UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2)).
[ ] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12.
COLONIAL INSURED MUNICIPAL FUND
(Name of Registrant as Specified in its Charter)
________________________________________________________________________________
(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of filing fee (check the approximate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
___________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
___________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
___________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
___________________________________________________________________________
5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
COLONIAL INSURED MUNICIPAL FUND
May [[2]], 2007
Dear Shareholder:
The annual meeting of shareholders of Colonial Insured Municipal Fund (the
"Fund") has been called to be held on June 22, 2007 at 2:00 p.m. Eastern time at
One Financial Center, 12th floor, in Boston, Massachusetts.
Columbia Management Advisors, LLC, the investment adviser and administrator of
the Fund, has agreed to sell certain assets used in its business of managing the
Fund and other closed-end funds to Massachusetts Financial Services Company,
Inc. ("MFS"). Upon the closing of the sale, the Fund's current investment
advisory agreement with MFS pursuant to which MFS would serve as investment
adviser to the Fund. Therefore, the meeting will be held for the following
purposes:
(1) to vote on a proposed new investment advisory agreement for the Fund
between the Fund and MFS;
(2) to vote on an amended and restated declaration of trust for the Fund,
contingent upon shareholder approval of (1) above;
(3) to elect trustees to the Board of Trustees of the Fund to replace all
of the current trustees of the Fund, contingent upon shareholder approval of (1)
above;
(4) to elect trustees to the Board of Trustees of the Fund so that those
current trustees whose terms will expire this year will continue to hold office
until the trustees elected pursuant to (3) above take office or until the end of
their stated terms, whichever is earlier;
and to transact any other business that may properly come before the meeting, or
any adjournments or postponements thereof.
THE BOARD OF TRUSTEES OF THE FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ALL
PROPOSALS.
The enclosed proxy statement explains the proposals to be considered in greater
detail. Please read it carefully. Although we hope that you can attend the
annual meeting in person, we urge you in any event to vote your shares at your
earliest convenience in order to make sure that you are represented at the
meeting.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. YOU CAN VOTE
EASILY AND QUICKLY BY MAIL, BY TELEPHONE, VIA THE INTERNET OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE HAS BEEN ENCLOSED FOR YOUR CONVENIENCE.
PLEASE HELP AVOID THE EXPENSE OF A FOLLOW-UP MAILING BY VOTING TODAY.
We appreciate your participation and prompt response in these matters and thank
you for your continued support.
Sincerely,
[[Insert Signature Graphic]]
Christopher L. Wilson
President
[[Job Code]]
COLONIAL INSURED MUNICIPAL FUND
One Financial Center
Boston, Massachusetts 02111-2621
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 22, 2007
To the Shareholders:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the "Meeting")
of Colonial Insured Municipal Fund (the "Fund") will be held at the offices of
the Fund at One Financial Center, 12th floor, Boston, Massachusetts, on June 22,
2007, at 2:00 p.m. Eastern time. The purpose of the Meeting is to consider and
to act upon the following matters:
(1) to approve a new investment advisory agreement for the Fund between the
Fund and Massachusetts Financial Services Company, Inc.;
(2) to approve an amended and restated declaration of trust for the Fund,
contingent upon shareholder approval of (1) above;
(3) to elect trustees to the Board of Trustees of the Fund, to replace the
current trustees of the Fund, contingent upon shareholder approval of (1)
above, as outlined below:
a. ten trustees to be elected by the holders of common shares of
beneficial interest (the "Common Shares") and municipal auction rate
cumulative preferred shares (the "Preferred Shares") of the Fund,
voting together as a single class, and
b. two trustees to be elected by the holders of Preferred Shares only,
voting as a single class; and
(4) to elect trustees to the Board of Trustees of the Fund so that those
current trustees whose terms will expire this year will continue to hold
office until the trustees elected pursuant to (3) above take office or
until the end of their stated terms, whichever is earlier, as outlined
below:
a. three trustees to be elected by the holders of Common Shares and
Preferred Shares of the Fund, voting together as a single class, and
b. two trustees to be elected by the holders of Preferred Shares only,
voting as a single class;
and to transact any other business as may properly come before the Meeting, or
any adjournments or postponements thereof.
The Board of Trustees has fixed the close of business on April 10, 2007 as the
record date for the determination of the shareholders of the Fund entitled to
notice of, and to vote at, the Meeting and any adjournments or postponements
thereof.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ALL PROPOSALS.
By the Order of the Trustees
[[Insert Signature Graphic]]
James R. Bordewick, Jr.
Secretary
YOUR VOTE IS IMPORTANT--PLEASE RETURN YOUR PROXY PROMPTLY.
Notice 1
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WE URGE YOU, WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, TO INDICATE YOUR VOTING INSTRUCTIONS ON
THE ENCLOSED PROXY, DATE AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED,
WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. ALTERNATIVELY, YOU MAY
VOTE BY TELEPHONE OR VIA THE INTERNET, PURSUANT TO THE INSTRUCTIONS ON THE
ENCLOSED PROXY. WE ASK YOUR COOPERATION IN MAILING YOUR PROXY, OR VOTING BY
TELEPHONE OR VIA THE INTERNET, PROMPTLY.
Dated: May [[2]], 2007
Notice 2
IMPORTANT INFORMATION TO HELP YOU UNDERSTAND AND VOTE ON THE PROPOSALS
The following questions and answers provide an overview of the matters on which
you are being asked to vote. The enclosed proxy statement contains more detailed
information about each proposal, and we encourage you to read it in its entirety
before voting. Your vote is important.
QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. Columbia Management Advisors, LLC ("Columbia") recently entered into an
asset purchase agreement with Massachusetts Financial Services Company,
Inc. ("MFS") pursuant to which Columbia will sell certain assets used in
its business of managing your Fund and certain other closed-end funds to
MFS (the "Sale"), subject to certain conditions (as set forth in the asset
purchase agreement and outlined in the enclosed proxy statement). Columbia
and MFS anticipate that, if those conditions are met, the Sale will close
in the third quarter of 2007.
MFS, headquartered in Boston, Massachusetts, is a registered investment
adviser and a subsidiary of Sun Life Financial, a Canadian financial
services company headquartered in Toronto, Ontario, Canada. MFS offers a
full spectrum of investment products to domestic and international retail,
business, and institutional investors.
If and when the Sale closes, your Fund's investment advisory agreement with
Columbia would terminate, and your Fund would enter into a new investment
advisory agreement with MFS. The enclosed proxy statement provides
additional information about MFS, the proposed investment advisory
agreement for your Fund, and certain other proposals on which the board of
trustees of your Fund is soliciting your vote. As explained in the enclosed
proxy statement, if approved by shareholders, the effectiveness of certain
proposals is contingent upon the closing of the Sale. The asset purchase
agreement contemplates that the Sale will close only if all of your Fund
and certain other closed-end funds approve a new advisory agreement and
elect nominees to the boards of trustees as described more fully in
Proposal 3 in the enclosed proxy statement. If the Sale does not close,
only the reelection of trustees will become effective.
YOUR FUND'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH
PROPOSAL AND NOMINEE DESCRIBED IN THE ENCLOSED PROXY STATEMENT.
Q. WHY ARE YOU SENDING ME THIS INFORMATION?
A. You are receiving the enclosed proxy statement and proxy card because you
own shares of Colonial Insured Municipal Fund and have the right to vote on
these important proposals concerning your investment.
Q. WHY AM I BEING ASKED TO VOTE ON A NEW INVESTMENT ADVISORY AGREEMENT?
A. If the Sale closes, Columbia would no longer serve as the investment
adviser to your Fund and your Fund's current investment advisory agreement
would terminate. In order for MFS to serve as the investment adviser to
your Fund, it must have an investment advisory agreement with your Fund
that has been approved by the Fund's shareholders. Under applicable law, as
a shareholder of your Fund, you have a right to vote on your Fund's new
investment advisory agreement with MFS.
Q. WHY AM I BEING ASKED TO VOTE ON A NEW DECLARATION OF TRUST?
A. The Fund operates under an agreement and declaration of trust, which is the
Fund's organizational and governing document under Massachusetts law. As
noted above, if the Sale closes, MFS would serve as the investment adviser
to your Fund. MFS currently serves as investment adviser to six closed-end
funds. The declarations of trust of such funds vary in certain ways (as
described in the enclosed proxy statement) from your Fund's agreement and
declaration of trust. MFS has advised your Fund's board of trustees that
the adoption of a new declaration of trust that conforms to the form of
declaration of trust currently in place for closed-end funds managed by MFS
would make the administration of your Fund more efficient.
Q&A 1
Q. WHY AM I BEING ASKED TO ELECT NEW TRUSTEES?
A. In connection with the Sale, your Fund's trustees have recommended that
shareholders elect a new slate of trustees who are more familiar with MFS
and with the management and operation of funds managed by MFS. The proposed
nominees currently serve as trustees of other funds managed by MFS. Two of
the proposed nominees, if elected, would be "interested persons" (as
defined in the Investment Company Act of 1940) of your Fund by reason of
their affiliation with MFS. The other proposed nominees, if elected, would
not be "interested persons" of your Fund. If all of the proposed nominees
are elected, your Fund's board of trustees will consist of twelve trustees.
Your Fund's trustees have also recommended that shareholders re-elect those
current trustees of your Fund whose terms expire at the shareholder
meeting. These persons have consented to serve as trustees of your Fund
during the period from the shareholder meeting through the closing of the
Sale, and, in the event that the Sale does not close, to serve as trustees
of your Fund for the terms set forth in the enclosed proxy statement.
Q. HOW WILL THE SALE AFFECT ME AS A SHAREHOLDER?
A. Neither your Fund's investment objectives and principal investment
strategies nor the number of shares you hold will change as a result of the
closing of the Sale. The terms of the proposed investment advisory
agreement for your Fund are similar to those of the Fund's current
investment advisory agreement. The contractual investment advisory fee
rates currently payable by your Fund will not change, but the calculation
methodology will change and may cause the amount of investment advisory
fees payable by the Fund to increase. MFS has advised the trustees of your
Fund that the current portfolio management personnel for your Fund will be
replaced by portfolio management personnel employed by MFS.
Q. WILL MY FUND'S NAME CHANGE?
A. Yes, MFS has advised the trustees of your Fund that your Fund's name will
change as a result of the Sale. Your Fund's new name will be [[MFS Insured
Municipal Fund]].
Q. HOW DO THE TRUSTEES OF MY FUND RECOMMEND THAT I VOTE?
A. The trustees of your Fund recommend that you vote FOR each proposal.
Q. WILL MY FUND PAY FOR THIS PROXY SOLICITATION?
A. No. Columbia has agreed to bear these costs.
Q. HOW DO I VOTE MY SHARES?
A. For your convenience, there are several ways you can vote:
By Mail: Vote, sign and return the enclosed proxy card(s) in the enclosed
self-addressed, postage-paid envelope.
By Telephone: Call the toll-free number printed on the enclosed proxy
card(s).
By Internet: Access the website address printed on the enclosed proxy
card(s).
In Person: Attend the shareholder meeting as described in the enclosed
proxy statement. If you wish to attend the meeting, we would appreciate
your notifying us by calling [[__________]].
Q. WHY MIGHT I RECEIVE MORE THAN ONE PROXY CARD?
A. If you own shares of more than one closed-end fund advised by Columbia, you
will receive a separate proxy card for each such fund.
Q&A 2
Q. WHOM SHOULD I CALL FOR ADDITIONAL INFORMATION ABOUT THE ENCLOSED PROXY
STATEMENT?
A. If you need any assistance, or have any questions regarding the proposals
or how to vote your shares, please call your Fund's proxy solicitor, The
Altman Group, at [[__________]].
Q&A 3
PROXY STATEMENT
COLONIAL INSURED MUNICIPAL FUND
One Financial Center
Boston, Massachusetts 02111-2621
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 22, 2007
The annual meeting of shareholders (together with any adjournments or
postponements thereof, the "Meeting"), of Colonial Insured Municipal Fund (the
"Fund") has been called to be held on June 22, 2007 at 2:00 p.m., Eastern time,
at One Financial Center, 12th floor, Boston, Massachusetts 02111-2621, for the
following purposes (each a "Proposal" and collectively, the "Proposals"), each
of which is described more fully herein:
(1) To vote on a proposed new investment advisory agreement for the Fund
between the Fund and Massachusetts Financial Services Company, Inc.
("MFS").
(2) To vote on an amended and restated declaration of trust for the Fund,
contingent upon shareholder approval of Proposal 1 above.
(3) To elect trustees to the Board of Trustees of the Fund to replace all of
the current trustees of the Fund, contingent upon shareholder approval of
Proposal 1 above.
(4) To elect trustees to the Board of Trustees of the Fund so that those
current trustees whose terms will expire this year will continue to hold
office until the trustees elected pursuant to Proposal 3 above take office
or until the end of their stated terms, whichever is earlier.
SOLICITATION OF PROXIES
This solicitation of proxies is being made by the Board of Trustees (the
"Board") of the Fund in connection with the Meeting and in connection with the
proposed sale by Columbia Management Advisors, LLC ("Columbia"), the Fund's
investment adviser, of certain assets used in its business of managing the Fund
and Colonial California Insured Municipal Fund, Colonial High Income Municipal
Trust, Colonial InterMarket Income Trust I, Colonial Intermediate High Income
Fund, Colonial Investment Grade Municipal Trust and Colonial Municipal Income
Trust (collectively, the "Colonial Closed-End Funds") to MFS. Solicitation of
proxies for use at the Meeting is being made by the mailing of this notice and
proxy statement with its enclosures on or about May [[2]], 2007. Shareholders of
record at the close of business on April 10, 2007 (the "Record Date") are
entitled to notice of and to vote at the Meeting. Shareholders of the Fund whose
shares are held by nominees, such as brokers, can vote their proxies by
contacting their respective nominees. In addition to the solicitation of proxies
by mail, officers and agents of the Fund and their affiliates may, without
additional compensation, solicit proxies by telephone, telegraph, facsimile, or
oral communication. Solicitation may also be made by The Altman Group, a proxy
solicitation firm. The costs of soliciting proxies for the Colonial Closed-End
Funds, estimated to be approximately thirty-five thousand U.S. dollars
(US$35,000), plus reasonable out-of-pocket expenses, will be borne by Columbia
pursuant to the terms of the Asset Purchase Agreement (as defined herein), and
not by the Fund.
A shareholder may revoke a valid proxy at any time prior to its use by filing
with the secretary of the Fund a written revocation or duly executed proxy
bearing a later date. In addition, any shareholder who attends the Meeting in
person may vote by ballot at the Meeting, thereby canceling any proxy previously
given. (Note that merely attending the Meeting without voting will not cancel a
previously given proxy.) The persons named in the accompanying proxy will vote
as directed by the proxy, but in the absence of voting directions in any proxy
that is signed and returned, they intend to vote "FOR" each Proposal and may
vote in their discretion with respect to other matters not now known to the
Board that may be presented at the Meeting.
If you have questions regarding the Meeting agenda or the execution of the
proxy, call a representative toll-free at [[__________]].
4
GENERAL OVERVIEW
THE TRANSACTION
On April 10, 2007, Columbia entered into an asset purchase agreement with MFS
(the "Asset Purchase Agreement") to sell certain assets used in Columbia's
business of managing the Colonial Closed-End Funds to MFS (such transaction, the
"Sale"). Upon the closing of the Sale (the "Closing"), MFS will serve as
investment adviser to the Fund.
The Closing is subject to certain terms and conditions, including, among others:
(a) the approval by shareholders of each Colonial Closed-End Fund of a new
investment advisory agreement with MFS, as set forth in Proposal 1; (b) the
resignation of the current trustees of the Colonial Closed-End Funds and the
election by shareholders of the Colonial Closed-End Funds of such of the
nominees set forth in Proposal 3 as will create a new board of trustees for the
Colonial Closed-End Funds at least 75% of whom are not "interested persons" (as
such term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of the Colonial Closed-End Funds; (c) the obtaining of any
necessary regulatory approvals by Columbia and MFS; and (d) certain other
conditions. Although there can be no assurance that the Sale will close, if each
of the terms and conditions is satisfied or waived, Columbia and MFS anticipate
that the Closing will occur in the third quarter of 2007.
Proposals relating to each of Colonial California Insured Municipal Fund,
Colonial High Income Municipal Fund, Colonial InterMarket Income Trust I,
Colonial Intermediate High Income Fund, Colonial Investment Grade Municipal
Trust and Colonial Municipal Income Trust are discussed in a separate proxy
statement.
POST-TRANSACTION STRUCTURE AND OPERATIONS
As noted above, upon the Closing, MFS will become the investment adviser to each
Colonial Closed-End Fund. MFS currently does not anticipate any significant
changes to the organization or structure of the Fund other than: (a) a new name
for the Fund, as set forth above in the section of the enclosed materials
captioned "Questions and Answers"; (b) the election of new trustees, as set
forth in Proposal 3, and the appointment of new officers; (c) a change in
portfolio management personnel; (d) a change in independent registered public
accounting firm from PricewaterhouseCoopers LLP to Ernst & Young LLP, which is
the independent registered public accounting firm for other registered
investment companies managed by MFS; (e) the approval of an amended and restated
declaration of trust for the Fund, as set forth in Proposal 2; (f) a new
administrative services agreement with MFS pursuant to which MFS will provide
administrative services to the Fund; (g) the negotiation of new agreements with
existing service providers; and (h) a change in the expense reimbursement
arrangements for the Fund.
NEW INVESTMENT ADVISORY AGREEMENTS (PROPOSAL 1)
Columbia currently serves as investment adviser to each Colonial Closed-End
Fund. Upon the Closing, MFS will become the investment adviser to each Colonial
Closed-End Fund pursuant to a new investment advisory agreement. The proposed
investment advisory agreement with MFS for the Fund has similar terms and the
same contractual fee rates as the corresponding investment advisory agreement
for the Fund with Columbia, although MFS has advised the Board that it intends
to terminate the expense reimbursement arrangement for Colonial Insured
Municipal Fund, as described more fully below in the section captioned "Expense
Reimbursement Arrangements". Although the contractual fee rates will not change,
the calculation methodology will change and may cause the amount of investment
advisory fees payable by the Fund to increase. If approved by shareholders, the
new investment advisory agreement with MFS will become effective, and the
existing investment advisory agreement with Columbia will terminate, upon the
Closing. If some but not all Colonial Closed-End Funds approve the new
investment advisory agreements, then the Closing may or may not occur with
respect to the Fund, at the option of MFS and Columbia.
NEW DECLARATIONS OF TRUST (PROPOSAL 2)
In connection with the Sale, MFS has proposed, and the Board has agreed, to
recommend to shareholders an amended and restated declaration of trust for the
Fund that will conform to the form of declaration of trust generally in effect
for the other registered closed-end investment companies managed by MFS. If the
Sale does not close for any reason, the Fund's existing agreement and
declaration of trust will remain in effect.
5
ELECTION OF TRUSTEES (PROPOSALS 3 AND 4)
In connection with the Sale, the Board has recommended that shareholders elect
new trustees to take office upon the Closing. The proposed nominees set forth in
Proposal 3 are trustees of other registered investment companies managed by MFS.
If the Sale closes, the existing trustees and officers have indicated that they
will resign effective upon the Closing.
If the Sale does not close for any reason, the current trustees of the Fund have
indicated that they would not resign. The Board has recommended that
shareholders re-elect those current trustees whose terms expire at the Meeting.
The current trustees (including the trustees proposed for re-election) have
consented to serve as currently constituted during the period between the
Meeting and the Closing, and to serve as currently constituted in the event the
Sale does not close.
VOTING RIGHTS
Shareholders of the Fund at the close of business on the Record Date will be
entitled to be present and to give voting instructions at the Meeting with
respect to their shares owned as of the Record Date. Shareholders of the Fund
will be entitled to cast one vote on each Proposal and on each other matter on
which they are entitled to vote at the Meeting for each share owned on the
Record Date. Shareholders of common shares of the Fund will also be entitled to
cast a proportionate fractional vote on each Proposal and on each other matter
on which they are entitled to vote at the Meeting for each fractional common
share owned on the Record Date. As of the Record Date, the Fund had
4,252,858.6670 common shares, 1,492 preferred shares and 4,254,350.6670 total
shares outstanding, which in each case equals the number of votes to which the
shareholders of such class of the Fund are entitled.
Votes cast in person or by proxy at the Meeting will be counted by persons
appointed by the Fund as tellers for the Meeting (the "Tellers"). Thirty percent
(30%) of the shares of the Fund outstanding on the Record Date and entitled to
vote, present at the Meeting in person or represented by proxy, constitutes a
quorum for the transaction of business by the shareholders of the Fund.
If a quorum for the Fund is not present at the Meeting, or if a quorum is
present but sufficient votes to approve a Proposal on which the Fund's
shareholders are voting have not been received, or for any other reason deemed
appropriate by the persons named as proxies, the persons named as proxies may
propose one or more adjournments of the Meeting as to the Fund to permit further
solicitation of proxies. Any adjournment will require the affirmative vote of a
majority of the shares of the Fund present at the Meeting in person or
represented by proxy. If an adjournment is proposed with respect to one or more
Proposals for the Fund, the persons named as proxies will vote all proxies that
they are entitled to vote for each such Proposal FOR such an adjournment and
will vote any proxies that they are required to vote against each such Proposal
AGAINST such an adjournment. The Meeting also may be postponed by the Board.
The Fund expects that, before the Meeting, broker-dealer firms holding shares of
the Fund in "street name" for their customers will request voting instructions
from their customers and beneficial owners. If those instructions are not
received by the date specified by the broker-dealer firm, the Fund understands
that the broker-dealers that are members of the New York Stock Exchange may not
be able to vote on certain items to be considered at the Meeting on behalf of
their customers and beneficial owners under the rules of the New York Stock
Exchange. In determining whether a quorum is present, the Tellers will count
shares represented by proxies that reflect abstentions and "broker non-votes" as
shares that are present and entitled to vote. Because these shares will be
counted as present, but not as voting in favor of any Proposal, for purposes
other than adjournment, these shares will have the same effect as if they cast
votes against the Proposal. "Broker non-votes" are shares held by brokers or
nominees as to which (i) the broker or nominee does not have discretionary
voting power and (ii) the broker or nominee has not received instructions from
the beneficial owner or other person who is entitled to instruct how the shares
will be voted.
6
BENEFICIAL OWNERS
Appendix A to this proxy statement lists the persons that, to the knowledge of
the Fund, owned beneficially 5% or more of the outstanding shares of any class
of the Fund as of the Record Date. A shareholder who owns beneficially, directly
or indirectly, more than 25% of the Fund's voting securities may be deemed a
"control person" (as defined in the 1940 Act) of the Fund. The trustees and
officers of the Fund, in the aggregate, owned less than 1% of the Fund's
outstanding shares as of the Record Date. The Fund is aware of no arrangements
other than those disclosed herein the operation of which at a subsequent date
may result in a change in control of the Fund.
EXPENSES
The expenses incurred in connection with the solicitation of proxies for the
Meeting, including preparation, filing, printing, mailing and solicitation
expenses, legal fees, out-of-pocket expenses and expenses of any proxy
solicitation firm, will be paid by Columbia pursuant to the terms of the Asset
Purchase Agreement, and not by the Fund.
SHAREHOLDER REPORTS
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL REPORT
AND, IF APPLICABLE, ITS MOST RECENT SEMIANNUAL REPORT SUBSEQUENT TO SUCH ANNUAL
REPORT, TO ITS SHAREHOLDERS ON REQUEST. REQUESTS FOR A REPORT SHOULD BE DIRECTED
TO THE FUND BY MAIL TO ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111-2621,
BY CALLING 1-800-730-6001 OR BY VISITING
WWW.COLUMBIAMANAGEMENT.COM/COLONIALFUNDS/HOME.HTM.
7
PROPOSAL 1
TO APPROVE A NEW INVESTMENT ADVISORY AGREEMENT WITH MFS
BACKGROUND
As discussed above, Columbia and MFS have entered into an Asset Purchase
Agreement pursuant to which Columbia will sell certain assets used in its
business of managing the Colonial Closed-End Funds to MFS. Accordingly,
shareholders of the Fund are being asked to approve a new investment advisory
agreement (a "New Advisory Agreement") between MFS and the Fund. If this
Proposal 1 is approved by shareholders of all Colonial Closed-End Funds, and if
certain other conditions to the Closing are satisfied or waived, it is
anticipated that the Closing will occur in [[July]] 2007. If this Proposal 1 is
approved by some, but not all, Colonial Closed-End Funds, or other closing
conditions are not satisfied, then the Closing may or may not occur with respect
to the Fund, at the option of MFS and/or Columbia. Upon the Closing, the
investment advisory agreement currently in place between Columbia and the Fund
(the "Current Advisory Agreement") will terminate, and the New Advisory
Agreement between MFS and the Fund will take effect.
At a meeting held on April 10, 2007, the Board, including the trustees who are
not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the
Fund (collectively, the "Independent Trustees"), approved each New Advisory
Agreement by unanimous vote, subject to shareholder approval. A description of
the New Advisory Agreement is provided below under the caption "The New Advisory
Agreement." In addition, a summary of the considerations of the Board with
respect to the New Advisory Agreement is provided below under the caption "Board
Considerations."
THE CURRENT ADVISORY AGREEMENT
As stated above, the Fund currently is party to an investment advisory agreement
with Columbia which was continued most recently at the Board's October 2006
meeting. The table below sets forth the date of the Current Advisory Agreement,
the date on which it was last submitted to a vote of shareholders of the Fund
and the purpose of such submission.
FUND DATE OF AGREEMENT DATE OF SHAREHOLDER VOTE PURPOSE
---- ----------------- ------------------------ --------------------
Colonial Insured Municipal Fund November 1, 2001 September 26, 2001 Change of control of
adviser
The table below sets forth the aggregate amount of the investment advisory fees
paid by the Fund to Columbia, the aggregate amount of any other material
payments by the Fund to Columbia and/or its affiliates and the purpose of any
such payments for the fiscal year ended November 30, 2006.
