of the Colonial New
York Insured Municipal Fund was held to conduct a vote for or against the
approval of the following Items listed on the Fund's Proxy Statement for said
Meeting. On July 16, 2001, the record date for the Meeting, the Fund had
1,606,899.667 common shares outstanding. The votes cast were as follows:
% OF SHARES
TO TOTAL % OF SHARES
OUTSTANDING TO TOTAL
SHARES SHARES SHARES VOTED
------ ----------- ------------
PROPOSAL 1: TO APPROVE A
NEW INVESTMENT ADVISORY
AGREEMENT:
For 1,491,044.667 92.79% 96.43%
Against 22,045.000 1.37% 1.43%
Abstain 33,187.000 2.01% 2.14%
FOR WITHHELD
--- --------
PROPOSAL 2: ELECTION OF TRUSTEES:
Douglas A. Hacker 1,518,636.667 27,640.000
Janet Langford Kelly 1,518,636.667 27,640.000
Richard W. Lowry 1,518,636.667 27,640.000
William E. Mayer 1,518,636.667 27,640.000
Charles R. Nelson 1,518,636.667 27,640.000
John J. Neuhauser 1,518,636.667 27,640.000
Joseph R. Palombo 1,518,636.667 27,640.000
Thomas C. Theobald 1,518,636.667 27,640.000
Anne-Lee Verville 1,518,636.667 27,640.000
On July 16, 2001, the record date for the Meeting, the Fund had 564 preferred
shares outstanding. The votes cast were as follows:
% OF SHARES
TO TOTAL % OF SHARES
OUTSTANDING TO TOTAL
SHARES SHARES SHARES VOTED
------ ----------- ------------
PROPOSAL 1: TO APPROVE A NEW
INVESTMENT ADVISORY
AGREEMENT:
For 558 98.94% 98.94%
Against 0 0.00% 0.00%
Abstain 6 1.06% 1.06%
FOR WITHHELD
--- --------
PROPOSAL 2: ELECTION OF TRUSTEES:
Douglas A. Hacker 563 1
Janet Langford Kelly 563 1
Richard W. Lowry 563 1
Salvatore Macera 563 1
William E. Mayer 563 1
Charles R. Nelson 563 1
John J. Neuhauser 563 1
Joseph R. Palombo 563 1
Thomas E. Stitzel 563 1
Thomas C. Theobald 563 1
Anne-Lee Verville 563 1
--------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
99.65% of the distributions from net investment income will be treated as exempt
income for federal income tax purposes.
12
--------------------------------------------------------------------------------
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 1933, 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. 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.
13
--------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN (CONTINUED)
--------------------------------------------------------------------------------
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
THIS PAGE INTENTIONALLY LEFT BLANK.
THIS PAGE INTENTIONALLY LEFT BLANK.
TRANSFER AGENT
--------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial New York Insured Municipal Fund is:
EquiServe Trust Company
100 Federal Street
Boston, MA 02110
1-800-730-6001
The Colonial New York Insured Municipal 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 New York Insured
Municipal Fund.
TRUSTEES
DOUGLAS A. HACKER
President of UAL Loyalty Services and Executive Vice President of United
Airlines (formerly Executive Vice President, Senior Vice President and Chief
Financial Officer of UAL, Inc.)
JANET LANGFORD KELLY
Executive Vice President-Corporate Development and Administration, General
Counsel and Secretary, Kellogg Company (formerly Senior Vice President,
Secretary and General Counsel, Sara Lee Corporation)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
SALVATORE MACERA
Private Investor (formerly Executive Vice President and Director of Itek Corp.)
WILLIAM E. MAYER
Managing Partner, Park Avenue Equity Partners (formerly Founding Partner,
Development Capital LLC; Dean and Professor, College of Business and
Management, University of Maryland)
CHARLES R. NELSON
Van Voorhis Professor, Department of Economics, University of Washington;
consultant of econometric and statistical matters (formerly Department Chairman
and Director of the Institute for Economic Research)
JOHN J. NEUHAUSER
Academic Vice President and Dean of Faculties, Boston College (formerly Dean,
Boston College School of Management)
JOSEPH R. PALOMBO
Chief Operating Officer, Fleet Asset Management; Executive Vice President and
Director of Colonial Management Associates, Inc. and Stein Roe & Farnham
Incorporated; Executive Vice President and Chief Administrative Officer of
Liberty Funds Group LLC (formerly Chief Operations Officer, Mutual Funds,
Liberty Financial Companies, Inc; Vice President of Liberty Mutual Funds, Stein
Roe Mutual Funds and All-Star Funds, and Chief Operating Officer, Putnam Mutual
Funds)
THOMAS E. STITZEL
Business Consultant and Chartered Financial Analysis (formerly Professor of
Finance, College of Business, Boise State University)
THOMAS C. THEOBALD
Managing Director, William Blair Capital Partners (formerly Chief Executive
Officer and Chairman of the Board of Directors, Continental Bank Corporation)
ANNE-LEE VERVILLE
Chairman of the Board of Directors, Enesco Group, Inc. and author and speaker
on educational systems needs (formerly General Manager, Global Education
Industry, and President, Applications Solutions Division, IBM Corporation)
--------------------------------------------------------------------------------
COLONIAL NEW YORK INSURED MUNICIPAL FUND ANNUAL REPORT
--------------------------------------------------------------------------------