INVESTMENT ADVISORY PURPOSE OF OTHER
FUND FEES OTHER MATERIAL PAYMENTS PAYMENTS
---- ------------------- ----------------------- ---------------------
Colonial Insured Municipal Fund $36,835 $6,514 Pricing & bookkeeping
fees
THE NEW ADVISORY AGREEMENT
Under the New Advisory Agreement for the Fund, MFS will, among other things: (i)
continuously furnish an investment program for the Fund; (ii) exercise voting
rights, rights to consent to corporate actions and other similar rights with
regard to the Fund's portfolio securities; (iii) place orders for the purchase,
sale and exchange of securities for the accounts of the Fund; and (iv) enter
into subadvisory contracts, if appropriate.
Under the New Advisory Agreement for the Fund, MFS will furnish at its own
expense investment advisory and administrative services, office space,
certain necessary equipment and clerical personnel, investment advisory
facilities and executive and supervisory personnel. The Fund will be responsible
for all expenses not specifically borne by MFS under the New Advisory Agreement,
including: expenses relating to the issuance of shares of the Fund; compensation
of trustees not affiliated with MFS; Investment Company Institute membership
dues allocable to the Fund; governmental fees, interest charges and taxes; fees
and expenses of independent auditors, legal counsel, and transfer, registrar or
dividend disbursing agents of the Fund; expenses of repurchasing and redeeming
shares and servicing shareholder accounts; expenses of preparing, printing and
mailing stock certificates, shareholder reports,
8
notices, proxy statements, and reports to government officers and commissions;
brokerage and other execution, recording and settlement expenses; insurance
premiums; custodian fees and expenses; expenses of calculating the net asset
value of shares of the Fund; organizational and start up costs; non-recurring
and extraordinary expenses, including those relating to actions involving the
Fund and indemnification of the Fund's trustees and officers with respect
thereto; and expenses relating to the issuance, registration and qualification
of shares of the Fund and, generally, the preparation, printing and mailing of
prospectuses for such purposes.
The form of the New Advisory Agreement for the Fund is attached to this proxy
statement in Appendix B, and the description set forth in this proxy statement
of the form of the New Advisory Agreement is qualified in its entirety by
reference to Appendix B.
Under the New Advisory Agreement, MFS will be entitled to compensation at the
same contractual rates as under the corresponding Current Advisory Agreement.
The New Advisory Agreement provides that compensation is calculated as a
percentage of average daily net assets, rather than as a percentage of average
weekly net assets, as in the Current Advisory Agreement. This change in
calculation methodology is meant to conform the New Advisory Agreement to
advisory agreements for other funds managed by MFS. This change may cause the
amount of investment advisory fees payable by the Funds to increase. MFS also
has advised the Board that it will continue the management fee waiver
arrangement currently in place for the Fund. The table below sets forth for the
Fund the annual contractual investment advisory fee rate as a percentage of
average weekly net assets(1) and the annual rate of such fee after Columbia's
waiver of investment advisory fees, if any, for the fiscal year ended November
30, 2006:
ADVISORY FEE
FUND CONTRACTUAL ADVISORY FEE (NET OF WAIVER)
---- ------------------------ ---------------
Colonial Insured Municipal Fund 0.65% 0.45%(2)
(1). Average weekly net assets include assets attributable to municipal auction
rate cumulative preferred shares for Funds that have such shares
outstanding.
(2). 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
Colonial Insured Municipal Fund's investment advisory fee will not exceed
the annual rates of 0.50%, 0.55% and 0.60%, respectively. MFS has advised
the Board that it will continue this management fee waiver arrangement.
The table below sets forth the total advisory fees (net of waiver) paid by the
Fund to Columbia pursuant to its Current Advisory Agreement during the fiscal
year ended November 30, 2006, the total advisory fees (net of waiver) that would
have been paid by the Fund to MFS pursuant to the New Advisory Agreement, and
the percentage difference between the two.
TOTAL INVESTMENT ADVISORY FEES:
----------------------------------------
ACTUALLY PAID UNDER ESTIMATED PAYABLE
CURRENT ADVISORY UNDER NEW ADVISORY
FUND AGREEMENT AGREEMENT PERCENTAGE CHANGE
---- ------------------- ------------------ -----------------
Colonial Insured Municipal Fund $36,835 $36,835 0%
The New Advisory Agreement will continue in effect for a period of two years
from its effective date, on which date it will terminate unless its continuance
is "specifically approved at least annually" (i) by the vote of a majority of
the Independent Trustees of the Fund at a meeting specifically called for the
purpose of voting on such approval, and (ii) by the Board or by the "vote of a
majority of the outstanding voting securities" of the Fund.
The New Advisory Agreement generally provides that it may be terminated at any
time, without penalty, by the Board or by the "vote of a majority of the
outstanding voting securities" of the Fund, or by MFS, in each case on not more
than 60 days' nor less than 30 days' written notice to the other party. The New
Advisory Agreement also shall automatically terminate in the event of its
"assignment". The New Advisory Agreement may be amended with respect to the Fund
only if such amendment is in writing signed by or on behalf of the Fund and MFS
and is approved by the "vote of a majority of the outstanding voting securities"
of the Fund (if such shareholder approval is required by the 1940 Act).
As used herein, the terms "specifically approved at least annually," "vote of a
majority of the outstanding securities" and "assignment" are used with the
meanings thereof contemplated by the 1940 Act.
9
Like the Current Advisory Agreement with respect to Columbia, the New Advisory
Agreement provides that in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of duties and obligations on the part of MFS,
MFS shall not be liable for any error of judgment or mistake of law, for any
loss arising out of any investment or for any act or omission in the execution
and management of the Fund.
EXPENSE REIMBURSEMENT ARRANGEMENT
Columbia has agreed to reimburse the Fund if its operating expenses (excluding
advisory fees, brokerage commissions, interest, taxes and extraordinary
expenses) exceed 0.20% annually of its average weekly net assets, including
assets attributable to municipal auction rate cumulative preferred shares. If
the Sale closes, MFS has advised the Board that it will terminate that expense
reimbursement arrangement and agree to reimburse the Fund if its total operating
expenses (excluding taxes, brokerage and transaction costs, currency conversion
costs, extraordinary expenses, expenses associated with the Fund's investing
activities and preferred shares remarketing fees) exceed 0.70% and 0.75%
annually of its average daily net assets, including assets attributable to
municipal auction rate cumulative preferred shares, for the years ending
November 30, 2007 and November 30, 2008, respectively. The current and
estimated expense ratios for the Fund are set forth in the table below under the
caption "New Administrative Services Agreement."
NEW ADMINISTRATIVE SERVICES AGREEMENT
If shareholders approve this Proposal 1 and the Closing occurs, the Fund also
will enter into a new administrative services agreement (the "Administrative
Services Agreement") with MFS. Pursuant to the Administrative Services
Agreement, MFS will provide administrative services to the Fund, including but
not limited to the preparation of financial information and related reports and
the facilitation of audits thereof; the negotiation of contracts with service
providers regarding the computation of net asset value, offering price,
dividends, yields and other values, and the oversight thereof; the
administration and oversight of portfolio securities valuations; the arrangement
of organizational and registration matters; the preparation and filing of
regulatory filings, reports and related materials; the administration and
maintenance of certain compliance polices, procedures and programs, and the
monitoring thereof; the administration of shareholder meetings; the provision of
legal guidance; the preparation of materials for and the facilitation of board
and committee meetings; the printing, production and delivery of shareholder
communications and other documents; and various oversight functions. As
compensation for the provisions of such administrative services, the Fund will
pay to MFS a fee calculated as follows: (i) a fixed annual fee of $17,500 plus
(ii) an annual fee calculated as a percentage of the average daily net assets of
the Fund, as follows: 0.0000% of such assets up to $50,000,000, plus 0.0175% of
such assets in excess of $50,000,000 but less than or equal to $750,000,000,
plus 0.0170% of such assets in excess of $750,000,000 but less than or equal to
$1,500,000,000 plus 0.0165% of such assets in excess of $1,500,000,000 but less
than or equal to $2,500,000,000, plus 0.0120% of such assets in excess of
$2,500,000,000 but less than or equal to $4,000,000,000, plus 0.0000% of such
assets in excess of $4,000,000,000. Such fees are subject to a ceiling and a
floor each year calculated with respect to fees payable to MFS by all funds for
which MFS provides services pursuant to the Administrative Services Agreement
(which includes funds other than the Fund).
The table below sets forth the Fund's annual expense ratios for the year ended
November 30, 2006 (adjusted to reflect current fee waiver arrangements) and the
estimated pro forma annual expense ratios for the year ending November 30, 2007,
assuming the approval by shareholders of this Proposal 1 and the Closing of the
Sale.
Colonial Insured Municipal Fund
EXISTING ESTIMATED
-------- ---------
Management Fee 0.65% 0.65%
Administrative Fee -- 0.03%
Other Expenses 0.26% 0.12%(1)
----- -----
Total Operating Expenses 0.91% 0.80%
Less Waiver/Reimbursement (0.15)%(2) (0.15)%(3)
----- -----
Net Operating Expenses 0.76% 0.65%
----------
(1). Estimated other expenses shown are based on contractual rates for services
provided to other funds advised by MFS. Actual other expenses may differ
from estimated other expenses.
(2). Columbia agreed contractually to waive the management fee payable by the
Fund so that such management fee would not exceed 0.45%, 0.50%, 0.55% and
0.60% annually of average weekly net assets, including assets attributable
to municipal auction rate cumulative preferred shares, for the years ending
November 30, 2006, November 30, 2007, November 30, 2008 and November 30,
2009, respectively. The waiver shown in the table is the waiver applicable
for the year ending November 30, 2007. Columbia also agreed voluntarily to
reimburse the Fund for certain expenses so that total operating expenses
(exclusive of management fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) would not exceed 0.20% annually of average
weekly net assets, including assets applicable to preferred shares. If this
reimbursement arrangement were reflected
10
in the table, net operating expenses would be 0.70%. This reimbursement
arrangement may be terminated by Columbia at any time.
(3). MFS has agreed contractually to waive the management fee payable by the
Fund so that such management fee does not exceed 0.50%, 0.55% and 0.60% of
average daily net assets, including assets attributable to municipal
auction rate cumulative preferred shares, for the years ending November 30,
2007, November 30, 2008 and November 30, 2009, respectively. MFS also has
agreed voluntarily to reimburse the Fund for certain expenses so that total
operating expenses (excluding taxes, brokerage and transaction costs,
currency conversion costs, extraordinary expenses, expenses associated with
the Fund's investing activities and preferred shares remarketing fees)
would not exceed 0.70% and 0.75% annually of average daily net assets,
including assets attributable to municipal auction rate cumulative
preferred shares, for the years ending November 30, 2007 and November 30,
2008, respectively. MFS may terminate this reimbursement arrangement only
with the approval of the Fund's board.
The example expenses below show the expenses a shareholder would bear, on both a
current and an estimated basis, given an investment in the Fund, assuming that a
shareholders has a $1,000 investment, that the Fund returns 5% each year, that
the operating expenses set forth above remain the same throughout the indicated
periods and that all dividends and distributions are reinvested at net asset
value. The example expenses should not be considered a representation of future
expenses of the Fund; actual expenses may be greater or lesser than those shown.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
CURRENT $[[_____]] $[[_____]] $[[_____]] $[[_____]]
ESTIMATED $[[_____]] $[[_____]] $[[_____]] $[[_____]]
COVENANTS REGARDING CERTAIN LEGAL REQUIREMENTS UNDER THE 1940 ACT
MFS has made certain covenants regarding compliance with Section 15(f) of the
1940 Act, which provides in pertinent part that an investment adviser or any of
its affiliated persons may receive any amount or benefit in connection with
certain transactions, such as the Sale, involving an assignment of an investment
advisory agreement as long as two conditions are satisfied.
The first condition requires that no "unfair burden" may be imposed on the
investment company as a result of such transactions, or as a result of any
express or implied terms, conditions or understandings applicable to such
transactions. The term "unfair burden," as defined in the 1940 Act, includes any
arrangement during the two-year period after the change in control whereby the
investment adviser (or predecessor or successor investment adviser), or any
interested person of any such investment adviser, receives or is entitled to
receive any compensation, directly or indirectly, from such investment company
or its security holders (other than fees for bona fide investment advisory or
other services) or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of such investment company
(other than bona fide ordinary fees for principal underwriting services). No
such compensation arrangements are contemplated in the Sale. MFS has agreed with
Columbia to use its reasonable best efforts to ensure that neither the Sale nor
any terms, conditions or understandings applicable thereto will cause the
imposition of an "unfair burden" on the Fund.
The second condition requires that, during the three-year period immediately
following the closing of such transactions, at least 75% of the investment
company's board of trustees must not be "interested persons" (as defined in
Section 2(a)(19) of the 1940 Act) of the investment adviser or predecessor
investment adviser. The Board currently satisfies, the Nominees (as hereinafter
defined), if elected, would satisfy, and MFS has agreed with Columbia to use its
reasonable best efforts to ensure continued satisfaction of, such 75%
requirement.
INFORMATION REGARDING MFS
MFS is registered as an investment adviser under the Investment Advisers Act of
1940, as amended. MFS offers a full spectrum of investment products to domestic
and international retail, business, and institutional investors. As of December
31, 2006, MFS had approximately $187 billion in assets under management. MFS
currently manages six closed-end funds. MFS' principal office address is 500
Boylston Street, Boston, MA 02116.
MFS currently manages one closed-end fund with investment objectives similar to
the Fund. The table below sets forth, for such fund, its net assets as of
October 31, 2006, its currently effective annual rate of management fee and any
currently effective management fee waivers.
FUND NAME NET ASSETS MANAGEMENT FEE MANAGEMENT FEE WAIVER
--------- ------------ -------------------------- ---------------------
MFS Municipal Income Trust $323,098,699 0.40% of average daily net None
assets plus 6.32% of gross
income
MFS's principal executive officers and directors and the principal occupation of
each are shown below. The address of each such principal executive officer and
director is c/o MFS Investment Management, 500 Boylston Street, Boston, MA
02116.
11
NAME PRINCIPAL OCCUPATION
---- --------------------
Donald Alexander Stewart Director, MFS; Chief Executive Officer, Sun Life Financial, Inc.
Martin Eric Beaulieu Executive Vice President, MFS
Robert James Manning Director, President, Chief Executive Officer and Chief Investment Officer, MFS
Robert Charles Pozen Director and Chairman, MFS
Maria Frances Dwyer Executive Vice President, Chief Regulatory Officer and Chief Compliance
Officer, MFS
Paul Thomas Kirwan Executive Vice President and Chief Financial Officer, MFS
Robin Ann Stelmach Executive Vice President and Chief Operations Officer, MFS
Thomas A. Bogart Director, MFS; Executive Vice President and Chief Legal Officer, Sun Life
Financial, Inc.
Mark Neil Polebaum Executive Vice President, General Counsel and Secretary, MFS
MFS' Parents are shown below, along with their bases of control of MFS. For
purposes of this proxy statement, the term "Parent" has the meaning ascribed to
it in Item 22(a)(1)(ix) of Rule 14a-101 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
PARENT BASIS OF CONTROL IMMEDIATE PARENT BASIS OF CONTROL
------ ---------------- -------------------------- --------------------
Sun Life Financial Inc. Shareholder Sun Life Financial Corp. Shareholder
Sun Life Financial Corp. Indirect Owner Sun Life Assurance Company Shareholder
of Canada - U.S.
Operations Holdings, Inc.
Sun Life Assurance Company of Indirect Owner Sun Life Financial (U.S.) Shareholder
Canada - U.S. Operations Holdings, Inc.
Holdings, Inc.
Sun Life Financial (U.S.) Indirect Owner Sun Life Financial (U.S.) Shareholder
Holdings, Inc. Investments LLC
Sun Life Financial (U.S.) Indirect Owner Sun Life of Canada (U.S.) Holder of Membership
Investments LLC Financial Services Interests
Holdings, Inc.
Sun Life of Canada (U.S.) Indirect Owner N/A N/A
Financial Services Holdings,
Inc.
MFS has advised the Board that no person not listed in the table above holds 10%
or more of the securities of MFS.
[[No current officer or trustee of the Fund is an officer, employee, director or
shareholder of MFS. No current officer or trustee of the Fund has any material
interest in MFS. No current trustee of the Fund has any material interest in any
transaction with MFS or any Parent of MFS.]]
MFS has advised the Board that it has no financial condition that could impair
its ability to fulfill its obligations under the New Advisory Agreement.
Please see the section captioned "Arrangements for Selection as Nominee" in
Appendix E hereto for information regarding any arrangements or understandings
made in connection with the proposed New Advisory Agreement with respect to the
composition of the Board after the Closing.
BOARD CONSIDERATIONS
The Advisory Fees and Expenses Committee of the Board reviewed the New Advisory
Agreement and determined to recommend that the full Board approve that
agreement.
The Board received and reviewed all materials that they, their legal counsel or
MFS, the Fund's proposed investment adviser, believed to be reasonably necessary
for the Board to evaluate and to determine whether to approve the New Advisory
Agreement. Those materials included, among other items, (i) information on the
investment performance of funds advised by MFS relative to the performance of
peer groups and performance benchmarks, (ii) information on the Fund's
anticipated investment advisory fees and other expenses, including information
about anticipated expense caps and fee waivers, (iii) information about the
anticipated profitability of the New Advisory Agreement to MFS, and potential
"fall-out" or ancillary benefits that MFS and its affiliates may
12
receive as a result of their relationships with the Fund and (iv) additional
information provided by MFS in response to a request of independent legal
counsel to the Independent Trustees. The Board also considered other information
such as (v) MFS' financial condition, (vi) the Fund's investment objective and
strategies and the size, education and experience of the portfolio management
staff MFS proposes to manage the Fund, (vii) the anticipated use by MFS of
"soft" commission dollars to pay for research products and services, and (viii)
MFS' resources to be devoted to the Fund's investment policies and restrictions,
and MFS' policies on personal securities transactions and other compliance
policies. The Board had the opportunity to ask questions of, and to request
additional materials from, MFS and to consult in executive session independent
legal counsel to the Independent Trustees.
In considering whether to approve the New Advisory Agreement, the Board,
including the Independent Trustees, did not identify any single factor as
determinative, and each trustee weighed various factors as he or she deemed
appropriate. The Board considered the following matters in connection with their
approval of the New Advisory Agreement:
The nature, extent and quality of the services to be provided to the Fund under
the New Advisory Agreement. The Board considered the nature, extent and quality
of the services to be provided by MFS and its affiliates to the Fund and the
resources to be dedicated to the Fund by MFS and its affiliates. Among other
things, the Board considered (i) MFS's ability, including its resources,
compensation programs for personnel involved in portfolio management, reputation
and other attributes, to attract and retain highly qualified research,
investment advisory and supervisory investment professionals; (ii) the portfolio
management services to be provided by those investment professionals; and (iii)
how those services compared to the services provided under the Current Advisory
Agreement. After reviewing the above and related factors, the Board concluded,
within the context of its overall conclusions regarding the New Advisory
Agreement, that the nature, extent and quality of services provided supported
the approval of the New Advisory Agreement.
Investment performance of funds advised by MFS. The Board reviewed information
about the performance of various funds advised by MFS over various time periods,
including information prepared by MFS that compared the performance of each Fund
to the performance of peer groups and performance benchmarks. The Board also
considered MFS' reputation generally and MFS' commitment to the business of
managing closed-end funds, including its experience managing the six closed-end
funds currently managed by MFS. After reviewing the above and related factors,
the Board concluded, within the context of its overall conclusions regarding the
New Advisory Agreement, that the performance of MFS was sufficient, in light of
other considerations, to warrant the approval of the New Advisory Agreement.
The costs of the services to be provided and the profits to be realized by MFS
and its affiliates from their relationships with the Fund. The Board considered
the fees to be charged to the Fund for investment advisory services as well as
the anticipated total expense levels of the Fund. That information included
information about the investment advisory fees charged by MFS to comparable
accounts. In evaluating the Fund's anticipated investment advisory fees, the
Board took into account the fact that the investment advisory fees included in
the New Advisory Agreement were the same as those included in the Current
Advisory Agreement. The Board also took into account the demands and complexity
of the investment management of the Fund. The Board considered the expense
reductions that MFS anticipated would result from the shift to the group of
service providers currently employed for transfer agency, fund accounting and
custody services by funds advised by MFS.
The Board also considered the compensation to be received directly or indirectly
by MFS and its affiliates from their relationships with the Fund. The Board
reviewed information provided by MFS regarding the estimated profitability to
MFS and its affiliates of their relationships with the Fund, and information
about the allocation of expenses used to calculate profitability. When reviewing
profitability, the Board also considered court cases in which investment adviser
profitability was an issue in whole or in part, the performance of funds advised
by MFS, the anticipated expense levels of the Fund and the extent to which MFS
would implement expense caps for the Fund. After reviewing the foregoing and
related factors, the Board concluded, within the context of its overall
conclusions regarding each of the New Advisory Agreement, that the investment
advisory fees to be charged to the Fund were fair and reasonable, and that the
anticipated costs of the investment advisory services generally, and the related
13
anticipated profitability to MFS and its affiliates of their relationships with
the Fund, supported the approval of the New Advisory Agreement.
Economies of Scale. The Board considered the potential existence of economies of
scale in the provision of services by MFS to the Fund and whether those
economies would be shared with the Fund through breakpoints in the investment
advisory fees or other means, such as expense caps. The Board noted that the
Fund benefited from fee waivers and expense caps prior to the Sale, and that it
was expected to continue to so benefit. In considering the issues above, the
Board also took note of the expected profitability to MFS and its affiliates of
their proposed relationships with the Fund, as discussed above. After reviewing
the above and related factors, the Board concluded, within the context of its
overall conclusions regarding the New Advisory Agreement, that the extent to
which economies of scale were expected to be shared with the Fund supported the
approval of the New Advisory Agreement.
Other Factors. The Board also considered other factors, which included but were
not limited to the following:
- the compliance programs of MFS and the compliance-related resources
that MFS and its affiliates would provide to the Fund.
- the nature, quality, estimated cost and extent of administrative and
shareholder services to be performed by MFS and its affiliates, both
under the New Advisory Agreement and under separate agreements for the
provision of administrative services.
- so-called "fall-out benefits" to MFS, such as the engagement of its
affiliates to provide services to the Fund, as well as possible
conflicts of interest associated with those fall-out and other
benefits.
Based on its evaluation of all factors that it deemed to be material, including
those factors described above, and assisted by the advice of independent
counsel, the Board, including all of the Independent Trustees, approved the New
Advisory Agreement.
REQUIRED VOTE AND RECOMMENDATION
Approval of a New Advisory Agreement on behalf of the Fund requires the
affirmative vote of a "majority of the outstanding voting securities" of the
Fund, which for this purpose means the affirmative vote of the lesser of (i)
more than 50% of the outstanding shares of the Fund or (ii) 67% or more of the
shares of the Fund present at the Meeting if more than 50% of the outstanding
shares of the Fund are present at the Meeting in person or represented by proxy.
Holders of municipal auction rate cumulative preferred shares ("Preferred
Shares") and holders of common shares of beneficial interest ("Common Shares")
vote together as a single class on this Proposal 1.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, HAS CONCLUDED THAT PROPOSAL 1 IS
IN THE BEST INTERESTS OF SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" PROPOSAL 1.
14
PROPOSAL 2
TO APPROVE AN AMENDED AND RESTATED DECLARATION OF TRUST
The Fund, like other investment companies, is subject to comprehensive federal
laws and regulations (in particular, to the 1940 Act) and to state laws. The
Fund is subject to Massachusetts law because the Fund is a Massachusetts
business trust. Under Massachusetts law, a business trust generally operates
under an organizational document, usually called declaration of trust, which
sets forth various provisions relating primarily to the authority and governance
of the business trust. The Fund currently operates under its own agreement and
declaration of trust (the "Current Declaration").
The Board recommends that shareholders of the Fund vote to approve an Amended
and Restated Declaration of Trust for the Fund (the "Revised Declaration") if
Proposal 1 is approved. The Board believes that, if the New Advisory Agreement
for the Fund referenced in Proposal 1 is approved and the Sale closes, in order
to increase the efficiency of administration of the Fund by MFS, it is in the
best interests of shareholders to conform the Current Declaration of the Fund to
the form of declaration of trust used for other closed-end funds advised by MFS.
Adoption of a Revised Declaration for the Fund will not alter the Fund's current
investments or investment policies.
A description of the material differences between the Current Declaration and
the form of proposed Revised Declaration is set forth in Appendix C.
If Proposal 1 and this Proposal 2 are approved by the shareholders of the Fund,
the Revised Declaration will become effective when a majority of the trustees of
the Fund has signed the Revised Declaration. The Fund currently anticipates
that, if the requisite shareholder approvals are obtained and if the Closing
occurs, the Revised Declaration for the Fund will become effective immediately
after the Closing.
The foregoing discussion and the summary set forth in Appendix C hereto are
qualified in their entireties by reference to the form of Revised Declaration,
which is attached hereto in Appendix D.
MFS has indicated that it intends, following the Closing, to propose to the
trustees of the Fund that the bylaws of the Fund be amended to conform them more
closely to the bylaws of the other closed-end funds advised by MFS. Unlike the
Current Declarations, the proposed form of Revised Declaration does not address
quorum requirements for shareholder meetings. MFS has advised the Board that the
amended bylaws of the Fund will address quorum requirements for shareholder
meetings. MFS has also advised the Board that the Fund's quorum for shareholder
meetings will not change upon Closing.
REQUIRED VOTE AND BOARD RECOMMENDATION
Approval of the Revised Declaration requires (i) the affirmative vote of at
least [[66 2/3]]% of the Common Shares and Preferred Shares of the Fund entitled
to vote, voting together as a single class, and (ii) the affirmative vote of at
least [[a majority]] of the Preferred Shares outstanding on the Record Date. If
the shareholders of the Fund fail to approve the Revised Declaration, or if the
Sale does not close, the Current Declaration will remain in effect. The Sale may
close even if the Revised Declaration is not approved by shareholders of the
Fund.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, HAS CONCLUDED THAT PROPOSAL 2 IS
IN THE BEST INTERESTS OF SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" PROPOSAL 2.
15
PROPOSAL 3
TO ELECT TRUSTEES IF PROPOSAL 1 IS APPROVED
BACKGROUND
The current trustees of the Fund have indicated that, if the New Advisory
Agreement referenced in Proposal 1 is approved and the Closing occurs, they will
resign in order to facilitate the oversight of the Fund by the same board of
trustees that currently oversees other funds advised by MFS. The current
trustees of the Fund believe that the interests of shareholders would most
efficiently and effectively be represented by trustees who are more familiar
with MFS and with the management and operation of other funds advised by MFS.
Messrs. Robert E. Butler, David H. Gunning, William R. Gutow, Michael Hegarty,
J. Atwood Ives, Robert J. Manning, Lawrence T. Perera, Robert C. Pozen, J. Dale
Sherratt and Robert W. Uek, Dr. Lawrence H. Cohn and Ms. Laurie J. Thomsen (each
a "Nominee" and collectively, the "Nominees"), each of whom has agreed to serve,
have been nominated for election as trustees of the Fund. The Nominees would
serve in accordance with the Revised Declaration (or, if Proposal 2 is not
approved by shareholders, the Current Declaration) and the bylaws of the Fund.
At a meeting held on April 10, 2007, the Board, including the Independent
Trustees, nominated each Nominee for election by shareholders of the Fund if
Proposal 1 is approved by shareholders and the Closing occurs. If, prior to the
Meeting, any Nominee refuses or becomes unable to serve, or becomes unavailable
for election, the persons named as proxies may vote the enclosed proxy for a
substitute nominee in their discretion.
The Board of the Fund has fixed the number of trustees for the Fund at twelve,
contingent upon approval by the shareholders of the Fund of Proposal 1 and the
occurrence of the Closing.
NOMINEES
The following ten Nominees are proposed for election by the holders of Common
Shares and Preferred Shares, voting together as a single class: Messrs. Butler,
Gunning, Gutow, Hegarty, Manning, Perera, Pozen, Sherratt and Uek and Dr. Cohn.
The following two Nominees are proposed for election by the holders of Preferred
Shares: Mr. Ives and Ms. Thomsen.
The Nominees, if elected, would be divided into three classes as follows, each
with a term expiring in the year indicated:
2008 2009 2010
---- ---- ----
Mr. Gutow Mr. Butler Dr. Cohn
Mr. Hegarty Mr. Gunning Mr. Manning
Mr. Ives Mr. Pozen Mr. Perera
Mr. Uek Mr. Sherratt Ms. Thomsen
The Nominees have advised the Board that, if elected, they would intend to
impose a mandatory retirement age of 73 years.
REQUIRED VOTE
The affirmative vote of a plurality of the holders of Common Shares and
Preferred Shares, voting together as a single class, present at the Meeting in
person or represented by proxy, is required for the election of each of Messrs.
Butler, Gunning, Gutow, Hegarty, Ives, Manning, Perera, Pozen, Sherratt and Uek
and Dr. Cohn, and the affirmative vote of a plurality of the holders of
Preferred Shares, present at the Meeting in person or represented by proxy, is
required for the election of each of Mr. Ives and Ms. Thomsen.
INFORMATION REGARDING NOMINEES
For information regarding the Nominees, please see Appendix E to this proxy
statement.
16
OWNERSHIP OF SHARES OF THE FUND BY NOMINEES
Appendix F to this proxy statement provides information, as of the Record Date,
regarding the beneficial ownership by the Nominees of equity securities in (a)
the Fund, (b) the Fund's "Family of Investment Companies" (as defined in Item
22(a)(1)(iv) of Rule 14a-101 under the Exchange Act), (c) an investment adviser
or principal underwriter of the Fund and (d) a person (other than a fund) in a
control relationship with an investment adviser or principal underwriter of the
Fund.
TRANSACTIONS IN SECURITIES OF MFS
None of the Nominees have purchased or sold any securities, in an amount
exceeding 1% of the outstanding securities, of MFS, its parent company or any
subsidiary of either.
LEGAL PROCEEDINGS
The Fund is aware of no material pending legal proceedings to which any Nominee
is a party adverse to the Fund or any affiliated person of the Fund, or in which
any Nominee has a material interest adverse to the Fund or to any affiliated
person of the Fund. The Fund further is aware of no legal proceedings involving
any Nominee that would be material to an evaluation of the ability or integrity
of any Nominee and that would require disclosure under Item 401(f) of Regulation
S-K under the Exchange Act.
PROPOSED COMMITTEES OF THE BOARD
The Nominees have indicated that if they are elected, they intend to organize
committees of the board as follows:
AUDIT COMMITTEE
The audit committee ("MFS Audit Committee") would oversee the accounting and
auditing procedures for the Fund and, among other things, would consider the
selection of independent accountants for the Fund and the scope of the audit,
and would consider the effect on the independence of those accountants of any
non-audit services such accountants provide to the Fund and any audit or
non-audit services such accountants provide to MFS and/or certain MFS
affiliates. The MFS Audit Committee also would be responsible for establishing
procedures for the receipt, retention and treatment of complaints received by
the Fund regarding accounting, internal accounting controls, or auditing matters
and the confidential, anonymous submission of concerns regarding questionable
Fund accounting matters by officers of the Fund and employees of the Fund's
investment advisers, administrators or any other providers of accounting-related
services to the Fund. If all of the Nominees are elected by shareholders, the
members of the MFS Audit Committee would be Ms. Thomsen and Messrs. Butler,
Gutow, Sherratt and Uek.
COMPLIANCE AND GOVERNANCE COMMITTEE
The compliance and governance committee ("MFS Compliance and Governance
Committee") would oversee the development and implementation of the Fund's
regulatory and fiduciary compliance policies, procedures and practices under the
1940 Act and other applicable laws and would oversee compliance policies of MFS
and certain other service providers as they relate to Fund activities. The chief
compliance officer would report directly to the MFS Compliance and Governance
Committee and would assist in carrying out its responsibilities. In addition,
the MFS Compliance and Governance Committee would advise and make
recommendations to the full board on matters concerning trustee practices and
recommendations concerning the functions and duties of the committees of the
board. If all of the Nominees are elected by shareholders, the members of the
MFS Compliance and Governance Committee would be Messrs. Butler, Gunning, Gutow
and Sherratt and Dr. Cohn.
CONTRACTS REVIEW COMMITTEE
The contracts review committee ("MFS Contracts Review Committee") would request,
review and consider the information deemed reasonably necessary to evaluate the
terms of the investment advisory agreements that the Fund proposes to renew or
continue, and would make its recommendations to the full board on these matters.
If all of the
17
Nominees are elected by shareholders, the members of the MFS Contracts Review
Committee would be Ms. Thomsen, Messrs. Butler, Gunning, Gutow, Hegarty, Ives,
Perera, Sherratt and Uek and Dr. Cohn.
NOMINATION AND COMPENSATION COMMITTEE
The nomination and compensation committee ("MFS Nomination and Compensation
Committee") would recommend qualified candidates to the full board in the event
that a position is vacated or created. The MFS Nomination and Compensation
Committee would consider recommendations by shareholders when a vacancy exists.
If Nominees are elected by shareholders and the Sale closes, shareholders
wishing to recommend candidates for trustee for consideration by the MFS
Nomination and Compensation Committee may do so by writing to the Fund's
secretary at the principal executive office of the Fund. Such recommendations
must be accompanied by biographical and occupational data on the candidate
(including whether the candidate would be an "interested person" of the Fund), a
written consent of the candidate to be named as a nominee and to serve as
trustee if elected, record and ownership information for the recommending
shareholder with respect to the Fund, and a description of any arrangements or
understandings regarding recommendation of the candidate for consideration. The
MFS Nomination and Compensation Committee also would be responsible for making
recommendations to the full board regarding any necessary standards or
qualifications for service on the board. The MFS Nomination and Compensation
Committee also would review and make recommendations to the full board regarding
compensation for the trustees who are not "interested persons" (as defined in
Section 2(a)(19) of the 1940 Act) of the Fund. If all of the Nominees are
elected by shareholders, the members of the MFS Nomination and Compensation
Committee would be Ms. Thomsen, Messrs. Butler, Gunning, Gutow, Hegarty, Ives,
Perera, Sherratt and Uek and Dr. Cohn.
PORTFOLIO TRADING AND MARKETING REVIEW COMMITTEE
The portfolio trading and marketing review committee ("MFS Portfolio Trading and
Marketing Review Committee") would oversee the policies, procedures and
practices of the Fund with respect to brokerage transactions involving portfolio
securities as those policies, procedures, and practices are carried out by MFS
and its affiliates. The MFS Portfolio Trading and Marketing Review Committee
also would oversee the administration of the Fund's proxy voting policies and
procedures by MFS. [[In addition, the committee would receive reports from MFS
regarding the policies, procedures and practices of MFS and its affiliates in
connection with their marketing of shares of the MFS funds.]] If all of the
Nominees are elected by shareholders, the members of the MFS Portfolio Trading
and Marketing Review Committee would be Messrs. Gunning, Hegarty and Perera and
Dr. Cohn.
PRICING COMMITTEE
The pricing committee ("MFS Pricing Committee") would oversee the determination
of the value of the portfolio securities and other assets held by the Fund and
would determine or cause to be determined the fair value of securities and
assets for which market quotations are not "readily available" in accordance
with the 1940 Act. The MFS Pricing Committee would delegate primary
responsibility for carrying out these functions to MFS and MFS' internal
valuation committee pursuant to pricing policies and procedures approved by the
committee and adopted by the full board, which would include methodologies to be
followed by MFS to determine the fair values of portfolio securities and other
assets held by the Fund for which market quotations are not readily available.
The MFS Pricing Committee would meet periodically with the members of MFS'
internal valuation committee to review and assess the quality of fair valuation
and other pricing determinations made pursuant to the Fund's pricing policies
and procedures, and to review and assess the policies and procedures themselves.
If all of the Nominees are elected by shareholders, the members of the MFS
Pricing Committee would be Ms. Thomsen and Messrs. Hegarty, Perera and Uek.
SERVICES CONTRACTS COMMITTEE
The services contracts committee ("MFS Services Contracts Committee") would
review and evaluate the contractual arrangements of the Fund relating to
transfer agency, administrative, custody, pricing and bookkeeping services and
the lending of portfolio securities, and would make recommendations to the full
board on these matters. If all of the Nominees are elected by shareholders, the
members of the MFS Services Contracts Committee would be Ms. Thomsen and Messrs.
Gunning, Sherratt and Uek.
18
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, HAS CONCLUDED THAT THE ELECTION
OF EACH NOMINEE AS A TRUSTEE OF THE FUND IF PROPOSAL 1 IS APPROVED BY
SHAREHOLDERS AND THE CLOSING OCCURS IS IN THE BEST INTERESTS OF SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF ALL NOMINEES.
19
PROPOSAL 4
TO ELECT TRUSTEES
COLONIAL INSURED MUNICIPAL FUND
BACKGROUND
The Board of the Fund has fixed the number of trustees for the Fund at ten. As
noted above, the Board of the Fund has approved increasing the number of
trustees of the Fund to twelve, provided that Proposal 1 is approved by
shareholders and that the Closing occurs.
Trustees are divided into three classes, each having a term of three years, with
the term of each class expiring in a different year. Generally, trustees are
elected by the holders of Common Shares and the holders of Preferred Shares,
voting together as a single class. However, for the Fund, the holders of
Preferred Shares, voting separately, are entitled to vote for two trustees. The
class to which you are electing trustees and the term of such class are set
forth below.
The Board, including all Independent Trustees, has nominated the nominees set
forth below for election by shareholders, each to serve for the term set forth
below, unless Proposal 1 is approved by shareholders and the Closing occurs.
Each nominee has agreed to serve as a trustee of the Fund if elected. If, prior
to the Meeting, any nominee refuses or becomes unable to serve, or becomes
unavailable for election, the persons named as proxies may vote for a substitute
nominee in their discretion. Under the terms of the Fund's retirement policy,
the trustees have a mandatory retirement age of 72 years, which might cause a
trustee to retire before the end of his or her stated term. In particular, Mr.
Stitzel, Mr. Lowry and Mr. Theobald are expected to retire in April 2008, June
2008 and June 2009, respectively. Each current trustee of the Fund, including
each nominee set forth in this Proposal 4, has indicated his or her intention to
resign, effective at the Closing, if Proposal 1 is approved by shareholders and
the Closing occurs.
COLONIAL INSURED MUNICIPAL FUND
Messrs. Neuhauser and Theobald and Ms. Verville are proposed for election as
trustees of the Fund and are to be elected by the holders of Common Shares and
Preferred Shares, voting together as a single class. If elected, Messrs.
Neuhauser and Theobald and Ms. Verville each will serve for three years or until
a successor is elected. Messrs. Hacker and Stitzel are proposed for election as
trustees of the Fund and are to be elected separately by the holders of
Preferred Shares. If elected, Messrs. Hacker and Stitzel each will serve for one
year or until his successor is elected.
If each of the nominees set forth in the immediately preceding paragraph is
elected by shareholders, the Board will be divided into the following three
classes, each with a term expiring in the year indicated:
2008 2009 2010
---- ---- ----
Mr. Hacker Mr. Lowry Mr. Neuhauser
Ms. Kelly Mr. Mayer Mr. Theobald
Mr. Simpson Mr. Nelson Ms. Verville
Mr. Stitzel
REQUIRED VOTE
With respect to the election of Messrs. Neuhauser and Theobald and Ms. Verville,
the affirmative vote of a plurality of the holders of Common Shares and
Preferred Shares, voting together as a single class, present at the Meeting in
person or represented by proxy, is required for the election of each such
nominee. With respect to the election of Messrs. Hacker and Stitzel, the
affirmative vote of a plurality of the holders of Preferred Shares, present at
the Meeting in person or represented by proxy, is required for the election of
each such nominee.
20
INFORMATION REGARDING TRUSTEES, NOMINEES AND OFFICERS
For information regarding the trustees and officers of the Fund and the nominees
set forth above, please see Appendix G to this proxy statement.
TRUSTEE AND OFFICER COMPENSATION
The trustees of the Fund also serve as trustees for certain other funds advised
by Columbia or its affiliates (the "Fund Complex"). For information regarding
the compensation of the trustees of the Fund, see Appendix H to this proxy
statement.
OWNERSHIP OF SHARES OF THE FUND BY TRUSTEES AND NOMINEES
Appendix I to this proxy statement provides information, as of the Record Date,
regarding the beneficial ownership by the trustees of the Fund and by the
nominees set forth in this Proposal 4 of equity securities in (a) the Fund, (b)
the Fund's "Family of Investment Companies" (as defined in Item 22(a)(1)(iv) of
Rule 14a-101 under the Exchange Act), (c) an investment adviser or principal
underwriter of the Fund and (d) a person (other than a fund) in a control
relationship with an investment adviser or principal underwriter of the Fund.
TRANSACTIONS IN SECURITIES OF COLUMBIA
No trustee or officer of the Fund has purchased or sold any securities, in an
amount exceeding 1% of the outstanding securities, of Columbia, its parent
company or any subsidiary of either.
LEGAL PROCEEDINGS
The Fund is aware of no material pending legal proceedings to which any nominee
set forth in this Proposal 4 is a party adverse to the Fund or any affiliated
person of the Fund, or in which any such nominee has a material interest adverse
to the Fund or to any affiliated person of the Fund. The Fund further is aware
of no legal proceedings involving any such nominee that would be material to an
evaluation of the ability or integrity of any such nominee and that would
require disclosure under Item 401(f) of Regulation S-K under the Exchange Act.
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, HAS CONCLUDED THAT THE ELECTION
OF EACH NOMINEE SET FORTH IN PROPOSAL 4 AS A TRUSTEE OF THE FUND IS IN THE BEST
INTERESTS OF SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
ELECTION OF ALL SUCH NOMINEES.
21
INFORMATION REGARDING THE BOARD
COMMITTEES OF THE BOARD
The Board is responsible for the overall management and supervision of the
Fund's affairs and for protecting the interests of the Fund's shareholders. The
Board has created several committees to perform specific functions on behalf of
the Fund. The members of each committee, a description of each committee's
functions and a table setting forth the number of meetings held by the Board and
each committee during the last fiscal year appear below.
AUDIT COMMITTEE
The Fund has an audit committee (the "Audit Committee") composed of only
Independent Trustees who meet the requirements for independence as set forth in
the listing standards of the New York Stock Exchange (the "NYSE") and the
American Stock Exchange (the "AMEX"). Each member of the Audit Committee must be
financially literate and at least one member must have prior accounting or
related financial management expertise. The Board has determined, in accordance
with applicable regulations of the NYSE and the AMEX, that each member of the
Audit Committee is financially literate and has prior accounting experience or
related financial management expertise. The current members of the Audit
Committee are Ms. Verville and Messrs. Hacker and Stitzel.
The Audit Committee adopted a revised written charter on February 10, 2004 which
sets forth the Audit Committee's structure, powers, duties and methods of
operation. A copy of the Audit Committee charter is available on the Fund's
website at www.columbiamanagement.com/ColonialFunds/Home.htm.
The Audit Committee serves as an independent and objective party to monitor the
Fund's accounting policies, financial reporting and internal control systems and
the work of the Fund's independent registered public accounting firm. The Audit
Committee also provides an open means of communication between the independent
registered public accounting firm, Columbia's internal accounting staff and the
Board. The principal functions of the Audit Committee are to assist Board
oversight of: (a) the integrity of the Fund's financial statements, (b) the
Fund's compliance with legal and regulatory requirements, (c) the independent
registered public accounting firm's qualifications and independence, (d) the
performance of Columbia's internal audit function and (e) the independent
registered public accounting firm. The Audit Committee has direct responsibility
for the appointment, compensation, retention and oversight of the work of the
independent registered public accounting firm (including resolution of financial
reporting disagreements between management and such independent registered
public accounting firm) for the purpose of preparing or issuing an audit report
or performing other review or attest services for the Fund.
GOVERNANCE COMMITTEE
The Fund has a governance committee (the "Governance Committee"). Messrs. Lowry,
Mayer, Simpson and Theobald are members of the Governance Committee of the Fund.
Messrs. Lowry, Simpson and Theobald are Independent Trustees who meet the
requirements for independence as set forth in the listing standards of the NYSE
and the AMEX. The Governance Committee performs the functions typically
performed by nominating and compensation committees. Among other things, members
of the Governance Committee who are Independent Trustees recommend to the Board
nominees for trustee and the Governance Committee recommends to the Board
nominees for appointment to various committees, performs periodic evaluations of
the effectiveness of the Board, reviews and recommends to the Board policies and
practices to be followed in carrying out the trustees' duties and
responsibilities and reviews and makes recommendations to the Board regarding
the compensation of the Independent Trustees. Members of the Governance
Committee who are Independent Trustees consider candidates for trustees
identified by any reasonable source, including current Independent Trustees,
Fund management, Fund shareholders and other persons or entities. On October 12,
2005 the Governance Committee adopted a written charter that sets forth the
Governance Committee's structure, duties, powers and methods of operation. A
copy of the Governance Committee charter was attached as Appendix F to the proxy
statement delivered to shareholders of the Fund in connection with the Fund's
annual meeting of shareholders held on May 24, 2006.
22
ADVISORY FEES AND EXPENSES COMMITTEE
The Fund has an advisory fees and expenses committee (the "Advisory Fees and
Expenses Committee"). The current members of the Advisory Fees and Expenses
Committee are Ms. Kelly and Messrs. Mayer, Nelson and Neuhauser. The Advisory
Fees and Expenses Committee's functions include reviewing and making
recommendations to the Board regarding contracts requiring the approval of a
majority of the Independent Trustees and regarding other contracts that may be
referred to it by the Board.
COMPLIANCE COMMITTEE
The Fund has a compliance committee (the "Compliance Committee"). The current
members of the Compliance Committee are Mses. Kelly and Verville and Messrs.
Nelson, Simpson and Stitzel. The Compliance Committee's functions include
providing oversight of the monitoring processes and controls of the Fund. The
Compliance Committee supervises legal and regulatory matters and internal rules,
policies, procedures and standards (other than those relating to accounting
matters) and oversees compliance by the Fund's investment adviser, principal
underwriter and transfer agent.
RECORD OF BOARD AND COMMITTEE MEETINGS
The Board and its committees held the following numbers of meetings during the
fiscal year ended November 30, 2006:
Board: 7
Audit Committee: 9
Governance Committee: 3
Advisory Fees and Expenses Committee: 7
Compliance Committee: 9
During the fiscal year ended November 30, 2006, each of the trustees attended
more than 75% of the meetings of the Board and of each committee of which such
trustee was a member. The Fund does not have a formal policy on trustee
attendance at the annual meetings of shareholders.
AUDIT COMMITTEE REPORT
At a meeting of the Audit Committee on January 18, 2007, the Audit Committee:
(i) reviewed and discussed with management the Fund's audited financial
statements for the most recently completed fiscal year and (ii) discussed with
PricewaterhouseCoopers LLP ("PwC"), the Fund's independent registered public
accounting firm, the matters required to be discussed by the American Institute
of Certified Public Accountants ("AICPA") Auditing Standards Board Statement on
Auditing Standards No. 61 and other professional standards and regulatory
requirements. At a meeting of the Audit Committee on February 6, 2007, the Audit
Committee obtained from PwC a formal written statement consistent with AICPA
Independence Standards Board Standard No. 1, describing all relationships
between PwC and the Fund that might bear on PwC's independence, discussed with
PwC any relationships that may affect its objectivity and independence, and
based on such statement and discussions, satisfied itself as to PwC's
independence. Based on its review and discussion, the Audit Committee
recommended to the Board that the audited financial statements for the Fund be
included in the Fund's annual report to shareholders.
Based on the recommendation from the Audit Committee and on its own review, the
Board selected PwC as the independent registered public accounting firm for the
Fund for the fiscal year ending November 30, 2007. Representatives of PwC are
not expected to be at the Meeting, but have been given the opportunity to make a
statement if they so desire and will be available should any matter arise
requiring their presence.
AUDIT COMMITTEE PRE-APPROVAL OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
SERVICES
The Audit Committee is required to pre-approve the engagement of the Fund's
independent registered public accounting firm to provide audit and non-audit
services to the Fund and non-audit services to the Fund's investment
23
adviser or any entity controlling, controlled by or under common control with
that investment adviser that provides ongoing services to the Fund (an "Adviser
Affiliate") if the engagement relates directly to the operations and financial
reporting of the Fund. The engagement may be entered into pursuant to
pre-approval policies and procedures established by the Audit Committee.
The Audit Committee has adopted a Policy for Engagement of Independent
Accountants for Audit and Non-Audit Services (the "Policy") for the pre-approval
of audit and non-audit services provided to the Fund and non-audit services
provided to the Fund's investment adviser and Adviser Affiliates if the
engagement relates directly to the operations or financial reporting of the
Fund. The Policy sets forth the procedures and conditions pursuant to which
services to be performed by the Fund's independent registered public accounting
firm are to be pre-approved. Unless a type of service receives general
pre-approval under the Policy, it requires specific pre-approval by the Audit
Committee if it is to be provided by the independent registered public
accounting firm. The Audit Committee may amend the Policy from time to time and
must review and approve the Policy at least annually.
The Policy provides for general pre-approval by the Audit Committee of certain:
(i) audit services to the Fund; (ii) audit-related services to the Fund; (iii)
tax services to the Fund; (iv) other services to the Fund; and (v) Fund-related
services to the Fund's investment adviser and its Adviser Affiliates. The Policy
requires the Fund treasurer and/or the director of board administration to
submit to the Audit Committee, at least annually, a schedule of the types of
services that are subject to general pre-approval. The schedule must provide a
description of each type of service that is subject to general pre-approval and,
where possible, will provide estimated fee caps for each instance of providing
each service. The general pre-approval and related fees relate to the fiscal
year of the Fund. At least annually, the Audit Committee will review and approve
the types of services and review the projected fees for the next fiscal year,
and may add to or subtract from the list of pre-approved services from time to
time. In addition to the fees for each individual service, the Audit Committee
has the authority to implement a fee cap on the aggregate amount of non-audit
services provided to the Fund. The fee amounts listed on the schedules will be
updated to the extent necessary at each regularly scheduled meeting of the Audit
Committee.
When specific pre-approval is required, management must submit a written request
to the Audit Committee detailing the proposed engagement and explaining the
purpose of using the independent registered public accounting firm for such
engagement. The Audit Committee reviews the request at its next regularly
scheduled meeting. In cases when the timing of the management request is
critical, the chairperson of the Audit Committee has the authority to approve
the request or to call a special meeting of the Audit Committee to consider the
request.
FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table sets forth the aggregate fees billed by PwC to the Fund for
the last two fiscal years for professional services rendered for (i) audit
services, including the audit of the Fund's financial statements and services
normally provided in connection with statutory and regulatory filings or
engagements for those fiscal years; (ii) audit-related services associated with
the review of the Fund's semi-annual financial statements and procedures
relating to reports required by rating agencies; (iii) tax services and,
primarily, reviews of Fund tax returns; and (iv) other services.
AUDIT AUDIT-RELATED TAX ALL OTHER
YEAR FEES FEES FEES FEES
---- ------- ------------- ------ ---------
Colonial Insured Municipal Fund 2006 $26,900 $13,730 $4,105 $0
2005 $24,148 $13,205 $3,363 $0
All of the audit fees, audit-related fees, tax fees and other fees billed by PwC
for services provided to the Fund for the fiscal years ended November 30, 2006
and November 30, 2005 were pre-approved by the Audit Committee. There were no
amounts that were approved by the Audit Committee pursuant to the de minimis
exception.
The aggregate amount of fees paid for non-audit services billed to the Fund, the
Fund's investment adviser and the Adviser Affiliates was $523,335 for the fiscal
year ended November 30, 2006 and $272,068 for the fiscal year ended November 30,
2005.
24
[[There were no amounts billed by PwC in the fiscal years ended November 30,
2006 and November 30, 2005 for audit-related services, tax services or other
services provided to the Fund's investment adviser or the Adviser Affiliates for
engagements that related directly to the operations or financial reporting of
the Fund.]]
The Audit Committee has determined that the provision of the services described
above to the Fund's investment adviser and the Adviser Affiliates is compatible
with maintaining the independence of PwC.
If Proposal 1 is approved by shareholders of the Fund and the Closing occurs, it
is anticipated that PwC will resign as the Fund's independent registered public
accounting firm due to independence issues. It is anticipated that the Fund will
engage Ernst & Young LLP as their independent registered public accounting firm.
Ernst & Young LLP currently is the independent registered public accounting firm
for other investment companies managed by MFS.
TRUSTEE NOMINATION PROCESS
The Board has adopted a policy relating to the consideration of candidates for
trustee proposed by shareholders. Under that policy as currently in effect,
members of the Governance Committee who are Independent Trustees consider, among
other things, whether prospective nominees have distinguished records in their
primary careers, personal and professional integrity and substantive knowledge
in areas important to the Board's operations, such as a background or education
in finance, auditing, securities law, the workings of the securities markets or
investment advice. For candidates to serve as Independent Trustees, independence
from the Fund's investment adviser, its affiliates and the Fund's other
principal service providers is critical, as is an independent and questioning
mind set. In each case, the members of the Governance Committee who are
Independent Trustees will evaluate whether a candidate is an "interested
person," as defined in Section 2(a)(19) of the 1940 Act, and "independent" under
the listing standards of the NYSE and the AMEX. Members of the Governance
Committee who are Independent Trustees also consider whether a prospective
candidate's workload would be consistent with regular attendance at Board
meetings and would allow him or her to be available for service on Board
committees and to devote the additional time and effort necessary to stay
apprised of Board matters and the rapidly changing regulatory environment in
which the Fund operates. Different substantive areas may assume greater or
lesser significance at particular times, in light of a Board's present
composition and its perceptions about future issues and needs.
Members of the Governance Committee who are Independent Trustees initially
evaluate prospective candidates on the basis of their resumes, considered in
light of the criteria discussed above. Those prospective candidates that appear
likely to be able to fill a significant need of the Board are contacted by a
member of the Governance Committee who is an Independent Trustee by telephone to
discuss the position. If there appears to be sufficient interest, an in-person
meeting with one or more of the members of the Governance Committee who are
Independent Trustees is arranged. If a member of the Governance Committee who is
an Independent Trustee, based on the results of such contacts, believes he or
she has identified a viable candidate, he or she airs the matter with the other
members of the Governance Committee who are Independent Trustees for input. Any
request by Fund management to meet with the prospective candidate is given
appropriate consideration. The Fund has not paid a fee to third parties to
assist in finding nominees.
Shareholders of the Fund who wish to nominate a candidate to the Board may send
information regarding prospective candidates to the Governance Committee, in
care of the Fund, at One Financial Center, Boston, Massachusetts 02111-2621. The
information should include evidence of the shareholders' Fund ownership, a full
listing of the proposed candidate's education, experience, current employment
and date of birth, the names and addresses of at least three professional
references, information as to whether the candidate is an "interested person"
under the 1940 Act and "independent" under the applicable NYSE or AMEX listing
standards and such other information as may be helpful to the members of the
Governance Committee who are Independent Trustees in evaluating the candidate.
All satisfactorily completed information packages regarding a candidate will be
forwarded to a member of the Governance Committee for consideration.
Recommendations for candidates will be evaluated in light of anticipated
vacancies and whether the number of trustees of the Fund is expected to be
increased. All nominations from Fund shareholders will be considered. There may
be times when the Governance Committee does not recruit new trustees. In such
case, shareholder recommendations are maintained on file pending the active
recruitment of trustees.
The foregoing policy is subject to change at any time by the Board.
25
CERTAIN RELATED TRANSACTIONS AND MANAGEMENT INDEBTEDNESS
[[There have been no transactions or series of similar transactions, since the
beginning of the Fund's last fiscal year, and there are no currently proposed
transactions, to which the Fund was or is to be a party, in which the amount
involved exceeded $120,000 and in which any officer of the Fund or any security
holder who is known by the Fund to own of record or beneficially more than 5% of
any class of the Fund's shares, or any member of the immediate family of any
such person, had or will have a direct or indirect material interest.]]
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
[[Section 16(a) of the Exchange Act requires the Fund's trustees and officers,
persons who own in excess of 10% of the Fund's outstanding shares and certain
officers and directors of the Fund's investment adviser (collectively, "Section
16 Reporting Persons") to file with the Securities and Exchange Commission (the
"Commission") initial reports of beneficial ownership and reports of changes in
beneficial ownership of shares of the Fund. Section 16 Reporting Persons are
required by Commission regulations to furnish the Fund with copies of all
Section 16(a) forms that they file. To the Fund's knowledge, based solely on a
review of the copies of such reports furnished to the Fund, and on
representations made, all Section 16 reporting persons complied with all Section
16(a) filing requirements applicable to them.]]
26
GENERAL INFORMATION
OTHER MATTERS TO COME BEFORE THE MEETING
Management of the Fund does not know of any matters to be presented at the
Meeting other than those described in this proxy statement. If other business
should properly come before the Meeting, the persons named as proxies will vote
thereon in accordance with their best judgment.
INVESTMENT ADVISER
The current investment adviser to the Fund is Columbia Management Advisors, LLC.
Its business address is One Financial Center, Boston, Massachusetts 02111-2621.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The current independent registered public accounting firm of the Fund is
PricewaterhouseCoopers LLP. Its business address is 125 High Street, Boston,
Massachusetts 02110. If Proposal 1 is approved by shareholders of the Fund and
the Closing occurs, it is anticipated that the Fund will engage Ernst & Young
LLP as their independent registered public accounting firm. Ernst & Young LLP's
business address is 200 Clarendon Street, Boston, Massachusetts 02116.
SHAREHOLDER PROPOSALS
Under the proxy rules of the Commission, shareholder proposals that meet tests
contained in those rules may, under certain conditions, be included in the
Fund's proxy materials for an annual shareholders' meeting. Under the proxy
rules, proposals submitted for inclusion in the proxy materials for the 2008
annual meeting must be received by the Fund on or before [[January 2, 2008]].
The fact that the Fund receives a shareholder proposal in a timely manner does
not ensure inclusion of the proposal in the proxy materials since there are
other requirements in the proxy rules relating to such inclusion.
Shareholders who wish to make a proposal at the 2008 annual meeting that will
not be included in the Fund's proxy materials must notify the Fund on or before
[[_______________]]. If a shareholder who wishes to submit a proposal fails to
timely notify the Fund, the persons named as proxies for the meeting will have
discretionary authority to vote on the shareholder's proposal if it is properly
brought before the meeting. If a shareholder makes a timely notification, the
persons named as proxies may still exercise discretionary voting authority under
circumstances consistent with the Commission's proxy rules.
You may submit shareholder proposals to the Fund c/o the Secretary of the Fund,
One Financial Center, Mail Stop MA515-11-05, Boston, Massachusetts 02111-2621.
SHAREHOLDER COMMUNICATIONS
Shareholders may communicate with the trustees as a group or individually. Any
such communications should be sent to the Board of the Fund or to an individual
trustee in writing, c/o the Secretary of the Fund, at One Financial Center, Mail
Stop MA515-11-05, Boston, MA 02111-2621. The Secretary may determine not to
forward to the Board or to a trustee any letter that does not relate to the
business of the Fund.
PROXY STATEMENT DELIVERY
"Householding" is the term used to describe the practice of delivering one copy
of a document to a household of shareholders instead of delivering one copy of a
document to each shareholder in the household. Shareholders of the Fund who
share a common address and who have not opted out of the householding process
should receive a single copy of the proxy statement together with one proxy card
for each account. If you received more than one copy of the proxy statement, you
may elect to household in the future; if you received a single copy of the proxy
statement, you may opt out of householding in the future; and you may, in any
event, obtain an additional copy of this proxy
27
statement by writing to the Fund at the following address: One Financial Center,
Boston, Massachusetts 02111-2621, or by calling the Fund at the following
number: [[1-800-426-3750]].
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A PRE-ADDRESSED,
POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, AND TOUCH-TONE TELEPHONE
AND INTERNET VOTING IS AVAILABLE.
----------------------------------------
James R. Bordewick, Jr.
Secretary
May [[2]], 2007
28
APPENDIX A
BENEFICIAL OWNERS OF FUND SHARES IN EXCESS OF 5%
As of the Record Date, to the knowledge of management of the Fund, no person
owned beneficially (or of record) more than 5% of the outstanding shares of any
class of the Fund, except as set forth below:
COLONIAL INSURED MUNICIPAL FUND
SHARES
BENEFICIALLY
OWNED
NAME AND ADDRESS OF BENEFICIAL -----------------
OWNER AND CLASS OF SHARES OWNED NUMBER PERCENT
------------------------------- ------- -------
Karpus Management, Inc.
d/b/a Karpus Investment Management
183 Sully's Trail 541,150 12.72%
Pittsford, New York 14534
(Common Shares)
A-1
APPENDIX B
FORM OF NEW ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated this ____th day of ___________ 2007,
by and between ____________________, a Massachusetts business trust (the
"Trust") listed on Appendix A attached hereto, and MASSACHUSETTS FINANCIAL
SERVICES COMPANY, a Delaware corporation (the "Adviser").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an investment company
registered under the Investment Company Act of 1940; and
WHEREAS, the Adviser is willing to provide services to the Trust on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE 1. DUTIES OF THE ADVISER. (a) The Adviser shall provide the Trust
with such investment advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its assets. The Adviser shall
act as investment adviser to the Trust and as such shall furnish continuously an
investment program and shall determine from time to time what securities or
other instruments shall be purchased, sold or exchanged and what portion of the
assets of the Trust shall be held uninvested, subject always to the restrictions
of the Trust's Declaration of Trust, dated _____________, and By-Laws, each as
amended from time to time (respectively, the "Declaration" and the "By-Laws"),
to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Trust's then-current Prospectus and
Statement of Additional Information. The Adviser also shall exercise voting
rights, rights to consent to corporate actions and any other rights pertaining
to the Trust's portfolio securities in accordance with the Adviser's policies
and procedures as presented to the Trustees of the Trust from time to time.
Should the Trustees at any time, however, make any definite determination as to
the investment policy and notify the Adviser thereof in writing, the Adviser
shall be bound by such determination for the period, if any, specified in such
notice or until similarly notified that such determination shall be revoked.
(b) The Adviser shall take, on behalf of the Trust, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities or other instruments for the Trust's account with brokers
or dealers selected by it, and to that end, the Adviser is authorized as the
agent of the Trust to give instructions to the Custodian of the Trust as to the
deliveries of securities or other instruments and payments of cash for the
account of the Trust. In connection with the selection of such brokers or
dealers and the placing of such orders, the Adviser is directed to seek for the
Trust the best overall price and execution available from responsible brokerage
firms, taking account of all factors it deems relevant, including by way of
illustration: price; the size of the transaction; the nature of the market for
the security; the amount of the commission; the timing and impact of the
transaction taking into account market prices and trends; the reputation,
experience and financial stability of the broker or dealer involved; and the
quality of services rendered by the broker or dealer in other transactions. In
fulfilling this requirement, the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Trust to pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
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particular transaction or the Adviser's overall responsibilities with respect to
the Trust and to other clients of the Adviser as to which the Adviser exercises
investment discretion.
(c) Subject to the general supervision and control of the Trustees of the
Trust and under the terms and conditions set forth in this Agreement, the Trust
acknowledges and agrees that it is contemplated that Adviser may, at its own
expense, select and contract with one or more investment advisers
("Sub-Advisers") to manage the investment operations and composition of the
Trust and render investment advice for the Trust, including the purchase,
retention, and disposition of the investments, securities and cash contained in
the Trust, subject always to the restrictions of the Trust's Declaration and the
By-Laws, to the provisions of the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder and to the Trust's then-current Prospectus and
Statement of Additional Information; provided, that any contract with an
Sub-Adviser (a "Sub-Advisory Agreement") shall be in compliance with and
approved as required by the Investment Company Act of 1940 and the Rules,
Regulations and orders thereunder or in accordance with exemptive relief granted
by the Securities and Exchange Commission ("SEC") under the Investment Company
Act of 1940.
(d) Subject always to the direction and control of the Trustees of the
Trust, Adviser will have (i) overall supervisory responsibility for the general
management and investment of the Trust's assets; (ii) full discretion to select
new or additional Sub-Advisers for the Trust; (iii) full discretion to enter
into and materially modify existing Sub-Advisory Agreements with Sub-Advisers;
(iv) full discretion to terminate and replace any Sub-Adviser; and (v) full
investment discretion to make all determinations with respect to the investment
of the Trust's assets not then managed by an Sub-Adviser. In connection with
Adviser's responsibilities herein, Adviser will assess the Trust's investment
focus and will seek to implement decisions with respect to the allocation and
reallocation of the Trust's assets among one or more current or additional
Sub-Advisers from time to time, as Adviser deems appropriate, to implement the
Trust's investment policies determined as provided above. In addition, Adviser
(in conjunction with the Trust's Independent Chief Compliance Officer) will
oversee (or, in the event that the Adviser does not require a Sub-Advisor to
assume responsibility therefore under the Sub-Advisory Agreement, shall be
responsible for) compliance of each Sub-Adviser with the investment objectives,
policies and restrictions of the Trust (or portions of the Trust) under the
management of such Sub-Adviser, and review and report to the Trustees of the
Trust on the performance of each Sub-Adviser. Adviser will furnish, or cause the
appropriate Sub-Adviser(s) to furnish, to the Trust such statistical
information, with respect to the investments that the Trust (or portions of the
Trust) may hold or contemplate purchasing, as the Trust may reasonably request.
Further, Adviser (in conjunction with the Trust's Independent Chief Compliance
Officer) will oversee compliance of each Sub-Adviser with the compliance program
of the Trust (or portions of the Trust) under the management of such
Sub-Adviser, as well as the compliance program of the Sub-Adviser as such
program relates to the Sub-Adviser's management of the Trust. On Adviser's own
initiative, Adviser will apprise, or cause the appropriate Sub-Adviser(s) to
apprise, the Trust of important developments materially affecting the Trust (or
any portion of the Trust that they advise) and will furnish the Trust, from time
to time, with such information as may be appropriate for this purpose. Further,
Adviser agrees to furnish, or cause the appropriate Sub-Adviser(s) to furnish,
to the Trustees of the Trust such periodic and special reports as the Trustees
of the Trust may reasonably request. In addition, Adviser agrees to cause the
appropriate Sub-Adviser(s) to furnish to third-party data reporting services all
currently available standardized performance information and other customary
data as may be appropriate.
(e) Subject to the provisions of Article 6, the Adviser shall not be liable
for any error of judgment or mistake of law by any Sub-adviser or for any loss
arising out of any investment made by any Sub-adviser or for any act or omission
in the execution and management of the Trust by any Sub-adviser.
ARTICLE 2. ALLOCATION OF CHARGES AND EXPENSES. (a) The Adviser shall
furnish at its own expense investment advisory and administrative services,
office space, equipment and clerical personnel necessary for servicing the
investments of the Trust and maintaining its organization, and investment
advisory facilities and executive and supervisory personnel for managing the
investments and effecting the portfolio transactions of the Trust. The Adviser
shall arrange, if desired by the Trust, for directors, officers and employees of
the Adviser to serve as Trustees, officers or agents of the Trust if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law.
B-2
(b) It is understood that the Trust will pay all of its own expenses
incurred in its operations and the offering of the Trust's shares, unless
specifically provided otherwise in this Agreement or except to the extent that
the Adviser agrees in a written instrument executed by the Adviser (specifically
referring to this Article 2(b)) to assume or otherwise pay for specified
expenses of the Trust, including, without limitation: compensation of Trustees
"not affiliated" with the Adviser; governmental fees; interest charges; taxes;
membership dues in the Investment Company Institute allocable to the Trust; fees
and expenses of independent auditors, of legal counsel, and of any transfer
agent, registrar or dividend disbursing agent of the Trust; expenses of
repurchasing and redeeming shares and servicing shareholder accounts; expenses
of preparing, printing and mailing stock certificates, shareholder reports,
notices, proxy statements and reports to governmental officers and commissions;
brokerage and other expenses connected with the execution, recording and
settlement of portfolio security transactions; insurance premiums; fees and
expenses of the custodian for all services to the Trust, including safekeeping
of funds and securities and maintaining required books and accounts; expenses of
calculating the net asset value of shares of the Trust; organizational and start
up costs; such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Trust is a party or
otherwise may have an exposure, and the legal obligation which the Trust may
have to indemnify the Trust's Trustees and officers with respect thereto; and
expenses relating to the issuance, registration and qualification of shares of
the Trust and the preparation, printing and mailing of prospectuses for such
purposes (except to the extent that any Distribution Agreement to which the
Trust is a party provides that another party is to pay some or all of such
expenses).
(c) The payment or assumption by the Adviser of any expenses of the Trust
that the Adviser is not obligated by this Agreement or otherwise to pay or
assume shall not obligate the Adviser to pay or assume the same or any similar
expenses of the Trust on any subsequent occasion.
ARTICLE 3. COMPENSATION OF THE ADVISER. For the services to be rendered and
the facilities provided, the Trust shall pay to the Adviser an investment
advisory fee computed and paid monthly as set forth in Appendix A attached
hereto. If the Adviser shall serve for less than the whole of any period
specified in this Article 3, the compensation paid to the Adviser will be
prorated.
ARTICLE 4. ADDITIONAL SERVICES. Should the Trust have occasion to request
the Adviser or its affiliates to perform administrative or other additional
services not herein contemplated or to request the Adviser or its affiliates to
arrange for the services of others, the Adviser or its affiliates will act for
the Trust upon request to the best of its ability, with compensation for the
services to be agreed upon with respect to each such occasion as it arises. No
such agreement for additional services shall expand, reduce or otherwise alter
the obligations of the Adviser, or the compensation that the Adviser is due,
under this Agreement.
ARTICLE 5. COVENANTS OF THE ADVISER. The Adviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's distributor,
if any, as principals in making purchases or sales of securities or other
property for the account of the Trust, except as permitted by the Investment
Company Act of 1940 and any rules, regulations or orders of the Securities and
Exchange Commission thereunder, will not take a long or short position in the
shares of the Trust except as permitted by the applicable law, and will comply
with all other provisions of the Declaration and the By-Laws and the
then-current Prospectus and Statement of Additional Information of the Trust
relative to the Adviser and its directors and officers.
ARTICLE 6. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution and management of
the Trust, except for willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations hereunder. As used in this
Article 6, the term "Adviser" shall include directors, officers and employees of
the Adviser as well as that corporation itself.
ARTICLE 7. ACTIVITIES OF THE ADVISER. (a) The Trust acknowledges that the
services of the Adviser to the Trust are not exclusive, the Adviser being free
to render investment advisory and/or other services to others. The Trust further
acknowledges that it is possible that, based on their investment objectives and
policies, certain funds or accounts managed by the Adviser or its affiliates may
at times take investment positions or engage in investment
B-3
techniques which are contrary to positions taken or techniques engaged in on
behalf of the Trust. Notwithstanding the foregoing, the Adviser will at all
times endeavor to treat all of its clients in a fair and equitable manner.
(b) The Trust acknowledges that whenever the Trust and one or more other
funds or accounts advised by the Adviser have available monies for investment,
investments suitable and appropriate for each shall be allocated in a manner
believed by the Adviser to be fair and equitable to each entity. Similarly,
opportunities to sell securities or other investments shall be allocated in a
manner believed by the Adviser to be fair and equitable to each entity. The
Trust acknowledges that in some instances this may adversely affect the size of
the position that may be acquired or disposed of for the Trust.
(c) It is understood that the Trustees, officers and shareholders of the
Trust are or may be or become interested in the Adviser, as directors, officers,
employees, or otherwise and that directors, officers and employees of the
Adviser are or may become similarly interested in the Trust, and that the
Adviser may be or become interested in the Trust as a shareholder or otherwise.
ARTICLE 8. MFS NAME. The Trust acknowledges that the names "Massachusetts
Financial Services," "MFS" or any derivatives thereof or logos associated with
those names (collectively, the "MFS Marks") are the valuable property of the
Adviser and its affiliates. The Adviser grants the Trust a non-exclusive and
non-transferable right and sub-license to use the MFS Marks only so long as the
Adviser serves as investment adviser to the Trust. The Trust agrees that if the
Adviser for any reason no longer serves as investment adviser to the Trust, and
the Adviser so requests, that the Trust promptly shall cease to use the MFS
Marks and promptly shall amend its registration statement to delete any
references to the MFS Marks. Likewise, the Trust agrees that if the Adviser for
any reason no longer serves as investment adviser to the Trust, and the Adviser
so requests, the Trust promptly shall cease to use the MFS Marks and promptly
shall amend its Declaration of Trust to delete any references to the MFS Marks.
The Trust acknowledges that the Adviser may permit other clients to use the MFS
Marks in their names or other material. For purposes of this Article, the Trust
shall be deemed to have taken the required action "promptly" if such action is
taken within 90 days of the Adviser no longer serving as the investment adviser
to the Trust, or from the date of the Adviser's request, as the case may be.
ARTICLE 9. DURATION, TERMINATION AND AMENDMENT OF THIS AGREEMENT. (a) This
Agreement shall become effective with respect to the Trust on the date first
written above if approved by the shareholders of the Trust, on the Effective
Date for the Trust, as set forth in Appendix A attached hereto. Thereafter, this
Agreement will remain in effect with respect to the Trust for a period of two
years from the Trust's Effective Date as set forth in Appendix A, on which date
it will terminate for the Trust unless its continuance is "specifically approved
at least annually" (i) by the vote of a majority of the Trustees of the Trust
who are not "interested persons" of the Trust or of the Adviser at a meeting
specifically called for the purpose of voting on such approval, and (ii) by the
Board of Trustees of the Trust, or by "vote of a majority of the outstanding
voting securities" of the applicable Trust.
(b) This Agreement may be terminated as to the Trust at any time without
the payment of any penalty by the Trustees or by "vote of a majority of the
outstanding voting securities" of the applicable Trust, or by the Adviser, in
each case on not more than sixty days' nor less than thirty days' written notice
to the other party. This Agreement shall automatically terminate in the event of
its "assignment".
(c) This Agreement may be amended with respect to the Trust only if such
amendment is in writing signed by or on behalf of the Trust and the Adviser and
is approved by "vote of a majority of the outstanding voting securities" of the
applicable Trust (if such shareholder approval is required by the Investment
Company Act of 1940).
ARTICLE 10. SCOPE OF TRUST'S OBLIGATIONS. A copy of the Trust's Declaration
of Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts. The Adviser acknowledges that the obligations of or arising out
of this Agreement are not binding upon any of the Trust's Trustees, officers,
employees, agents or shareholders individually, but are binding solely upon the
assets and property of the Trust. If this Agreement is executed by the Trust,
the Adviser further acknowledges that the assets and liabilities of the Trust
are separate and
B-4
distinct and that the obligations of or arising out of this Agreement concerning
the Trust are binding solely upon the assets or property of the Trust and not
upon the assets or property of any other Trust.
ARTICLE 11. DEFINITIONS AND INTERPRETATIONS. The terms "specifically
approved at least annually," "vote of a majority of the outstanding voting
securities," "assignment," "affiliated person," and "interested person," when
used in this Agreement, shall have the respective meanings specified, and shall
be construed in a manner consistent with, the Investment Company Act of 1940 and
the rules and regulations promulgated thereunder. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the Investment Company Act of 1940, the
Investment Advisers Act of 1940, the Securities Act of 1933, or the Securities
Exchange Act of 1934 (collectively, the "Federal Securities Acts") shall be
resolved by reference to such term or provision of the Federal Securities Acts
and to interpretations thereof, if any, by United States federal courts or, in
the absence of any controlling decisions of any such court, by rules or
regulations of the Securities and Exchange Commission. Where the effect of a
requirement of the Federal Securities Acts reflected in any provision of this
Agreement is revised by rule or regulation of the Securities and Exchange
Commission, such provisions shall be deemed to incorporate the effect of such
rule or regulation.
ARTICLE 12. RECORD KEEPING. The Adviser will maintain records in a form
acceptable to the Trust and in compliance with the rules and regulations of the
Securities and Exchange Commission, including but not limited to records
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and the rules thereunder, which at all times will be the property of the Trust
and will be available for inspection and use by the Trust.
ARTICLE 13. MISCELLANEOUS. (a) This Agreement contains the entire
understanding and agreement of the parties with respect to the subject matter
hereof.
(b) Headings in this Agreement are for ease of reference only and shall not
constitute a part of the Agreement.
(c) Should any portion of this Agreement for any reason be held void in law
or equity, the remainder of the Agreement shall be construed to the extent
possible as if such voided portion had never been contained herein.
(d) This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts, without giving effect to the choice of laws provisions thereof,
except that questions of interpretation shall be resolved in accordance with the
provisions of Article 11 above.
B-5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned
officers thereunto duly authorized, all as of the day and year first above
written. The undersigned officer of the Trust has executed this Agreement not
individually, but as an officer under the Declaration and the obligations of
this Agreement are not binding upon any of the Trustees, officers or
shareholders of the Trust, individually, but bind only the trust estate.
,
-------------------------------
[Trust]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By:
------------------------------------
Name: Robert J. Manning
Title: Chief Executive Officer
B-6
APPENDIX A
COMPENSATION TO THE ADVISER
COLONIAL INSURED MUNICIPAL FUND
The investment advisory fee payable by the Trust shall be computed and paid
monthly in an amount equal to the sum of 0.65% of the Trust's average daily net
assets including assets applicable to the auction preferred shares (average
daily net assets being computed for this purpose without deducting any liability
for money borrowed for investment in accordance with the Trust's investment
objective and policies).
B-7
APPENDIX C
DESCRIPTION OF MATERIAL DIFFERENCES BETWEEN CURRENT
DECLARATION AND FORM OF REVISED DECLARATION
REVISED DECLARATION CURRENT DECLARATION
----------------------------------------- ----------------------------------------------
SHAREHOLDER LIABILITY: The Trust shall indemnify and hold each A shareholder or former shareholder held to be
shareholder or former shareholder personally liable solely by reason of his or
harmless against all claims in connection her being or having been a shareholder is
with Trust property or the acts, entitled to be held harmless from and
obligations or affairs of the Trust to indemnified against all loss and expense
which such shareholder may become subject arising from such liability.
solely by reason of his or her being or
having been a shareholder.
Every written obligation, contract, Every note, bond, contract, instrument,
instrument, certificate, share, other certificate or undertaking made or issued by
security of the Trust or undertaking made the Trustees or by any officers or officer
or issued by the Trustees or officers must recite that the same was executed or made
shall recite that the same is executed or by or on behalf of the Trust or by them as
made by or on behalf of Trustees and that Trustees or as officers and that obligations
the obligations of such instrument are of such instrument are not binding upon any of
not binding on any of the Trustees, them or shareholders individually.
officers or shareholders individually.
SHAREHOLDER VOTING Shareholders have the power to vote only Subject to the voting powers of one or more
RIGHTS: (i) for the election, when submitted to classes or series of shares as set forth in
shareholders, or removal of Trustees; the bylaws, shareholders have the power to
(ii) with respect to any investment vote only (i) for the election or removal of
advisory or management contract for which Trustees; (ii) with respect to any investment
a shareholder vote is required by the advisory or management contract; (iii) with
1940 Act; (iii) with respect to respect to any termination, by the
termination, by the shareholders, of the shareholders, of the Trust; (iv) with respect
Trust; (iv) with respect to any amendment to any amendment of the Declaration of Trust
of the Declaration of Trust that requires that requires shareholder authorization; (v)
shareholder approval; (v) with respect to with respect to derivative actions similar to
any merger, consolidation or sale of a Massachusetts corporation; and (vi) with
assets where shareholder authorization is respect to any other matters required by law,
required; (vi) with respect to derivative the organizational documents, registration
actions similar to a Massachusetts with the Commission or other regulators or
corporation; (vii) with respect to any deemed desirable by the Board.
conversion of the Trust to an "open-end
company"; and (viii) with respect to
certain transactions with principal
shareholders; and (ix) with respect to
any other matters required by the
organizational documents, registration
with the Commission or other regulators
or deemed desirable by the Board.
A shareholder is entitled to one vote for Except as provided in the by-laws, each whole
each share owned by such shareholder on share or fractional share is entitled to one
each matter on which such shareholder is vote or a proportionate fractional vote,
entitled to vote, and each fractional respectively.
share is entitled to a proportionate
fractional vote. On any matter submitted to a vote of
shareholders, all shares of the Trust then
Except as otherwise required by law or entitled to vote shall, except as otherwise
the organizational documents, shares provided in the by-laws or required by law, be
representing a majority of the shares voted in the aggregate as a single class
voted in person or by proxy shall decide without regard to classes or series of shares.
any questions and a plurality shall elect
a Trustee. Except when a different vote is required by
the provisions of the Declaration of Trust or
the by-laws, a majority of the shares voted
shall decide any questions and a plurality
shall elect a Trustee, provided that where the
bylaws require that the holders of any class
or series shall vote as an individual class or
series, a majority of the shares of that class
or series voted on the matter (or a plurality
with respect to the election of a Trustee)
shall decide that matter insofar as that class
or series is concerned.
C-1
REVISED DECLARATION CURRENT DECLARATION
----------------------------------------- ----------------------------------------------
SHAREHOLDERS MEETINGS: Issue not addressed in the Declaration of If the Trustees shall fail to call or give
Trust. notice of any meeting of shareholders for 30
days after written application requesting a
meeting by shareholders holding at least 10%
of the shares then outstanding of all classes
and series entitled to vote at such meeting,
then shareholders holding at least 10% of the
shares then outstanding may call and give
notice of such meeting.
SHAREHOLDER QUORUM: Issue not addressed in the Declaration of 30% of the shares entitled to vote on a
Trust, but intended to be addressed in particular matter shall be a quorum, except
the Bylaws as described in Proposal 2. where the by-laws require that holders of any
class or series shall vote as an individual
class or series, in which case 30% of the
aggregate number of shares of that class or
series is necessary to constitute a quorum.
SHAREHOLDER CONSENT: Majority consent required for shareholder Majority consent (or such larger proportion as
action taken without a meeting, as required by any express provision of the
relates to approval of merger/ Declaration of Trust or bylaws) required for
consolidation or amendments to the shareholder action taken without a meeting.
Declaration of Trust.
NOTICE TO SHAREHOLDERS: Any notices to which a shareholder may be Notice of shareholder meetings is to be
entitled and any and all communications mailed, postage prepaid, not less than seven
shall be deemed duly served (i) if days in advance.
mailed, postage prepaid, (ii) if sent by
electronic transmission to shareholder, Notice must state the time, place and purpose
(iii) if mailed or sent by electronic of the meeting.
delivery to one or more members of
shareholder's household, or (iv) if
otherwise sent in accordance with
applicable law or regulation.
Notice is not expressly required for
shareholder meetings.
TRUSTEE'S POWER TO Except where shareholder authorization is Except to the extent the bylaws or applicable
AMEND DECLARATION OF required, the Declaration of Trust may be law require a higher vote or a separate vote
TRUST: amended by the Trustees, to change the of one or more classes or series of shares,
name or principal office of the Trust, to the Declaration of Trust may be amended at any
supply any omission, to cure, correct or time by an instrument in writing signed by a
supplement any ambiguous, defective or majority of the then Trustees when authorized
inconsistent provision or if the Trustees so to do by vote of a majority of the shares
deem it necessary or advisable, to entitled to vote with respect to such
conform the Declaration of Trust to the amendment, except that shareholder
requirements of applicable law. authorization is not required for amendments
to authorize one or more classes or series of
Shareholders have the right to vote on shares, to change the name of the Trust,
any amendment that would affect their supply any omission, cure any ambiguity or
right to vote, any amendment that cure, correct or supplement any defective or
requires a shareholder approval under law inconsistent provision.
or the trust's registration statement,
any amendment to the declaration of trust
provision regarding amendment and any
other amendment submitted to them by the
trustees. Except as provided below, any
amendment on which the shareholders have
the right to vote shall require a
majority shareholder vote.
No amendment may be made which shall Except to the extent the bylaws or applicable
amend, alter, change or repeal any of the law require a higher vote or a separate vote,
provisions relating to term of trustees, no amendment may be made which repeals certain
termination of the trust, amendments to provisions relating to the number and term of
the declaration of trust, merger, Trustees, the conversion to an open-end fund
consolidation or sale of assets; or this provision, unless such amendment shall
conversion and certain transactions receive the affirmative vote of 66 2/3% of the
unless the amendment effecting such shares entitled to vote.
amendment, alteration, change or repeal
shall receive the affirmative vote or
consent of sixty-six and two-thirds
percent (66 2/3%) of the shares
outstanding and entitled to vote.
C-2
REVISED DECLARATION CURRENT DECLARATION
----------------------------------------- ----------------------------------------------
TERMINATION OF TRUST: Shareholders have the right to terminate Subject to the voting powers of one or more
the Trust upon a two-thirds vote of classes or series of shares as set forth in
outstanding shares of the Trust. the bylaws, the Trust may be terminated at any
time by vote of shareholders holding at least
66 2/3% of the shares entitled to vote.
Trustees may terminate the Trust by Trustees may terminate the Trust by written
written notice to shareholders. notice to the shareholders.
MERGER OR CONSOLIDATION The Declaration of Trust provides that a Issue not addressed in the Declaration of
TRUST: consolidation, merger or sale of assets Trust.
may be authorized by a two-thirds
shareholder vote at a meeting called for
such purpose, or by written consent,
without a meeting, of the holders of not
less than two-thirds of such shares,
provided, however, that if such merger,
consolidation, sale, lease or exchange is
recommended by the Trustees, the vote or
written consent of the holders of a
majority of shares outstanding and
entitled to vote, shall be sufficient
authorization.
CONVERSION: Notwithstanding any other provision of The conversion of the Trust from a "closed-end
this Declaration, the conversion of the company" to an "open-end company," together
Trust from a "closed-end company" to an with any necessary amendments to the
"open-end company," as those terms are Declaration of Trust to permit such a
defined in the 1940 Act, shall require conversion, require the affirmative vote of 66
the affirmative vote or consent of the 2/3% of shares of each class entitled to vote.
holders of sixty-six and two-thirds
percent (66 2/3%) of the shares
outstanding and entitled to vote.
REMOVAL OF TRUSTEES: A Trustee may be removed at any meeting At any meeting called for such purpose and
of shareholders by a vote of shares subject to the voting powers of one or more
representing two-thirds of the classes or series of shares as set forth in
outstanding shares of the Trust entitled the bylaws, a Trustee may be removed, with or
to vote for the election of such trustee. without cause, by vote of 75% of the
outstanding shares of the classes or series
entitled to vote for the election of such
Trustee.
A Trustee may be removed at any time, The Trustees may remove a Trustee, with or
with or without cause, by written without cause, by vote of 75% of the Trustees
instrument signed by at least then in office.
three-quarters of the Trustees,
specifying the date when such removal
shall become effective.
TRUSTEE LIABILITY: No Trustee, advisory Trustee, officer or Trustees are not responsible or liable for any
employee or agent will be liable neglect or wrongdoing of any officer, agent,
whatsoever to any person in connection employee, adviser, or principal underwriter of
with Trust property or the affairs of the the Trust. No Trustee is responsible for the
Trust, and no Trustee or advisory Trustee act or omission of any other Trustee. Trustee
will be liable or responsible in any is not protected against any liability to
event for any neglect or wrongdoing of which he or she would otherwise be subject by
any officer, employee or agent of the reason of willful misfeasance, bad faith,
Trust or for the act or omission of any gross negligence or reckless disregard of the
other Trustee. Trustees, advisory duties involved in the conduct of his or her
Trustees, officers, employees and agents office.
are not protected against any liability
to the Trust or its shareholders to which
he or she would otherwise be subject by
reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of
the duties involved in the conduct of his
or her office or position with or on
behalf of the Trust.
TRUSTEE INDEMNIFICATION: The Trust will indemnify each of its The Trust will indemnify each of its Trustees
Trustees, advisory Trustees and officers and officers (including persons who serve at
against all liability and all expenses the Trust's request as trustees or officers of
reasonably incurred by him or her in another organization in which the Trust has
connection with any proceeding in which any interest as a shareholder, creditor or
that individual becomes involved as a otherwise) against all liabilities and
party or otherwise by virtue of being or expenses, including amounts paid in
having been a Trustee, advisory Trustee satisfaction of judgments, in compromise, as
or officer and against amount paid or fines and penalties, and as counsel fees,
incurred by that individual in settlement reasonably incurred by such person while in
thereof. No indemnification will be office or thereafter, by reason of the
provided to a Trustee, advisory Trustee indemnified person's service as a Trustee or
or officer of the Trust: (i) against any officer. The Trust will not indemnify its
liability to the Trust or the Trustees and officers with respect to any
shareholders by reason of a final matter in which such person has been finally
adjudication by the court that such adjudicated in a decision on the merits not
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REVISED DECLARATION CURRENT DECLARATION
----------------------------------------- ----------------------------------------------
person engaged in willful misfeasance, to have acted in good faith in the reasonable
bad faith, gross negligence or reckless belief that such person's action was in the
disregard of the duties involved in the best interests of the Trust. The Trust will
conduct of that individual's office; or not indemnify its Trustees and officers
(ii) with respect to any matter as to against any liability to the Trust or to its
which such person has been finally shareholders to which he or she would
adjudicated not to have acted in good otherwise be subject by reason of willful
faith in the reasonable belief that the misfeasance, bad faith, gross negligence or
individual's action was in the best reckless disregard of the duties involved in
interest of the Trust. the conduct of such person's office.
No indemnification will be provided in In the absence of a final decision on the
the event of a settlement or other merits by an adjudicating body that such
disposition not involving a final person is liable by reason of willful
adjudication resulting in a payment by a misfeasance, bad faith, gross negligence or
Trustee, advisory Trustee or officer, reckless disregard of the duties involved in
unless there has been a determination the conduct of their office or did not act in
that such person did not engage in good faith in the reasonable belief that his
willful misfeasance, bad faith, gross or her actions were in the best interests of
negligence or reckless disregard of the Trust, indemnification will be provided if
duties involved in the conduct of that (a) approved as in the best interests of the
individual's office by the court or other Trust, after notice that it involves such
body approving the settlement or other indemnification, by at least a majority of the
disposition or by a reasonable disinterested, non-Party Trustees acting on
determination that the individual did not the matter (provided that a majority of the
engage in such conduct: (i) by vote of a disinterested Trustees then in office act on
majority of the disinterested, non-party the matter) upon a determination that such
Trustees; or (ii) by written opinion of person acted in good faith in the reasonable
the then-current legal counsel to the belief that his or her actions were in the
disinterested Trustees or other legal best interest of the Trust and is not liable
counsel chosen by the majority of the to the Trust or its shareholders by reason of
disinterested, non-party Trustees. willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties
involved in the conduct of his or her office
or (b) there has been obtained an opinion in
writing of independent legal counsel to the
effect that such person acted in good faith
and such indemnification would not protect
such person against any liability to the Trust
to which such person would otherwise be
subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard
of the duties involved in the conduct of his
or her office.
LEGAL EXPENSES: Legal expenses associated with authorized Legal expenses may be paid from time to time
indemnification shall be advanced by the by the Trust in advance of the final
Trust prior to final disposition thereof disposition of any such proceeding if the
upon receipt of an undertaking by or on Trust receives a written undertaking by the
behalf of the indemnified person to repay indemnified person to reimburse the Trust in
such amount if it is ultimately the event it is ultimately determined that the
determined that such person is not indemnified person is not entitled to such
entitled to indemnification, provided indemnification and (a) the indemnified person
that (a) the indemnified person provides provides security for his undertaking, or (b)
security for his undertaking or the Trust the Trust is insured against losses arising by
is insured against such losses, or (b) a reason of such indemnified person's failure to
majority of the disinterested, non-party fulfill his or her undertaking, or (c) a
Trustees or independent legal counsel, majority of the disinterested, non-party
through a written opinion, determine that Trustees (provided that a majority of such
the indemnified person ultimately will be Trustees then in office act on the matter) or
found entitled to indemnification. independent legal counsel, as expressed in a
written opinion, determines that there is
reason to believe that the indemnified person
ultimately will be found entitled to
indemnification.
DERIVATIVE ACTIONS: No shareholder shall have the right to Issue not addressed.
bring or maintain any court action,
proceeding or claim on behalf of the
Trust without first making demand on the
Trustees requesting the Trustees to bring
or maintain such action, proceeding or
claim. Such demand shall be excused only
when the plaintiff makes a specific
showing that irreparable injury to the
Trust would otherwise result, or if a
majority of the Trustees or a majority of
any committee established to consider the
merits of such action, has a material
personal financial interest in the action
at issue.
C-4
APPENDIX D
FORM OF REVISED DECLARATION
DECLARATION OF TRUST
OF
----------
Dated as of _____________, 2007
D-1
TABLE OF CONTENTS
PAGE
----
ARTICLE I--Name and Definitions 1
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II--Trustees 3
Section 2.1 Number of Trustees 3
Section 2.2 Term of Office of Trustees 3
Section 2.3 Resignation and Appointment of Trustees 5
Section 2.4 Vacancies 5
Section 2.5 Delegation of Power to Other Trustees 5
ARTICLE III--Powers of Trustees 6
Section 3.1 General 6
Section 3.2 Investments 6
Section 3.3 Legal Title 8
Section 3.4 Issuance and Repurchase of Securities 8
Section 3.5 Borrowing Money; Lending Trust Property 8
Section 3.6 Delegation 8
Section 3.7 Collection and Payment 8
Section 3.8 Expenses 9
Section 3.9 Manner of Acting; By-Laws 9
Section 3.10 Miscellaneous Powers 9
ARTICLE IV--Investment Adviser, Distributor, Custodian and Transfer Agent 10
Section 4.1 Investment Adviser 10
Section 4.2 Distributor 11
Section 4.3 Custodian 11
Section 4.4 Transfer Agent 11
Section 4.5 Parties to Contract 11
ARTICLE V--Limitations of Liability of Shareholders, Trustees and Others 12
Section 5.1 No Personal Liability of Shareholders 12
Section 5.2 Limitation of Liability of Trustees and Others 12
Section 5.3 Mandatory Indemnification 13
Section 5.4 No Bond Required 15
Section 5.5 No Duty of Investigation; Notice in Trust
Instruments 15
Section 5.6 Good Faith Action; Reliance on Experts 16
Section 5.7 Derivative Actions 16
ARTICLE VI--Shares of Beneficial Interest 17
Section 6.1 Beneficial Interest 17
Section 6.2 Rights of Shareholders 17
Section 6.3 Trust Only 18
D-2
Section 6.4 Issuance of Shares 18
Section 6.5 Register of Shares 18
Section 6.6 Transfer of Shares 19
Section 6.7 Notices 19
Section 6.8 Voting Powers 19
ARTICLE VII--Determination of Net Asset Value, Net Income and
Distributions 20
ARTICLE VIII--Duration; Termination of Trust; Amendment; Mergers, etc. 21
Section 8.1 Duration 21
Section 8.2 Termination of Trust 21
Section 8.3 Amendment Procedure 21
Section 8.4 Merger, Consolidation and Sale of Assets 23
Section 8.5 Incorporation, Reorganization 23
Section 8.6 Conversion 24
Section 8.7 Certain Transactions 24
ARTICLE IX--Miscellaneous 26
Section 9.1 Filing 26
Section 9.2 Governing Law 26
Section 9.3 Principal Office 26
Section 9.4 Counterparts 27
Section 9.5 Reliance by Third Parties 27
Section 9.6 Provisions in Conflict with Law or Regulations 27
Signature Page 28
D-3
DECLARATION OF TRUST
OF
----------
Dated as of _____, 2007
This DECLARATION OF TRUST is made this __th day of ________, 2007 by the
Trustees;
WHEREAS, the Trustees desire to establish a trust for the investment and
reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the Trust
assets be divided into transferable Shares of Beneficial Interest (without par
value) issued in one or more series, as hereinafter provided;
NOW THEREFORE, the Trustees hereby confirm that all money and property
contributed to the Trust hereunder shall be held and managed in trust for the
benefit of holders, from time to time, of the Shares of Beneficial Interest
(without par value) issued hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the Trust is _________.
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "Advisory Trustee" means any person, which may include a former
Trustee, appointed by resolution of the Trustees to serve the Board in an
advisory capacity, for such period and in accordance with such terms and
conditions as are determined by the Trustees. An Advisory Trustee shall serve at
the pleasure of the Trustees and may be removed by the Trustees at any time and
for any reason, with or without cause, and may resign at any time by an
instrument in writing signed by that Advisory Trustee and delivered to the
Trust. Advisory Trustees, in their capacity as such, are not Trustees or
officers of the Trust for any purpose and shall have no legal, voting or other
powers or obligations of Trustees or officers hereunder, and shall not perform
the functions of the Trustees or officers in any manner.
(b) "By-Laws" means the By-laws referred to in Section 3.9 hereof, as from
time to time amended.
(c) "Commission" has the meaning given that term in the 1940 Act.
(d) "Declaration" means this Declaration of Trust, as amended from time to
time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein" and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(e) "Distributor" means a party furnishing services to the Trust pursuant
to any contract described in Section 4.2 hereof.
(f) "Interested Person" has the meaning given that term in the 1940 Act.
(g) "Investment Adviser" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.1 hereof.
D-4
(h) "Majority Shareholder Vote" has the same meaning as the phrase "vote of
a majority of the outstanding voting securities" as defined in the 1940 Act.
(i) "1940 Act" means the Investment Company Act of 1940 and the Rules and
Regulations thereunder, as amended from time to time, and as such Act or the
Rules and Regulations thereunder may apply to the Trust pursuant to any
exemptive order or similar relief or interpretation issued by the Commission
under such Act.
(j) "Person" means and includes individuals, corporations, limited
liability companies, partnerships, trusts, associations, joint ventures and
other entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof, whether domestic or foreign.
(k) "Shareholder" means a record owner of outstanding Shares.
(l) "Shares" means the Shares of Beneficial Interest into which the
beneficial interest in the Trust shall be divided from time to time. The term
"Shares" includes fractions of Shares as well as whole Shares.
(m) "Transfer Agent" means a party furnishing services to the Trust
pursuant to any transfer agency contract described in Section 4.4 hereof.
(n) "Trust" means the trust hereunder.
(o) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is owned or held by or for the account of the Trust or the
Trustees.
(p) "Trustees" means the persons who have signed the Declaration, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be duly elected or appointed, qualified
and serving as Trustees in accordance with the provisions hereof, and reference
herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder. For the avoidance of any doubt, an
"Advisory Trustee" as defined in Section 1.2(a) is not a Trustee for any purpose
hereunder.
ARTICLE II
TRUSTEES
Section 2.1. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a majority of the Trustees,
provided, however, that the number of Trustees shall in no event be less than
three (3) nor more than fifteen (15). No reduction in the number of Trustees
shall have the effect of removing any Trustee from office prior to the
expiration of his or her term unless the Trustee is specifically removed
pursuant to Section 2.2 hereof at the time of the decrease.
Section 2.2. Term of Office of Trustees. The Board of Trustees shall be
divided into three classes. Within the limits above specified, the number of
Trustees in each class shall be determined by resolution of the Board of
Trustees. The term of office of the first class shall expire on the date of the
first annual meeting of Shareholders or special meeting in lieu thereof
following January 1, 2008. The term of office of the second class shall expire
on the date of the second annual meeting of Shareholders or special meeting in
lieu thereof. The term of office of the third class shall expire on the date of
the third annual meeting of Shareholders or special meeting in lieu thereof.
Upon expiration of the term of office of each class as set forth above, the
number of Trustees in such class, as determined by the Board of Trustees, shall
be elected for a term expiring on the date of the third annual meeting of
Shareholders or special meeting in lieu thereof following such expiration to
succeed the Trustees whose terms of office expire. The Trustees shall be elected
at an annual meeting of the Shareholders or special meeting in lieu thereof
called for that purpose, except as provided in Section 2.3 hereof.
Each Trustee shall hold office until the earlier of his or her death or the
election and qualification of his or her successor; except that:
D-5
(a) any Trustee may resign his or her trust (without need for prior or
subsequent accounting) by an instrument in writing signed by that Trustee and
delivered to the Trust, which shall take effect upon such delivery or upon such
later date as is specified therein;
(b) any Trustee may be removed at any time, with or without cause, by
written instrument signed by at least three-quarters of the Trustees, specifying
the date when such removal shall become effective;
(c) any Trustee who has attained a mandatory retirement age established
pursuant to any written policy adopted from time to time by at least two-thirds
of the Trustees shall, automatically and without action of such Trustee or the
remaining Trustees, be deemed to have retired in accordance with the terms of
such policy, effective as of the date determined in accordance with such policy;
and
(d) a Trustee may be removed at any meeting of Shareholders by a vote of
Shares representing two-thirds of the outstanding Shares of the Trust entitled
to vote for the election of such Trustee.
Upon the resignation, retirement or removal of a Trustee, or his or her
otherwise ceasing to be a Trustee, that individual shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held in the
name of the resigning, retiring or removed Trustee. Upon the incapacity or death
of any Trustee, that Trustee's legal representative shall execute and deliver on
his or her behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence.
Except to the extent expressly provided in a written agreement to which the
Trust is a party or in a written policy adopted by the Trustees, no resigning or
removed Trustee shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damages on account
of such removal.
Section 2.3. Resignation and Appointment of Trustees. In case of the
declination, death, resignation, retirement or removal of any of the Trustees,
or in case a vacancy shall, by reason of an increase in number of Trustees, or
for any other reason, exist, a majority of the remaining Trustees may fill such
vacancy by appointing such other individual as they in their discretion shall
see fit. Any such appointment shall not become effective, however, until the
person appointed shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of the Declaration. An appointment of a Trustee
may be made by the Trustees then in office in anticipation of a vacancy to occur
by reason of retirement, resignation, removal or increase in number of Trustees
effective at a later date, provided that said appointment shall become effective
only at or after the effective date of said retirement, resignation, removal or
increase in number of Trustees. The power of appointment is subject to all
applicable provisions of the 1940 Act.
Section 2.4. Vacancies. The death, declination, resignation, retirement,
removal or incapacity of the Trustees, or any of them, shall not operate to
annul the Trust or to revoke any existing agency created pursuant to the terms
of the Declaration. Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in Section 2.3, or while any Trustee is
incapacitated, the other Trustees in office, regardless of their number, shall
have all the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by the Declaration, and only such other Trustees shall
be counted for the purposes of the existence of a quorum or the taking of any
action to be taken by the Trustees. A written instrument certifying the
existence of such vacancy or incapacity signed by a majority of the Trustees
shall be conclusive evidence of the existence thereof.
Section 2.5. Delegation of Power to Other Trustees. Subject to requirements
imposed by the 1940 Act and other applicable law, any Trustee may, by power of
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees; provided that in no case shall fewer than
two Trustees personally exercise the powers granted to the Trustees under the
Declaration except as otherwise expressly provided herein.
D-6
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. General. Subject to the provisions of the Declaration, the
Trustees shall have exclusive and absolute control over the Trust Property and
over the business of the Trust to the same extent as if the Trustees were the
sole owners of the Trust Property and business in their own right, but with such
powers of delegation as may be permitted by the Declaration. The Trustees shall
have power to conduct the business of the Trust and carry on its operations in
any and all of its branches and maintain offices both within and without The
Commonwealth of Massachusetts, in any and all states of the United States of
America, in the District of Columbia, and in any and all commonwealths,
territories, dependencies, colonies, possessions, agencies or instrumentalities
of the United States of America and of foreign governments, and to do all such
other things and execute all such instruments as the Trustees deem necessary,
proper or desirable in order to promote the interests of the Trust although such
things are not herein specifically mentioned. Any determination as to what is in
the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of the Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power or any other power of the Trustees hereunder. Such
powers of the Trustees may be exercised without order of or resort to any court.
Section 3.2. Investments. (a) The Trustees shall have the power:
(i) to conduct, operate and carry on the business of an investment company;
(ii) to subscribe for, invest in, reinvest in, purchase or otherwise
acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, lend
or otherwise deal in or dispose of securities of every nature and kind, U.S. and
foreign currencies, any form of gold or other precious metal, commodity
contracts, any form of option contract, contracts for the future acquisition or
delivery of fixed income or other securities, derivative instruments of every
kind, "when-issued" or standby contracts, and all types of obligations or
financial instruments, including, without limitation, all types of bonds,
debentures, stocks, negotiable or non-negotiable instruments, obligations,
evidences of indebtedness, certificates of deposit or indebtedness, commercial
paper, repurchase agreements, bankers' acceptances, and other securities of any
kind, issued, created, guaranteed or sponsored by any and all Persons,
including, without limitation,
(A) states, territories and possessions of the United States and the
District of Columbia and any political subdivision, agency or instrumentality of
any such Person,
(B) the U.S. Government, any foreign government, or any political
subdivision or any agency or instrumentality of the U.S. Government or any
foreign government,
(C) any international instrumentality,
(D) any bank or savings institution, or
(E) any corporation or organization organized under the laws of the United
States or of any state, territory or possession thereof, or under any foreign
law;
to retain Trust assets in cash and from time to time to change the investments
in which the assets of the Trust are invested; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any and all
such investments of every kind and description, including, without limitation,
the right to consent and otherwise act with respect thereto, with power to
designate one or more Persons to exercise any of said rights, powers and
privileges in respect of any of said investments; and
(iii) to carry on any other business in connection with or incidental to
any of the foregoing powers, to do everything necessary, proper or desirable for
the accomplishment of any purpose or the attainment of any object or
D-7
the furtherance of any power hereinbefore set forth, and to do every other act
or thing incidental or appurtenant to or connected with the aforesaid purposes,
objects or powers.
(b) The Trustees shall not be limited to investing in securities or
obligations maturing before the possible termination of the Trust, nor shall the
Trustees be limited by any law limiting the investments which may be made by
fiduciaries.
(c) Notwithstanding any other provision of the Declaration to the contrary,
the Trustees shall have the power in their discretion without any requirement of
approval by Shareholders to either invest all or a portion of the Trust
Property, or sell all or a portion of such Trust Property and invest the
proceeds of such sales, in one or more other investment companies to the extent
not prohibited by the 1940 Act.
Section 3.3. Legal Title. Legal title to all Trust Property shall be vested
in the Trustees as joint tenants except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or in the name of one or
more of the Trustees, or in the name of the Trust, or in the name of any other
Person or nominee, on such terms as the Trustees may determine. The right, title
and interest of the Trustees in the Trust Property shall vest automatically in
each person who may hereafter become a Trustee. Upon the resignation,
retirement, removal or death of a Trustee, such Trustee shall automatically
cease to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered.
Section 3.4. Issuance and Repurchase of Securities. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VII and VIII hereof, to apply to any
such repurchase, redemption, retirement, cancellation or acquisition of Shares
any funds of the Trust or other Trust Property, whether capital or surplus or
otherwise.
Section 3.5. Borrowing Money; Lending Trust Property. The Trustees shall
have power to borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the Trust Property, to
endorse, guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person and to lend Trust Property.
Section 3.6. Delegation. The Trustees shall have power to delegate from
time to time to such of their number or to officers, employees, any Investment
Adviser, Distributor, custodian, agent or independent contractor of the Trust
the doing of such things and the execution of such instruments either in the
name of the Trust or the names of the Trustees or otherwise as the Trustees may
deem appropriate or expedient.
Section 3.7. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 3.8. Expenses. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of the Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees, Trustees and Advisory
Trustees.
Section 3.9. Manner of Acting; By-Laws. Except as otherwise provided
herein, in the 1940 Act or in the By-Laws, any action to be taken by the
Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees at which a quorum is present, including any meeting held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, or by
written consents of two-thirds of the Trustees. The Trustees may adopt By-Laws
not inconsistent with the Declaration to provide for the conduct of the business
of the Trust and may amend or repeal such By-Laws to the extent permitted
therein at any time.
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Section 3.10. Miscellaneous Powers. Without limiting the foregoing, the
Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust;
(b) enter into joint ventures, partnerships and any other combinations or
associations;
(c) elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, in each case with or without cause, and
appoint and terminate any one or more committees which may exercise some or all
of the power and authority of the Trustees as the Trustees may determine;
(d) purchase, and pay for out of Trust Property, such insurance as they may
deem necessary or appropriate for the conduct of the business of the Trust,
including, without limitation, insurance policies insuring the assets of the
Trust and payment of distributions and principal on its portfolio investments,
and insurance policies insuring Shareholders, any administrator, Trustees,
Advisory Trustees, officers, employees, agents, any Investment Adviser, any
Distributor, selected dealers or independent contractors of the Trust against
all claims arising by reason of holding any such position or by reason of any
action taken or omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust would have the power to
indemnify such Person against such liability;
(e) establish pension, profit-sharing, Share purchase, deferred
compensation, and other retirement, incentive and benefit plans for any
Trustees, officers, employees or agents of the Trust;
(f) to the extent permitted by law, indemnify any person with whom the
Trust has dealings, including any Investment Adviser, administrator, custodian,
Distributor, Transfer Agent, shareholder servicing agent and any dealer, to such
extent as the Trustees shall determine;
(g) guarantee indebtedness or contractual obligations of others;
(h) determine and change the fiscal year of the Trust and the method by
which its accounts shall be kept; and
(i) adopt a seal for the Trust, provided that the absence of such seal
shall not impair the validity of any instrument executed on behalf of the Trust.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR,
CUSTODIAN AND TRANSFER AGENT
Section 4.1. Investment Adviser. Subject to applicable requirements of the
1940 Act, the Trustees may in their discretion from time to time enter into one
or more investment advisory or management contracts whereby the other party to
each such contract shall undertake to furnish the Trust such management,
investment advisory, statistical and research facilities and services,
promotional activities, and such other facilities and services, if any, as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine. Notwithstanding
any provision of the Declaration, the Trustees may delegate to the Investment
Adviser authority (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales, loans or
exchanges of assets of the Trust on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of the Investment Adviser (and all without further
action by the Trustees). Any of such purchases, sales, loans or exchanges shall
be deemed to have been authorized by all the Trustees. Such services may be
provided by one or more Persons.
Section 4.2. Distributor. Subject to applicable requirements of the 1940
Act, the Trustees may in their discretion from time to time enter into one or
more exclusive or non-exclusive distribution contracts providing for the sale of
Shares, whereby the Trust may either agree to sell the Shares to the other party
to any such contract or appoint any such other party its sales agent for such
Shares. In either case, any such contract shall be on such terms
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and conditions as the Trustees may in their discretion determine, provided that
such terms and conditions are not inconsistent with the provisions of the
Declaration or the By-Laws; and such contract may also provide for the
repurchase or sale of Shares by such other party as principal or as agent of the
Trust and may provide that such other party may enter into selected dealer
agreements or agency agreements with securities dealers or other Persons to
further the purpose of the distribution or repurchase of the Shares. Such
services may be provided by one or more Persons.
Section 4.3. Custodian. The Trustees may in their discretion from time to
time enter into one or more contracts whereby the other party to each such
contract shall undertake to furnish such custody services to the Trust as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of the 1940 Act,
the Declaration or the By-Laws. The Trustees may authorize any custodian to
employ one or more sub-custodians from time to time to perform such of the
services of the custodian as the Trustees shall from time to time consider
desirable. Services described in this Section may be provided by one or more
Persons.
Section 4.4. Transfer Agent. The Trustees may in their discretion from time
to time enter into one or more transfer agency or sub-transfer agency and
shareholder servicing contracts whereby the other party to each such contract
shall undertake to furnish such transfer agency and/or shareholder services to
the Trust as the Trustees shall from time to time consider desirable and all
upon such terms and conditions as the Trustees may in their discretion
determine, provided that such terms and conditions are not inconsistent with the
provisions of the Declaration or the By-Laws. Such services may be provided by
one or more Persons.
Section 4.5. Parties to Contract. Any contract of the character described
in any Section of this Article IV may be entered into with any Person, although
one or more of the Trustees or officers of the Trust may be an officer, partner,
director, trustee, shareholder, or member of such other party to the contract,
and no such contract shall be invalidated or rendered voidable by reason of the
existence of any such relationship; nor shall any Person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of any such contract or accountable for
any profit realized directly or indirectly therefrom, provided that the contract
when entered into was not inconsistent with the provisions of this Article IV or
the By-Laws. The same Person may be the other party to contracts entered into
pursuant to Sections 4.1, 4.2, 4.3 and 4.4 above, and any individual may be
financially interested or otherwise affiliated with Persons who are parties to
any or all of the contracts mentioned in this Section 4.5.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholders. No Shareholder or
former Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust solely by reason of being or having been a Shareholder. The Trust
shall indemnify and hold each Shareholder and former Shareholder harmless from
and against all claims and liabilities to which such Shareholder may become
subject solely by reason of his or her being or having been a Shareholder (other
than taxes payable by virtue of owning Shares), and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. The rights accruing to a
Shareholder or former Shareholder under this Section 5.1 shall not exclude any
other right to which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder or former Shareholder in any appropriate situation even
though not specifically provided herein. The Trust shall, upon request by a
Shareholder or former Shareholder, assume the defense of any claim made against
such Shareholder for any act or obligation of the Trust and satisfy any judgment
thereon from the assets of the Trust.
Section 5.2. Limitation of Liability of Trustees and Others. (a) No
Trustee, Advisory Trustee, officer or employee or agent of the Trust shall be
subject to any liability whatsoever to any Person in connection with Trust
Property or the affairs of the Trust, and no Trustee or Advisory Trustee shall
be responsible or liable in any event for any neglect or wrongdoing of any
officer, employee or agent of the Trust or for the act or omission of any other
Trustee or Advisory Trustee. For the sake of clarification and without limiting
the foregoing, the appointment,
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designation or identification of a Trustee as the Chair of the Trustees, the
lead or assistant lead independent Trustee, a member or Chair of a committee of
the Trustees, an expert on any topic or in any area (including an audit
committee financial expert) or any other special appointment, designation or
identification given to a Trustee, shall not (a) impose on that person any duty,
obligation or liability that is greater than the duties, obligations and
liabilities imposed on that person as a Trustee in the absence of the
appointment, designation or identification or (b) affect in any way such
Trustee's rights or entitlement to indemnification, and no Trustee who has
special skills or expertise, or is appointed, designated or identified as
aforesaid, shall (x) be held to a higher standard of care by virtue thereof or
(y) be limited with respect to any indemnification to which such Trustee would
otherwise be entitled. Notwithstanding anything to the contrary in this Section
5.2(a) or otherwise, nothing in the Declaration shall protect any Trustee,
Advisory Trustee, officer, employee or agent of the Trust against any liability
to the Trust or its Shareholders to which he, she or it would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his, her or its
office or position with or on behalf of the Trust.
(b) All persons extending credit to, contracting with or having claim
against the Trust shall look solely to the assets of the Trust for payment under
such credit, contract or claim; and neither any Trustee or Advisory Trustee, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor.
Section 5.3. Mandatory Indemnification. (a) Subject to the exceptions and
limitations contained in paragraph (b) below:
(i) every person who is or has been a Trustee, Advisory Trustee or officer
of the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust against all liability and against all expenses
reasonably incurred or paid by him or her in connection with any claim, action,
suit or proceeding in which that individual becomes involved as a party or
otherwise by virtue of being or having been a Trustee, Advisory Trustee or
officer and against amounts paid or incurred by that individual in the
settlement thereof;
(ii) the words "claim," "action," "suit" or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal, administrative or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement or compromise, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) against any liability to the Trust or the Shareholders by reason of a
final adjudication by the court or other body before which the proceeding was
brought that the Covered Person engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of that
individual's office;
(ii) with respect to any matter as to which the Covered Person shall have
been finally adjudicated not to have acted in good faith in the reasonable
belief that that individual's action was in the best interest of the Trust; or
(iii) in the event of a settlement involving a payment by a Trustee,
Advisory Trustee or officer or other disposition not involving a final
adjudication as provided in paragraph (b)(i) or (b)(ii) above resulting in a
payment by a Covered Person, unless there has been either a determination that
such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of that
individual's office by the court or other body approving the settlement or other
disposition or by a reasonable determination, based upon a review of readily
available facts (as opposed to a full trial-type inquiry) that that individual
did not engage in such conduct:
(A) by vote of a majority of the Disinterested Trustees (as defined
below) acting on the matter (provided that a majority of the Disinterested
Trustees then in office act on the matter); or
(B) by written opinion of (i) the then-current legal counsel to the
Trustees who are not Interested Persons of the Trust or (ii) other legal counsel
chosen by a majority of the Disinterested Trustees (or if there are no
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Disinterested Trustees with respect to the matter in question, by a majority of
the Trustees who are not Interested Persons of the Trust) and determined by them
in their reasonable judgment to be independent.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be a Covered Person and shall inure to
the benefit of the heirs, executors and administrators of such person. Nothing
contained herein shall limit the Trust from entering into other insurance
arrangements or affect any rights to indemnification to which Trust personnel,
including Covered Persons, may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit, or proceeding of the character described in paragraph (a) of this
Section 5.3 shall be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the Covered Person to repay
such amount if it is ultimately determined that the Covered Person is not
entitled to indemnification under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or legal counsel meeting the requirement in Section 5.3(b)(iii)(B)
above in a written opinion, shall determine, based upon a review of readily
available facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the Covered Person ultimately will be found entitled to
indemnification.
As used in this Section 5.3 a "Disinterested Trustee" is one (i) who is not
an "Interested Person" of the Trust (including anyone who has been exempted from
being an "Interested Person" by any rule, regulation or order of the
Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
(e) With respect to any such determination or opinion referred to in clause
(b)(iii) above or clause (d)(ii) above, a rebuttable presumption shall be
afforded that the Covered Person has not engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office in accordance with pronouncements of the
Commission.
Section 5.4. No Bond Required. No Trustee, Advisory Trustee or officer
shall be obligated to give any bond or other security for the performance of any
of his or her duties hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust Instruments. No
purchaser, lender, shareholder servicing agent, Transfer Agent or other Person
dealing with the Trustees or any officer, employee or agent of the Trust shall
be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of money or property paid, loaned, or delivered to
or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing whatsoever executed in
connection with the Trust shall be conclusively presumed to have been executed
or done by the executors thereof only in their capacity as Trustees under the
Declaration or in their capacity as officers, employees or agents of the Trust.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees or officers
shall recite that the same is executed or made by them not individually, but as
or on behalf of Trustees under the Declaration, and that the obligations of any
such instrument are not binding upon any of the Trustees, officers or
Shareholders individually, but bind only the Trust estate, and may contain any
further recital deemed appropriate, but the omission of such recital shall not
operate to bind any of the Trustees, officers or Shareholders individually. The
Trustees may maintain insurance for the protection of the Trust Property,
Shareholders, Trustees, Advisory Trustees, officers, employees and agents in
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment shall
deem advisable.
Section 5.6. Good Faith Action; Reliance on Experts. The exercise by the
Trustees or the officers of the Trust of their powers and discretions hereunder
in good faith and with reasonable care under the circumstances then
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prevailing shall be binding upon everyone interested. The Trustees or the
officers of the Trust shall not be liable for errors of judgment or mistakes of
fact or law. Each Trustee and officer or employee of the Trust shall, in the
performance of his or her duties, be under no liability and fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon advice of counsel, or upon reports made to the Trust by any of its
officers or employees or by the Investment Adviser, the Distributor, Transfer
Agent, custodian, any shareholder servicing agent, selected dealers,
accountants, appraisers or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
Section 5.7. Derivative Actions. No Shareholder shall have the right to
bring or maintain any court action, proceeding or claim on behalf of the Trust
without first making demand on the Trustees requesting the Trustees to bring or
maintain such action, proceeding or claim. Such demand shall be excused only
when the plaintiff makes a specific showing that irreparable injury to the Trust
would otherwise result, or if a majority of the Board of Trustees, or a majority
of any committee established to consider the merits of such action, has a
material personal financial interest in the action at issue. A Trustee shall not
be deemed to have a personal financial interest in an action or otherwise be
disqualified from ruling on a Shareholder demand by virtue of the fact that such
Trustee receives remuneration from his or her service on the Board of Trustees
of the Trust or on the boards of one or more investment companies with the same
or an affiliated investment adviser or underwriter, or the amount of such
remuneration.
Such demand shall be mailed to the Secretary or Clerk of the Trust at the
Trust's principal office and shall set forth in reasonable detail the nature of
the proposed court action, proceeding or claim and the essential facts relied
upon by the Shareholder to support the allegations made in the demand. The
Trustees shall consider such demand within 45 days of its receipt by the Trust.
In their sole discretion, the Trustees may submit the matter to a vote of
Shareholders of the Trust, as appropriate. Any decision by the Trustees to
bring, maintain or settle (or not to bring, maintain or settle) such court
action, proceeding or claim, or to submit the matter to a vote of Shareholders,
shall be made by the Trustees in their business judgment and shall be binding
upon the Shareholders. Any decision by the Trustees to bring or maintain a court
action, proceeding or suit on behalf of the Trust shall be subject to the right
of the Shareholders under Section 6.8 of the Declaration to vote on whether or
not such court action, proceeding or suit should or should not be brought or
maintained.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The interest of the beneficiaries
hereunder may be divided into transferable Shares of Beneficial Interest
(without par value). The number of Shares authorized hereunder is unlimited. All
Shares issued hereunder including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully paid
and non-assessable.
Section 6.2. Rights of Shareholders. The ownership of the Trust Property of
every description and the right to conduct any business hereinbefore described
are vested exclusively in the Trustees, and the Shareholders shall have no
interest therein other than the beneficial interest conferred by their Shares,
and they shall have no right to call for any partition or division of any
property, profits, rights or interests of the Trust nor can they be called upon
to assume any losses of the Trust or suffer an assessment of any kind by virtue
of their ownership of Shares. The Shares shall be personal property giving only
the rights specifically set forth in the Declaration. The Shares shall not
entitle the holder to preference, preemptive, appraisal, conversion or exchange
rights. By becoming a Shareholder each Shareholder shall be held expressly to
have assented to and agreed to be bound by the provisions of the Declaration.
Section 6.3. Trust Only. It is the intention of the Trustees to create only
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
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Section 6.4. Issuance of Shares. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times, and on such terms as the Trustees may deem
best, and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with, the assumption of liabilities) and
businesses. In connection with any issuance of Shares, the Trustees may issue
fractional Shares. The Trustees may from time to time divide or combine the
Shares into a greater or lesser number without thereby changing their
proportionate beneficial interests in Trust Property. Contributions to the Trust
may be accepted for whole Shares and/or 1/1,000ths of a Share or integral
multiples thereof.
Section 6.5. Register of Shares. A register or registers shall be kept at
the principal office of the Trust or at an office of the Transfer Agent which
shall contain the names and addresses (which may be addresses for electronic
delivery) of the Shareholders and the number of Shares held by them respectively
and a record of all transfers thereof. Such register shall be conclusive as to
who are the holders of the Shares and who shall be entitled to receive dividends
or distributions or otherwise to exercise or enjoy the rights of Shareholders.
No Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to that Shareholder as provided herein or
in the By-Laws, until the Shareholder has given his or her address to the
Transfer Agent or such other officer or agent of the Trustees as shall keep the
said register for entry thereon. The Trustees, in their discretion, may
authorize the issuance of Share certificates and promulgate appropriate rules
and regulations as to their use.
Section 6.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by the record holder's
agent thereunto authorized in writing, upon delivery to the Trustees or, if
there is a Transfer Agent with respect to such Shares, the Transfer Agent of a
duly executed instrument of transfer together with any certificate or
certificates (if issued) for such Shares and such evidence of the genuineness of
each such execution and authorization and of other matters as may reasonably be
required. Upon such delivery the transfer shall be recorded on the register of
the Trust. Until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer, employee or agent
of the Trust shall be affected by any notice of the proposed transfer.
Any Person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent; but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
Section 6.7. Notices. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given (i)
if mailed, postage prepaid, addressed to any Shareholder of record at the
Shareholder's last known address as recorded on the register of the Trust, (ii)
if sent by electronic transmission to the Shareholder of record at the
Shareholder's last known address for electronic delivery as recorded on the
register of the Trust, (iii) if mailed or sent by electronic delivery to one or
more members of the Shareholder's household in accordance with applicable law or
regulation, or (iv) if otherwise sent in accordance with applicable law or
regulation.
Section 6.8. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees when that issue is submitted to Shareholders,
and for the removal of Trustees as provided in Section 2.2 hereof, (ii) with
respect to any investment advisory or management contract on which a shareholder
vote is required by the 1940 Act, (iii) with respect to termination of the Trust
to the extent and as provided in Section 8.2 hereof, (iv) with respect to any
amendment of the Declaration to the extent and as provided in Section 8.3
hereof, (v) with respect to any merger, consolidation, or sale of assets to the
extent and as provided in Sections 8.4 and 8.7 hereof, (vi) with respect to any
conversion of the Trust to an "open-end company" to the extent and as provided
in Section 8.6 hereof, (vii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders, and (viii) with
respect to such additional matters relating to the Trust as may be required by
the Declaration, the By-Laws, or any registration of the Trust with the
Commission (or any successor
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agency) or any other regulator having jurisdiction over the Trust, or as the
Trustees may consider necessary or desirable.
A Shareholder shall be entitled to one vote for each Share owned by such
Shareholder on each matter on which such Shareholder is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote.
Shares held in the treasury of the Trust shall not be voted.
Except when a larger vote is required by applicable law or by any provision
of the Declaration or the By-Laws, if any, Shares representing a majority of the
Shares voted in person or by proxy shall decide any questions and a plurality
shall elect a Trustee, provided that abstentions and broker non-votes shall not
be counted as votes cast but shall be counted as being present for purposes of
determining the existence of a quorum.
There shall be no cumulative voting in the election of Trustees. Until
Shares are issued and during any period when no Shares are outstanding, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, the Declaration or the By-Laws to be taken by Shareholders. The
By-Laws may include further provisions for Shareholder votes and meetings and
related matters.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
The Trustees, in their absolute discretion, may prescribe and shall set
forth in the By-Laws or in a duly adopted vote of the Trustees such bases and
times for determining the per Share net asset value of the Shares or net income,
or the declaration and payment of dividends and distributions, as they may deem
necessary or desirable.
ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article VIII.
Section 8.2. Termination of Trust. (a) The Trust may be terminated at any
time (i) by the affirmative vote of the holders of not less than two-thirds of
the Shares outstanding and entitled to vote at any meeting of Shareholders, or
(ii) by the Trustees by written notice to the Shareholders. Upon the termination
of the Trust:
(i) The Trust shall carry on no business except for the purpose of winding
up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the Trust and all
the powers of the Trustees under the Declaration shall continue until the
affairs of the Trust shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the remaining
Trust Property to one or more Persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities, and to do all other acts
appropriate to liquidate its business; and
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly in cash
and partly in kind, among the Shareholders of the Trust according to their
respective rights.
(b) After termination of the Trust and distribution to the Shareholders of
the Trust as herein provided, a majority of the Trustees shall execute and lodge
among the records of the Trust an instrument in writing setting forth the fact
of such termination, and the Trustees shall thereupon be discharged from all
further liabilities and duties
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hereunder with respect to the Trust, and the rights and interests of all
Shareholders of the Trust shall thereupon cease.
Section 8.3. Amendment Procedure. (a) Except as specifically provided
herein, the Trustees may, without any Shareholder vote, amend or otherwise
supplement the Declaration by making an amendment, a Declaration of Trust
supplemental hereto or an amended and restated Declaration. Without limiting the
foregoing power reserved to the Trustees, the Trustees may, without any
Shareholder vote, amend the Declaration to change the name or principal office
of the Trust, to supply any omission, to cure, correct or supplement any
ambiguous, defective or inconsistent provision hereof, or if they deem it
necessary or advisable, to conform the Declaration to the requirements of
applicable law, including the 1940 Act and the Internal Revenue Code of 1986, as
amended, but the Trustees shall not be liable for failing to do so. Shareholders
shall have the right to vote on (i) any amendment that would affect their right
to vote granted in Section 6.8; (ii) any amendment to Section 8.3(a) or (b);
(iii) any amendment as may be required by law or by the Trust's registration
statement to be approved by Shareholders; and (iv) any amendment submitted to
them by the Trustees. Except as otherwise provided in Section 8.3(c), any
amendment on which Shareholders have the right to vote shall require a Majority
Shareholder Vote of the Shareholders of the Trust, or the written consent,
without a meeting, of the holders of Shares representing not less than a
majority of the voting power of the Shares of the Trust.
(b) Nothing contained in the Declaration shall permit the amendment of the
Declaration to impair the exemption from personal liability of the Shareholders,
former Shareholders, Trustees, Advisory Trustees, officers, employees and agents
of the Trust or to permit assessments upon Shareholders or former Shareholders.
Notwithstanding anything else herein, any amendment to Section 5.3 shall not
limit the rights to indemnification or insurance provided therein with respect
to actions or omissions of persons entitled to indemnification under such
Section prior to such amendment.
(c) No amendment may be made which shall amend, alter, change or repeal any
of the provisions of Section 2.2, Section 8.2, this Section 8.3(c), Section 8.4,
Section 8.6 and Section 8.7 unless the amendment effecting such amendment,
alteration, change or repeal shall receive the affirmative vote or consent of
sixty-six and two-thirds percent (66 2/3%) of the Shares outstanding and
entitled to vote. Such affirmative vote or consent shall be in addition to the
vote or consent of the holders of Shares otherwise required by law or by the
terms of any class or series of preferred stock, whether now or hereafter
authorized, or any agreement between the Trust and any national securities
exchange.
(d) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders (if
applicable) or by the Trustees as aforesaid or a copy of the Declaration, as
amended, and executed by a majority of the Trustees, shall be conclusive
evidence of such amendment when lodged among the records of the Trust.
Section 8.4. Merger, Consolidation and Sale of Assets. Subject to
applicable law and except as otherwise provided in Section 8.5 hereof, the Trust
may merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property including its good will, upon such terms and conditions and for
such consideration when and as authorized (a) at any meeting of Shareholders
called for the purpose by the affirmative vote of the holders of not less than
two-thirds of the Shares outstanding and entitled to vote, or (b) by the written
consent, without a meeting, of the holders of not less than two-thirds of such
Shares, provided, however, that if such merger, consolidation, sale, lease or
exchange is recommended by the Trustees, the vote or written consent of the
holders of a majority of Shares outstanding and entitled to vote, shall be
sufficient authorization. Any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to the statutes of The Commonwealth of Massachusetts. Such transactions
may be effected through share-for-share exchanges, transfers or sales of assets,
in-kind redemptions and purchases, exchange offers, or any other method approved
by the Trustees. Nothing contained herein shall be construed as requiring
approval of Shareholders for any sale of assets in the ordinary course of the
business of the Trust, or for any transaction, whether deemed a merger,
consolidation, reorganization or exchange of shares or otherwise, whereby the
Trust issues shares in connection with the acquisition of assets (including
those subject to liabilities) from any other investment company or similar
entity.
D-16
Section 8.5. Incorporation, Reorganization. The Trustees may, without the
vote or consent of Shareholders, cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction, or any other
trust (or series or class of a trust), unit investment trust, partnership,
limited liability company, association or other organization to acquire all or a
portion of the Trust Property or to carry on any business in which the Trust
shall directly or indirectly have any interest, and to sell, convey and transfer
such Trust Property to any such corporation, trust (or series or class of a
trust), partnership, limited liability company, association or organization in
exchange for the shares or securities thereof or otherwise, and to lend money
to, subscribe for the shares or securities of, and enter into any contracts with
any such corporation, trust, partnership, association or organization in which
the Trust holds or is about to acquire shares or any other interest. The
Trustees may also, without the vote or consent of Shareholders, cause a merger
or consolidation between the Trust or any successor thereto and any such
corporation, trust (or series or class of a trust), partnership, association or
other organization if and to the extent permitted by law. The Trustees shall
provide written notice to affected Shareholders of each transaction pursuant to
this Section 8.5. Such transactions may be effected through share-for-share
exchanges, transfers or sales of assets, in-kind redemptions and purchases,
exchange offers, or any other method approved by the Trustees.
Section 8.6. Conversion. Notwithstanding any other provision of this
Declaration, the conversion of the Trust from a "closed-end company" to an
"open-end company," as those terms are defined in the 1940 Act, shall require
the affirmative vote or consent of the holders of sixty-six and two-thirds
percent (66 2/3%) of the Shares outstanding and entitled to vote. Such
affirmative vote or consent shall be in addition to the vote or consent of the
holders of the Shares otherwise required by law or by the terms of any class or
series of preferred stock, whether now or hereafter authorized, or any agreement
between the Trust and any national securities exchange.
Section 8.7. Certain Transactions. (a) Notwithstanding any other provision
of this Declaration and subject to the exceptions provided in paragraph (d) of
this Section, the types of transactions described in paragraph (c) of this
Section shall require the affirmative vote or consent of the holders of
sixty-six and two-thirds percent (66 2/3%) of the Shares outstanding and
entitled to vote, when a Principal Shareholder (as defined in paragraph (b) of
this Section) is a party to the transaction. Such affirmative vote or consent
shall be in addition to the vote or consent of the Shareholders otherwise
required by law or by the terms of any class or series of preferred stock,
whether now or hereafter authorized, or any agreement between the Trust and any
national securities exchange.
(b) The term "Principal Shareholder" shall mean any corporation, person or
other entity which is the beneficial owner, directly or indirectly, of more than
five percent (5%) of the outstanding Shares and shall include any affiliate or
associate, as such terms are defined in clause (ii) below, of a Principal
Shareholder. For the purposes of this Section, in addition to the Shares which a
corporation, person or other entity beneficially owns directly, (a) any
corporation, person or other entity shall be deemed to be the beneficial owner
of any Shares (i) which it has the right to acquire pursuant to any agreement or
upon exercise of conversion rights or warrants, or otherwise (but excluding
share options granted by the Trust) or (ii) which are beneficially owned,
directly or indirectly (including Shares deemed owned through application of
clause (i) above), by any other corporation, person or entity with which its
"affiliate" or "associate" (as defined below) has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
Shares, or which is its "affiliate" or "associate" as those terms are defined in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934 as in effect on December 1, 1986, and (b) the outstanding Shares
shall include Shares deemed owned through application of clauses (i) and (ii)
above but shall not include any other shares which may be issuable pursuant to
any agreement, or upon exercise of conversion rights or warrants, or otherwise.
(c) This Section shall apply to the following transactions:
(i) the merger or consolidation of the Trust or any subsidiary of the Trust
with or into any Principal Shareholder;
(ii) the issuance of any securities of the Trust to any Principal
Shareholder for cash;
(iii) the sale, lease or exchange of all or any substantial part of the
assets of the Trust to any Principal Shareholder (except assets having an
aggregate fair market value of less than $1,000,000, aggregating for the purpose
of such computation all assets sold, leased or exchanged in any series of
similar transactions within a twelve-month period);
D-17
(iv) the sale, lease or exchange to the Trust or any subsidiary thereof, in
exchange for securities of the Trust of any assets of any Principal Shareholder
(except assets having an aggregate fair market value of less than $1,000,000,
aggregating for the purposes of such computation all assets sold, leased or
exchanged in any series of similar transactions within a twelve-month period).
(d) The provisions of this Section shall not be applicable to (i) any of
the transactions described in paragraph (c) of this Section if the Board of
Trustees of the Trust shall by resolution have approved a memorandum of
understanding with such Principal Shareholder with respect to and substantially
consistent with such transaction, or (ii) any such transaction with any
corporation of which a majority of the outstanding shares of all classes of
stock normally entitled to vote in elections of directors is owned of record or
beneficially by the Trust and its subsidiaries.
(e) The Board of Trustees shall have the power and duty to determine for
the purposes of this Section on the basis of information known to the Trust,
whether (i) a corporation, person or entity beneficially owns more than five
percent (5%) of the outstanding Shares, (ii) a corporation, person or entity is
an "affiliate" or "associate" (as defined above) of another, (iii) the assets
being acquired or leased to or by the Trust or any subsidiary thereof,
constitute a substantial part of the assets of the Trust and have an aggregate
fair market value of less than $1,000,000, and (iv) the memorandum of
understanding referred to in paragraph (d) hereof is substantially consistent
with the transaction covered thereby. Any such determination shall be conclusive
and binding for all purposes of this Section.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Filing. The Declaration and any subsequent amendment hereto
shall be filed in the office of the Secretary of The Commonwealth of
Massachusetts and in such other place or places as may be required under the
laws of The Commonwealth of Massachusetts and may also be filed or recorded in
such other places as the Trustees deem appropriate, provided that the failure to
so file shall not invalidate this instrument or any properly authorized
amendment hereto. Each amendment so filed shall be accompanied by a certificate
signed and acknowledged by an officer or Trustee stating that such action was
duly taken in a manner provided herein, and unless such amendment or such
certificate sets forth some other time for the effectiveness of such amendment,
such amendment shall be effective upon its filing. A restated Declaration,
integrating into a single instrument all of the provisions of the Declaration
which are then in effect and operative, may be executed from time to time by a
majority of the Trustees and shall, upon filing with the Secretary of The
Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in lieu of the original
Declaration and the various amendments thereto.
Section 9.2. Governing Law. The Declaration is executed by the Trustees and
delivered in The Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said Commonwealth. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust,
and the absence of a specific reference herein to any such power, privilege, or
action shall not imply that the Trust may not exercise such power or privilege
or take such action.
Section 9.3. Principal Office. The principal office of the Trust is 500
Boylston Street, Boston, Massachusetts. The Trustees, without a vote of
Shareholders, may change the principal office of the Trust.
Section 9.4. Counterparts. The Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 9.5. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, appears to be an officer
or Trustee hereunder, certifying to: (i) the number or identity of Trustees or
Shareholders, (ii) the due authorization of the execution of any instrument or
writing, (iii) the form of any vote
D-18
passed at a meeting of Trustees or Shareholders, (iv) the fact that the number
of Trustees or Shareholders present at any meeting or executing any written
instrument satisfies the requirements of the Declaration, (v) the form of any
By-Laws adopted by or the identity of any officers elected by the Trustees, or
(vi) the existence of any fact or facts which in any manner relates to the
affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
Section 9.6. Provisions in Conflict with Law or Regulations.
(a) The provisions of the Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company or other provisions
of the Internal Revenue Code of 1986, as amended, or with other applicable laws
and regulations, the conflicting provision shall be deemed never to have
constituted a part of the Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
D-19
IN WITNESS WHEREOF, the undersigned have executed this instrument as of the
day and year first written above.
-------------------------------------
Robert E. Butler
As Trustee and Not Individually
-------------------------------------
Lawrence H. Cohn
As Trustee and Not Individually
-------------------------------------
David H. Gunning
As Trustee and Not Individually
-------------------------------------
William R. Gutow
As Trustee and Not Individually
-------------------------------------
Michael Hegarty
As Trustee and Not Individually
-------------------------------------
J. Atwood Ives
As Trustee and Not Individually
-------------------------------------
Robert J. Manning
As Trustee and Not Individually
-------------------------------------
Lawrence T. Perera
As Trustee and Not Individually
-------------------------------------
Robert C. Pozen
As Trustee and Not Individually
-------------------------------------
J. Dale Sherrattt
As Trustee and Not Individually
-------------------------------------
Laurie J. Thomsen
As Trustee and Not Individually
-------------------------------------
Robert W. Uek
As Trustee and Not Individually
D-20
APPENDIX E
NOMINEE INFORMATION
1. BIOGRAPHICAL INFORMATION REGARDING NOMINEES.
Information regarding the Nominees, together with their principal business
occupations during the last five years (their titles may have varied during that
period), is shown below. The address of each Nominee is 500 Boylston Street,
Boston, Massachusetts 02116.
NUMBER OF
PORTFOLIOS
YEAR FIRST IN COLUMBIA
ELECTED OR FUND COMPLEX OTHER
POSITION APPOINTED TO PRINCIPAL OCCUPATION(S) DURING TO BE OVERSEEN DIRECTORSHIPS
NAME AND BIRTH YEAR WITH FUND OFFICE PAST FIVE YEARS BY NOMINEE HELD(1)
------------------- ---------- ------------ -------------------------------- -------------- ---------------------
DISINTERESTED NOMINEES
Robert E. Butler N/A N/A Consultant - regulatory and 7 MFS Funds (99 funds)
(Born 1941) compliance matters (since July
2002); PricewaterhouseCoopers
LLP (professional services
firm), Partner (November 2000
until June 2002)
Lawrence H. Cohn, M.D. N/A N/A Chief of Cardiac Surgery (until 7 MFS Funds (99 funds)
(Born 1937) 2005), Brigham and Women's
Hospital; Harvard Medical
School, Professor of Cardiac
Surgery; Physician Director of
Medical Device Technology for
Partners Health Care
David H. Gunning N/A N/A Vice Chairman, Cleveland-Cliffs 7 MFS Funds (99
(Born 1942) Inc. (mining products and funds);
service provider); Portman Cleveland-Cliffs
Limited (Mining), Director Inc. (mining
(since 2005); Director, Lincoln products and service
Electric Holdings, Inc. (welding provider); Lincoln
equipment manufacturer). Electric Holdings,
Inc. (welding
equipment
manufacturer)
William R. Gutow N/A N/A Private investor and real estate 7 MFS Funds (99 funds)
(Born 1941) consultant; Capitol
Entertainment Management Company
(video franchise), Vice
Chairman; Atlantic Coast Tan
(Tanning salons), Vice Chairman.
E-1
NUMBER OF
PORTFOLIOS
YEAR FIRST IN COLUMBIA
ELECTED OR FUND COMPLEX OTHER
POSITION APPOINTED TO PRINCIPAL OCCUPATION(S) DURING TO BE OVERSEEN DIRECTORSHIPS
NAME AND BIRTH YEAR WITH FUND OFFICE PAST FIVE YEARS BY NOMINEE HELD(1)
------------------- ---------- ------------ -------------------------------- -------------- ---------------------
Michael Hegarty N/A N/A Retired; formerly AXA Financial 7 MFS Funds (99 funds)
(Born 1944) (financial services and
insurance), and President and
Chief Operating Officer (until
May 2001), Vice Chairman and
Chief Operating Officer; The
Equitable Life Assurance Society
(insurance).
J. Atwood Ives N/A N/A Private investor; formerly 7 MFS Funds (99 funds)
(born 1936) Chairman, Trustee and Chief
Executive Officer, Eastern
Enterprises (diversified
services company).
Lawrence T. Perera N/A N/A Hemenway & Barnes (attorneys), 7 MFS Funds (99 funds)
(Born 1935) Partner
J. Dale Sherrattt N/A N/A Insight Resources, Inc. 7 MFS Funds (99 funds)
(Born 1938) (acquisition planning
specialists), President;
Wellfleet Investments (investor
in health care companies),
Managing General Partner (since
1993); formerly Chief Executive
Officer (until May 2001),
Cambridge Nutraceuticals
(professional nutritional
products),
Laurie J. Thomsen N/A N/A Private investor; Prism Venture 7 MFS Funds (99
(Born 1957) Partners (venture capital), funds); St. Paul
Co-founder and General Partner Travelers Companies
(until June 2004) (commercial property
liability insurance)
Robert W. Uek N/A N/A Retired; formerly Partner, 7 MFS Funds (99 funds)
(Born 1941) PricewaterhouseCoopers LLP
(professional services firm);
Consultant to investment company
industry.
INTERESTED TRUSTEES
Robert J. Manning N/A N/A Massachusetts Financial Services 7 MFS Funds (99
(born 1963) * Company, Chief Executive funds);
Officer, President, Chief Massachusetts
Investment Officer Financial Services
Company
E-2
NUMBER OF
PORTFOLIOS
YEAR FIRST IN COLUMBIA
ELECTED OR FUND COMPLEX OTHER
POSITION APPOINTED TO PRINCIPAL OCCUPATION(S) DURING TO BE OVERSEEN DIRECTORSHIPS
NAME AND BIRTH YEAR WITH FUND OFFICE PAST FIVE YEARS BY NOMINEE HELD(1)
------------------- ---------- ------------ -------------------------------- -------------- ---------------------
Robert C. Pozen N/A N/A Massachusetts Financial Services 7 MFS Funds (99
(born 1946) * Company, Chairman (since funds);
February 2004); MIT Sloan School Massachusetts
(education), Senior Lecturer Financial Services
(since 2006); Secretary of Company; Bell Canada
Economic Affairs, The Enterprises
Commonwealth of Massachusetts (telecommunications);
(January 2002 to December 2002); Medtronic, Inc.
formerly Vice Chairman and (medical
President, Fidelity Investments, technology); Telesat
Fidelity Management & Research (satellite
Company (investment adviser). communications)
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
* This individual would be an "Interested person" within the meaning of the
Investment Company Act of 1940, which is the principal federal law
governing investment companies like the Fund, as a result of position with
MFS. The address of MFS is 500 Boylston Street, Boston, Massachusetts
02116.
E-3
2. POSITIONS HELD WITH AFFILIATED PERSONS
If Proposal 1 is approved by shareholders, each of Messrs. Manning and Pozen
would be an "interested person" (as that term is defined in Section 2(a)(19) of
the 1940 Act) of the Fund by reason of his affiliation with MFS. No other
Nominee would be an "interested person" of the Fund.
3. ARRANGEMENTS FOR SELECTION AS NOMINEE
In light of the Sale, the Board determined that nomination of persons who are
more familiar with MFS and with the management and operation of other funds
advised by MFS would facilitate the efficient and effective representation of
shareholder interests. All Nominees were reviewed by the Board based on the
criteria generally employed by the Governance Committee to review candidates for
nomination as trustee.
4. RELATED POSITIONS HELD BY DISINTERESTED NOMINEES
[[Except as disclosed in the table in Section 1 of this Appendix E, no
disinterested Nominee and no immediate family member of any Nominee holds, or
has held within the past five years, any position, as a director, general
partner, officer, employee or otherwise, with the Fund, any fund having the same
investment adviser or principal underwriter as the Fund, any fund having an
investment adviser or principal underwriter in a control relationship with any
investment adviser or principal underwriter of the Fund, any investment adviser
or principal underwriter of the Fund or any person in a control relationship
with any investment adviser or principal underwriter of the Fund.]]
5. INTERESTS OF DISINTERESTED NOMINEES IN AFFILIATED PERSONS
[[No disinterested Nominee and no immediate family member of any Nominee has,
and at no time in the past five years had, any direct or indirect interest, the
value of which exceeds $120,000, in any investment adviser or principal
underwriter of the Fund, or in any person (other than a fund) in a control
relationship with any investment adviser or principal underwriter of the Fund.]]
6. INTERESTS OF DISINTERESTED NOMINEES IN AFFILIATED TRANSACTIONS
[[No disinterested nominee and no immediate family member of any Nominee has,
and at no time since the beginning of the past two completed fiscal years of the
Fund had, any direct or indirect material interest in any transaction or series
of similar transactions involving amounts in excess of $120,000 to which any of
the following persons was or is a party: (a) the Fund; (b) any officer of the
Fund; (c) any fund having the same investment adviser or principal underwriter
as the Fund; (d) any fund having an investment adviser or principal underwriter
in a control relationship with any investment adviser or principal underwriter
of the Fund; (e) any officer of any fund having the same investment adviser or
principal underwriter as the Fund; (f) any officer of any fund having an
investment adviser or principal underwriter in a control relationship with any
investment adviser or principal underwriter of the Fund; (g) any investment
adviser or principal underwriter of the Fund; (h) any officer of any investment
adviser or principal underwriter of the Fund; (i) any person in a control
relationship with any investment adviser or principal underwriter of the Fund;
or (j) any officer of any person in a control relationship with any investment
adviser or principal underwriter of the Fund.]]
7. RELATIONSHIPS OF DISINTERESTED NOMINEES WITH AFFILIATED PERSONS
[[No disinterested Nominee and no immediate family member of any Nominee has,
and at no time since the beginning of the past two completed fiscal years of the
Fund had, any direct or indirect relationship involving amounts in excess of
$120,000 with any of the following persons: (a) the Fund; (b) any officer of the
Fund; (c) any fund having the same investment adviser or principal underwriter
as the Fund; (d) any fund having an investment adviser or principal underwriter
in a control relationship with any investment adviser or principal underwriter
of the Fund; (e) any officer of any fund having the same investment adviser or
principal underwriter as the Fund; (f) any officer of any fund having an
investment adviser or principal underwriter in a control relationship with any
investment adviser or principal underwriter of the Fund; (g) any investment
adviser or principal underwriter of any Fund; (h) any officer of any investment
adviser or principal underwriter of the Fund; (i) any person in a control
relationship with any investment adviser or principal underwriter of the Fund;
or (j) any officer of any person in a
E-4
control relationship with any investment adviser or principal underwriter of the
Fund. For purposes of this Section 7 of this Appendix E, "relationship" includes
payments of property or services to or from any person specified above;
provision of legal services to any person specified above; provision of
investment banking services to any person specified above, other than as a
participating underwriter in a syndicate; and any consulting or other
relationship substantially similar in nature and scope to any of the
relationships listed in this sentence.]]
8. POTENTIAL CONFLICTS OF INTEREST OF THE NOMINEES
[[No officer of any investment adviser or principal underwriter of the Fund, and
no officer of any person in a control relationship with any investment adviser
or principal underwriter of the Fund, serves, and at no time since the beginning
of the past two completed fiscal years of the Fund served, as a director of any
company for which a disinterested Nominee or an immediate family member of any
Nominee is, or at any time since the beginning of the past two completed fiscal
years of the Fund was, an officer.]]
E-5
APPENDIX F
NOMINEE SHARE OWNERSHIP
1. BENEFICIAL OWNERSHIP OF EQUITY SECURITIES BY NOMINEES IN THE FUND AND IN
FAMILY OF INVESTMENT COMPANIES
The tables below show the dollar range of equity securities of the Fund and the
aggregate dollar range of equity securities of the Fund in it's "Family of
Investment Companies" (as defined in Item 22(a)(1)(iv) of Rule 14a-101 under the
Exchange Act) owned by each Nominee as of the Record Date. For purposes of the
tables below, the following symbols are applicable:
N None
A $1 - $10,000
B $10,001 - $50,000
C $50,001 - $100,000
D Over $100,000
DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND
---------------------------------------------------
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL FUNDS OVERSEEN
COLONIAL INSURED BY TRUSTEE OR NOMINEE IN FAMILY
MUNICIPAL FUND OF INVESTMENT COMPANIES
---------------- --------------------------------
Mr. Robert E. Butler [[________]] [[________]]
Dr. Lawrence H. Cohn [[________]] [[________]]
Mr. David H. Gunning [[________]] [[________]]
Mr. William R. Gutow [[________]] [[________]]
Mr. Michael Hegarty [[________]] [[________]]
Mr. J. Atwood Ives [[________]] [[________]]
Mr. Robert J. Manning [[________]] [[________]]
Mr. Lawrence T. Perera [[________]] [[________]]
Mr. Robert C. Pozen [[________]] [[________]]
Mr. J. Dale Sherratt [[________]] [[________]]
Ms. Laurie J. Thomsen [[________]] [[________]]
Mr. Robert W. Uek [[________]] [[________]]
2. BENEFICIAL OWNERSHIP BY DISINTERESTED NOMINEES OF EQUITY SECURITIES IN FUND
AFFILIATES
[[No disinterested Nominees or family members of any disinterested Nominees have
any beneficial ownership of equity securities in the investment adviser or
principal underwriter of the Fund, or in any person in a control relationship
with the investment adviser or principal underwriter of the Fund.]]
F-1
APPENDIX G
TRUSTEE, NOMINEE AND OFFICER INFORMATION
1. BIOGRAPHICAL INFORMATION REGARDING TRUSTEES, NOMINEES AND EXECUTIVE
OFFICERS OF THE FUND.
Information regarding the current trustees and officers of the Fund (including
the nominees set forth in Proposal 4), together with their principal business
occupations during the last five years (their titles may have varied during that
period), is shown below. The address of each trustee, nominee and officer is One
Financial Center, Boston, Massachusetts 02111-2621. If the Closing occurs, each
current officer of the Fund has indicated his or her intention to resign
effective at the Closing.
NUMBER OF
YEAR FIRST PORTFOLIOS IN
ELECTED OR COLUMBIA FUND
APPOINTED TO PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN OTHER
NAME AND BIRTH YEAR POSITION WITH FUND OFFICE(1) DURING PAST FIVE YEARS BY TRUSTEE DIRECTORSHIPS HELD(2)
------------------- ------------------ ------------ --------------------------------- ---------------- ---------------------
DISINTERESTED TRUSTEES
Thomas C. Theobald Trustee and 1996 Partner and Senior Advisor, 75 Anixter International
(Born 1937) Chairman of the Chicago Growth Partners (private (network support
Board equity investing) since equipment
September, 2004; Managing distributor); Ventas,
Director, William Blair Capital Inc. (real estate
Partners (private equity investment trust);
investing) from September, 1994 Jones Lang LaSalle
to September, 2004. (real estate
management services;
Ambac Financial Group
(financial guaranty
insurance)
Douglas A. Hacker Trustee 1996 Independent business executive 75 Nash Finch Company
(Born 1955) since May, 2006; Executive Vice (food distributor);
President - Strategy of United Aircastle Limited
Airlines (airline) from December, (aircraft leasing)
2002 to May, 2006; President of
UAL Loyalty Services (airline
marketing company) from
September, 2001 to December,
2002; Executive Vice President
and Chief Financial Officer of
United Airlines from July, 1999
to September, 2001.
Janet Langford Kelly Trustee 1996 Deputy General Counsel - 75 None
(Born 1957) Corporate Legal Services,
ConocoPhillips (integrated
petroleum company) since August,
2006; Partner, Zelle, Hofmann,
Voelbel, Mason & Gette LLP (law
firm) from March, 2005 to July,
2006; Adjunct Professor of Law,
Northwestern University, from
September, 2004 to June, 2006;
Director, UAL Corporation
(airline) from February, 2006 to
July, 2006; Chief Administrative
Officer and Senior Vice
President, Kmart Holding
Corporation (consumer goods),
from September, 2003 to March,
2004; Executive Vice President -
Corporate Development and
Administration, General Counsel
and Secretary, Kellogg Company
(food manufacturer), from
G-1
NUMBER OF
YEAR FIRST PORTFOLIOS IN
ELECTED OR COLUMBIA FUND
APPOINTED TO PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN OTHER
NAME AND BIRTH YEAR POSITION WITH FUND OFFICE(1) DURING PAST FIVE YEARS BY TRUSTEE DIRECTORSHIPS HELD(2)
------------------- ------------------ ------------ --------------------------------- ---------------- ---------------------
September, 1999 to August, 2003.
Richard W. Lowry Trustee 1995 Private Investor since August, 75 None
(Born 1936) 1987; formerly Chairman and Chief
Executive Officer, U.S. Plywood
Corporation (building products
manufacturer).
Charles R. Nelson Trustee 1981 Professor of Economics, 75 None
(Born 1943) University of Washington since
January, 1976; Ford and Louisa
University of Washington Van
Voorhis Professor of Political
Economy, University of
Washington, since September,
1993; Director, Institute for
Economic Research, University of
Washington from September, 2001
to June, 2003; Adjunct Professor
of Statistics, University of
Washington since September, 1980;
Associate Editor, Journal of
Money Credit and Banking since
September, 1993; consultant on
econometric and statistical
matters.
John J. Neuhauser Trustee 1985 University Professor, Boston 75 None
(Born 1942) College since November, 2005;
Academic Vice President and Dean
of Faculties, Boston College from
August, prior thereto.
Patrick J. Simpson Trustee 2000 Partner, Perkins Coie L.L.P. 75 None
(Born 1944) (law firm).
Thomas E. Stitzel Trustee 1998 Business Consultant since 1999; 75 None
(Born 1936) Chartered Financial Analyst.
Anne-Lee Verville Trustee 1998 Retired since 1997; formerly 75 None
(Born 1945) General Manager, Global Education
Industry, IBM Corporation
(computer and technology).
INTERESTED TRUSTEE
William E. Mayer(3) Trustee 1994 Partner, Park Avenue Equity 75 Lee Enterprises
(Born 1940) Partners (private equity) since (print media), WR
February, 1999; formerly Dean and Hambrecht & Co.
Professor, College of Business, (financial service
University of Maryland. provider); Reader's
Digest (publishing).
1. The date shown is the earliest date on which a trustee was elected or
appointed to the board of a fund in the Columbia Fund Complex.
2. Directorships or trusteeships of companies required to report to the
Commission (i.e., "public companies").
3. Mr. Mayer is an "interested person" (as defined in the 1940 Act) of the
Fund by reason of his affiliation with WR Hambrecht + Co., a registered
broker-dealer that may execute portfolio transactions for or engage in
principal transactions with the Fund or other funds or clients advised by
Columbia or its affiliates.
G-2
YEAR FIRST
ELECTED OR
APPOINTED TO
NAME AND BIRTH YEAR POSITION WITH FUND OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
------------------- -------------------------------- ------------ -----------------------------------------------------------
OFFICERS
Christopher L. Wilson President 2004 Head of Mutual Funds, Columbia, since August, 2004 and
(Born 1957) Managing Director, Columbia, since September, 2005;
President and Chief Executive Officer, DCD IXIS Asset
Management Services, Inc. (investment management), prior
thereto
James R. Bordewick, Jr. Senior Vice President, Secretary 2006 Associate General Counsel, Bank of America since April,
(Born 1959) and Chief Legal Officer 2005; Senior Vice President and Associate General Counsel,
MFS Investment management (investment management) prior
thereto
J. Kevin Connaughton Senior Vice President, Chief 2000 Managing director of the Advisor since February, 1998
(Born 1964) Financial Officer and Treasurer
Linda J. Wondrack Senior Vice President and Chief 2007 Director (Columbia Management Group LLC and Investment
(Born 1964) Compliance Officer Product Group Compliance), Bank of America, since June
2005; Director of Corporate Compliance and Conflicts
Officer, MFS Investment Management (investment management)
Michael G. Clarke Chief Accounting Officer and 2004 Director of Fund Administration, Columbia, since January
(Born 1969) Assistant Treasurer 2006; Managing Director of Columbia Management Advisors,
LLC September, 2004 to December, 2005; Vice President Fund
Administration, Columbia, June, 2002 to September, 2004.
Vice President Product Strategy and Development, Columbia,
prior thereto.
Stephen T. Welsh Vice President 1996 President, Columbia Management Services, Inc., since July,
(Born 1957) 2004; Senior Vice President and Controller, Columbia
Management Services, Inc. prior thereto.
Jeffrey R. Coleman Deputy Treasurer 2004 Director of Fund Administration, Columbia, since January,
(Born 1969) 2006; Fund Controller from October, 2004 to January, 2006;
Vice President of CDC IXIS Asset Management Services, inc.
(investment management) prior thereto.
Joseph F. DiMaria Deputy Treasurer 2004 Director of Fund Administration, Columbia, since January,
(Born 1968) 2006; Head of Tax/Compliance and Assistant Treasurer,
Columbia, from November, 2004 to December, 2005; Director
of Trustee Administration (Sarbanes-Oxley, Columbia) from
May, 2003 to October, 2004; Senior Audit Management,
PricewaterhouseCoopers (independent registered public
accounting firm) prior thereto.
Ty S. Edwards Deputy Treasurer 2004 Director of Fund Administration, Columbia, since January,
(Born 1966) 2006; Vice President of the Adviser from July, 2002 to
December, 2005; Assistant Vice President and Director,
State Street Corporation (financial services), prior
thereto.
Kathryn Dwyer-Thompson Assistant Treasurer 2006 Vice President, Mutual Fund Accounting Oversight of the
(Born 1967) Advisor since December 2004; Vice President, State Street
Corporation, prior thereto
Marybeth C. Pilat Assistant Treasurer 2006 Vice President, Mutual Fund Valuation of the Advisor since
(Born 1968) January 2006; Vice President, Mutual Fund Accounting
oversight of the Advisor prior to January 2006.
G-3
YEAR FIRST
ELECTED OR
APPOINTED TO
NAME AND BIRTH YEAR POSITION WITH FUND OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
------------------- -------------------------------- ------------ -----------------------------------------------------------
Philip N. Prefontaine Assistant Treasurer 2006 Vice President, Trustee Reporting of the Advisor since
(Born 1948) September 2003; Manager, Investors Bank & Trust Company
(financial services), from December 2002 to September 2003;
Audit Senior, Deloitte & Touche, LLP (independent
registered public accounting firm) prior thereto.
Barry S. Vallan Controller 2006 Vice President-Fund Treasury of the Advisor since October,
(Born 1969) 2004,; Vice President-Trustee Reporting, Columbia, from
April, 2002 to October, 2004; Management Consultant,
PricewaterhouseCoopers (independent registered public
account firm), prior thereto.
Peter T. Fariel Assistant Secretary 2006 Associate General Counsel, Bank of America since April,
(born 1957) 2005; Partner, Goodwin Procter LLP (law firm) prior to
April, 2005.
Julie B. Lyman Assistant Secretary 2007 Assistant General Counsel, Bank of America since October
(Born 1970) 2006; Associate, Kirkpatrick & Lockhart Nicholas Graham LLP
(law firm), from April 2004 to October 2006; Counsel &
Assistant Vice President, CDC IXIS Asset Management
Services, Inc. (investment management) prior thereto.
Ryan C. Larrenaga Assistant Secretary 2005 Assistant General Counsel, Bank of America since March,
(Born 1970) 2005; Associate, Ropes & Gray LLP (law firm), prior
thereto.
Julian Quero Assistant Treasurer 2003 Senior Compliance Manager of Columbia since April, 2002;
(Born 1967) Assistant Vice President of Taxes and Distributions of
Columbia prior thereto.
G-4
2. POSITIONS HELD WITH AFFILIATED PERSONS
With the exception of Mr. Mayer, no trustee of the Fund and no nominee set forth
in Proposal 4 is an "interested person" (as that term is defined in Section
2(a)(19) of the 1940 Act) of the Fund. Officers of the Fund hold the positions
with affiliated persons of the Fund set forth in the preceding table.
3. ARRANGEMENTS FOR SELECTION AS TRUSTEE, NOMINEE OR OFFICER
[[All nominees set forth in Proposal 4 were reviewed by the Board based on the
criteria generally employed by the Governance Committee to review candidates for
nomination as trustee. There exist no arrangements or understandings between any
such nominee and any other person pursuant to which any such nominee was
selected as a nominee. There also exist no arrangements or understandings
between any trustee or officer of the Fund and any other person pursuant to
which any such trustee or officer was selected as a trustee or officer,
respectively.]]
4. RELATED POSITIONS HELD BY INDEPENDENT TRUSTEES OR DISINTERESTED NOMINEES
[[Except as disclosed in the table in Section 1 of this Appendix G, no
Independent Trustee, no disinterested nominee set forth in Proposal 4 and no
immediate family member of any of the foregoing holds, or has held within the
past five years, any position, as a director, general partner, officer, employee
or otherwise, with the Fund, any fund having the same investment adviser or
principal underwriter as the Fund, any fund having an investment adviser or
principal underwriter in a control relationship with any investment adviser or
principal underwriter of the Fund, any investment adviser or principal
underwriter of the Fund or any person in a control relationship with any
investment adviser or principal underwriter of the Fund.]]
5. INTERESTS OF INDEPENDENT TRUSTEES OR DISINTERESTED NOMINEES IN AFFILIATED
PERSONS
[[No Independent Trustee, no disinterested nominee set forth in Proposal 4 and
no immediate family member of any of the foregoing has, and at no time in the
past five years had, any direct or indirect interest, the value of which exceeds
$120,000, in any investment adviser or principal underwriter of the Fund, or in
any person (other than a fund) in a control relationship with any investment
adviser or principal underwriter of the Fund.]]
6. INTERESTS OF INDEPENDENT TRUSTEES OR DISINTERESTED NOMINEES IN AFFILIATED
TRANSACTIONS
[[No Independent Trustee, no disinterested nominee set forth in Proposal 4 and
no immediate family member of any of the foregoing has, and at no time since the
beginning of the past two completed fiscal years of the Fund had, any direct or
indirect material interest in any transaction or series of similar transactions
involving amounts in excess of $120,000 to which any of the following persons
was or is a party: (a) the Fund; (b) any officer of the Fund; (c) any fund
having the same investment adviser or principal underwriter as the Fund; (d) any
fund having an investment adviser or principal underwriter in a control
relationship with any investment adviser or principal underwriter of the Fund;
(e) any officer of any fund having the same investment adviser or principal
underwriter as the Fund; (f) any officer of any fund having an investment
adviser or principal underwriter in a control relationship with any investment
adviser or principal underwriter of the Fund; (g) any investment adviser or
principal underwriter of the Fund; (h) any officer of any investment adviser or
principal underwriter of the Fund; (i) any person in a control relationship with
any investment adviser or principal underwriter of the Fund; or (j) any officer
of any person in a control relationship with any investment adviser or principal
underwriter of the Fund.]]
7. RELATIONSHIPS OF INDEPENDENT TRUSTEES OR DISINTERESTED NOMINEES WITH
AFFILIATED PERSONS
[[No Independent Trustee, no disinterested nominee set forth in Proposal 4 and
no immediate family member of any of the foregoing has, and at no time since the
beginning of the past two completed fiscal years of the Fund had, any direct or
indirect relationship involving amounts in excess of $120,000 with any of the
following persons: (a) the Fund; (b) any officer of the Fund; (c) any fund
having the same investment adviser or principal underwriter as the Fund; (d) any
fund having an investment adviser or principal underwriter in a control
relationship with any investment adviser or principal underwriter of the Fund;
(e) any officer of any fund having the same investment adviser or principal
underwriter as the Fund; (f) any officer of any fund having an investment
adviser or principal underwriter in a control relationship with any investment
adviser or principal underwriter of the Fund; (g) any
G-5
investment adviser or principal underwriter of the Fund; (h) any officer of any
investment adviser or principal underwriter of the Fund; (i) any person in a
control relationship with any investment adviser or principal underwriter of the
Fund; or (j) any officer of any person in a control relationship with any
investment adviser or principal underwriter of the Fund. For purposes of this
Section 7 of this Appendix G, "relationship" includes payments of property or
services to or from any person specified above; provision of legal services to
any person specified above; provision of investment banking services to any
person specified above, other than as a participating underwriter in a
syndicate; and any consulting or other relationship substantially similar in
nature and scope to any of the relationships listed in this sentence.]]
8. POTENTIAL CONFLICTS OF INTEREST OF THE TRUSTEES OR NOMINEES
[[No officer of any investment adviser or principal underwriter of the Fund, and
no officer of any person in a control relationship with any investment adviser
or principal underwriter of the Fund, serves, and at no time since the beginning
of the past two completed fiscal years of the Fund served, as a director of any
company for which an Independent Trustee, a disinterested nominee set forth in
Proposal 4 or an immediate family member of any of the foregoing is, or at any
time since the beginning of the past two completed fiscal years of the Fund was,
an officer.]]
G-6
APPENDIX H
TRUSTEE COMPENSATION
The table below sets forth the compensation during the fiscal year ended
November 30, 2006 of each trustee from the Fund for serving as trustee, and the
aggregate compensation during the calendar year ended December 31, 2006 of each
trustee from the Fund Complex for serving as trustee. Two-thirds of the
trustees' fees are allocated among the fund within the Fund Complex that are
supervised by the trustees of the Fund based on the relative net assets of the
fund. One-third of such fees is divided equally among the funds within the Fund
Complex that are supervised by the trustees of the Fund.
AGGREGATE COMPENSATION FROM:
------------------------------------------------------------
PENSION OR TOTAL COMPENSATION
RETIREMENT BENEFITS FROM THE FUND
COLONIAL INSURED ACCRUED AS PART COMPLEX PAID TO THE
MUNICIPAL FUND OF FUND EXPENSES(1) TRUSTEES
---------------- ------------------- -------------------
DISINTERESTED TRUSTEES
Douglas A. Hacker $[[_____] N/A $199,000
Janet Langford Kelly $[[_____] N/A $194,500
Richard W. Lowry(2) $[[_____] N/A $223,500
Charles R. Nelson $[[_____] N/A $183,000
John J. Neuhauser(2) $[[_____] N/A $193,500
Patrick J. Simpson(3) $[[_____] N/A $183,000
Thomas E. Stitzel(4) $[[_____] N/A $186,000
Thomas C. Theobald(5) $[[_____] N/A $274,500
Anne-Lee Verville(6) $[[_____] N/A $191,500
Richard L. Woolworth(7) $[[_____] N/A $103,250
INTERESTED TRUSTEE
William E. Mayer(2) $[[_____] N/A $193,500
(1) The Fund does not provide pension or retirement plan benefits to the
trustees.
(2) Total Compensation figures for Messrs. Lowry, Mayer and Neuhauser include
trustee fees paid to them by Liberty All-Star Equity Fund and Liberty
All-Star Growth Fund, Inc. prior to December 15, 2006, at which time those
funds ceased to be part of the Columbia Fund Complex.
(3) During the indicated periods, Mr. Simpson deferred all of his compensation
from funds in the Columbia Fund Complex, pursuant to the deferred
compensation plan. At December 31, 2006, the value of Mr. Simpson's account
under that plan was $511,995.
(4) During the indicated periods, Mr. Stitzel deferred $[[____]] from the Fund,
and in the calendar year ended December 31, 2006 $116,500 of his total
compensation from the Columbia Fund Complex, pursuant to the deferred
compensation plan. At December 31, 2006, the value of Mr. Stitzel's account
under that plan was $128,397.
(5) During the indicated periods, Mr. Theobald deferred 68% of his compensation
from the funds in the Columbia Fund Complex, pursuant to the deferred
compensation plan. At December 31, 2006, the value of Mr. Theobald's
account under that plan was $584,565.
(6) At December 31, 2006, the value of Ms. Verville's account under the
deferred compensation plan was $792,952.
(7) Mr. Woolworth served as a trustee of the Fund until August 4, 2006.
H-1
APPENDIX I
TRUSTEE AND NOMINEE SHARE OWNERSHIP
1. BENEFICIAL OWNERSHIP OF EQUITY SECURITIES BY TRUSTEES AND NOMINEES IN THE
FUND AND IN FAMILY OF INVESTMENT COMPANIES
The tables below show the dollar range of equity securities of the Fund and the
aggregate dollar range of equity securities of all funds in the Fund's "Family
of Investment Companies" (as defined in Item 22(a)(1)(iv) of Rule 14a-101 under
the Exchange Act) owned by each trustee and each nominee set forth in Proposal 4
as of the Record Date. For purposes of the tables below, the following symbols
are applicable:
N None
A $1 - $10,000
B $10,001 - $50,000
C $50,001 - $100,000
D Over $100,000
DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND
-------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL FUNDS OVERSEEN
COLONIAL INSURED MUNICIPAL BY TRUSTEE OR NOMINEE IN FAMILY
FUND OF INVESTMENT COMPANIES
-------------------------- --------------------------------
DISINTERESTED TRUSTEES
Douglas A. Hacker N D
Janet Langford Kelly N D
Richard W. Lowry N D
Charles R. Nelson N D
John J. Neuhauser N D
Patrick J. Simpson N D
Thomas E. Stitzel N D
Thomas C. Theobald N D
Anne-Lee Verville N D
INTERESTED TRUSTEE
William E. Mayer N C
2. BENEFICIAL OWNERSHIP BY INDEPENDENT TRUSTEES OR DISINTERESTED NOMINEES OF
EQUITY SECURITIES IN FUND AFFILIATES
[[No Independent Trustees, disinterested nominee set forth in Proposal 4 or
family member of any of the foregoing persons has any beneficial ownership of
equity securities in the investment adviser or principal underwriter of the
Fund, or in any person in a control relationship with the investment adviser or
principal underwriter of the Fund.]]
I-1
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
THREE CONVENIENT WAYS TO VOTE YOUR PROXY.
YOU CAN VOTE YOUR PROXIES OVER THE INTERNET, BY
TOUCH-TONE TELEPHONE OR BY MAIL - IT'S EASY AND CONFIDENTIAL.
INTERNET AND TELEPHONE VOTING ARE AVAILABLE
24 HOURS A DAY, SEVEN DAYS A WEEK.
IF YOU ARE VOTING BY INTERNET OR TELEPHONE,
YOU SHOULD NOT MAIL YOUR PROXY CARD.
VOTE BY INTERNET:
READ THE PROXY STATEMENT AND HAVE YOUR PROXY CARD AVAILABLE.
GO TO [[WEBSITE]] AND FOLLOW THE ON SCREEN DIRECTIONS.
VOTE BY TOUCH-TONE TELEPHONE:
READ THE PROXY STATEMENT AND HAVE YOUR PROXY CARD AVAILABLE.
CALL TOLL FREE [[NUMBER]] AND FOLLOW THE RECORDED INSTRUCTIONS PROVIDED TO CAST
YOUR VOTE.
VOTE BY MAIL:
READ THE PROXY STATEMENT.
VOTE ON EACH PROPOSAL WHERE INDICATED ON THE ENCLOSED PROXY CARD, SIGN AND DATE
IT, AND RETURN IT IN THE ENCLOSED ENVELOPE.
IF YOU HAVE ANY QUESTIONS OR CONCERNS, PLEASE CALL [[NUMBER]] FROM [[TIME]] A.M.
TO [[TIME]] P.M. EASTERN TIME MONDAY THROUGH FRIDAY, OR FROM [[TIME]] P.M. TO
[[TIME]] P.M. EASTERN TIME ON SATURDAY.
YOU MAY RECEIVE ADDITIONAL PROXIES FOR OTHER ACCOUNTS.
THESE ARE NOT DUPLICATES.
YOU SHOULD SIGN AND RETURN EACH PROXY
IN ORDER FOR YOUR VOTES TO BE COUNTED.
PROXY COLONIAL INSURED MUNICIPAL FUND PROXY
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder hereby appoints each of James R. Bordewick, Jr., Michael G. Clarke, Ryan
C. Larrenaga, J. Kevin Connaughton and Christopher L. Wilson as proxies of the undersigned, with
power of substitution to each, and hereby authorizes each of them to represent and to vote at the
Annual Meeting of Shareholders of Colonial Insured Municipal Fund (the "Fund"), to be held in
Boston, Massachusetts on Friday, June 22, 2007, and at any adjournments and postponements thereof,
all of the shares of the Fund that the undersigned would be entitled to vote if personally present,
as follows below.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN AND, ABSENT
DIRECTION, WILL BE VOTED FOR EACH OF THE NOMINEES AND PROPOSALS SET FORTH BELOW. THIS PROXY WILL BE
VOTED IN THE DISCRETION OF THE HOLDERS AS TO ANY OTHER MATTER.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE NOMINEES AND PROPOSALS SET FORTH BELOW.
VOTE VIA THE INTERNET: [[WEBSITE]]
VOTE VIA TOUCH-TONE TELEPHONE: [[NUMBER]]
999 9999 9999 999
Please sign exactly as name(s) appear(s) hereon.
Joint owners should each sign personally. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. If a corporation, please sign in corporate
name by President or other authorized officer. If
a partnership, please sign in partnership name by
authorized person.
--------------------------------------------------
Signature
--------------------------------------------------
Signature (if held jointly)
--------------------------------------------------
Date
PLEASE VOTE, DATE AND SIGN ABOVE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK VOTES AS IN THIS EXAMPLE: [X]
FOR AGAINST ABSTAIN
1. TO APPROVE A NEW ADVISORY AGREEMENT WITH MASSACHUSETTS [ ] [ ] [ ]
FINANCIAL SERVICES COMPANY.
FOR AGAINST ABSTAIN
2. TO APPROVE AN AMENDED AND RESTATED DECLARATION OF [ ] [ ] [ ]
TRUST.
FOR ALL AGAINST ALL FOR ALL EXCEPT
3A. TO ELECT TEN TRUSTEES: [ ] [ ] [ ]
01 Robert E. Butler 02 Lawrence H. Cohn 03 David H. Gunning 04 William R. Gutow
05 Michael Hegarty 06 Robert J. Manning 07 Lawrence T. Perera 08 Robert C. Pozen
09 J. Dale Sherratt 10 Robert W. Uek
To withhold authority to elect one or more nominees, mark the "FOR ALL EXCEPT" box and write the
number(s) or the nominee(s) for whom you wish to withhold authority on the line: ___________________
FOR ALL AGAINST ALL FOR ALL EXCEPT
3B. TO ELECT TWO TRUSTEES: [ ] [ ] [ ]
01 Laurie J. Thompsen 02 J. Atwood Ives
To withhold authority to elect one or more nominees, mark the "FOR ALL EXCEPT" box and write the
number(s) or the nominee(s) for whom you wish to withhold authority on the line: ___________________
FOR ALL AGAINST ALL FOR ALL EXCEPT
4A. TO ELECT THREE TRUSTEES.: [ ] [ ] [ ]
01 John J. Neuhauser 02 Thomas C. Theobald 03 Anne-Lee Verville
To withhold authority to elect one or more nominees, mark the "FOR ALL EXCEPT" box and write the
number(s) or the nominee(s) for whom you wish to withhold authority on the line: ___________________
FOR ALL AGAINST ALL FOR ALL EXCEPT
4B. TO ELECT TWO TRUSTEES.: [ ] [ ] [ ]
01 Douglas A. Hacker 02 Thomas E. Stitzel
To withhold authority to elect one or more nominees, mark the "FOR ALL EXCEPT" box and write the
number(s) or the nominee(s) for whom you wish to withhold authority on the line: ___________________
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
THREE CONVENIENT WAYS TO VOTE YOUR PROXY.
YOU CAN VOTE YOUR PROXIES OVER THE INTERNET, BY
TOUCH-TONE TELEPHONE OR BY MAIL - IT'S EASY AND CONFIDENTIAL.
INTERNET AND TELEPHONE VOTING ARE AVAILABLE
24 HOURS A DAY, SEVEN DAYS A WEEK.
IF YOU ARE VOTING BY INTERNET OR TELEPHONE,
YOU SHOULD NOT MAIL YOUR PROXY CARD.
VOTE BY INTERNET:
READ THE PROXY STATEMENT AND HAVE YOUR PROXY CARD AVAILABLE.
GO TO [[WEBSITE]] AND FOLLOW THE ON SCREEN DIRECTIONS.
VOTE BY TOUCH-TONE TELEPHONE:
READ THE PROXY STATEMENT AND HAVE YOUR PROXY CARD AVAILABLE.
CALL TOLL FREE [[NUMBER]] AND FOLLOW THE RECORDED INSTRUCTIONS PROVIDED TO CAST
YOUR VOTE.
VOTE BY MAIL:
READ THE PROXY STATEMENT.
VOTE ON EACH PROPOSAL WHERE INDICATED ON THE ENCLOSED PROXY CARD, SIGN AND DATE
IT, AND RETURN IT IN THE ENCLOSED ENVELOPE.
IF YOU HAVE ANY QUESTIONS OR CONCERNS, PLEASE CALL [[NUMBER]] FROM [[TIME]] A.M.
TO [[TIME]] P.M. EASTERN TIME MONDAY THROUGH FRIDAY, OR FROM [[TIME]] P.M. TO
[[TIME]] P.M. EASTERN TIME ON SATURDAY.
YOU MAY RECEIVE ADDITIONAL PROXIES FOR OTHER ACCOUNTS.
THESE ARE NOT DUPLICATES.
YOU SHOULD SIGN AND RETURN EACH PROXY
IN ORDER FOR YOUR VOTES TO BE COUNTED.
PROXY COLONIAL INSURED MUNICIPAL FUND PROXY
COMMON SHARES
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder hereby appoints each of James R. Bordewick, Jr., Michael G. Clarke, Ryan
C. Larrenaga, J. Kevin Connaughton and Christopher L. Wilson as proxies of the undersigned, with
power of substitution to each, and hereby authorizes each of them to represent and to vote at the
Annual Meeting of Shareholders of Colonial Insured Municipal Fund (the "Fund"), to be held in
Boston, Massachusetts on Friday, June 22, 2007, and at any adjournments and postponements thereof,
all of the shares of the Fund that the undersigned would be entitled to vote if personally present,
as follows below.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN AND, ABSENT
DIRECTION, WILL BE VOTED FOR EACH OF THE NOMINEES AND PROPOSALS SET FORTH BELOW. THIS PROXY WILL BE
VOTED IN THE DISCRETION OF THE HOLDERS AS TO ANY OTHER MATTER.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE NOMINEES AND PROPOSALS SET FORTH BELOW.
VOTE VIA THE INTERNET: [[WEBSITE]]
VOTE VIA TOUCH-TONE TELEPHONE: [[NUMBER]]
999 9999 9999 999
Please sign exactly as name(s) appear(s) hereon.
Joint owners should each sign personally. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. If a corporation, please sign in corporate
name by President or other authorized officer. If
a partnership, please sign in partnership name by
authorized person.
--------------------------------------------------
Signature
--------------------------------------------------
Signature (if held jointly)
--------------------------------------------------
Date
PLEASE VOTE, DATE AND SIGN ABOVE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK VOTES AS IN THIS EXAMPLE: [X]
FOR AGAINST ABSTAIN
1. TO APPROVE A NEW ADVISORY AGREEMENT WITH MASSACHUSETTS [ ] [ ] [ ]
FINANCIAL SERVICES COMPANY.
FOR AGAINST ABSTAIN
2. TO APPROVE AN AMENDED AND RESTATED DECLARATION OF [ ] [ ] [ ]
TRUST.
FOR ALL AGAINST ALL FOR ALL EXCEPT
3. TO ELECT TEN TRUSTEES: [ ] [ ] [ ]
01 Robert E. Butler 02 Lawrence H. Cohn 03 David H. Gunning 04 William R. Gutow
05 Michael Hegarty 06 Robert J. Manning 07 Lawrence T. Perera 08 Robert C. Pozen
09 J. Dale Sherratt 10 Robert W. Uek
To withhold authority to elect one or more nominees, mark the "FOR ALL EXCEPT" box and write the
number(s) or the nominee(s) for whom you wish to withhold authority on the line: ___________________
FOR ALL AGAINST ALL FOR ALL EXCEPT
4. TO ELECT THREE TRUSTEES.: [ ] [ ] [ ]
01 John J. Neuhauser 02 Thomas C. Theobald 03 Anne-Lee Verville
To withhold authority to elect one or more nominees, mark the "FOR ALL EXCEPT" box and write the
number(s) or the nominee(s) for whom you wish to withhold authority on the line: ___________________